SECURITY AGREEMENT
EXHIBIT
10.3
THIS
SECURITY AGREEMENT
(this
“Agreement”)
is
made and entered into by and among Debt Resolve, Inc., a Delaware corporation,
with its principal executive offices located at 000 Xxxxxxxxxxx Xxxxxx, Xxxxx
X0, Xxxxx Xxxxxx, Xxx Xxxx 00000 (the “Company”),
CAMOFI Master LDC, a Cayman Islands limited duration company (the “Agent”),
and
each of the purchasers set forth on the counterpart signature pages hereto
(the
“Purchasers,”
and
each a “Secured
Party”
or
together the “Secured
Parties”),
and
is dated with respect to each of the Purchasers as of the date noted on each
such Purchaser’s counterpart signature page.
WHEREAS,
in
connection with the Securities Purchase Agreement by and among the parties
hereto of even date herewith (the “Securities
Purchase Agreement”),
the
Company has agreed, upon the terms and subject to the conditions contained
therein, to issue and sell to the Purchasers (i) 15% senior secured convertible
promissory notes, or 15% senior secured promissory notes in the case of one
Purchaser, of the Company in the aggregate principal amount of up to Four
Million Dollars ($4,000,000), which includes a $1,000,000 over-allotment option
(together with any note(s) issued in replacement thereof or as a dividend
thereon or otherwise with respect thereto in accordance with the terms thereof,
the “Notes”),
a
portion of which Notes is convertible into shares of common stock, par value
$.001 per share, of the Company (the “Common
Stock”),
and
(ii) warrants to purchase shares of Common Stock of the Company (the
“Warrants”);
and
WHEREAS,
in
order to induce the Purchasers to purchase the Notes and Warrants, the Company
has agreed to grant the Purchasers a first priority security interest in all
of
the Company’s Collateral listed in Exhibit
A
hereto,
and to that end has required the execution and delivery of this Agreement by
the
Company.
NOW,
THEREFORE,
in
consideration of the premises and the mutual covenants contained herein and
other good and valuable consideration, the receipt and sufficiency of which
are
hereby acknowledged, the Company and each of the Purchasers hereby agree as
follows:
1. Incorporation
of Recitals.
The
foregoing Recitals are hereby incorporated herein in their entirety by this
reference.
2. Definitions.
The
following terms shall have the meanings set forth below:
“Collateral”
shall
mean all of the items set forth on Exhibit
A
hereto.
“Patents”
shall
mean, collectively, all of the Company’s letters patent under the laws of the
United States, all recordings and registrations thereof and applications
therefor, including, without limitation, the inventions described therein,
all
reissues, continuations, divisions, renewals, extensions, continuations-in-part
thereof, in each case whether now owned or existing or hereafter acquired or
arising.
“Permitted
Liens”
shall
mean, collectively, the following: (i) liens for current taxes or other
governmental or regulatory assessments which are not delinquent, or which are
being contested in good faith by the appropriate procedures and for which
appropriate reserves are maintained; (ii) liens in favor of the Agent and/or
the
Secured Parties; and (iii) licenses or sublicenses of Patents, in each instance
granted to others not interfering in any material respect with the business
of
the Company.
“Proceeds”
shall
mean any consideration received from the sale, exchange, lease or other
disposition of any asset or property which constitutes Collateral, any other
value received as a consequence of the possession of any Collateral and any
payment received from any insurer or other person or entity as a result of
the
destruction, loss, theft or other involuntary conversion of whatever nature
of
any asset or property that constitutes Collateral.
“Secured
Obligations”
has
the
meaning given in Section 3(a) below.
“Security
Interest”
has
the
meaning given in Section 3(b) below.
3. Security
for Obligations.
(a) This
Agreement secures, and the Collateral is collateral security for, the prompt
payment or performance in full when due, whether at stated maturity, by required
prepayment, declaration, acceleration, conversion, demand or otherwise
(including the payment of amounts that would become due but for the operation
of
the automatic stay under Section 363(a) of the Bankruptcy Code, 11 U.S.C.
§362(a)) of all obligations and liabilities of every nature of the Company now
or hereafter existing under or arising out of the Notes, and this Agreement
and
all extensions or renewals thereof, whether for principal, interest, (including,
without limitation, interest that, but for the filing of a petition in
bankruptcy with respect to the Company, would accrue on such obligations),
fees,
expenses, indemnities or otherwise, whether 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 the Agent
or
any Secured Party as a preference, fraudulent transfer or otherwise (all such
obligations of the Company being the “Secured
Obligations”).
(b) Security
Interest.
As
security for the payment or performance, as the case may be, of the Secured
Obligations, the Company hereby creates and grants to the Agent, its successors
and its assigns, for its own benefit and for the pro rata benefit of the
Purchasers, their successors and their assigns, a security interest in the
Collateral (the “Security
Interest”).
