EXHIBIT 10.3
SECURITY AGREEMENT
SECURITY AGREEMENT, dated as of October 27, 2005 (this "Agreement"),
among Velocity Asset Management Inc., a Delaware corporation (the "Company"), X.
Xxxxxx Inc., a New Jersey corporation and a wholly-owned Subsidiary of the
Company ("Holder"), and all of the other Subsidiaries of the Company other than
Velocity Investments, LLC ("Velocity Investments") (such subsidiaries, the
"Guarantors") (the Company and Guarantors are collectively referred to as the
"Debtors") and the holder or holders of the Company's 10% Convertible Secured
Debenture due April 27, 2007 in the original aggregate principal amount of up to
$1,800,000 (the "Debenture"), signatory hereto, their endorsees, transferees and
assigns (collectively referred to as, the "Secured Parties"). Notwithstanding
anything herein to the contrary, DKR SoundShore Oasis Holding Fund Ltd. is the
only Secured Party and references hereunder to "Secured Parties" or multiple
Secured Parties shall be disregarded.
W I T N E S S E T H:
WHEREAS, pursuant to the Purchase Agreement (as defined in the
Debenture), the Secured Parties have severally agreed to purchase the Debenture;
WHEREAS, pursuant to a certain Subsidiary Guarantee dated as of the
date hereof (the "Guaranty"), the Guarantors have jointly and severally agreed
to guaranty and act as surety for payment of the obligations underlying the
Debentures;
WHEREAS, in order to induce the Secured Parties to purchase the
Debentures, each Debtor has agreed to execute and deliver to the Secured Parties
this Agreement and to grant the Secured Parties, pari passu with each other
Secured Party, a perfected (other than as provided herein) security interest in
certain property of such Debtor to secure the prompt payment, performance and
discharge in full of all of the Company's obligations under the Debenture and
the other Debtor's obligations under the Guaranty.
NOW, THEREFORE, in consideration of the agreements herein contained and
for other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, the parties hereto hereby agree as follows:
1. Certain Definitions. As used in this Agreement, the following
terms shall have the meanings set forth in this Section 1. Terms used but not
otherwise defined in this Agreement that are defined in Article 9 of the UCC
(such as "account", "chattel paper", "commercial tort claim", "deposit account",
"document", "equipment", "fixtures", "general intangibles", "goods",
"instruments", "inventory", "investment property", "letter-of-credit rights",
"proceeds" and "supporting obligations") shall have the respective meanings
given such terms in Article 9 of the UCC.
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(a) "Collateral" means the collateral in which the
Secured Parties are granted a security interest by this Agreement and
which shall include the following personal property of the Debtors,
whether presently owned or existing or hereafter acquired or coming
into existence, wherever situated, and all additions and accessions
thereto and all substitutions and replacements thereof, and all
proceeds, products and accounts thereof, including, without limitation,
all proceeds from the sale or transfer of the Collateral and of
insurance covering the same and of any tort claims in connection
therewith, and all dividends, interest, cash, notes, securities, equity
interest or other property at any time and from time to time acquired,
receivable or otherwise distributed in respect of, or in exchange for,
any or all of the Pledged Securities (as defined below):
(i) All goods, including, without limitations,
(A) all machinery, equipment, computers, motor vehicles,
trucks, tanks, boats, ships, appliances, furniture, special
and general tools, fixtures, test and quality control devices
and other equipment of every kind and nature and wherever
situated, together with all documents of title and documents
representing the same, all additions and accessions thereto,
replacements therefor, all parts therefor, and all substitutes
for any of the foregoing and all other items used and useful
in connection with any Debtor's businesses and all
improvements thereto; and (B) all inventory;
(ii) All contract rights and other general
intangibles, including, without limitation, all partnership
interests, membership interests, stock or other securities,
rights under any of the Organizational Documents, agreements
related to the Pledged Securities, licenses, distribution and
other agreements, computer software (whether "off-the-shelf",
licensed from any third party or developed by any Debtor),
computer software development rights, leases, franchises,
customer lists, quality control procedures, grants and rights,
goodwill, trademarks, service marks, trade styles, trade
names, patents, patent applications, copyrights, and income
tax refunds;
(iii) All accounts, together with all instruments,
all documents of title representing any of the foregoing, all
rights in any merchandising, goods, equipment, motor vehicles
and trucks which any of the same may represent, and all right,
title, security and guaranties with respect to each account,
including any right of stoppage in transit;
(iv) All documents, letter-of-credit rights,
instruments and chattel paper;
(v) All commercial tort claims;
(vi) All deposit accounts and all cash (whether
or not deposited in such deposit accounts);
(vii) All investment property;
(viii) All supporting obligations; and
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(ix) All files, records, books of account,
business papers, and computer programs; and
(x) The products and proceeds of all of the
foregoing Collateral set forth in clauses (i)-(ix) above.
Without limiting the generality of the foregoing, the
"Collateral" shall include all investment property and general
intangibles respecting ownership and/or other equity interests
in each Guarantor, including, without limitation, the shares
of capital stock and the other equity interests listed on
Schedule H hereto (as the same may be modified from time to
time pursuant to the terms hereof), and any other shares of
capital stock and/or other equity interests of any other
direct or indirect subsidiary of any Debtor obtained in the
future, and, in each case, all certificates representing such
shares and/or equity interests and, in each case, all rights,
options, warrants, stock, other securities and/or equity
interests that may hereafter be received, receivable or
distributed in respect of, or exchanged for, any of the
foregoing (all of the foregoing being referred to herein as
the "Pledged Securities") and all rights arising under or in
connection with the Pledged Securities, including, but not
limited to, all dividends, interest and cash.
Notwithstanding the foregoing, nothing herein shall
be deemed to constitute an assignment of any asset which, in
the event of an assignment, becomes void by operation of
applicable law or the assignment of which is otherwise
prohibited by applicable law (in each case to the extent that
such applicable law is not overridden by Sections 9-406, 9-407
and/or 9-408 of the UCC or other similar applicable law);
provided, however, that to the extent permitted by applicable
law, this Agreement shall create a valid security interest in
such asset and, to the extent permitted by applicable law,
this Agreement shall create a valid security interest in the
proceeds of such asset.
(b) "Intellectual Property" means the collective
reference to all rights, priorities and privileges relating to
intellectual property, whether arising under United States,
multinational or foreign laws or otherwise, including, without
limitation, (i) all copyrights arising under the laws of the United
States, any other country or any political subdivision thereof, whether
registered or unregistered and whether published or unpublished, all
registrations and recordings thereof, and all applications in
connection therewith, including, without limitation, all registrations,
recordings and applications in the United States Copyright Office, (ii)
all letters patent of the United States, any other country or any
political subdivision thereof, all reissues and extensions thereof, and
all applications for letters patent of the United States or any other
country and all divisions, continuations and continuations-in-part
thereof, (iii) all trademarks, trade names, corporate names, company
names, business names, fictitious business names, trade dress, service
marks, logos, domain names and other source or business identifiers,
and all goodwill associated therewith, now existing or hereafter
adopted or acquired, all registrations and recordings thereof, and all
applications in connection therewith, whether in the United States
Patent and Trademark Office or in any similar office or agency of the
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United States, any State thereof or any other country or any political
subdivision thereof, or otherwise, and all common law rights related
thereto, (iv) all trade secrets arising under the laws of the United
States, any other country or any political subdivision thereof, (v) all
rights to obtain any reissues, renewals or extensions of the foregoing,
(vi) all licenses for any of the foregoing, and (vii) all causes of
action for infringement of the foregoing.
(c) "Majority in Interest" shall mean, at any time of
determination, the majority in interest (based on then-outstanding
principal amounts of Debentures at the time of such determination) of
the Secured Parties.
(d) "Necessary Endorsement" shall mean undated stock
powers endorsed in blank or other proper instruments of assignment duly
executed and such other instruments or documents as the Secured Parties
may reasonably request.
