SECURITY AGREEMENT
Exhibit 10.5
This
SECURITY AGREEMENT, dated as of November 27, 2019 (this
“Agreement”), is among
Exactus, Inc., a Nevada corporation (the “Company”), any subsidiary
and affiliate of the Company that is a signatory hereto either now
or joined in the future (such subsidiaries, the “Guarantors” and, together
with the Company, the “Debtors”) and 3i, LP, as
a secured party and Agent, and the other secured parties signatory
hereto their endorsees, transferees and assigns (collectively, the
“Secured
Parties”).
W I T N E S S E T H:
WHEREAS, pursuant
to that certain Securities Purchase Agreement, dated as of even
date herewith (the “Purchase Agreement”), the
Secured Parties have agreed to fund the Company with respect to the
issuance of certain Senior Secured Convertible Notes, subject to the terms
therein, issued by the Company to the Secured Parties (the
“Notes”);
and together with any other securities that may be issued from
time-to-time (the “Securities”).
WHEREAS, pursuant
to a certain Subsidiary Guarantee, dated as of the date hereof (the
“Guarantee”), the
Guarantors have jointly and severally agreed to guarantee and act
as surety for payment of such Notes; and
WHEREAS, in order
to induce the Secured Parties to extend the loans evidenced by the
Notes, 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 and through the Agent (as defined in Section 18 hereof), a
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 Notes and the
Guarantors’ obligations under the Guarantee.
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.
(a) “Collateral”
means the collateral in which the Secured Parties are granted a
security interest by this Agreement and which shall include all of
the assets of the Debtors, including 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 or Pledged Interests (as defined
below):
(i) All
goods, including, without limitation, (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;
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(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 or Pledged
Interests, 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, Intellectual
Property 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;
(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 and all rights
arising under or in connection with the Pledged Securities or
Pledged Interests, 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 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.
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(c) “Majority
in Interest” means, at any time of determination, the
majority in interest (based on then-outstanding principal amounts
of Notes at the time of such determination) of the Secured
Parties.
(d)
“Necessary
Endorsement” means undated stock powers endorsed in
blank or other proper instruments of assignment duly executed and
such other instruments or documents as the Agent (as that term is
defined below) 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 Securities,
the other Transaction Documents (as defined in the Purchase
Agreement), 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, interest, and any other amounts owed on the Note
as set forth in the Note; (ii) any and all obligations due under
the Transaction Documents (as defined in the Purchase Agreement),
(iii) 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 Securities, the other Transaction
Documents (as defined in the Purchase Agreement) and any other
instruments, agreements or other documents executed and/or
delivered in connection herewith or therewith; and (iv) 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 articles of
incorporation, 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).
(g) “Permitted
Liens” means the following:
(i) Liens
imposed by law for taxes that are not yet due or are being
contested in good faith, which in each
case, have been appropriately reserved for;
(ii) Carriers’,
warehousemen’s, mechanics’, materialmen’s,
repairmen’s and other like Liens imposed by law, arising in
the ordinary course of business and securing obligations that are
not overdue by more than thirty (30) days or are being contested in
good faith;
(iii) Pledges
and deposits made in the ordinary course of business in compliance
with workers’ compensation, unemployment insurance and other
social security laws or regulations;
(iv) Deposits
to secure the performance of bids, trade contracts, leases,
statutory obligations, surety and appeal bonds, performance bonds
and other obligations of a like nature, in each case in the
ordinary course of business;
(v) Liens
under this Agreement; and
(vi) Any
other liens in favor of the Secured Parties.
(h) “Pledged
Interests” shall have the meaning ascribed to such
term in Section 4(j).
(i) “Pledged
Securities” shall have the meaning ascribed to such
term in Section 4(i).
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(j) “UCC”
means the Uniform Commercial Code of the State of New York and any
other applicable law of any state or states that 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 Security Interest in Collateral. As an inducement for the
Secured Parties to fund the Company 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 perfected, first priority 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 (a “Security Interest” and,
collectively, the “Security
Interests”).
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 Agent (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. The Debtors are, contemporaneously
with the execution hereof, delivering to Agent, or have previously
delivered to Agent, a true and correct copy of each Organizational
Document governing any of the Pledged Securities.
4. Representations,
Warranties, Covenants and Agreements of the Debtors. Except
as set forth under the corresponding Section of the disclosure
schedules delivered to the Secured Parties concurrently herewith
(the “Disclosure
Schedules”), which Disclosure Schedules shall be
deemed a part hereof, 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.
(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 set forth on Schedule A. 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 and as set forth on Schedule B attached hereto, the
Debtors are the sole owners 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 Interests. Except as set forth on Schedule C attached hereto,
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) covering or affecting
any of the Collateral. Except as set forth on Schedule C attached hereto and
except pursuant to this Agreement, as 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 other
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).