Without limiting the foregoing, the Agent is hereby authorized to file one
or
more financing statements, continuation statements or other documents for the
purpose of perfecting, confirming, continuing, enforcing or protecting the
Security Interest, naming the Company as debtors and the Agent as secured
party.
The
Company agrees at all times to keep in all material respects accurate and
complete accounting records with respect to the Collateral, including, but
not
limited to, a record of all payments and Proceeds received.
4. Representations
and Warranties.
The
Company represents and warrants as follows:
(a) Financing
Statements.
Except
for the financing statements in favor of Secured Parties, at the time of
granting the security interest described herein, no financing statement covering
the Collateral or any portion thereof will be on file in any public office,
and
except for Permitted Liens, the Company agrees not to execute or authorize
the
filing of any such additional financing statement in favor of any person, entity
or governmental agency (whether federal, state or local) other than Secured
Parties as long as any portion of the Secured Obligations evidenced by the
Notes
remain unpaid.
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(b) Legal
Name.
The
Company’s exact legal name is as set forth in the first paragraph of this
Security Agreement. The Company shall not change its legal name or its form
of
organization without 30 days’ prior written notice to the Agent.
(c) Title
and Authority.
The
Company has (i) rights in and good title to the Collateral in which it is
granting a security interest hereunder and (ii) the requisite corporate power
and authority to grant to the Agent the Security Interest in such Collateral
pursuant hereto and to execute, deliver and perform its obligations in
accordance with the terms of this Agreement, without the consent or approval
of
any other person other than any consent or approval which has been obtained.
The
Company has the sole, full and clear title to each of the Patents shown on
Schedule
A
hereto
and the registrations thereof are valid and subsisting and in full force and
effect. None of the Patents has been abandoned or dedicated, and, except to
the
extent that the Agent, upon prior written notice by the Company, shall consent,
the Company will not do any act, or omit to do any act, whereby the Patents
may
become abandoned or dedicated and shall notify the Agent immediately if it
knows
of any reason or has reason to know that any application or registration may
become abandoned or dedicated. The Company hereby represents and warrants that
the Patents shown on Schedule
A
are the
only issued U.S. patents owned by the Company as of the date of this
Agreement.
(d) Filing.
Fully
executed Uniform Commercial Code financing statements containing a description
of the Collateral shall have been, or shall be delivered to the Agent in a
form
such that they can be, filed of record in every governmental, municipal or
other
office in every jurisdiction in which any portion of the Collateral is located
necessary to publish notice of and protect the validity of and to establish
a
valid, legal and perfected security interest in favor of the Agent in respect
of
the Collateral in which a security interest may be perfected by filing in the
United States and its territories and possessions, and no further or subsequent
filing, refiling, recording, rerecording, registration or reregistration is
necessary in any such jurisdiction, except as provided under applicable law
with
respect to the filing of Uniform Commercial Code continuation
statements.
(e) Validity
of Security Interest.
The
Security Interest constitutes a valid, legal and perfected first priority
security interest in all of the Collateral for payment and performance of the
Secured Obligations subject only to Permitted Liens.
(f) Locations
of Collateral; Place of Business.
The
Company hereby represents and warrants that all the Collateral is located at
the
locations listed on Schedule
A
hereto
and that its federal employer identification number is as set forth on said
Schedule. The Company agrees not to establish, or permit to be established,
any
other location for Collateral unless all filings under the Uniform Commercial
Code as in effect in any state or otherwise which are required by this Agreement
or the Notes to be made with respect to the Collateral have been made and the
Agent has a valid, legal and perfected first priority security interest in
the
Collateral. The Company confirms that its chief executive office is located
at
the office indicated on Schedule
A
hereto.
The Company agrees not to change, or permit to be changed, the location of
its
chief executive office unless all filings under the Uniform Commercial Code
or
otherwise which are required by this Agreement or the Notes to be made have
been
made and the Agent has a valid, legal and perfected first priority security
interest.
3
(g) Incorporation
by Reference.
The
Company hereby makes to each Secured Party all of the representations and
warranties of the Company contained in the Securities Purchase Agreement, which
representations and warranties are incorporated by reference herein as if fully
set forth herein.
Covenants
and Agreements.
The
Company covenants and agrees as follows:
(a) Restrictions.
The
Company agrees that until the Secured Obligations shall have been satisfied
in
full, the Company shall not, without the Agent’s prior written consent, assign,
transfer, encumber or otherwise dispose of the Collateral, or any interest
therein, except that the Company may (i) license (other than on an exclusive
basis for all known fields of use for the duration of the term of the Patent)
or
grant similar rights and interests on an arm’s length basis consistent with good
industry practice in all or any part of the Patents to unrelated third parties
pursuant to its business, (ii) sell, license on an exclusive basis for all
known
fields of use for the duration of the term of the Patent or otherwise transfer
for value all or any part of the Patents with the prior written consent of
the
Agent, which consent will not be unreasonably withheld, provided that the
restriction on exclusive licenses shall terminate beginning on the date that
more than one-half of the principal amount of the Notes secured by the
Collateral has been repaid by the Company or has been converted to Common Stock
and (iii) sell inventory in the ordinary course of business or sell obsolete
equipment or inventory for the reasonable fair value thereof. The Company
further agrees that it will not take any action, or permit any action to be
taken by others subject to its control, including licensees, or fail to take
any
action, which would affect the validity or enforcement of the rights transferred
to the Secured Parties under this Agreement.