(e) "Obligations" means all of the liabilities and
obligations (primary, secondary, direct, contingent, sole, joint or
several) due or to become due, or that are now or may be hereafter
contracted or acquired, or owing to, of any Debtor to the Secured
Parties, including, without limitation, all obligations under this
Agreement, the Debentures, the Guaranty and any other instruments,
agreements or other documents executed and/or delivered in connection
herewith or therewith, in each case, whether now or hereafter existing,
voluntary or involuntary, direct or indirect, absolute or contingent,
liquidated or unliquidated, whether or not jointly owed with others,
and whether or not from time to time decreased or extinguished and
later increased, created or incurred, and all or any portion of such
obligations or liabilities that are paid, to the extent all or any part
of such payment is avoided or recovered directly or indirectly from any
of the Secured Parties as a preference, fraudulent transfer or
otherwise as such obligations may be amended, supplemented, converted,
extended or modified from time to time. Without limiting the generality
of the foregoing, the term "Obligations" shall include, without
limitation: (i) principal of, and interest on the Debentures; (ii) any
and all other fees, indemnities, costs, obligations and liabilities of
the Debtors from time to time under or in connection with this
Agreement, the Debentures, the Guaranty and any other instruments,
agreements or other documents executed and/or delivered in connection
herewith or therewith; and (iii) all amounts (including but not limited
to post-petition interest) in respect of the foregoing that would be
payable but for the fact that the obligations to pay such amounts are
unenforceable or not allowable due to the existence of a bankruptcy,
reorganization or similar proceeding involving any Debtor.
(f) "Organizational Documents" means with respect to any
Debtor, the documents by which such Debtor was organized (such as a
certificate of incorporation, certificate of limited partnership or
articles of organization, and including, without limitation, any
certificates of designation for preferred stock or other forms of
preferred equity) and which relate to the internal governance of such
Debtor (such as bylaws, a partnership agreement or an operating,
limited liability or members agreement).
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(g) "UCC" means the Uniform Commercial Code of the State
of New York and or any other applicable law of any state or states
which has jurisdiction with respect to all, or any portion of, the
Collateral or this Agreement, from time to time. It is the intent of
the parties that defined terms in the UCC should be construed in their
broadest sense so that the term "Collateral" will be construed in its
broadest sense. Accordingly if there are, from time to time, changes to
defined terms in the UCC that broaden the definitions, they are
incorporated herein and if existing definitions in the UCC are broader
than the amended definitions, the existing ones shall be controlling.
2. Grant of Perfected Security Interest. As an inducement for the
Secured Parties to purchase the Debentures and to secure the complete and timely
payment, performance and discharge in full, as the case may be, of all of the
Obligations, each Debtor hereby unconditionally and irrevocably pledges, grants
and hypothecates to the Secured Parties a continuing and perfected (other than
as provided herein) security interest in and to, a lien upon and a right of
set-off against all of their respective right, title and interest of whatsoever
kind and nature in and to, the Collateral (the "Security Interest").
3. Delivery of Certain Collateral. Contemporaneously or prior to
the execution of this Agreement, each Debtor shall deliver or cause to be
delivered to the Secured Parties (a) any and all certificates and other
instruments representing or evidencing the Pledged Securities, and (b) any and
all certificates and other instruments or documents representing any of the
other Collateral, in each case, together with all Necessary Endorsements (other
than any such items that have been delivered or are required to be delivered to
Xxxxx Fargo Foothill, Inc. pursuant to the Xxxxx Fargo Security Interest (as
defined below) which items will be delivered as soon as they are no longer
subject to such security interest). The Debtors are, contemporaneously with the
execution hereof, delivering to the Secured Parties, or have previously
delivered to the Secured Parties, a true and correct copy of each Organizational
Document governing any of the Pledged Securities.
4. Representations, Warranties, Covenants and Agreements of the
Debtors. Each Debtor represents and warrants to, and covenants and agrees with,
the Secured Parties as follows:
(a) Each Debtor has the requisite corporate, partnership,
limited liability company or other power and authority to enter into
this Agreement and otherwise to carry out its obligations hereunder.
The execution, delivery and performance by each Debtor of this
Agreement and the filings contemplated therein have been duly
authorized by all necessary action on the part of such Debtor and no
further action is required by such Debtor. This Agreement has been duly
executed by each Debtor. This Agreement constitutes the legal, valid
and binding obligation of each Debtor, enforceable against each Debtor
in accordance with its terms except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization and
similar laws of general application relating to or affecting the rights
and remedies of creditors and by general principles of equity.
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(b) The Debtors have no place of business or offices
where their respective books of account and records are kept (other
than temporarily at the offices of its attorneys or accountants) or
places where Collateral is stored or located, except as set forth on
Schedule A attached hereto. Except as specifically set forth on
Schedule A, each Debtor is the record owner of the real property where
such Collateral is located, and there exist no mortgages or other liens
on any such real property except for Permitted Liens (as defined in the
Debentures). Except as disclosed on Schedule A, none of such Collateral
is in the possession of any consignee, bailee, warehouseman, agent or
processor.
(c) Except for Permitted Liens (as defined in the
Debentures) and except as set forth on Schedule B attached hereto, the
Debtors are the sole owner of the Collateral (except for non-exclusive
licenses granted by any Debtor in the ordinary course of business),
free and clear of any liens, security interests, encumbrances, rights
or claims, and are fully authorized to grant the Security Interest.
There is not on file in any governmental or regulatory authority,
agency or recording office an effective financing statement, security
agreement, license or transfer or any notice of any of the foregoing
(other than those that will be filed in favor of the Secured Parties
pursuant to this Agreement and other than as to the security interest
of the Company, Velocity Investments and TLOP Acquisition Company,
Inc., a New Jersey corporation and wholly owned Subsidiary of the
Company in favor of Xxxxx Fargo Foothill, Inc. (the "Xxxxx Fargo
Security Interest")) covering or affecting any of the Collateral. So
long as this Agreement shall be in effect, the Debtors shall not
execute and shall not knowingly permit to be on file in any such office
or agency any such financing statement or other document or instrument
(except to the extent filed or recorded in favor of the Secured Parties
pursuant to the terms of this Agreement or filings with respect to the
existing Xxxxx Fargo Security Interest).
(d) No written claim has been received that any
Collateral or Debtor's use of any Collateral violates the rights of any
third party. There has been no adverse decision to any Debtor's claim
of ownership rights in or exclusive rights to use the Collateral in any
jurisdiction or to any Debtor's right to keep and maintain such
Collateral in full force and effect, and there is no proceeding
involving said rights pending or, to the best knowledge of any Debtor,
threatened before any court, judicial body, administrative or
regulatory agency, arbitrator or other governmental authority.
(e) Each Debtor shall at all times maintain its books of
account and records relating to the Collateral at its principal place
of business and its Collateral at the locations set forth on Schedule A
attached hereto and may not relocate such books of account and records
or tangible Collateral unless it delivers to the Secured Parties at
least 30 days prior to such relocation (i) written notice of such
relocation and the new location thereof and (ii) evidence that
appropriate financing statements or other applicable documentation
under the UCC or other applicable recordation system and other
necessary documents have been filed and recorded and other steps have
been taken to perfect the Security Interest to create in favor of the
Secured Parties a valid, perfected and continuing perfected lien in the
Collateral, which lien shall be a first priority lien in all of such
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Collateral other than the Collateral subject to the Xxxxx Fargo
Security Interest (as to which the Secured Parties shall have a second
priority lien).
(f) This Agreement creates in favor of the Secured
Parties a valid, security interest in the Collateral, subject only to
Permitted Liens (as defined in the Debentures) securing the payment and
performance of the Obligations. Upon making the filings described in
the immediately following paragraph, all security interests created
hereunder in any Collateral which may be perfected by filing Uniform
Commercial Code financing statements shall have been duly perfected.