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(d) No
written claim has been received that any Collateral or any
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
thirty (30) days prior to such relocation (i) written notice of
such relocation and the new location thereof (which must be within
the United States) and (ii) evidence that appropriate financing
statements under the UCC and other necessary documents have been
filed and recorded and other steps have been taken to perfect the
Security Interests to create in favor of the Secured Parties a
valid, perfected and continuing perfected first priority lien in
the Collateral.
(f) This
Agreement creates in favor of the Secured Parties a valid first
priority security interest in the Collateral, subject only to
Permitted Liens, 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 (i) the filing of the Uniform Commercial Code financing
statements referred to in the immediately following paragraph, (ii)
]the recordation of the Intellectual Property Security Agreement
(as defined in Section 4(p) hereof) with respect to copyrights and
copyright applications in the United States Copyright Office
referred to in paragraph (mm), (iii) the recordation of the
Intellectual Property Security Agreement (as defined in Section
4(p) hereof) with respect to patents and trademarks of the Debtors
in the United States Patent and Trademark Office referred to in
paragraph (oo), (iv) 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, (v) if there is any investment property or deposit account
included as Collateral that can be perfected by
“control” through an account control agreement, the
execution and delivery of securities account control agreements
satisfying the requirements of 9-106 of the UCC with respect to
each such investment property of the Debtors, and (vi) the delivery
of the certificates and other instruments provided in Section 3,
Section 4(aa) and Section 4(cc), no action is necessary to create,
perfect or protect the security interests created hereunder.
Without limiting the generality of the foregoing, except for the
foregoing, 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 (x) the
execution, delivery and performance of this Agreement, (y) the
creation or perfection of the Security Interests created hereunder
in the Collateral or (z) the enforcement of the rights of the Agent
and the Secured Parties hereunder.
(g) Each
Debtor hereby authorizes the Agent to file one or more financing
statements under the UCC, with respect to the Security Interests,
with the proper filing and recording agencies in any jurisdiction
deemed proper by it.
(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. If any, all
required consents (including, without limitation, from stockholders
or creditors of any Debtor) necessary for any Debtor to enter into
and perform its obligations hereunder have been
obtained.
(i) The
capital stock and other equity interests listed on Schedule H hereto (the
“Pledged
Securities”) represent all 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. 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.
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(j) The
ownership and other equity interests in partnerships and limited
liability companies (if any) included in the Collateral, including,
without limitation, 100% of the membership interests of Exactus One
World, LLC, a Oregon limited liability company (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.
All of the Pledged Interests are validly issued, fully paid and
nonassessable, and the Company is the legal and beneficial owner of
the Pledged Interests, free and clear of any lien, security
interest or other encumbrance except for the security interests
created by this Agreement and other Permitted Liens.
(k) Except
for Permitted Liens, each Debtor shall at all times maintain the
liens and Security Interests 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 14 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 Agent, each Debtor will sign
and deliver to the Agent on behalf of the Agent at any time or from
time to time one or more financing statements pursuant to the UCC
in form reasonably satisfactory to the Agent and will pay the cost
of filing the same in all public offices wherever filing is, or is
deemed by the Agent 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 Interests hereunder, and each Debtor shall obtain and
furnish to the Agent 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 Interests
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, sales of inventory by a Debtor in its ordinary course
of business and the replacement of worn-out or obsolete equipment
by a Debtor in its ordinary course of business) without the prior
written consent of the Agent
(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, including
Collateral hereafter acquired, 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
Agent, that (a) the Agent will be named as lender-loss-payee 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 Agent and
such cancellation or change shall not be effective as to the Agent
for at least thirty (30) days after receipt by the Agent of such
notice, unless the effect of such change is to extend or increase
coverage under the policy; and (c) the Agent 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
Notes) 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 (as defined in the Note) or
an Event of Default occurs and is continuing or in excess of
$100,000 for any occurrence or series of related occurrences, upon
approval by Secured Parties, which approval shall not be
unreasonably withheld, delayed, denied or conditioned, 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 paid to the Agent on behalf of the Secured
Parties and, if received by such Debtor, shall be held in trust for
the Secured Parties and immediately paid over to the Agent unless
otherwise directed in writing by the Agent. Copies of such policies
or the related certificates, in each case, naming the Agent as
lender-loss-payee and additional insured shall be delivered to the
Agent at least annually and at the time any new policy of insurance
is issued.
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(o) Each
Debtor shall, within ten (10) days of obtaining knowledge thereof,
advise the Secured Parties, in sufficient detail, of any material
adverse change in the Collateral, and of the occurrence of any
event that would have a material adverse effect on the value of the
Collateral or on the Secured Parties’ security interest,
through the Agent, therein.