(b) Defense.
The
Company shall, at its own cost and expense, take any and all actions reasonably
necessary to defend title to the Collateral owned by it against all persons
and
to defend the Security Interest in such Collateral, and the priority thereof,
against any adverse lien of any nature whatsoever (other than Permitted
Liens).
(c) Maintenance.
The
Company shall at all times and at its own expense maintain and keep, or cause
to
be maintained and kept, the Collateral. The
Company will keep the Collateral in good order and repair, and will not waste
or
destroy the Collateral or any part hereof, and will make any needful and proper
repairs, renewals, replacements or improvements so that its business may at
all
times be properly and advantageously conducted, and will not use the Collateral
in violation of any applicable statute, ordinance or policy of insurance
thereon. Upon prior written notice to the Company, the Agent may enter on the
Company’s property and may examine and inspect the Collateral or the Company’s
books, records, papers and journals at any reasonable time or times, wherever
located. The
Company shall perform all acts and execute all documents, including, without
limitation, security agreements with respect to Patents in form suitable for
filing with the United States Patent and Trademark Office hereof requested
by
the Agent at any time to evidence, perfect, maintain, record and enforce the
Agent’s interest in the Collateral that consists of Patents or otherwise in
furtherance of the provisions of this Agreement, and the Company hereby
authorizes the Agent to execute and file one or more financing statements (and
similar documents) or copies thereof or of this Agreement with respect to the
Collateral signed only by the Agent. The Company will take all necessary steps
in any proceeding before the United States Patent and Trademark Office or any
similar office or agency of the United States or any State thereof to maintain
each application and registration of the Patents, including, without limitation,
filing of renewals, affidavits of use, affidavits of incontestability and
opposition, interference and cancellation proceedings.
4
(d) Agent’s
Right to Take Action.
If,
after ten days written notice from the Agent, the Company fails to perform
or
observe any of its covenants or agreements set forth in this Section 5 or
if the Company notifies the Agent that it intends to abandon all or any part
of
the Collateral, the Agent may (but need not) perform or observe such covenant
or
agreement or take steps to prevent such intended abandonment on behalf and
in
the name, place, and stead of the Company (or, in the case of intended
abandonment, in the Agent’s own name) and may (but need not) take any and all
other actions that the Agent may reasonably deem necessary to cure or correct
such failure or prevent such intended abandonment.
(e) Costs
and Expenses.
Except
to the extent that the effect of such payment would be to render any loan or
forbearance of money usurious or otherwise illegal under any applicable law,
the
Company shall pay the Agent on demand the amount of all moneys expended and
all
costs and expenses (including reasonable attorneys’ fees and disbursements)
incurred by the Agent or the Secured Parties in connection with or as a result
of the Agent’s taking action under subsection 5(d), except for intended
abandonment of the Collateral by the Company, or exercising its rights under
Section 7, together with interest thereon from the date expended or incurred
by
the Agent or Secured Parties.
(f) Use
and Disposition of Collateral.