Except for the filing of the Uniform Commercial Code financing
statements referred to in the immediately following paragraph, the
recordation of the Intellectual Property Security Agreement (as defined
below) with respect to copyrights and copyright applications in the
United States Copyright Office referred to in paragraph (m), the
execution and delivery of deposit account control agreements satisfying
the requirements of Section 9-104(a)(2) of the UCC with respect to each
deposit account of the Debtors, and the delivery of the certificates
and other instruments provided in Section 3, no action is necessary to
create, perfect or protect the security interests created hereunder.
Without limiting the generality of the foregoing, except for the filing
of said financing statements, the recordation of said Intellectual
Property Security Agreement, and the execution and delivery of said
deposit account control agreements, no consent of any third parties and
no authorization, approval or other action by, and no notice to or
filing with, any governmental authority or regulatory body is required
for (i) the execution, delivery and performance of this Agreement, (ii)
the creation or perfection of the Security Interests created hereunder
in the Collateral or (iii) the enforcement of the rights of the Secured
Parties hereunder.
(g) Each Debtor hereby authorizes the Secured Parties, or
any of them, to file one or more financing statements or other
applicable documents under the UCC or other applicable recordation
system, with respect to the Security Interest with the proper filing
and recording agencies in any jurisdiction deemed proper by them.
(h) The execution, delivery and performance of this
Agreement by the Debtors does not (i) violate any of the provisions of
any Organizational Documents of any Debtor or any judgment, decree,
order or award of any court, governmental body or arbitrator or any
applicable law, rule or regulation applicable to any Debtor or (ii)
conflict with, or constitute a default (or an event that with notice or
lapse of time or both would become a default) under, or give to others
any rights of termination, amendment, acceleration or cancellation
(with or without notice, lapse of time or both) of, any agreement,
credit facility, debt or other instrument (evidencing any Debtor's debt
or otherwise) or other understanding to which any Debtor is a party or
by which any property or asset of any Debtor is bound or affected. No
consent (including, without limitation, from stockholders or creditors
of any Debtor) is required for any Debtor to enter into and perform its
obligations hereunder.
(i) The capital stock and other equity interests listed
on Schedule H hereto represent all of the capital stock and other
equity interests of the Guarantors, and represent all capital stock and
other equity interests owned, directly or indirectly, by the Company.
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All of the Pledged Securities are validly issued, fully paid and
nonassessable, and the Company is the legal and beneficial owner of the
Pledged Securities, free and clear of any lien, security interest or
other encumbrance except for the security interests created by this
Agreement and other Permitted Liens (as defined in the Debenture).
(j) The ownership and other equity interests in
partnerships and limited liability companies (if any) included in the
Collateral (the "Pledged Interests") by their express terms do not
provide that they are securities governed by Article 8 of the UCC and
are not held in a securities account or by any financial intermediary.
(k) Each Debtor shall at all times maintain the liens and
Security Interest provided for hereunder as valid and perfected first
priority liens and security interests in the Collateral in favor of the
Secured Parties until this Agreement and the Security Interest
hereunder shall be terminated pursuant to Section 11 hereof. Each
Debtor hereby agrees to defend the same against the claims of any and
all persons and entities. Each Debtor shall safeguard and protect all
Collateral for the account of the Secured Parties. At the request of
the Secured Parties, each Debtor will sign and deliver to the Secured
Parties at any time or from time to time one or more financing
statements or other applicable documents pursuant to the UCC or other
applicable recordation system in form reasonably satisfactory to the
Secured Parties and will pay the cost of filing the same in all public
offices wherever filing is, or is deemed by the Secured Parties to be,
necessary or desirable to effect the rights and obligations provided
for herein. Without limiting the generality of the foregoing, each
Debtor shall pay all fees, taxes and other amounts necessary to
maintain the Collateral and the Security Interest hereunder, and each
Debtor shall obtain and furnish to the Secured Parties from time to
time, upon demand, such releases and/or subordinations of claims and
liens which may be required to maintain the priority of the Security
Interest hereunder.
(l) No Debtor will transfer, pledge, hypothecate,
encumber, license, sell or otherwise dispose of any of the Collateral
(except for non-exclusive licenses granted by a Debtor in its ordinary
course of business and sales of inventory by a Debtor in its ordinary
course of business) without the prior written consent of a Majority in
Interest.
(m) Each Debtor shall keep and preserve its equipment,
inventory and other tangible Collateral in good condition, repair and
order and shall not operate or locate any such Collateral (or cause to
be operated or located) in any area excluded from insurance coverage.
(n) Each Debtor shall maintain with financially sound and
reputable insurers, insurance with respect to the Collateral against
loss or damage of the kinds and in the amounts customarily insured
against by entities of established reputation having similar properties
similarly situated and in such amounts as are customarily carried under
similar circumstances by other such entities and otherwise as is
prudent for entities engaged in similar businesses but in any event
sufficient to cover the full replacement cost thereof. Each Debtor
shall cause each insurance policy issued in connection herewith to
provide, and the insurer issuing such policy to certify to the Secured
Parties that (a) the Secured Parties will be named as lender loss payee
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and additional insured under each such insurance policy; (b) if such
insurance be proposed to be cancelled or materially changed for any
reason whatsoever, such insurer will promptly notify the Secured
Parties and such cancellation or change shall not be effective as to
the Secured Parties for at least thirty (30) days after receipt by the
Secured Parties of such notice, unless the effect of such change is to
extend or increase coverage under the policy; and (c) the Secured
Parties will have the right (but no obligation) at its election to
remedy any default in the payment of premiums within thirty (30) days
of notice from the insurer of such default. If no Event of Default (as
defined in the Debenture) exists and if the proceeds arising out of any
claim or series of related claims do not exceed $100,000, loss payments
in each instance will be applied by the applicable Debtor to the repair
and/or replacement of property with respect to which the loss was
incurred to the extent reasonably feasible, and any loss payments or
the balance thereof remaining, to the extent not so applied, shall be
payable to the applicable Debtor, provided, however, that payments
received by any Debtor after an Event of Default occurs and is
continuing or in excess of $100,000 for any occurrence or series of
related occurrences shall be paid to the Secured Parties and, if
received by such Debtor, shall be held in trust for and immediately
paid over to the Secured Parties unless otherwise directed in writing
by the Secured Parties. Copies of such policies or the related
certificates, in each case, naming the Secured Parties as lender loss
payee and additional insured shall be delivered to the Secured Parties
at least annually and at the time any new policy of insurance is
issued.
(o) Each Debtor shall, within ten (10) days of obtaining
knowledge thereof, advise the Secured Parties promptly, in sufficient
detail, of any substantial change in the Collateral, and of the
occurrence of any event which would have a material adverse effect on
the value of the Collateral or on the Secured Parties' security
interest therein.
(p) Each Debtor shall promptly execute and deliver to the
Secured Parties such further assignments, security agreements,
financing statements or other instruments, documents, certificates and
assurances and take such further action as the Secured Parties may from
time to time request and may in its sole discretion deem necessary to
perfect, protect or enforce its security interest in the Collateral
including, without limitation, if applicable, the execution and
delivery of a separate security agreement with respect to each Debtor's
Intellectual Property ("Intellectual Property Security Agreement") in
which the Secured Parties have been granted a security interest
hereunder, substantially in a form acceptable to the Secured Parties,
which Intellectual Property Security Agreement, other than as stated
therein, shall be subject to all of the terms and conditions hereof.
(q) Each Debtor shall permit the Secured Parties and
their representatives and agents to inspect the Collateral at any time,
on reasonable notice, and to make copies of records pertaining to the
Collateral as may be requested by a Secured Party from time to time.
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(r) Each Debtor shall take all steps reasonably necessary
to diligently pursue and seek to preserve, enforce and collect any
rights, claims, causes of action and accounts receivable in respect of
the Collateral.
(s) Each Debtor shall promptly notify the Secured Parties
in sufficient detail upon becoming aware of any attachment,
garnishment, execution or other legal process levied against any
Collateral and of any other information received by such Debtor that
may materially affect the value of the Collateral, the Security
Interest or the rights and remedies of the Secured Parties hereunder.
(t) All information heretofore, herein or hereafter
supplied to the Secured Parties by or on behalf of any Debtor with
respect to the Collateral is accurate and complete in all material
respects as of the date furnished.