(p) Each
Debtor shall promptly execute and deliver to the Agent such further
deeds, mortgages, assignments, security agreements, financing
statements or other instruments, documents, certificates and
assurances and take such further action as the Agent may from time
to time request and may in its sole discretion deem necessary to
perfect, protect or enforce the Secured Parties’ 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 has been granted a security interest hereunder,
substantially in a form reasonably acceptable to the Agent, which
Intellectual Property Security Agreement, other than as stated
therein, shall be subject to all of the terms and conditions
hereof.
(q) Upon
reasonable prior notice (so long as no
Event of Default (as defined in the Note) or a breach under any of the Transaction Documents
(as defined in the Purchase Agreement) has occurred or continuing,
which in either such event, no prior notice is required),
each Debtor shall permit the Secured Parties and its
representatives and agents to inspect the Collateral during normal
business hours and to make copies of records pertaining to the
Collateral as may be reasonably requested by the Secured Parties
from time to time.
(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 thirty (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 the perfection of the Security Interests granted and
evidenced by this Agreement.
(w) Except
in the ordinary course of business, 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 the Agent, which shall not be
unreasonably withheld, delayed, denied, or
conditioned.
(x) No
Debtor may relocate its chief executive office to a new location
without providing thirty (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 the perfection of the Security Interests granted and
evidenced by this Agreement.
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(y) Each
Debtor was organized and remains organized solely under the laws of
the state set forth next to such Debtor’s name in
Schedule D attached
hereto, which Schedule
D 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
Schedule D attached
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 forth on Schedule E for the preceding
five (5) 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 Agent.
(bb) Each
Debtor, in its capacity as issuer, hereby agrees to comply with any
and all orders and instructions of Agent 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 Agent, 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 Agent, to be entered into and delivered to
the Agent for the benefit of 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 Agent 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 reasonably satisfactory to
the Agent.
(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
Agent.
(hh) Each
Debtor shall immediately provide written notice to the Secured
Parties of any and all accounts that are equal to or in excess of
$10,000 and which arise out of contracts with any governmental
authority and, to the extent necessary to perfect or continue the
perfected status of the Security Interests in such accounts and
proceeds thereof, shall execute and deliver to the Agent an
assignment of claims for such accounts and cooperate with the Agent
in taking any other steps required, in its 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 Interests in such accounts and proceeds
thereof.
-8-
(ii) Each
Debtor shall cause each subsidiary 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.
Concurrently 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 Agent may reasonably request. Upon delivery of
the foregoing to the Agent, 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 and Pledged Interests to
comply with the covenants and agreements set forth herein and in
the Transaction Documents (as defined in the Purchase
Agreement).
(kk)
Each Debtor shall register the pledge of the applicable Pledged
Securities and Pledged Interests on the books of such Debtor. Each
Debtor shall notify each issuer of Pledged Securities and Pledged
Interests to register the pledge of the applicable Pledged
Securities and Pledged Interests in the name of the Agent on the
books of such issuer. Further, except with respect to certificated
securities delivered to the Agent, the applicable Debtor shall
deliver to Agent 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 and Pledged Interests, which
acknowledgement shall confirm that: (a) it has registered the
pledge on its books and records; and (b) at any time directed by
Agent during the continuation of an Event of Default, such issuer
will transfer the record ownership of such Pledged Securities or
Pledged Interests, as applicable, into the name of any designee of
Agent, will take such steps as may be necessary to effect the
transfer, and will comply with all other instructions of Agent
regarding such Pledged Securities and Pledged Interests without the
further consent of the applicable Debtor.
(ll) In
the event that, upon an occurrence of an Event of Default, Agent
shall sell all or any of the Pledged Securities or Pledged
Interests to another party or parties (herein called the
“Transferee”) or shall
purchase or retain all or any of the Pledged Securities or Pledged
Interests, each Debtor shall, to the extent applicable: (i) deliver
to Agent 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 (but not including any items
subject to the attorney-client privilege related to this Agreement
or any of the transactions hereunder); (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 and Pledged Interests to the Transferee or the purchase
or retention of the Pledged Securities and Pledged Interests by
Agent and allow the Transferee or Agent 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 Agent notice whenever it acquires (whether
absolutely or by license) or creates any additional material
Intellectual Property.
-9-
(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 Agent may reasonably request,
in order to perfect 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
Federal Assignment of Claims Act or any similar federal, state or
local statute or rule in respect of such Collateral.
(qq) Until
the Obligations shall have been paid and performed in full, the
Company covenants that it shall promptly direct any direct or
indirect subsidiary of the Company formed or acquired after the
date hereof to enter into a guarantee in favor of the Secured
Party, in the form of attached as an exhibit to the Purchase
Agreement.