The
Company shall not make or permit to be made any assignment, pledge or
hypothecation of the Collateral other than Permitted Liens or as permitted
by
Section 5(a) above, or grant any security interest in the Collateral except
for
the Security Interest and Permitted Liens. The Company shall not make or permit
to be made any transfer of any Collateral, except in the ordinary course of
business or as permitted by Section 5(a) above, and the Company shall remain
at
all times in possession of the Collateral owned by it other than transfers
to
the Agent pursuant to the provisions hereof and as otherwise provided in this
Agreement. The Agent shall have the right, as the true and lawful agent of
the
Company, with power of substitution for the Company and in the Company’s name,
the Agent’s name or otherwise, for the use and benefit of the Agent and the
Purchasers and solely to effect the purposes of this Agreement, (i) to endorse
the Company’s name upon any notes, acceptances, checks, drafts, money orders or
other evidences of payment with respect to the Collateral that may come into
its
possession; (ii) to sign the name of the Company on any invoice relating to
any
of the Collateral and (iii) upon the occurrence and during the continuance
of an
event of default under this Agreement or under the Notes, (A) to receive,
endorse, assign and/or deliver any and all notes, acceptances, checks, drafts,
money orders or other evidences or instruments of payment relating to the
Collateral or any part thereof, and the Company hereby waives notice of
presentment, protest and non-payment of any instrument so endorsed, (B) to
demand, collect, receive payment of, give receipt for, extend the time of
payment of and give discharges and releases of all or any of the Collateral
and/or release the obligor thereon, (C) to commence and prosecute any and all
suits, actions or proceedings at law or in equity in any court of competent
jurisdiction to collect or otherwise realize on all or any of the Collateral
or
to enforce any rights in respect of any Collateral, (D) to settle, compromise,
compound, adjust or defend any actions, suits or proceedings relating to or
pertaining to all or any of the Collateral, and (H) to use, sell, assign,
transfer, pledge, make any agreement with respect to or otherwise deal with
all
or any of the Collateral, and to do all other acts and things necessary to
carry
out the purposes of this Agreement, as fully and completely as though the Agent
were the absolute owner of the Collateral for all purposes; provided,
however,
that
nothing herein contained shall be construed as requiring or obligating the
Agent
or any Secured Party to make any commitment or to make any inquiry as to the
nature or sufficiency of any payment received by the Agent or such Secured
Party
or to present or file any claim or notice, or to take any action with respect
to
the Collateral or any part thereof or the moneys due or to become due in respect
thereof or any property covered thereby, and no action taken by the Agent or
any
Secured Party or omitted to be taken with respect to the Collateral or any
part
thereof shall give rise to any defense, counterclaim or offset in favor of
the
Company or to any claim or action against the Agent or any Secured Party in
the
absence of the gross negligence or willful misconduct of the Agent or such
Secured Party; and provided further,
that
the Agent shall at all times act reasonably and in good faith. It is understood
and agreed that the appointment of the Agent as the agent of the Company for
the
purposes set forth above in this Section 5(f) is coupled with an interest and
is
irrevocable. The provisions of this Section 5(f) shall in no event relieve
the
Company of any of its obligations hereunder with respect to the Collateral
or
any part thereof (other than obligations which are impaired as a result of
actions taken by the Agent pursuant to this Section 5(f)) or impose any
obligation on the Agent or any Secured Party to proceed in any particular manner
with respect to the Collateral or any part thereof, or in any way limit the
exercise by the Agent or any Secured Party of any other or further right which
it may have on the date of this Agreement or hereafter, whether hereunder or
by
law or otherwise. Anytime action is taken under this Section 5(f), prompt
written notice of such action shall be provided to the Company by the
Agent.
5
(g) Further
Assurances.
The
Company agrees, at its expense, to execute, acknowledge, deliver and cause
to be
duly filed all such further instruments and documents and take all such actions
as the Agent may from time to time reasonably request for the assuring and
preserving of the Security Interest and the rights and remedies created hereby,
including, without limitation, the payment of any fees and taxes required in
connection with the execution and delivery of this Agreement, the granting
of
the Security Interest and the filing of any financing statements or other
documents in connection herewith. If any amount payable under or in connection
with any of the Collateral shall be or become evidenced by any promissory note
or other instrument, such note or instrument shall be promptly pledged and
delivered to the Agent, duly endorsed in a manner satisfactory to the Agent.
The
Company agrees to notify promptly the Agent of any change in its corporate
name
or in the location of its chief executive office, its chief place of business
or
the office where it keeps its records.
(h) Subsidiaries.
The
Company has no subsidiaries at this time; however, should the Company form
any
subsidiaries during the term of this Agreement, the Company shall cause such
subsidiaries to become a party to this Agreement and such subsidiaries’ assets
shall be made a part of the Collateral hereunder.
(i) Insurance.
The
Company shall, at its expense, keep the Collateral at all times insured in
a
commercially reasonable manner for full value with nationally recognized,
reputable and sufficiently capitalized insurers. Such insurance shall not be
cancelable or not renewed by the Company and the Company shall take all
commercially reasonable actions to ensure that such insurance is not cancelled.
All risk of loss of, damage to or destruction of the Collateral shall at all
times be on the Company.
(j) Written
Statements.
The
Company will furnish to Agent from time to time, upon written request to the
Company, written statements and schedules identifying and describing the
Collateral and any additions thereto and substitutions thereof, in such detail
as Agent may reasonably require, and will maintain books and records pertaining
to the Collateral in such detail, form and scope as is customary in transactions
such as this, and will advise Agent promptly and in sufficient detail of any
substantial change in the Collateral and of the occurrence of any event which
would have any material effect on the value of any of the Collateral or on
the
lien and security interest granted to the Secured Parties therein.
6
(k) Notice
of Default.
The
Company shall promptly give notice to the Agent of the occurrence of any Event
of Default (as defined in below) or of any event which could, with the giving
of
notice or the passage of time, or both, constitute an Event of
Default.
Events
of Default.