(u) The Debtors shall at all times preserve and keep in
full force and effect their respective valid existence and good
standing and any rights and franchises material to its business.
(v) No Debtor will change its name, type of organization,
jurisdiction of organization, organizational identification number (if
it has one), legal or corporate structure, or identity, or add any new
fictitious name unless it provides at least 30 days prior written
notice to the Secured Parties of such change and, at the time of such
written notification, such Debtor provides any financing statements or
fixture filings necessary to perfect and continue perfected the
perfected security interest granted and evidenced by this Agreement.
(w) No Debtor may consign any of its Inventory or sell
any of its Inventory on xxxx and hold, sale or return, sale on
approval, or other conditional terms of sale without the consent of a
Majority in Interest which shall not be unreasonably withheld, except
to the extent such consignment or sale does not exceed 15% of the total
value of all of the Company's finished goods in Inventory.
(x) No Debtor may relocate its chief executive office to
a new location without providing 30 days prior written notification
thereof to the Secured Parties and so long as, at the time of such
written notification, such Debtor provides any financing statements or
fixture filings necessary to perfect and continue perfected the
perfected security Interest granted and evidenced by this Agreement.
(y) Each Debtor was organized and remains organized
solely under the laws of the state set forth next to such Debtor's name
in the first paragraph of this Agreement. Schedule D attached hereto
sets forth each Debtor's organizational identification number or, if
any Debtor does not have one, states that one does not exist.
(z) (i) The actual name of each Debtor is the name set
forth in the signature lines hereto; (ii) no Debtor has any trade names
except as set forth on Schedule E attached hereto; (iii) no Debtor has
used any name other than that stated in the preamble hereto or as set
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forth on Schedule E for the preceding five years; and (iv) no entity
has merged into any Debtor or been acquired by any Debtor within the
past five years except as set forth on Schedule E.
(aa) At any time and from time to time that any Collateral
consists of instruments, certificated securities or other items that
require or permit possession by the secured party to perfect the
security interest created hereby, the applicable Debtor shall deliver
such Collateral to the Secured Parties. In the event that any such
instruments, certificated securities or other items are held by Xxxxx
Fargo Foothill, Inc. pursuant to the Xxxxx Fargo Security Interest,
such items will be delivered to the Secured Parties as soon as such
items are no longer subject to such security interest.
(bb) Each Debtor, in its capacity as issuer, hereby agrees
to comply with any and all orders and instructions of Secured Parties
regarding the Pledged Interests consistent with the terms of this
Agreement without the further consent of any Debtor as contemplated by
Section 8-106 (or any successor section) of the UCC. Further, each
Debtor agrees that it shall not enter into a similar agreement (or one
that would confer "control" within the meaning of Article 8 of the UCC)
with any other person or entity.
(cc) Each Debtor shall cause all tangible chattel paper
constituting Collateral to be delivered to the Secured Parties, or, if
such delivery is not possible, then to cause such tangible chattel
paper to contain a legend noting that it is subject to the security
interest created by this Agreement. To the extent that any Collateral
consists of electronic chattel paper, the applicable Debtor shall cause
the underlying chattel paper to be "marked" within the meaning of
Section 9-105 of the UCC (or successor section thereto).
(dd) If there is any investment property or deposit
account included as Collateral that can be perfected by "control"
through an account control agreement, the applicable Debtor shall cause
such an account control agreement, in form and substance in each case
satisfactory to the Secured Parties, to be entered into and delivered
to the Secured Parties.
(ee) To the extent that any Collateral consists of
letter-of-credit rights, the applicable Debtor shall cause the issuer
of each underlying letter of credit to consent to an assignment of the
proceeds thereof to the Secured Parties.
(ff) To the extent that any Collateral is in the
possession of any third party, the applicable Debtor shall join with
the Secured Parties in notifying such third party of the Secured
Parties' security interest in such Collateral and shall use its best
efforts to obtain an acknowledgement and agreement from such third
party with respect to the Collateral, in form and substance
satisfactory to the Secured Parties.
(gg) If any Debtor shall at any time hold or acquire a
commercial tort claim, such Debtor shall promptly notify the Secured
Parties in a writing signed by such Debtor of the particulars thereof
and grant to the Secured Parties in such writing a security interest
therein and in the proceeds thereof, all upon the terms of this
Agreement, with such writing to be in form and substance satisfactory
to the Secured Parties.
11
(hh) Each Debtor shall immediately provide written notice
to the Secured Parties of any and all accounts which arise out of
contracts with any governmental authority and, to the extent necessary
to perfect or continue the perfected status of the Security Interest in
such accounts and proceeds thereof, shall execute and deliver to the
Secured Parties an assignment of claims for such accounts and cooperate
with the Secured Parties in taking any other steps required, in their
judgment, under the Federal Assignment of Claims Act or any similar
federal, state or local statute or rule to perfect or continue the
perfected status of the Security Interest in such accounts and proceeds
thereof.
(ii) Each Debtor shall cause each subsidiary (other than
Velocity Investments) of such Debtor to immediately become a party
hereto (an "Additional Debtor"), by executing and delivering an
Additional Debtor Joinder in substantially the form of Annex A attached
hereto and comply with the provisions hereof applicable to the Debtors.
Concurrent therewith, the Additional Debtor shall deliver replacement
schedules for, or supplements to all other Schedules to (or referred to
in) this Agreement, as applicable, which replacement schedules shall
supersede, or supplements shall modify, the Schedules then in effect.
The Additional Debtor shall also deliver such opinions of counsel,
authorizing resolutions, good standing certificates, incumbency
certificates, organizational documents, financing statements and other
information and documentation as the Secured Parties may reasonably
request. Upon delivery of the foregoing to the Secured Parties, the
Additional Debtor shall be and become a party to this Agreement with
the same rights and obligations as the Debtors, for all purposes hereof
as fully and to the same extent as if it were an original signatory
hereto and shall be deemed to have made the representations, warranties
and covenants set forth herein as of the date of execution and delivery
of such Additional Debtor Joinder, and all references herein to the
"Debtors" shall be deemed to include each Additional Debtor.
(jj) Each Debtor shall vote the Pledged Securities to
comply with the covenants and agreements set forth herein and in the
Debentures.
(kk) Each Debtor shall register the pledge of the
applicable Pledged Securities on the books of such Debtor. Each Debtor
shall notify each issuer of Pledged Securities to register the pledge
of the applicable Pledged Securities in the name of the Secured Parties
on the books of such issuer Debtor as soon as such securities are
delivered to the Secured Parties. Further, except with respect to
certificated securities delivered to the Secured Parties, the
applicable Debtor shall deliver to Secured Parties an acknowledgement
of pledge (which, where appropriate, shall comply with the requirements
of the relevant UCC with respect to perfection by registration) signed
by the issuer of the applicable Pledged Securities, which
acknowledgement shall confirm that: (a) it has registered the pledge on
its books and records; and (b) at any time directed by the Secured
Parties during the continuation of an Event of Default, such issuer
will transfer the record ownership of such Pledged Securities into the
name of any designee of the Secured Parties, will take such steps as
may be necessary to effect the transfer, and will comply with all other
instructions of the Secured Parties regarding such Pledged Securities
without the further consent of the applicable Debtor.
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(ll) In the event that, upon an occurrence of an Event of
Default, the Secured Parties shall have possession of, and sell all or
any of the Pledged Securities to another party or parties (herein
called the "Transferee") or shall purchase or retain all or any of the
Pledged Securities, each Debtor shall, to the extent applicable: (i)
deliver to the Secured Parties or the Transferee, as the case may be,
the articles of incorporation, bylaws, minute books, stock certificate
books, corporate seals, deeds, leases, indentures, agreements,
evidences of indebtedness, books of account, financial records and all
other Organizational Documents and records of the Debtors and their
direct and indirect subsidiaries; (ii) use its best efforts to obtain
resignations of the persons then serving as officers and directors of
the Debtors and their direct and indirect subsidiaries, if so
requested; and (iii) use its best efforts to obtain any approvals that
are required by any governmental or regulatory body in order to permit
the sale of the Pledged Securities to the Transferee or the purchase or
retention of the Pledged Securities by the Secured Parties and allow
the Transferee or the Secured Parties to continue the business of the
Debtors and their direct and indirect subsidiaries.