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 by Debtors that the pledge of
such equity or ownership interests pursuant to this Agreement or
the enforcement of any of Agent’s 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
Note);
(b) The
occurrence of an event of default or breach under any Transaction
Documents (as defined in the Purchase Agreement);
(c) Any
representation or warranty of any Debtor in this Agreement shall
prove to have been incorrect in any material respect when
made;
(d) The
failure by any Debtor to observe or perform any of its obligations
hereunder for five (5) 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
(e) 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.
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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 Interests, whether
payable pursuant to the Transaction Documents (as defined in the
Purchase Agreement) 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 Agent, pro-rata in proportion to their
respective then-currently issued and outstanding Principal Amount
for application to the satisfaction of the
Obligations.
(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 Pledged Interests or instruments
representing Pledged Securities or Pledged Interests 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 or Pledged Interests (whether as an addition to, in
substitution of, or in exchange for, such Pledged Securities,
Pledged Interests 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 Agent on or before the close of business on the fifth
(5th)
business day following the receipt thereof by such Debtor, in the
exact form received together with the Necessary Endorsements, to be
held by Agent 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 the Agent, shall have the right
to exercise all of the remedies conferred hereunder and under the
Transaction Documents (as defined in the Purchase Agreement), and
the Secured Parties shall have all the rights and remedies of a
secured party under the UCC. Without limitation, the Agent, for the
benefit of the Secured Parties, shall have the following rights and
powers:
(i) The
Agent 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 Agent at
places which the Agent shall reasonably select, whether at such
Debtor’s premises or elsewhere, and make available to the
Agent, without rent, all of such Debtor’s respective premises
and facilities for the purpose of the Agent taking possession of,
removing or putting the Collateral in saleable or disposable
form.
(ii) Upon
notice to the Debtors by Agent, 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,
Agent shall have the right to receive, for the benefit of the
Secured Parties, any interest, cash dividends or other payments on
the Collateral and, at the option of Secured Parties, to exercise
in such Agent’s discretion all voting rights pertaining
thereto. Without limiting the generality of the foregoing, Agent
shall have the right (but not the obligation) to exercise all
rights with respect to the Collateral as it were the sole and
absolute owner thereof, including, without limitation, to vote
and/or to exchange, at its sole 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
Agent 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 Agent 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 Agent, for the benefit of 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.
-11-
(iv) The
Agent 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 Agent, on behalf of the Secured
Parties, and to enforce the Debtors’ rights against such
account debtors and obligors.
(v) The
Agent, for the benefit of the Secured Parties, may (but is not
obligated to) direct any financial intermediary or any other person
or entity holding any investment property to transfer the same to
the Agent, on behalf of the Secured Parties, or its
designee.
(vi) The
Agent may (but is 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
Agent shall 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 Agent may sell the Collateral without
giving any warranties and may specifically disclaim such
warranties. If the Agent 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 (except as shall be
required by applicable statute and cannot be waived) any and all
rights that it may have to a judicial hearing in advance of the
enforcement of any of the Agent’s 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 Agent to further exercise rights and
remedies under this Section 8 or elsewhere provided by agreement or
applicable law, each Debtor hereby grants to the Agent, for the
benefit of the Agent and the Secured Parties, an irrevocable,
nonexclusive license (exercisable 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 or from payments made on
account of any insurance policy insuring any portion of the
Collateral 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 Agent
in enforcing the Secured Parties’ 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 issued and outstanding
Securities 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 12.5% 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. 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 Agent may be
limited in its ability to effect a sale to the public of all or
part of the Pledged Securities or Pledged Interests 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 or Pledged Interests 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 or Pledged Interests were sold to the public,
and that Agent has no obligation to delay the sale of any Pledged
Securities or Pledged Interests for the period of time necessary to
register the Pledged Securities or Pledged Interests for sale to
the public under the Securities Laws. Each Debtor shall cooperate
with Agent in its attempt to satisfy any requirements under the
Securities Laws (including, without limitation, registration
thereunder if requested by Agent) applicable to the sale of the
Pledged Securities and Pledged Interests by Agent.
-12-
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 Agent. The
Debtors shall also pay all other claims and charges which in the
reasonable opinion of the Agent are reasonably likely to prejudice,
imperil or otherwise affect the Collateral or the Security
Interests therein. The Debtors will also, upon demand, pay to the
Agent 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 Agent, for the benefit of the Secured Parties,
may incur in connection with the creation, perfection, protection,
satisfaction, foreclosure, collection or enforcement of the
Security Interest and the preparation, administration, continuance,
amendment or enforcement of this Agreement and pay to the Agent 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 Agent, for the benefit of the Secured Parties, and 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 Transaction Documents (as
defined in the Purchase Agreement). Until so paid, any fees payable
hereunder shall be added to the amounts owed under the Transaction
Documents (as defined in the Purchase Agreement) 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 and except as required by applicable law, (a)
neither the Agent nor any 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. Neither the Agent nor any 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 the
Agent or any Secured Party of any payment relating to any of the
Collateral, nor shall the Agent or 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 the Agent
or 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 Agent or to which the Agent or
any Secured Party may be entitled at any time or
times.