Each of
the following occurrences shall constitute an event of default under this
Agreement (herein called an “Event
of Default”):
(a) an
Event
of Default, as defined in the Notes, shall occur;
(b) The
Company shall fail promptly to observe or perform any covenant or agreement
herein binding on it and such failure is not cured within 15 days after written
notice from the Agent;
(c) there
is
any levy, seizure, or attachment of all or any material portion of the
Collateral, other than as set forth in this Agreement; or
(d) any
of
the representations or warranties contained in Section 4 shall prove to have
been incorrect in any material respect when made.
Remedies.
Upon
the occurrence of an Event of Default and at any time thereafter, the Agent
may,
at its option, take any or all of the following actions:
(a) exercise
any or all remedies available under this Agreement or the Notes including,
without limitation, any and all rights afforded to a secured party under, and
subject to its obligations contained in, the Uniform Commercial Code as in
effect in any state or other applicable law;
(b) sell,
assign, transfer, pledge, encumber, or otherwise dispose of the
Collateral;
(c) enforce
the Patents comprising the Collateral and if the Agent shall commence any suit
for such enforcement, the Company shall, at the request of the Agent, do any
and
all lawful acts and execute any and all proper documents reasonably required
by
the Agent in aid of such enforcement; or
(d) incur
expenses, including attorneys’ fees at the regular hourly rates of the Agent’s
counsel from time to time in effect, legal expenses and costs for the exercise
of any right or power under this Security Agreement, which expenses are secured
by this Security Agreement.
Any
disposition of Collateral by the Agent shall be subject to the mandatory
requirements of applicable law and subject to the requirement that the Agent
act
reasonably and in good faith. Subject to such conditions, the Agent may sell
or
otherwise dispose of all or any part of the Collateral, at public or private
sale, for cash, upon credit or for future delivery as the Agent shall deem
appropriate. Each purchaser at any such sale shall hold the property sold
absolutely free from any claim or right on the part of the Company, and the
Company hereby waives (to the extent permitted by law) all rights of redemption,
stay and appraisal which the Company now has or may at any time in the future
have under any rule of law or statute now existing or hereafter enacted. The
Agent shall give the Company ten (10) days’ written notice (which the Company
agrees is reasonable notice within the meaning of Section 9-504(3) of the
Uniform Commercial Code) of the Agent’s intention to make any sale of
Collateral. Such notice, in the case of a public sale, shall state the time
and
place for such sale. Any such public sale shall be held at such time or times
within ordinary business hours and at such place or places as the Agent may
fix
and state in the notice (if any) of such sale. At any such sale, the Collateral,
or portion thereof, to be sold may be sold in one lot, as an entirety or in
separate parcels, as the Agent may (in its sole and absolute discretion)
determine. The Agent shall not be obligated to make any sale of any Collateral
if it shall determine not to do so, regardless of the fact that notice of sale
of such Collateral shall have been given. The Agent may, without notice or
publication, adjourn any public or private sale or cause the same to be
adjourned from time to time by announcement at the time and place fixed for
sale, and such sale may, without further notice, be made at the time and place
to which the same was so adjourned. In case any sale of all or any part of
the
Collateral is made on credit or for future delivery, the Collateral so sold
may
be retained by the Agent until the sale price is paid by the purchaser or
purchasers thereof, but the Agent shall not incur any liability in case any
such
purchaser or purchasers shall fail to take up and pay for the Collateral so
sold
and, in case of any such failure, such Collateral may be sold again upon like
notice. At any public sale made pursuant to this Section 7, any Secured Company
may bid for or purchase, free (to the extent permitted by law) from any right
of
redemption, stay or appraisal on the part of the Company (all said rights being
also hereby waived and released to the extent permitted by law), with respect
to
the Collateral or any part thereof offered for sale and any such Secured Party
may make payment on account thereof by using any claim then due and payable
to
any such Secured Party from the Company as a credit against the purchase price,
and any such Secured Party may, upon compliance with the terms of sale, hold,
retain and dispose of such property without further accountability to the
Company therefor. For purposes hereof, a written agreement to purchase the
Collateral or any portion thereof shall be treated as a sale thereof; the Agent
shall be free to carry out such sale and purchase pursuant to such agreement,
and the Company shall not be entitled to the return of the Collateral or any
portion thereof subject thereto, notwithstanding the fact that after the Agent
shall have entered into such an agreement all events of default shall have
been
remedied and the Secured Obligations paid in full. The Company shall remain
liable for any deficiency. As an alternative to exercising the power of sale
herein conferred upon it, the Agent may proceed by a suit or suits at law or
in
equity to foreclose this Agreement and to sell the Collateral or any portion
thereof pursuant to a judgment or decree of a court or courts having competent
jurisdiction or pursuant to a proceeding by a court appointed
receiver.
7
Designation
of the Agent.