(mm) Without limiting the generality of the other
obligations of the Debtors hereunder, each Debtor shall promptly (i)
cause to be registered at the United States Copyright Office all of its
material copyrights, (ii) cause the security interest contemplated
hereby with respect to all Intellectual Property registered at the
United States Copyright Office or United States Patent and Trademark
Office to be duly recorded at the applicable office, and (iii) give the
Secured Parties notice whenever it acquires (whether absolutely or by
license) or creates any additional material Intellectual Property.
(nn) Each Debtor will from time to time, at the joint and
several expense of the Debtors, promptly execute and deliver all such
further instruments and documents, and take all such further action as
may be necessary or desirable, or as the Secured Parties may reasonably
request, in order to perfect (to the extent provided herein) and
protect any security interest granted or purported to be granted hereby
or to enable the Secured Parties to exercise and enforce their rights
and remedies hereunder and with respect to any Collateral or to
otherwise carry out the purposes of this Agreement.
(oo) Schedule F attached hereto lists all of the patents,
patent applications, trademarks, trademark applications, registered
copyrights, and domain names owned by any of the Debtors as of the date
hereof. Schedule F lists all material licenses in favor of any Debtor
for the use of any patents, trademarks, copyrights and domain names as
of the date hereof. All material patents and trademarks of the Debtors
have been duly recorded at the United States Patent and Trademark
Office and all material copyrights of the Debtors have been duly
recorded at the United States Copyright Office.
(pp) Except as set forth on Schedule G attached hereto,
none of the account debtors or other persons or entities obligated on
any of the Collateral is a governmental authority covered by the
13
Federal Assignment of Claims Act or any similar federal, state or local
statute or rule in respect of such Collateral.
5. Effect of Pledge on Certain Rights. If any of the Collateral
subject to this Agreement consists of nonvoting equity or ownership interests
(regardless of class, designation, preference or rights) that may be converted
into voting equity or ownership interests upon the occurrence of certain events
(including, without limitation, upon the transfer of all or any of the other
stock or assets of the issuer), it is agreed that the pledge of such equity or
ownership interests pursuant to this Agreement or the enforcement of any of the
Secured Parties' rights hereunder shall not be deemed to be the type of event
which would trigger such conversion rights notwithstanding any provisions in the
Organizational Documents or agreements to which any Debtor is subject or to
which any Debtor is party.
6. Defaults. The following events shall be "Events of Default":
(a) The occurrence of an Event of Default (as defined in
the Debenture) under the Debenture;
(b) Any representation or warranty of any Debtor in this
Agreement shall prove to have been incorrect in any material respect
when made;
(c) The failure by any Debtor to observe or perform any
of its obligations hereunder for ten (10) days after delivery to such
Debtor of notice of such failure by or on behalf of a Secured Party
unless such default is capable of cure but cannot be cured within such
time frame and such Debtor is using best efforts to cure same in a
timely fashion; or
(d) If any provision of this Agreement shall at any time
for any reason be declared to be null and void, or the validity or
enforceability thereof shall be contested by any Debtor, or a
proceeding shall be commenced by any Debtor, or by any governmental
authority having jurisdiction over any Debtor, seeking to establish the
invalidity or unenforceability thereof, or any Debtor shall deny that
any Debtor has any liability or obligation purported to be created
under this Agreement.
7. Duty To Hold In Trust.
(a) Upon the occurrence of any Event of Default and at
any time thereafter, each Debtor shall, upon receipt of any revenue,
income, dividend, interest or other sums subject to the Security
Interest, whether payable pursuant to the Debenture or otherwise, or of
any check, draft, note, trade acceptance or other instrument evidencing
an obligation to pay any such sum, hold the same in trust for the
Secured Parties and shall forthwith endorse and transfer any such sums
or instruments, or both, to the Secured Parties, pro-rata in proportion
to their initial purchases of Debentures for application to the
satisfaction of the Obligations (and if any Debenture is not
outstanding, pro-rata in proportion to the initial purchases of the
remaining Debentures).
14
(b) If any Debtor shall become entitled to receive or
shall receive any securities or other property (including, without
limitation, shares of Pledged Securities or instruments representing
Pledged Securities acquired after the date hereof, or any options,
warrants, rights or other similar property or certificates representing
a dividend, or any distribution in connection with any
recapitalization, reclassification or increase or reduction of capital,
or issued in connection with any reorganization of such Debtor or any
of its direct or indirect subsidiaries) in respect of the Pledged
Securities (whether as an addition to, in substitution of, or in
exchange for, such Pledged Securities or otherwise), such Debtor agrees
to (i) accept the same as the agent of the Secured Parties; (ii) hold
the same in trust on behalf of and for the benefit of the Secured
Parties; and (iii) to deliver any and all certificates or instruments
evidencing the same to the Secured Parties on or before the close of
business on the fifth business day following the receipt thereof by
such Debtor, in the exact form received together with the Necessary
Endorsements, to be held by the Secured Parties subject to the terms of
this Agreement as Collateral.
8. Rights and Remedies Upon Default.
(a) Upon the occurrence of any Event of Default and at
any time thereafter, the Secured Parties, acting through any agent
appointed by them for such purpose, shall have the right to exercise
all of the remedies conferred hereunder and under the Debentures, and
the Secured Parties shall have all the rights and remedies of a secured
party under the UCC. Without limitation, the Secured Parties shall have
the following rights and powers:
(i) The Secured Parties shall have the right to
take possession of the Collateral and, for that purpose,
enter, with the aid and assistance of any person, any premises
where the Collateral, or any part thereof, is or may be placed
and remove the same, and each Debtor shall assemble the
Collateral and make it available to the Secured Parties at
places which the Secured Parties shall reasonably select,
whether at such Debtor's premises or elsewhere, and make
available to the Secured Parties, without rent, all of such
Debtor's respective premises and facilities for the purpose of
the Secured Parties taking possession of, removing or putting
the Collateral in saleable or disposable form.
(ii) Upon notice to the Debtors by the Secured
Parties, all rights of each Debtor to exercise the voting and
other consensual rights which it would otherwise be entitled
to exercise and all rights of each Debtor to receive the
dividends and interest which it would otherwise be authorized
to receive and retain, shall cease. Upon such notice, the
Secured Parties shall have the right to receive any interest,
cash dividends or other payments on the Collateral and, at the
option of the Secured Parties, to exercise in such the Secured
Parties' discretion all voting rights pertaining thereto.
Without limiting the generality of the foregoing, the Secured
Parties shall have the right (but not the obligation) to
exercise all rights with respect to the Collateral as it were
the sole and absolute owners thereof, including, without
limitation, to vote and/or to exchange, at its sole
15
discretion, any or all of the Collateral in connection with a
merger, reorganization, consolidation, recapitalization or
other readjustment concerning or involving the Collateral or
any Debtor or any of its direct or indirect subsidiaries.
(iii) The Secured Parties shall have the right to
operate the business of each Debtor using the Collateral and
shall have the right to assign, sell, lease or otherwise
dispose of and deliver all or any part of the Collateral, at
public or private sale or otherwise, either with or without
special conditions or stipulations, for cash or on credit or
for future delivery, in such parcel or parcels and at such
time or times and at such place or places, and upon such terms
and conditions as the Secured Parties may deem commercially
reasonable, all without (except as shall be required by
applicable statute and cannot be waived) advertisement or
demand upon or notice to any Debtor or right of redemption of
a Debtor, which are hereby expressly waived. Upon each such
sale, lease, assignment or other transfer of Collateral, the
Secured Parties may, unless prohibited by applicable law which
cannot be waived, purchase all or any part of the Collateral
being sold, free from and discharged of all trusts, claims,
right of redemption and equities of any Debtor, which are
hereby waived and released.