13. Security
Interests Absolute. All rights of the Secured Parties and
all obligations of each Debtor hereunder, shall be absolute and
unconditional, irrespective of: (a) any lack of validity or
enforceability of this Agreement, the Securities, the Transaction
Documents (as defined in the Purchase Agreement), or any agreement
entered into in connection with the foregoing, or any portion
hereof or thereof, against any other Debtor or Guarantor; (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 Transaction Documents (as defined in the Purchase Agreement) 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 guarantee, 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
Interests 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. 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
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.
-13-
14. Term
of Agreement. This Agreement shall terminate on the date on
which all payments under the Securities and the Transaction
Documents (as defined in the Purchase Agreement) (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 Agent, and does hereby make, constitute and
appoint the Agent and its 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 Agent 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 Agent; (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 Agent, 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 Agent deems necessary to protect, preserve and
realize upon the Collateral and the Security Interests granted
therein in order to effect the intent of this Agreement and the
Transaction Documents (as defined in the Purchase Agreement) 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 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
Agent, to perfect the Security Interests granted hereunder and
otherwise to carry out the intent and purposes of this Agreement,
or for assuring and confirming to the Agent the grant or perfection
of a perfected security interest in all the Collateral under the
UCC.
(c) Each
Debtor hereby irrevocably appoints the Agent 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 Agent’s discretion, to take any action and to execute any
instrument which the Agent 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 Agent. 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.
-14-
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 Agent 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. Appointment
of Agent. The Secured Parties hereby appoint 3i, LP to act
as their agent ( “Agent”) for purposes of
exercising any and all rights and remedies of the Secured Parties
hereunder. The Agent shall have the rights, responsibilities and
immunities set forth in Annex B hereto.
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 Transaction Documents (as defined in the Purchase
Agreement) shall operate as a waiver 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, the Securities or the
Transaction Documents (as defined in the Purchase Agreement) or by
any other agreements, instruments or documents or by law shall be
cumulative and may be exercised singly or
concurrently.
(c) This
Agreement, together with the exhibits and schedules hereto,
contains the entire understanding of the parties with respect to
the subject matter hereof and supersede all prior agreements and
understandings, oral or written, with respect to such matters,
which the parties acknowledge have been merged into this Agreement
and the exhibits and schedules hereto. No provision of this
Agreement may be waived, modified, supplemented or amended except
in a written instrument signed, in the case of an amendment, by the
Debtors and the Secured Parties holding a Majority in Interest or
more of the Principal Amount, as defined in the Note, then issued
and outstanding, or, in the case of a waiver, by the party against
whom enforcement of any such waived provision is sought provided,
however, that no such waiver,
modification, supplement or amendment,
as applied to any provision of this Agreement, shall, without the
written consent of that particular Secured Party disproportionally
and adversely affect any rights under this Agreement of such
Secured Party.
(d) If
any term, provision, covenant or restriction of this Agreement is
held by a court of competent jurisdiction to be invalid, illegal,
void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full
force and effect and shall in no way be affected, impaired or
invalidated, and the parties hereto shall use their commercially
reasonable efforts to find and employ an alternative means to
achieve the same or substantially the same result as that
contemplated by such term, provision, covenant or restriction. It
is hereby stipulated and declared to be the intention of the
parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of
such that may be hereafter declared invalid, illegal, void or
unenforceable.
(e) No
waiver of any default with respect to any provision, condition or
requirement of this Agreement shall be deemed to be a continuing
waiver in the future or a waiver of any subsequent default or a
waiver of any other provision, condition or requirement hereof, nor
shall any delay or omission of any party to exercise any right
hereunder in any manner impair the exercise of any such
right.
(f) This
Agreement shall be binding upon and inure to the benefit of the
parties and their successors and permitted assigns. The Company and
the Guarantors may not assign this Agreement or any rights or
obligations hereunder without the prior written consent of each
Secured Party (other than by merger). Any Secured Party may assign
any or all of its rights under this Agreement to any Person (as
defined in the Purchase Agreement) to whom such Secured Party
assigns or transfers any Obligations, provided such transferee
agrees in writing to be bound, with respect to the transferred
Obligations, by the provisions of this Agreement that apply to the
“Secured Parties.”