The
Purchasers hereby irrevocably designate CAMOFI Master LDC (and its successors
and assigns) as their agent and CAMOFI Master LDC hereby accepts such
designation, in order to execute any and all instruments or other documents
on
behalf of the Purchasers and to do any and all other acts or things on behalf
of
the Purchasers that CAMOFI Master LDC (or its successors or assigns) in its
sole
discretion deems necessary or advisable or that may be required pursuant to
this
Agreement or otherwise, to exercise the Secured Parties’ rights and remedies
under this Agreement. None of the Purchasers may take any action or exercise
any
rights under this Agreement except through CAMOFI Master LDC as their agent.
Each Secured Party hereby appoints the Agent the attorney-in-fact of such
Secured Party solely for the purpose of carrying out the provisions of this
Agreement and taking any action and executing any instrument which the Agent
may
reasonably deem necessary or advisable to accomplish the purposes hereof, which
appointment is irrevocable so long as this Agreement and the Security Interest
have not been terminated and coupled with an interest.
8
9. Application
of Proceeds.
The
proceeds of any collection or sale of Collateral, as well as any Collateral
consisting of cash, shall be applied by the Agent as follows:
FIRST,
to
the payment of all reasonable costs and expenses incurred by the Agent in
connection with such collection or sale or otherwise in connection with this
Agreement or any of the Secured Obligations, including, but not limited to,
all
court costs and the reasonable fees and expenses of its agents and legal
counsel, the repayment of all advances made by the Agent hereunder on behalf
of
the Company and any other reasonable costs or expenses incurred in connection
with the exercise of any right or remedy hereunder;
SECOND,
pro rata to the payment in full of principal and interest in respect of any
amount of the Notes outstanding, subject to the last sentence of Section 2
of
the Notes;
THIRD,
to
the Company, its successors and assigns, or as a court of competent jurisdiction
may otherwise direct.
Security
Interest Absolute.
All
rights of the Secured Parties and the Agent hereunder, the Security Interest,
and all obligations of the Company hereunder, shall be absolute and
unconditional irrespective of (i) any partial invalidity or unenforceability
of
the Note, any other agreement with respect to any of the Secured Obligations
or
any other agreement or instrument relating to any of the foregoing, (ii) any
change in the time, manner or place of payment of, or in any other term of,
all
or any of the Secured Obligations, or any other amendment or waiver of or
consent to any departure from the Notes, or any other agreement or instrument,
(iii) any exchange, release or nonperfection of any other Collateral, or any
release or amendment or waiver of or consent to or departure from any guarantee,
for all or any of the Secured Obligations, or (iv) any other circumstance which
might otherwise constitute a defense available to, or discharge of the Company
in respect of the Secured Obligations or in respect of this
Agreement.
Value
of the Collateral.
Each
Secured Party acknowledges that it is familiar with the Company or has
independent access to information regarding the Company, and is not relying
upon
any representations of the Company as to the value of the Collateral being
pledged hereunder or the present or future prospects or value of the
Company.
Miscellaneous.
This
Agreement can be waived, modified, amended, terminated or discharged, and the
Security Interest can be released, only explicitly in a writing signed by the
Agent. A waiver signed by the Agent shall be effective only in the specific
instance and for the specific purpose given. Mere delay or failure to act shall
not preclude the exercise or enforcement of any of any Secured Parties’ or the
Agent’s rights or remedies. All rights and remedies of a Secured Party shall be
cumulative and may be exercised singularly or concurrently, at the Agent’s
option, and the exercise or enforcement of any one such right or remedy shall
neither be a condition to nor bar the exercise or enforcement of any other.
The
Secured Parties shall not be obligated to preserve any rights the Company may
have against prior parties, to realize on the Collateral at all or in any
particular manner or order, or to apply any cash proceeds of the Collateral
in
any particular order of application. This Agreement shall be binding upon and
inure to the benefit of the Company and Secured Parties and their respective
participants, successors, and permitted assigns and shall take effect when
signed by the Company and Secured Parties, and the Company waives notice of
Secured Parties’ acceptance hereof; provided, however, that the Secured Parties’
rights hereunder may not be transferred or assigned to any third party without
the prior written consent of the Company. This Agreement shall be governed
by
the internal law of the State of New York without regard to conflicts of law
provisions. If any provision or application of this Agreement is held unlawful
or unenforceable in any respect, such illegality or unenforceability shall
not
affect other provisions or applications which can be given effect and this
Agreement shall be construed as if the unlawful or unenforceable provision
or
application had never been contained herein or prescribed hereby. All
representations and warranties contained in this Agreement shall survive the
execution, delivery and performance of this Agreement and the creation and
payment of the Secured Obligations. Any notices required or permitted to be
given under the terms hereof shall be sent by certified or registered mail
(return receipt requested) or delivered personally or by courier (including
a
recognized overnight delivery service) or by facsimile and shall be effective
five days after being placed in the mail, if mailed by regular United States
mail, or upon receipt, if delivered personally or by courier (including a
recognized overnight delivery service) or by facsimile, in each case addressed
to a party. The addresses for such communications shall be:
9
(i) If
to the
Company:
Debt
Resolve, Inc.