(iv) The Secured Parties shall have the right
(but not the obligation) to notify any account debtors and any
obligors under instruments or accounts to make payments
directly to the Secured Parties and to enforce the Debtors'
rights against such account debtors and obligors.
(v) The Secured Parties may (but are not
obligated to) direct any financial intermediary or any other
person or entity holding any investment property to transfer
the same to the Secured Parties or their designee.
(vi) The Secured Parties may (but are not
obligated to) transfer any or all Intellectual Property
registered in the name of any Debtor at the United States
Patent and Trademark Office and/or Copyright Office into the
name of the Secured Parties or any designee or any purchaser
of any Collateral.
(b) The Secured Parties may comply with any applicable
law in connection with a disposition of Collateral and such compliance
will not be considered adversely to affect the commercial
reasonableness of any sale of the Collateral. The Secured Parties may
sell the Collateral without giving any warranties and may specifically
disclaim such warranties. If the Secured Parties sells any of the
Collateral on credit, the Debtors will only be credited with payments
actually made by the purchaser. In addition, each Debtor waives any and
all rights that it may have to a judicial hearing in advance of the
enforcement of any of the Secured Parties' rights and remedies
hereunder, including, without limitation, its right following an Event
of Default to take immediate possession of the Collateral and to
exercise its rights and remedies with respect thereto.
(c) For the purpose of enabling the Secured Parties to
further exercise rights and remedies under this Section 8 or elsewhere
provided by agreement or applicable law, each Debtor hereby grants to
the Secured Parties, an irrevocable, nonexclusive license (exercisable
16
without payment of royalty or other compensation to such Debtor) to
use, license or sublicense following an Event of Default, any
Intellectual Property now owned or hereafter acquired by such Debtor,
and wherever the same may be located, and including in such license
access to all media in which any of the licensed items may be recorded
or stored and to all computer software and programs used for the
compilation or printout thereof.
9. Applications of Proceeds. The proceeds of any such sale, lease
or other disposition of the Collateral hereunder shall be applied first, to the
expenses of retaking, holding, storing, processing and preparing for sale,
selling, and the like (including, without limitation, any taxes, fees and other
costs incurred in connection therewith) of the Collateral, to the reasonable
attorneys' fees and expenses incurred by the Secured Parties in enforcing their
rights hereunder and in connection with collecting, storing and disposing of the
Collateral, and then to satisfaction of the Obligations pro rata among the
Secured Parties (based on then-outstanding principal amounts of Debentures at
the time of any such determination), and to the payment of any other amounts
required by applicable law, after which the Secured Parties shall pay to the
applicable Debtor any surplus proceeds. If, upon the sale, license or other
disposition of the Collateral, the proceeds thereof are insufficient to pay all
amounts to which the Secured Parties are legally entitled, the Debtors will be
liable for the deficiency, together with interest thereon, at the rate of 10%
per annum or the lesser amount permitted by applicable law (the "Default Rate"),
and the reasonable fees of any attorneys employed by the Secured Parties to
collect such deficiency. Except as otherwise provided herein and to the extent
permitted by applicable law, each Debtor waives all claims, damages and demands
against the Secured Parties arising out of the repossession, removal, retention
or sale of the Collateral, unless due solely to the gross negligence or willful
misconduct of the Secured Parties as determined by a final judgment (not subject
to further appeal) of a court of competent jurisdiction.
10. Securities Law Provision. Each Debtor recognizes that the
Secured Parties may be limited in its ability to effect a sale to the public of
all or part of the Pledged Securities by reason of certain prohibitions in the
Securities Act of 1933, as amended, or other federal or state securities laws
(collectively, the "Securities Laws"), and may be compelled to resort to one or
more sales to a restricted group of purchasers who may be required to agree to
acquire the Pledged Securities for their own account, for investment and not
with a view to the distribution or resale thereof. Each Debtor agrees that sales
so made may be at prices and on terms less favorable than if the Pledged
Securities were sold to the public, and that the Secured Parties has no
obligation to delay the sale of any Pledged Securities for the period of time
necessary to register the Pledged Securities for sale to the public under the
Securities Laws. Each Debtor shall cooperate with the Secured Parties in its
attempt to satisfy any requirements under the Securities Laws (including,
without limitation, registration thereunder if requested by the Secured Parties)
applicable to the sale of the Pledged Securities by the Secured Parties.
11. Costs and Expenses. Each Debtor agrees to pay all reasonable
out-of-pocket fees, costs and expenses incurred in connection with any filing
required hereunder, including without limitation, any financing statements
pursuant to the UCC, continuation statements, partial releases and/or
termination statements related thereto or any expenses of any searches
reasonably required by the Secured Parties. The Debtors shall also pay all other
claims and charges which in the reasonable opinion of the Secured Parties might
prejudice, imperil or otherwise affect the Collateral or the Security Interest
17
therein. The Debtors will also, upon demand, pay to the Secured Parties the
amount of any and all reasonable expenses, including the reasonable fees and
expenses of its counsel and of any experts and agents, which the Secured Parties
may incur in connection with (i) the enforcement of this Agreement, (ii) the
custody or preservation of, or the sale of, collection from, or other
realization upon, any of the Collateral, or (iii) the exercise or enforcement of
any of the rights of the Secured Parties under the Debentures. Until so paid,
any fees payable hereunder shall be added to the principal amount of the
Debentures and shall bear interest at the Default Rate.
12. Responsibility for Collateral. The Debtors assume all
liabilities and responsibility in connection with all Collateral, and the
Obligations shall in no way be affected or diminished by reason of the loss,
destruction, damage or theft of any of the Collateral or its unavailability for
any reason. Without limiting the generality of the foregoing, (a) no Secured
Party (i) has any duty (either before or after an Event of Default) to collect
any amounts in respect of the Collateral or to preserve any rights relating to
the Collateral, or (ii) has any obligation to clean-up or otherwise prepare the
Collateral for sale, and (b) each Debtor shall remain obligated and liable under
each contract or agreement included in the Collateral to be observed or
performed by such Debtor thereunder. No Secured Party shall have any obligation
or liability under any such contract or agreement by reason of or arising out of
this Agreement or the receipt by any Secured Party of any payment relating to
any of the Collateral, nor any Secured Party be obligated in any manner to
perform any of the obligations of any Debtor under or pursuant to any such
contract or agreement, to make inquiry as to the nature or sufficiency of any
payment received by any Secured Party in respect of the Collateral or as to the
sufficiency of any performance by any party under any such contract or
agreement, to present or file any claim, to take any action to enforce any
performance or to collect the payment of any amounts which may have been
assigned to the Secured Parties or to which any Secured Party may be entitled at
any time or times.
13. Security Interest Absolute. All rights of the Secured Parties
and all obligations of the Debtors hereunder, shall be absolute and
unconditional, irrespective of: (a) any lack of validity or enforceability of
this Agreement, the Debentures or any agreement entered into in connection with
the foregoing, or any portion hereof or thereof; (b) any change in the time,
manner or place of payment or performance of, or in any other term of, all or
any of the Obligations, or any other amendment or waiver of or any consent to
any departure from the Debentures or any other agreement entered into in
connection with the foregoing; (c) any exchange, release or nonperfection of any
of the Collateral, or any release or amendment or waiver of or consent to
departure from any other collateral for, or any guaranty, or any other security,
for all or any of the Obligations; (d) any action by the Secured Parties to
obtain, adjust, settle and cancel in its sole discretion any insurance claims or
matters made or arising in connection with the Collateral; or (e) any other
circumstance which might otherwise constitute any legal or equitable defense
available to a Debtor, or a discharge of all or any part of the Security
Interest granted hereby. Until the Obligations shall have been paid and
performed in full, the rights of the Secured Parties shall continue even if the
Obligations are barred for any reason, including, without limitation, the
running of the statute of limitations or bankruptcy. Each Debtor expressly
waives presentment, protest, notice of protest, demand, notice of nonpayment and
demand for performance. In the event that at any time any transfer of any
18
Collateral or any payment received by the Secured Parties hereunder shall be
deemed by final order of a court of competent jurisdiction to have been a
voidable preference or fraudulent conveyance under the bankruptcy or insolvency
laws of the United States, or shall be deemed to be otherwise due to any party
other than the Secured Parties, then, in any such event, each Debtor's
obligations hereunder shall survive cancellation of this Agreement, and shall
not be discharged or satisfied by any prior payment thereof and/or cancellation
of this Agreement, but shall remain a valid and binding obligation enforceable
in accordance with the terms and provisions hereof. Each Debtor waives all right
to require the Secured Parties to proceed against any other person or entity or
to apply any Collateral which the Secured Parties may hold at any time, or to
marshal assets, or to pursue any other remedy. Each Debtor waives any defense
arising by reason of the application of the statute of limitations to any
obligation secured hereby.