-15-
(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) Except
to the extent mandatorily governed by the jurisdiction or situs
where the Collateral is located, 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. Except to the
extent mandatorily governed by the jurisdiction or situs where the
Collateral is located, each Debtor agrees that all proceedings
concerning the interpretations, enforcement and defense of the
transactions contemplated by this Agreement and the Transaction
Documents (as defined in the Purchase Agreement) (whether brought
against a party hereto or its respective affiliates, directors,
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. Except to
the extent mandatorily governed by the jurisdiction or situs where
the Collateral is located, 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, 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.
(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 Agent and
the Secured Parties and their respective partners, members,
shareholders, officers, directors, employees and agents (and any
other persons with other titles that have similar functions)
(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 Purchase Agreement,
the Transaction Documents (as defined in the Purchase Agreement),
or any other agreement, instrument or other document executed or
delivered in connection herewith or therewith.
(l) Nothing
in this Agreement shall be construed to subject Agent or 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 Agent or 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 of 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 represent that all
such consents and approvals have been obtained.
[SIGNATURE
PAGE OF DEBTORS FOLLOWS]
-16-
IN
WITNESS WHEREOF, the parties hereto have caused this Security
Agreement to be duly executed on the day and year first above
written.
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By:
/s/ Xxxxxxxx
Xxxx
Name:
Xxxxxxxx Xxxx
Title:
President & CEO
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[SIGNATURE
PAGE OF HOLDERS FOLLOWS]
-17-
[SIGNATURE
PAGE OF HOLDERS TO SECURITY AGREEMENT]
Name of
Secured Party: 3i,
LP
Signature of Authorized Signatory of Secured Party:
/s/ Xxxxx
Xxxxxx
Name of
Authorized Signatory: Xxxxx Xxxxxx
Title
of Authorized Signatory: Authorized Signer
-18-
DISCLOSURE SCHEDULES
(Security
Agreement)
The
following are the Disclosure Schedules (the “Disclosure Schedules”)
referred to in that certain Security Agreement, dated as of
November 27, 2019 (the “Agreement”), by and
between Exactus, Inc., a Nevada corporation (the
“Company”),
any subsidiary and affiliate of the Company that is a signatory
hereto either now or joined in the future (the “Subsidiaries”, and,
together with the Company, the “Debtors”) and the
holder(s) of the Note (as defined in the Agreement), their
endorsees, transferees and assigns (collectively, the
“Secured
Parties”).
-19-
SCHEDULE A
Principal Place of Business of Debtors:
Locations Where Collateral is Located or Stored
Exactus
Offices:
00 XX
0xx
Xxxxxx
Xxxxx
00
Xxxxxx
Xxxxx, Xxxxxxx 00000
00 XX
0xx
Xxxxxx
Xxxxx
00
Xxxxxx
Xxxxx, Xxxxxxx 00000
00 XX
0xx
Xxxxxx
Xxxxx
000
Xxxxxx
Xxxxx, Xxxxxxx 00000
-20-
SCHEDULE B
Liens on Assets
None
-21-
SCHEDULE C
Governmental or regulatory filing evidencing liens on
collateral
None
-22-
SCHEDULE D
Organizational Information on Subsidiaries of Exactus,
Inc.
Exactus,
Inc. – Nevada Corporation
-23-
SCHEDULE E
See
Schedule H below for subsidiary information.
Exactus,
Inc. (the Debtor) consists of multiple brands.
-24-
SCHEDULE F
Patents & trademarks listing
See
patent information set forth in separate attachment
(None)
See
trademark information set forth in separate
attachment:
Green
Goddess Extracts
-25-
SCHEDULE G
Account debtors’ governmental authority
None
-26-
SCHEDULE H
Pledged ownership & equity interests in partnerships and
LLC’s
Exactus
One World, LLC (organized in Oregon) – 50.1%
interest
Paradise
Medlife, LLC (organized in Florida) – 51%
interest
-27-
SCHEDULE I
Written claims upon the Collateral
Legal:
In July
2018 we received notice of the expiration and termination of a
license agreement dated January 19, 2016 acquired through the Share
Exchange by our subsidiary Exactus BioSolutions, Inc that the
Company recognized as an intangible asset from Digital Diagnostics,
Inc. (“Digital Diagnostics”) related to our FibriLyzer
and MatriLyzer technologies. In addition, on December 14,
2018 we received a letter from KD Innovation, Ltd.
(“KDI”) and Xx. Xxxxxxx Xxxxxxxx, our former director
seeking payment for alleged past due consulting fees from June 2017
through November 2018 pursuant to a Consulting Agreement dated
January 20, 2016. On January 23, 2019, Digital Diagnostics,
made a demand for compensation against the Company in connection
with an alleged breach of a License Agreement. Under the terms of
these agreements, the parties are required to arbitrate
claims. Although we dispute the material allegations made by
Digital Diagnostics and KDI, if such actions were successful
damages could be awarded against us.
On
December 14, 2018, the Company received a termination and demand
notice from KD Innovation, Ltd, an entity 100% owned by a former
Board member, in connection with a consulting agreement KDI entered
into with the Company’s subsidiary, Exactus Biosolutions,
Inc., on or about January 20, 2016. No lawsuit has been filed;
however, in the event a lawsuit is filed, the Company intends to
vigorously contest the matter.
On
September 25, 2019, Xxxxxxxx Xxxxxxx, a former director, filed and
served a complaint against the Company in the courts of Nassau
County, New York. The complaint alleges that Xx. Xxxxxxx is
entitled to retain certain cancelled equity awards and seeks
specific performance and damages. The Company has filed a notice of
removal and intends to vigorously defend the allegations as it
believes the claims are without merit.
-28-
SCHEDULE J
Pledged ownership & equity interests in partnerships and
LLC’s
See
Note H
-29-
ANNEX A
to
SECURITY AGREEMENT
FORM OF ADDITIONAL DEBTOR JOINDER
Security
Agreement dated as of November 27, 2019, made by Exactus, 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 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.
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[Name
of Additional Debtor]
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By:
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Name:
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Title:
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Address:
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Dated:
A-1
ANNEX B
to
SECURITY
AGREEMENT
THE AGENT
1.
Appointment. The Secured Parties (all
capitalized terms used herein and not otherwise defined shall have
the respective meanings provided in the Security Agreement to which
this Annex B is attached (the “Agreement”)), by their
acceptance of the benefits of the Agreement, hereby designate 3i,
LP ( “Agent”) as the Agent to
act as specified herein and in the Agreement. Each Secured Party
shall be deemed irrevocably to authorize the Agent to take such
action on its behalf under the provisions of the Agreement and any
other Transaction Document (as such term is defined in the Purchase
Agreement) and to exercise such powers and to perform such duties
hereunder and thereunder as are specifically delegated to or
required of the Agent by the terms hereof and thereof and such
other powers as are reasonably incidental thereto. The Agent may
perform any of its duties hereunder by or through its agents or
employees.
2.
Nature of Duties. The Agent shall have no duties or
responsibilities except those expressly set forth in the Agreement.
Neither the Agent nor any of its partners, members, shareholders,
officers, directors, employees or agents shall be liable for any
action taken or omitted by it as such under the Agreement or
hereunder or in connection herewith or therewith, be responsible
for the consequence of any oversight or error of judgment or
answerable for any loss, unless caused solely by its or their gross
negligence or willful misconduct as determined by a final judgment
(not subject to further appeal) of a court of competent
jurisdiction. The duties of the Agent shall be mechanical and
administrative in nature; the Agent shall not have by reason of the
Agreement or any other Transaction Document a fiduciary
relationship in respect of any Debtor or any Secured Party; and
nothing in the Agreement or any other Transaction Document,
expressed or implied, is intended to or shall be so construed as to
impose upon the Agent any obligations in respect of the Agreement
or any other Transaction Document except as expressly set forth
herein and therein.
3.
Lack of Reliance on the
Agent. Independently and without reliance upon the Agent,
each Secured Party, to the extent it deems appropriate, has made
and shall continue to make (i) its own independent investigation of
the financial condition and affairs of the Company and its
subsidiaries in connection with such Secured Party’s
investment in the Debtors, the creation and continuance of the
Obligations, the transactions contemplated by the Transaction
Documents, and the taking or not taking of any action in connection
therewith, and (ii) its own appraisal of the creditworthiness of
the Company and its subsidiaries, and of the value of the
Collateral from time to time, and the Agent shall have no duty or
responsibility, either initially or on a continuing basis, to
provide any Secured Party with any credit, market or other
information with respect thereto, whether coming into its
possession before any Obligations are incurred or at any time or
times thereafter. The Agent shall not be responsible to the Debtors
or any Secured Party for any recitals, statements, information,
representations or warranties herein or in any document,
certificate or other writing delivered in connection herewith, or
for the execution, effectiveness, genuineness, validity,
enforceability, perfection, collectability, priority or sufficiency
of the Agreement or any other Transaction Document, or for the
financial condition of the Debtors or the value of any of the
Collateral, or be required to make any inquiry concerning either
the performance or observance of any of the terms, provisions or
conditions of the Agreement or any other Transaction Document, or
the financial condition of the Debtors, or the value of any of the
Collateral, or the existence or possible existence of any default
or Event of Default under the Agreement, the Notes or any of the
other Transaction Documents.
4.
Certain Rights of the Agent.
The Agent shall have the right to take any action with respect to
the Collateral, on behalf of all of the Secured Parties. To the
extent practical, the Agent shall request instructions from the
Secured Parties with respect to any material act or action
(including failure to act) in connection with the Agreement or any
other Transaction Document, and shall be entitled to act or refrain
from acting in accordance with the instructions of a Majority in
Interest; if such instructions are not provided despite the
Agent’s request therefor, the Agent shall be entitled to
refrain from such act or taking such action, and if such action is
taken, shall be entitled to appropriate indemnification from the
Secured Parties in respect of actions to be taken by the Agent; and
the Agent shall not incur liability to any person or entity by
reason of so refraining. Without limiting the foregoing, (a) no
Secured Party shall have any right of action whatsoever against the
Agent as a result of the Agent acting or refraining from acting
hereunder in accordance with the terms of the Agreement or any
other Transaction Document, and the Debtors shall have no right to
question or challenge the authority of, or the instructions given
to, the Agent pursuant to the foregoing and (b) the Agent shall not
be required to take any action which the Agent believes (i) could
reasonably be expected to expose it to personal liability or (ii)
is contrary to this Agreement, the Transaction Documents or
applicable law.
B-1
5.
Reliance. The Agent shall be
entitled to rely, and shall be fully protected in relying, upon any
writing, resolution, notice, statement, certificate, telex,
teletype or telecopier message, cablegram, radiogram, order or
other document or telephone message signed, sent or made by the
proper person or entity, and, with respect to all legal matters
pertaining to the Agreement and the other Transaction Documents and
its duties thereunder, upon advice of counsel selected by it and
upon all other matters pertaining to this Agreement and the other
Transaction Documents and its duties thereunder, upon advice of
other experts selected by it. Anything to the contrary
notwithstanding, the Agent shall have no obligation whatsoever to
any Secured Party to assure that the Collateral exists or is owned
by the Debtors or is cared for, protected or insured or that the
liens granted pursuant to the Agreement have been properly or
sufficiently or lawfully created, perfected, or enforced or are
entitled to any particular priority.
6.
Indemnification. To the extent that the Agent is not
reimbursed and indemnified by the Debtors, the Secured Parties will
jointly and severally reimburse and indemnify the Agent, in
proportion to their initially purchased respective principal
amounts of Notes, from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or nature whatsoever
which may be imposed on, incurred by or asserted against the Agent
in performing its duties hereunder or under the Agreement or any
other Transaction Document, or in any way relating to or arising
out of the Agreement or any other Transaction Document except for
those determined by a final judgment (not subject to further
appeal) of a court of competent jurisdiction to have resulted
solely from the Agent’s own gross negligence or willful
misconduct. Prior to taking any action hereunder as Agent, the
Agent may require each Secured Party to deposit with it sufficient
sums as it determines in good faith is necessary to protect the
Agent for costs and expenses associated with taking such
action.
7.
Resignation by the
Agent.
(a) The
Agent may resign from the performance of all its functions and
duties under the Agreement and the other Transaction Documents at
any time by giving 30 days’ prior written notice (as provided
in the Agreement) to the Debtors and the Secured Parties. Such
resignation shall take effect upon the appointment of a successor
Agent pursuant to clauses (b) and (c) below.
(b)
Upon any such notice of resignation, the Secured Parties, acting by
a Majority in Interest, shall appoint a successor Agent
hereunder.
(c) If
a successor Agent shall not have been so appointed within said
30-day period, the Agent shall then appoint a successor Agent who
shall serve as Agent until such time, if any, as the Secured
Parties appoint a successor Agent as provided above. If a successor
Agent has not been appointed within such 30-day period, the Agent
may petition any court of competent jurisdiction or may interplead
the Debtors and the Secured Parties in a proceeding for the
appointment of a successor Agent, and all fees, including, but not
limited to, extraordinary fees associated with the filing of
interpleader and expenses associated therewith, shall be payable by
the Debtors on demand.
8.
Rights with respect to
Collateral. Each
Secured Party agrees with all other Secured Parties and the Agent
(i) that it shall not, and shall not attempt to, exercise any
rights with respect to its security interest in the Collateral,
whether pursuant to any other agreement or otherwise (other than
pursuant to this Agreement), or take or institute any action
against the Agent or any of the other Secured Parties in respect of
the Collateral or its rights hereunder (other than any such action
arising from the breach of this Agreement) and (ii) that such
Secured Party has no other rights with respect to the Collateral
other than as set forth in this Agreement and the other Transaction
Documents. Upon the acceptance of any appointment as Agent
hereunder by a successor Agent, such successor Agent shall
thereupon succeed to and become vested with all the rights, powers,
privileges and duties of the retiring Agent and the retiring Agent
shall be discharged from its duties and obligations under the
Agreement. After any retiring Agent’s resignation or removal
hereunder as Agent, the provisions of the Agreement including this
Annex B shall inure to its benefit as to any actions taken or
omitted to be taken by it while it was Agent.
B-2