000
Xxxxxxxxxxx Xxxxxx, Xxxxx Xxxxx
Xxxxx
Xxxxxx, Xxx Xxxx 00000
Attention:
Xxxxx X. Xxxxxxxxx
Telephone:
(000) 000-0000
Facsimile:
(000) 000-0000
With
a
copy to:
Xxxxxxxxx
Traurig LLP
MetLife
Building
000
Xxxx
Xxxxxx, 00xx Xxxxx
Xxx
Xxxx,
XX 00000
Attention:
Xxxxxxx X. Xxxxxxx, Esq.
Telephone:
(000) 000-0000
Facsimile:
(000) 000-0000
(ii) If
to the
Agent:
CAMOFI
Master LDC
c/o
Centrecourt Asset Management
000
Xxxxxxx Xxxxxx, 0xx
Xxxxx
Xxx
Xxxx,
Xxx Xxxx 00000
Attention:
Xxxxx X. Xxxxxxx, General Counsel
Telephone:
(000) 000-0000
Facsimile:
(000) 000-0000
10
|
(iii)
|
If
to a Purchaser: To the address and fax number set forth immediately
below
such Purchaser’s name on the signature pages to this
Agreement.
|
With
copy
to:
Capital
Growth Financial, Inc.
000
XX
Xxxxxx Xxxxxxxxx, Xxxxx #000
Xxxx
Xxxxx, XX 00000
Attention:
Xxxx Xxxxxx
Telephone:
(000) 000-0000
Facsimile:
(000) 000-0000
and
Maxim
Group LLC
000
Xxxxxxxxx Xxxxxx
Xxx
Xxxx,
XX 00000
Attention:
Xxxxxxxx X. Xxxxxx
Telephone:
(000) 000-0000
Facsimile:
(000) 000-0000
Each
party shall provide notice to the other party of any change in
address.
Waiver
of Jury Trial:
THE
COMPANY HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES THE RIGHT THE
COMPANY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON
OR
ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT AND ANY AGREEMENT
CONTEMPLATED TO BE EXECUTED IN CONJUNCTION HEREWITH, OR ANY COURSE OF CONDUCT,
COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF EITHER
PARTY. THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE SECURED PARTIES ENTERING
INTO THIS AGREEMENT.
Termination.
This
Agreement and the Security Interest shall terminate when all the Secured
Obligations have been fully and indefeasibly paid in full, at which time the
Agent shall execute and deliver to the Company all Uniform Commercial Code
termination statements and similar documents which the Company shall reasonably
request to evidence such termination; provided,
however,
that
all indemnities of the Company contained in this Agreement shall survive, and
remain operative and in full force and effect regardless of, the termination
of
this Agreement for a period of six (6) months following the termination of
this
Agreement.
[Remainder
of page intentionally left blank; signature pages
follow.]
11
IN
WITNESS WHEREOF,
the
parties have duly executed and delivered this Security Agreement as of the
date
and year first written above.
| COMPANY: | ||
| |
DEBT RESOLVE, INC. |
|
| By: | /s/ Xxxxx X. Xxxxxxxxx | |
|
Name:
Xxxxx X. Xxxxxxxxx
Title:
Co-chairman, President and CEO
|
||
| AGENT: | ||
| |
CAMOFI MASTER LDC |
|
| By: | /s/ Xxxxxxx X. Xxxx | |
|
Name:
Xxxxxxx X. Xxxx
Title:
Authorized
Signatory
|
||
|
PURCHASERS:
The
Purchasers executing the Signature Page in the form attached hereto
as
Annex
A
and delivering the same to the Company or its agents shall be deemed
to
have executed this Agreement and agreed to the terms hereof.
|
12
Annex
A
Purchaser
Counterpart Signature Page
The
undersigned, desiring to enter into this Security Agreement dated as of
_________________ ___, 2006 (the “Agreement”),
between the undersigned, Debt Resolve, Inc., a Delaware corporation (the
“Company”),
CAMOFI Master LDC, a Cayman Islands limited duration company (the “Agent”),
and
the other parties thereto, in or substantially in the form furnished to the
undersigned, hereby agrees to join the Agreement as a party thereto, with all
the rights and privileges appertaining thereto, and to be bound in all respects
by the terms and conditions thereof.
IN
WITNESS WHEREOF,
the
undersigned has executed the Agreement as of _________________ ___,
2006.
|
PURCHASER:
|
||
|
Name
and Address, Fax No. and Social Security No./EIN of
Purchaser:
|
||
|
|
||
|
|
||
|
|
||
|
|
||
| Fax No.: _____________________________________ | ||
|
Soc.
Sec. No./EIN:
________________________________
|
||
|
If
a partnership, corporation, trust or other
business entity:
|
||
| By: | ||
|
Name:
Title:
|
||
|
If an individual:
|
||
|
Signature
|
||
13
SCHEDULE
A
Collateral
Locations
000
Xxxxxxxxxxx Xxxxxx, Xxxxx Xxxxx
Xxxxx
Xxxxxx, Xxx Xxxx 00000
(also
principal executive office)
Federal
Employer Identification Number:
00-0000000
Patents
Described in Section 4(c):
None.
14
EXHIBIT
A
DESCRIPTION
OF COLLATERAL
The
term
“Collateral”
shall
mean all
of
the Company’s now owned or hereafter acquired right, title, and interest in and
to each of the following, together
with all present and future additions, attachments and accessions thereto and
all substitutions therefor and replacements thereof, and all copies or originals
of all records and documents relating thereto:
(a) All
“accounts,” as that term is defined in Article 9 of the Uniform Commercial Code,
as in effect in the State of New York (“UCC”),
including, without limitation, every right to payment for goods or other
property of any kind sold or leased or for services rendered or for any other
transaction, whether or not the right to payment has been earned by performance,
and including without limitation every account receivable, all purchase orders,
all interest in goods the sale or lease of which gives rise to the right to
payment (including returned or repossessed goods and unpaid seller’s rights),
and the rights pertaining to such goods, including the right to stoppage in
transit, every right to payment under any contract, and every lien, guaranty,
or
security interest that secures a right to payment for any of the foregoing
(“Accounts”);
(b) All
chattel paper, consisting of a writing or writings evidencing both a monetary
obligation and a security interest in or lease of goods, together with any
guarantees, letters of credit, and other security therefore (“Chattel
Paper”);
(c) All
“deposit accounts,” as defined in the UCC (“Deposit
Accounts”);
(d) All
“inventory” of whatever kind, as that term is used in the UCC, including without
limitation all goods held by the Company for sale or lease, goods furnished
or
to be furnished under a contract for service, and supplies, packaging, raw
materials, goods in transit, work-in-process, and materials used or consumed
or
to be used or consumed in the Company’s business, or in the processing,
packaging, or shipping of same, all finished goods, and all property, the sale
or lease of which has given rise to Accounts, Chattel Paper, or Instruments,
and
that has been returned to the Company or repossessed by the Company or stopped
in transit, and all warranties and related claims, credits, setoffs, and other
rights of recovery with respect to any of the foregoing (“Inventory”);
(e) All
“equipment,” as that term is used in the UCC, including without limitation all
equipment, machinery, and other property held for use in or purchased for the
Company’s business, together with all increases, parts, fittings, accessories,
repair equipment, and special tools now or later affixed to, or used in
connection with, that property, all transferable rights of the Company to the
licenses and warranties (express and implied) received from the sellers and
manufacturers of the foregoing property, all related claims, credits, setoffs,
and other rights of recovery (“Equipment”);
(f) All
“instruments,” including without limitation every instrument of any kind, as
that term is used in the UCC, and includes every promissory note, negotiable
instrument, certificated security, or other writing that evidences a right
to
payment of money, that is not a lease or security agreement, and that is
transferred in the ordinary course of business by delivery with any necessary
assignment or indorsement (“Instruments”);
15
(g) “Investment
property,” as that term is defined in the UCC (“Investment
Property”);
(h) All
documents, including without limitation any paper that is treated in the regular
course of business as adequate evidence that the person in possession of the
paper is entitled to receive, hold, and dispose of the goods the paper covers,
including warehouse receipts, bills of lading, certificates of title, and
applications for certificates of title;
(i) All
“general intangibles” of any kind, as that term is used in the UCC, and includes
without limitation all intangible personal property other than Accounts,
Documents, Instruments, and Chattel Paper, and includes without limitation
money, contract rights, corporate or other business records, deposit accounts,
inventions, designs, formulas, Patents (as defined in Section 2 of this
Agreement), service marks, trademarks, trade names, trade secrets, engineering
drawings, goodwill, rights to prepaid expenses, registrations, franchises,
copyrights, licenses, customer lists, computer programs and other software,
source code, tax refund claims, royalty, licensing and product rights, all
claims under guarantees, security interests or other security held by or granted
to the Company to secure payment of any of the Accounts by an Account Debtor,
all indemnification rights, and rights to retrieval from third parties of
electronically processed and recorded data pertaining to any Collateral, things
in action, items, checks, drafts, and orders in transit to or from the Company,
credits or deposits of the Company (whether general or special) that are held
by
Secured Parties (“General
Intangibles”);
(j) All
Instruments, including stock certificates and membership interest certificates,
evidencing ownership in any and all subsidiaries of the Company;
(k) “Supporting
obligations,” as that term is defined in the UCC (“Supporting
Obligations”);
and
(l) To
the
extent not listed above in this Exhibit
A
as
original collateral, proceeds and products of the foregoing.
16