14. Term of Agreement. This Agreement and the Security Interest
shall terminate on the date on which all payments under the Debentures have been
indefeasibly paid in full and all other Obligations have been paid or
discharged; provided, however, that all indemnities of the Debtors contained in
this Agreement shall survive and remain operative and in full force and effect
regardless of the termination of this Agreement.
15. Power of Attorney; Further Assurances.
(a) Each Debtor authorizes the Secured Parties, and does
hereby make, constitute and appoint the Secured Parties and their
respective officers, agents, successors or assigns with full power of
substitution, as such Debtor's true and lawful attorney-in-fact, with
power, in the name of the various Secured Parties or such Debtor, to,
after the occurrence and during the continuance of an Event of Default,
(i) endorse any note, checks, drafts, money orders or other instruments
of payment (including payments payable under or in respect of any
policy of insurance) in respect of the Collateral that may come into
possession of the Secured Parties; (ii) to sign and endorse any
financing statement pursuant to the UCC or any invoice, freight or
express xxxx, xxxx of lading, storage or warehouse receipts, drafts
against debtors, assignments, verifications and notices in connection
with accounts, and other documents relating to the Collateral; (iii) to
pay or discharge taxes, liens, security interests or other encumbrances
at any time levied or placed on or threatened against the Collateral;
(iv) to demand, collect, receipt for, compromise, settle and xxx for
monies due in respect of the Collateral; (v) to transfer any
Intellectual Property or provide licenses respecting any Intellectual
Property; and (vi) generally, at the option of the Secured Parties, and
at the expense of the Debtors, at any time, or from time to time, to
execute and deliver any and all documents and instruments and to do all
acts and things which the Secured Parties deem necessary to protect,
preserve and realize upon the Collateral and the Security Interest
granted therein in order to effect the intent of this Agreement and the
Debentures all as fully and effectually as the Debtors might or could
do; and each Debtor hereby ratifies all that said attorney shall
lawfully do or cause to be done by virtue hereof. This power of
attorney is coupled with an interest and shall be irrevocable for the
term of this Agreement and thereafter as long as any of the Obligations
shall be outstanding. The designation set forth herein shall be deemed
to amend and supersede any inconsistent provision in the Organizational
Documents or other documents or agreements to which any Debtor is
19
subject or to which any Debtor is a party. Without limiting the
generality of the foregoing, after the occurrence and during the
continuance of an Event of Default, each Secured Party is specifically
authorized to execute and file any applications for or instruments of
transfer and assignment of any patents, trademarks, copyrights or other
Intellectual Property with the United States Patent and Trademark
Office and the United States Copyright Office.
(b) On a continuing basis, each Debtor will make,
execute, acknowledge, deliver, file and record, as the case may be,
with the proper filing and recording agencies in any jurisdiction,
including, without limitation, the jurisdictions indicated on Schedule
C attached hereto, all such instruments, and take all such action as
may reasonably be deemed necessary or advisable, or as reasonably
requested by the Secured Parties, to perfect the Security Interest
granted hereunder and otherwise to carry out the intent and purposes of
this Agreement, or for assuring and confirming to the Secured Parties
the grant or perfection of a perfected security interest in all the
Collateral under the UCC.
(c) Each Debtor hereby irrevocably appoints the Secured
Parties as such Debtor's attorney-in-fact, with full authority in the
place and instead of such Debtor and in the name of such Debtor, from
time to time in the Secured Parties' discretion, to take any action and
to execute any instrument which the Secured Parties may deem necessary
or advisable to accomplish the purposes of this Agreement, including
the filing, in its sole discretion, of one or more financing or
continuation statements and amendments thereto, relative to any of the
Collateral without the signature of such Debtor where permitted by law,
which financing statements may (but need not) describe the Collateral
as "all assets" or "all personal property" or words of like import, and
ratifies all such actions taken by the Secured Parties. This power of
attorney is coupled with an interest and shall be irrevocable for the
term of this Agreement and thereafter as long as any of the Obligations
shall be outstanding.
16. Notices. All notices, requests, demands and other
communications hereunder shall be subject to the notice provision of the
Purchase Agreement (as such term is defined in the Debentures).
17. Other Security. To the extent that the Obligations are now or
hereafter secured by property other than the Collateral or by the guarantee,
endorsement or property of any other person, firm, corporation or other entity,
then the Secured Parties shall have the right, in its sole discretion, to
pursue, relinquish, subordinate, modify or take any other action with respect
thereto, without in any way modifying or affecting any of the Secured Parties'
rights and remedies hereunder.
18. [RESERVED].
19. Miscellaneous.
(a) No course of dealing between the Debtors and the
Secured Parties, nor any failure to exercise, nor any delay in
exercising, on the part of the Secured Parties, any right, power or
privilege hereunder or under the Debentures shall operate as a waiver
20
thereof; nor shall any single or partial exercise of any right, power
or privilege hereunder or thereunder preclude any other or further
exercise thereof or the exercise of any other right, power or
privilege.
(b) All of the rights and remedies of the Secured Parties
with respect to the Collateral, whether established hereby or by the
Debentures or by any other agreements, instruments or documents or by
law shall be cumulative and may be exercised singly or concurrently.
(c) This Agreement constitutes the entire agreement of
the parties with respect to the subject matter hereof and is intended
to supersede all prior negotiations, understandings and agreements with
respect thereto. Except as specifically set forth in this Agreement, no
provision of this Agreement may be modified or amended except by a
written agreement specifically referring to this Agreement and signed
by the parties hereto.
(d) In the event any provision of this Agreement is held
to be invalid, prohibited or unenforceable in any jurisdiction for any
reason, unless such provision is narrowed by judicial construction,
this Agreement shall, as to such jurisdiction, be construed as if such
invalid, prohibited or unenforceable provision had been more narrowly
drawn so as not to be invalid, prohibited or unenforceable. If,
notwithstanding the foregoing, any provision of this Agreement is held
to be invalid, prohibited or unenforceable in any jurisdiction, such
provision, as to such jurisdiction, shall be ineffective to the extent
of such invalidity, prohibition or unenforceability without
invalidating the remaining portion of such provision or the other
provisions of this Agreement and without affecting the validity or
enforceability of such provision or the other provisions of this
Agreement in any other jurisdiction.
(e) No waiver of any breach or default or any right under
this Agreement shall be considered valid unless in writing and signed
by the party giving such waiver, and no such waiver shall be deemed a
waiver of any subsequent breach or default or right, whether of the
same or similar nature or otherwise.
(f) This Agreement shall be binding upon and inure to the
benefit of each party hereto and its successors and assigns.
(g) Each party shall take such further action and execute
and deliver such further documents as may be necessary or appropriate
in order to carry out the provisions and purposes of this Agreement.
(h) All questions concerning the construction, validity,
enforcement and interpretation of this Agreement shall be governed by
and construed and enforced in accordance with the internal laws of the
State of New York, without regard to the principles of conflicts of law
thereof. Each Debtor agrees that all proceedings concerning the
interpretations, enforcement and defense of the transactions
contemplated by this Agreement and the Debenture (whether brought
against a party hereto or its respective affiliates, directors,
21
officers, shareholders, partners, members, employees or agents) shall
be commenced exclusively in the state and federal courts sitting in the
City of New York, Borough of Manhattan. Each Debtor hereby irrevocably
submits to the exclusive jurisdiction of the state and federal courts
sitting in the City of New York, Borough of Manhattan for the
adjudication of any dispute hereunder or in connection herewith or with
any transaction contemplated hereby or discussed herein, and hereby
irrevocably waives, and agrees not to assert in any proceeding, any
claim that it is not personally subject to the jurisdiction of any such
court, that such proceeding is improper. Each party hereto hereby
irrevocably waives personal service of process and consents to process
being served in any such proceeding by mailing a copy thereof via
registered or certified mail or overnight delivery (with evidence of
delivery) to such party at the address in effect for notices to it
under this Agreement and agrees that such service shall constitute good
and sufficient service of process and notice thereof. Nothing contained
herein shall be deemed to limit in any way any right to serve process
in any manner permitted by law. Each party hereto hereby irrevocably
waives, to the fullest extent permitted by applicable law, any and all
right to trial by jury in any legal proceeding arising out of or
relating to this Agreement or the transactions contemplated hereby. If
any party shall commence a proceeding to enforce any provisions of this
Agreement, then the prevailing party in such proceeding shall be
reimbursed by the other party for its reasonable attorney's fees and
other costs and expenses incurred with the investigation, preparation
and prosecution of such proceeding.
(i) This Agreement may be executed in any number of
counterparts, each of which when so executed shall be deemed to be an
original and, all of which taken together shall constitute one and the
same Agreement. In the event that any signature is delivered by
facsimile transmission, such signature shall create a valid binding
obligation of the party executing (or on whose behalf such signature is
executed) the same with the same force and effect as if such facsimile
signature were the original thereof.
(j) All Debtors shall jointly and severally be liable for
the obligations of each Debtor to the Secured Parties hereunder.
(k) Each Debtor shall indemnify, reimburse and hold
harmless the Secured Parties and their respective partners, members,
shareholders, officers, directors, employees and agents (collectively,
"Indemnitees") from and against any and all losses, claims,
liabilities, damages, penalties, suits, costs and expenses, of any kind
or nature, (including fees relating to the cost of investigating and
defending any of the foregoing) imposed on, incurred by or asserted
against such Indemnitee in any way related to or arising from or
alleged to arise from this Agreement or the Collateral, except any such
losses, claims, liabilities, damages, penalties, suits, costs and
expenses which result from the gross negligence or willful misconduct
of the Indemnitee as determined by a final, nonappealable decision of a
court of competent jurisdiction. This indemnification provision is in
addition to, and not in limitation of, any other indemnification
provision in the Debentures, the Purchase Agreement (as such term is
defined in the Debentures) or any other agreement, instrument or other
document executed or delivered in connection herewith or therewith.
22
(l) Nothing in this Agreement shall be construed to
subject any Secured Party to liability as a partner in any Debtor or
any if its direct or indirect subsidiaries that is a partnership or as
a member in any Debtor or any of its direct or indirect subsidiaries
that is a limited liability company, nor shall any Secured Party be
deemed to have assumed any obligations under any partnership agreement
or limited liability company agreement, as applicable, of any such
Debtor or any if its direct or indirect subsidiaries or otherwise,
unless and until any such Secured Party exercises its right to be
substituted for such Debtor as a partner or member, as applicable,
pursuant hereto.
(m) To the extent that the grant of the security interest
in the Collateral and the enforcement of the terms hereof require the
consent, approval or action of any partner or member, as applicable, of
any Debtor or any direct or indirect subsidiary of any Debtor or
compliance with any provisions of any of the Organizational Documents,
the Debtors hereby grant such consent and approval and waive any such
noncompliance with the terms of said documents.
(n) Notwithstanding anything herein to the contrary, the
security interest created hereunder and the exercise by the Secured
Parties of their rights and remedies with respect to the Pledged
Securities are subject to the Xxxxx Fargo Security Interest and the
rights and remedies of the holders of the Xxxxx Fargo Security Interest
with respect to the Pledged Securities subject to the Xxxxx Fargo
Security Interest.
[SIGNATURE PAGES FOLLOW]
23
IN WITNESS WHEREOF, the parties hereto have caused this Security
Agreement to be duly executed on the day and year first above written.
VELOCITY ASSET MANAGEMENT INC.
By: /s/ XXXXX X. XXXXXXXXX
----------------------------------
Name: Xxxxx X. Xxxxxxxxx
Title: CFO and Chief Legal Counsel
X. XXXXXX INC.
By: /s/ W. XXXXX XXXXX, XX.
----------------------------------
Name: W. Xxxxx Xxxxx, Xx.
Title: President
TLOP ACQUISITION COMPANY, LLC
By: /s/ XXXXX X. XXXXXXXXX
----------------------------------
Name: Xxxxx X. Xxxxxxxxx
Title: CFO and Chief Legal Counsel
VOM, LLC
By: /s/ W. XXXXX XXXXX, XX.
----------------------------------
Name: W. Xxxxx Xxxxx, Xx.
Title: President
SH SALES, INC.
By: /s/ W. XXXXX XXXXX, XX.
----------------------------------
Name: W. Xxxxx Xxxxx, Xx.
Title: President
[SIGNATURE PAGE OF HOLDERS FOLLOWS]
24
[SIGNATURE PAGE OF HOLDERS TO VCYA SA]
Name of Purchaser: DKR SoundShore Oasis Holding Fund, Ltd.
Signature of Authorized Signatory of Purchaser: /s/ XXXX XXXXXXX
Name of Authorized Signatory: Xxxx Xxxxxxx
Title of Authorized Signatory: Director
25
SCHEDULE A
Principal Place of Business of Debtors:
Locations Where Collateral is Located or Stored:
26
SCHEDULE B
27
SCHEDULE C
28
SCHEDULE D
Organizational Identification Numbers
29
SCHEDULE E
Names; Mergers and Acquisitions
30
SCHEDULE F
Intellectual Property
31
SCHEDULE G
Account Debtors
32
SCHEDULE H
Pledged Securities
33
ANNEX A
to
SECURITY
AGREEMENT
FORM OF ADDITIONAL DEBTOR JOINDER
Security Agreement dated as of [_____ ___, 2005 made by
Velocity Asset Management, Inc.
and its subsidiaries party thereto from time to time, as Debtors
to and in favor of
the Secured Parties identified therein (the "Security Agreement")
Reference is made to the Security Agreement as defined above;
capitalized terms used herein and not otherwise defined herein shall have the
meanings given to such terms in, or by reference in, the Security Agreement.
The undersigned hereby agrees that upon delivery of this Additional
Debtor Joinder to the Secured Parties referred to above, the undersigned shall
(a) be an Additional Debtor under the Security Agreement, (b) have all the
rights and obligations of the Debtors under the Security Agreement as fully and
to the same extent as if the undersigned was an original signatory thereto and
(c) be deemed to have made the representations and warranties set forth in
Section ___ therein as of the date of execution and delivery of this Additional
Debtor Joinder. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, THE
UNDERSIGNED SPECIFICALLY GRANTS TO THE SECURED PARTIES A SECURITY INTEREST IN
THE COLLATERAL AS MORE FULLY SET FORTH IN THE SECURITY AGREEMENT AND
ACKNOWLEDGES AND AGREES TO THE WAIVER OF JURY TRIAL PROVISIONS SET FORTH
THEREIN.
Attached hereto are supplemental and/or replacement Schedules to the
Security Agreement, as applicable.
An executed copy of this Joinder shall be delivered to the Secured
Parties, and the Secured Parties may rely on the matters set forth herein on or
after the date hereof. This Joinder shall not be modified, amended or terminated
without the prior written consent of the Secured Parties.
IN WITNESS WHEREOF, the undersigned has caused this Joinder to be
executed in the name and on behalf of the undersigned.
[Name of Additional Debtor]
By:
Name:
Title:
Address:
Dated:
