SECURITY AGREEMENT
Exhibit
4.3
This
SECURITY AGREEMENT, dated as of March __, 2010 (this “Agreement”), is among
MSGI Security Solutions, Inc., a Nevada corporation (the “ Company ”), all of
the Subsidiaries of the Company (such subsidiaries, the “ Guarantors ” and
together with the Company, the “ Debtors ”) and the
holders of the Company’s 10% Secured Convertible Notes due March __, 2011 and
issued on March __, 2011, in the original aggregate principal amount of $650,000
(collectively, the “ Notes ”) signatory
hereto, their endorsees, transferees and assigns (collectively, the “ Secured Parties
”).
WITNESSETH:
WHEREAS,
pursuant to the Subscription Agreement (as defined in the Notes), the Secured
Parties have severally agreed to extend the loans to the Company evidenced by
the Notes;
WHEREAS,
pursuant to a certain Subsidiary Guaranty, dated as of the date hereof (the
“Guaranty”),
the Guarantors have jointly and severally agreed to guarantee and act as surety
for payment of such Notes;
WHEREAS,
the Company has previously granted a first priority security interest to Enable
Growth Partners, LP, Enable Opportunity Partners LP and Xxxxxx Diversified
Strategy Master Fund LLC (“Existing Secured Parties”) in
connection with the issuance of 8% Secured Convertible Notes due May 21, 2010
and issued on May 21, 2007 pursuant to that certain security agreement (the
“Existing Security
Agreement ”, dated May 21, 2007, by and among the Company, its
Subsidiaries and the Existing Secured Parties, each in effect as of the date
hereof; 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 Collateral Agent, (defined in Section 18) 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 Guaranty.
NOW,
THEREFORE, in consideration of the agreements herein contained and for other
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto hereby agree as follows:
1. Certain Definitions. As used
in this Agreement, the following terms shall have the meanings set forth in this
Section 1. Terms used but not otherwise defined in this Agreement that are
defined in Article 9 of the UCC (such as “account”, “chattel paper”, “commercial
tort claim”, “deposit account”, “document”, “equipment”, “fixtures”, “general
intangibles”, “goods”, “instruments”, “inventory”, “investment property”,
“letter-of-credit rights”, “proceeds” and “supporting obligations”) shall have
the respective meanings given such terms in Article 9 of the UCC.
(a) “Collateral” means the
collateral in which the Secured Parties are granted a security interest by this
Agreement and which shall include the following personal property of the
Debtors, whether presently owned or existing or hereafter acquired or coming
into existence, wherever situated, and all additions and accessions thereto and
all substitutions and replacements thereof, and all proceeds, products and
accounts thereof, including, without limitation, all proceeds from the sale or
transfer of the Collateral and of insurance covering the same and of any tort
claims in connection therewith, and all dividends, interest, cash, notes,
securities, equity interest or other property at any time and from time to time
acquired, receivable or otherwise distributed in respect of, or in exchange for,
any or all of the Pledged Securities (as defined below):
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(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;
(ii) All
contract rights and other general intangibles, including, without limitation,
all partnership interests, membership interests, stock or other securities,
rights under any of the Organizational Documents, agreements related to the
Pledged Securities, licenses, distribution and other agreements, computer
software (whether “off-the-shelf”, licensed from any third party or developed by
any Debtor), computer software development rights, leases, franchises, customer
lists, quality control procedures, grants and rights, goodwill, trademarks,
service marks, trade styles, trade names, patents, patent applications,
copyrights, and income tax refunds;
(iii) All
accounts, together with all instruments, all documents of title representing any
of the foregoing, all rights in any merchandising, goods, equipment, motor
vehicles and trucks which any of the same may represent, and all right, title,
security and guaranties with respect to each account, including any right of
stoppage in transit;
(iv) All
documents, letter-of-credit rights, instruments and chattel paper;
(v)
All commercial tort claims;
(vi) All
deposit accounts and all cash (whether or not deposited in such deposit
accounts);
(vii) All
investment property;
(viii) All
supporting obligations; and
(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.
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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,
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.
(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 Collateral Agent (as that term is defined below) may reasonably
request.
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(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 Notes, the Guaranty and any other instruments, agreements or other documents
executed and/or delivered in connection herewith or therewith, in each case,
whether now or hereafter existing, voluntary or involuntary, direct or indirect,
absolute or contingent, liquidated or unliquidated, whether or not jointly owed
with others, and whether or not from time to time decreased or extinguished and
later increased, created or incurred, and all or any portion of such obligations
or liabilities that are paid, to the extent all or any part of such payment is
avoided or recovered directly or indirectly from any of the Secured Parties as a
preference, fraudulent transfer or otherwise as such obligations may be amended,
supplemented, converted, extended or modified from time to time. Without
limiting the generality of the foregoing, the term “Obligations” shall include,
without limitation: (i) principal of, and interest on the Notes and the loans
extended pursuant thereto; (ii) any and all other fees, indemnities, costs,
obligations and liabilities of the Debtors from time to time under or in
connection with this Agreement, the Notes, the Guaranty and any other
instruments, agreements or other documents executed and/or delivered in
connection herewith or therewith; and (iii) all amounts (including but not
limited to post-petition interest) in respect of the foregoing that would be
payable but for the fact that the obligations to pay such amounts are
unenforceable or not allowable due to the existence of a bankruptcy,
reorganization or similar proceeding involving any Debtor.
(f) “Organizational
Documents” means with respect to any Debtor, the documents by which such
Debtor was organized (such as a certificate of incorporation, certificate of
limited partnership or articles of organization, and including, without
limitation, any certificates of designation for preferred stock or other forms
of preferred equity) and which relate to the internal governance of such Debtor
(such as bylaws, a partnership agreement or an operating, limited liability or
members agreement).
(g) “Pledged Securities”
shall have the meaning ascribed to such term in Section 4(i).
(h) “UCC” means the
Uniform Commercial Code of the State of New York and or any other applicable law
of any state or states which has jurisdiction with respect to all, or any
portion of, the Collateral or this Agreement, from time to time. It is the
intent of the parties that defined terms in the UCC should be construed in their
broadest sense so that the term “Collateral” will be construed in its broadest
sense. Accordingly if there are, from time to time, changes to defined terms in
the UCC that broaden the definitions, they are incorporated herein and if
existing definitions in the UCC are broader than the amended definitions, the
existing ones shall be controlling.
2. Grant of Security Interest in
Collateral. As an inducement for the Secured Parties to extend the loans
as evidenced by the Notes 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 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 Collateral
Agent, to the extent not previously delivered to the Collateral Agent under the
Existing Security Agreement or delivered to a secured party under the Existing
Security Agreement pursuant to the terms thereof (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.
Upon the termination of the security interest in favor of the Existing Secured
Parties, to the extent not previously delivered hereunder, each Debtor shall
deliver or cause to be delivered to the Collateral Agent the items required by
the preceding sentence. The Debtors are, contemporaneously with the execution
hereof, delivering to Collateral Agent, or have previously delivered to
Collateral Agent, a true and correct copy of each Organizational Document
governing any of the Pledged Securities.
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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 defined in the Subscription
Agreement). 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 except as set forth on Schedule B attached
hereto, the Debtors are the sole owner of the Collateral (except for
non-exclusive licenses granted by any Debtor in the ordinary course of
business), free and clear of any liens, security interests, encumbrances, rights
or claims, and are fully authorized to grant the Security Interests. Except as
set forth on Schedule
B 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 B
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).
(d) No
written claim has been received that any Collateral or Debtor's use of any
Collateral violates the rights of any third party. There has been no adverse
decision to any Debtor's claim of ownership rights in or exclusive rights to use
the Collateral in any jurisdiction or to any Debtor's right to keep and maintain
such Collateral in full force and effect, and there is no proceeding involving
said rights pending or, to the best knowledge of any Debtor, threatened before
any court, judicial body, administrative or regulatory agency, arbitrator or
other governmental authority.
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(e) Each
Debtor shall at all times maintain its books of account and records relating to
the Collateral at its principal place of business and its Collateral at the
locations set forth on Schedule
A attached hereto and may not relocate such books of account
and records or tangible Collateral unless it delivers to the Secured Parties at
least 30 days prior to such relocation (i) written notice of such relocation and
the new location thereof (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,
subject only to the Permitted.
(f) This
Agreement creates in favor of the Secured Parties a valid security interest in
the Collateral, subject only to Permitted Liens (as defined in the Notes)
securing the payment and performance of the Obligations. Upon making the filings
described in the immediately following paragraph, all security interests created
hereunder in any Collateral which may be perfected by filing Uniform Commercial
Code financing statements shall have been duly perfected. Except for the filing
of the Uniform Commercial Code financing statements referred to in the
immediately following paragraph, the recordation of the Intellectual Property
Security Agreement (as defined below) with respect to copyrights and copyright
applications in the United States Copyright Office referred to in paragraph (m),
the execution and delivery of deposit account control agreements satisfying the
requirements of Section 9-104(a)(2) of the UCC with respect to each deposit
account of the Debtors, and the delivery of the certificates and other
instruments provided in Section 3, no action is necessary to create, perfect or
protect the security interests created hereunder. Without limiting the
generality of the foregoing, except for the filing of said financing statements,
the recordation of said Intellectual Property Security Agreement, and the
execution and delivery of said deposit account control agreements, no consent of
any third parties and no authorization, approval or other action by, and no
notice to or filing with, any governmental authority or regulatory body is
required for (i) the execution, delivery and performance of this Agreement, (ii)
the creation or perfection of the Security Interests created hereunder in the
Collateral or (iii) the enforcement of the rights of the Collateral Agent and
the Secured Parties hereunder.
(g) Each
Debtor hereby authorizes the Collateral 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 and
authorizes Collateral Agent to take any other action in Collateral Agent’s
absolute discretion to effectuate, memorialize and protect Secured Parties’
interest and rights under this Agreement.
(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.
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(i) The
capital stock and other equity interests listed on Schedule H hereto
(the “Pledged
Securities ”) represent all of the capital stock and other equity
interests of the Guarantors, and represent all capital stock and other equity
interests owned, directly or indirectly, by the Company. 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.
(j) The
ownership and other equity interests in partnerships and limited liability
companies (if any) included in the Collateral (the “ Pledged Interests ”)
by their express terms do not provide that they are securities governed by
Article 8 of the UCC and are not held in a securities account or by any
financial intermediary.
(k) 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 11 hereof. Each Debtor hereby agrees to defend the same
against the claims of any and all persons and entities. Each Debtor shall
safeguard and protect all Collateral for the account of the Secured Parties. At
the request of the Collateral Agent, each Debtor will sign and deliver to the
Collateral Agent on behalf of the Secured Parties at any time or from time to
time one or more financing statements pursuant to the UCC in form reasonably
satisfactory to the Collateral Agent and will pay the cost of filing the same in
all public offices wherever filing is, or is deemed by the Collateral 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
Collateral 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)
Other than with respect to Permitted Liens, no Debtor will
transfer, pledge, hypothecate, encumber, license, sell or otherwise dispose of
any of the Collateral (except for non-exclusive licenses granted by a Debtor in
its ordinary course of business and sales of inventory by a Debtor in its
ordinary course of business) without the prior written consent of a Majority in
Interest.
(m) Each
Debtor shall keep and preserve its equipment, inventory and other tangible
Collateral in good condition, repair and order and shall not operate or locate
any such Collateral (or cause to be operated or located) in any area excluded
from insurance coverage.
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(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
Collateral Agent, that (a) the Collateral Agent will be named as lender loss
payee and additional insured under each such insurance policy; and (b) if such
insurance is proposed to be cancelled or materially changed for any reason
whatsoever, such insurer or the Company will promptly notify the Collateral
Agent. In addition, the Collateral 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 Company or the insurer of any 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 occurs and is
continuing or in excess of $100,000 for any occurrence or series of related
occurrences shall be paid to the Collateral 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 Collateral Agent unless otherwise
directed in writing by the Collateral Agent. Copies of such policies or the
related certificates, in each case, naming the Collateral Agent as lender loss
payee and additional insured shall be delivered to the Collateral Agent at least
annually and at the time any new policy of insurance is issued.
(o) Each
Debtor shall, within ten (10) days of obtaining knowledge thereof, advise the
Secured Parties promptly, in sufficient detail, of any material adverse change
in the Collateral, and of the occurrence of any event which would have a
material adverse effect on the value of the Collateral or on the Secured
Parties’ security interest, through the Collateral Agent, therein.
(p) Each
Debtor shall promptly execute and deliver to the Collateral Agent such further
deeds, mortgages, assignments, security agreements, financing statements or
other instruments, documents, certificates and assurances and take such further
action as the Collateral 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 have been granted a
security interest hereunder, substantially in a form reasonably acceptable to
the Collateral Agent, which Intellectual Property Security Agreement, other than
as stated therein, shall be subject to all of the terms and conditions
hereof.
(q) Each
Debtor shall permit the Collateral Agent and its representatives and agents to
inspect the Collateral during normal business hours and upon reasonable prior
notice, and to make copies of records pertaining to the Collateral as may be
reasonably requested by the Collateral Agent 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.
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(u) The
Debtors shall at all times preserve and keep in full force and effect their
respective valid existence and good standing and any rights and franchises
material to its business.
(v) No
Debtor will change its name, type of organization, jurisdiction of organization,
organizational identification number (if it has one), legal or corporate
structure, or identity, or add any new fictitious name unless it provides at
least 30 days prior written notice to the Secured Parties of such change and, at
the time of such written notification, such Debtor provides any financing
statements or fixture filings necessary to perfect and continue 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 Collateral Agent which shall not be unreasonably withheld.
(x) No
Debtor may relocate its chief executive office to a new location without
providing 30 days prior written notification thereof to the Secured Parties and
so long as, at the time of such written notification, such Debtor provides any
financing statements or fixture filings necessary to perfect and continue the
perfection of the Security Interests granted and evidenced by this
Agreement.
(y) Each
Debtor was organized and remains organized solely under the laws of the state
set forth next to such Debtor’s name in 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 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 Collateral Agent to the extent not
previously delivered to the Collateral Agent under the Existing Security
Agreement or delivered to a secured party under the Existing Security Agreement
pursuant to the terms thereof.
(bb) Each
Debtor, in its capacity as issuer, hereby agrees to comply with any and all
orders and instructions of Collateral 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 Collateral Agent to the extent not previously delivered to the
Collateral Agent under the Existing Security Agreement or delivered to a secured
party under the Existing Security Agreement pursuant to the terms thereof, 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).
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(dd) Subject
only to the rights of the Existing Secured Parties under the Existing Security
Agreement, 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 Collateral Agent, to be
entered into and delivered to the Collateral 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, subject
only to the rights of the Existing Secured Parties under the Existing Security
Agreement.
(ff) To
the extent that any Collateral is in the possession of any third party, the
applicable Debtor shall join with the Collateral 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 Collateral 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 Collateral Agent.
(hh)
Each Debtor shall immediately provide written notice to
the Secured Parties of any and all accounts which arise out of contracts with
any governmental authority and, to the extent necessary to perfect or continue
the perfected status of the Security Interests in such accounts and proceeds
thereof, shall execute and deliver to the Collateral Agent an assignment of
claims for such accounts and cooperate with the Collateral 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.
(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. Concurrent therewith, the Additional Debtor shall
deliver replacement schedules for, or supplements to all other Schedules to (or
referred to in) this Agreement, as applicable, which replacement schedules shall
supersede, or supplements shall modify, the Schedules then in effect. The
Additional Debtor shall also deliver such opinions of counsel, authorizing
resolutions, good standing certificates, incumbency certificates, organizational
documents, financing statements and other information and documentation as the
Collateral Agent may reasonably request. Upon delivery of the foregoing to the
Collateral 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.
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(jj) Each
Debtor shall vote the Pledged Securities to comply with the covenants and
agreements set forth herein and in the Notes.
(kk) Each
Debtor shall register the pledge of the applicable Pledged Securities on the
books of such Debtor. Each Debtor shall notify each issuer of Pledged Securities
to register the pledge of the applicable Pledged Securities in the name of the
Secured Parties on the books of such issuer. Further, except with respect to
certificated securities delivered to the Collateral Agent, the applicable Debtor
shall deliver to Collateral 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, which acknowledgement shall confirm that: (a) it has registered the
pledge on its books and records; and (b) subject only to the rights of the
Existing Secured Parties under the Existing Security Agreement, at any time
directed by Collateral Agent during the continuation of an Event of Default,
such issuer will transfer the record ownership of such Pledged Securities into
the name of any designee of Collateral Agent, will take such steps as may be
necessary to effect the transfer, and will comply with all other instructions of
Collateral Agent regarding such Pledged Securities without the further consent
of the applicable Debtor.
(ll) Subject
only to the rights of the Existing Secured Parties under the Existing Security
Agreement, in the event that, upon an occurrence of an Event of Default,
Collateral Agent shall sell all or any of the Pledged Securities to another
party or parties (herein called the “Transferee”) or shall
purchase or retain all or any of the Pledged Securities, each Debtor shall, to
the extent applicable: (i) deliver to Collateral 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; (ii) use its best efforts to obtain resignations of the
persons then serving as officers and directors of the Debtors and their direct
and indirect subsidiaries, if so requested; and (iii) use its best efforts to
obtain any approvals that are required by any governmental or regulatory body in
order to permit the sale of the Pledged Securities to the Transferee or the
purchase or retention of the Pledged Securities by Collateral Agent and allow
the Transferee or Collateral 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 Collateral Agent
notice whenever it acquires (whether absolutely or by license) or creates any
additional material Intellectual Property.
(nn) Each
Debtor will from time to time, at the joint and several expense of the Debtors,
promptly execute and deliver all such further instruments and documents, and
take all such further action as may be necessary or desirable, or as the
Collateral 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.
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(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.
5. Effect of Pledge on Certain
Rights. If
any of the Collateral subject to this Agreement consists of nonvoting equity or
ownership interests (regardless of class, designation, preference or rights)
that may be converted into voting equity or ownership interests upon the
occurrence of certain events (including, without limitation, upon the transfer
of all or any of the other stock or assets of the issuer), it is agreed that the
pledge of such equity or ownership interests pursuant to this Agreement or the
enforcement of any of Collateral 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 Notes) under the
Notes;
(b) Any
representation or warranty of any Debtor in this Agreement shall prove to have
been incorrect in any material respect when made;
(c) The
failure by any Debtor to observe or perform any of its obligations hereunder for
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
(d) If
any provision of this Agreement shall at any time for any reason be declared to
be null and void, or the validity or enforceability thereof shall be contested
by any Debtor, or a proceeding shall be commenced by any Debtor, or by any
governmental authority having jurisdiction over any Debtor, seeking to establish
the invalidity or unenforceability thereof, or any Debtor shall deny that any
Debtor has any liability or obligation purported to be created under this
Agreement.
7. Duty To Hold In
Trust.
(a) Subject
only to the rights of the Existing Secured Parties under the Existing Security
Agreement, 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 Notes or otherwise, or of any check, draft, note, trade
acceptance or other instrument evidencing an obligation to pay any such sum,
hold the same in trust for the Secured Parties and shall forthwith endorse and
transfer any such sums or instruments, or both, to the Secured Parties, pro-rata
in proportion to their respective then-currently outstanding principal amount of
Notes for application to the satisfaction of the Obligations (and if any Note is
not outstanding, pro-rata in proportion to the initial purchases of the
remaining Notes).
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(b) Subject
only to the rights of the Existing Secured Parties under the Existing Security
Agreement, if any Debtor shall become entitled to receive or shall receive any
securities or other property (including, without limitation, shares of Pledged
Securities or instruments representing Pledged Securities acquired after the
date hereof, or any options, warrants, rights or other similar property or
certificates representing a dividend, or any distribution in connection with any
recapitalization, reclassification or increase or reduction of capital, or
issued in connection with any reorganization of such Debtor or any of its direct
or indirect subsidiaries) in respect of the Pledged Securities (whether as an
addition to, in substitution of, or in exchange for, such Pledged Securities or
otherwise), such Debtor agrees to (i) accept the same as the Collateral 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 Collateral Agent on or before the close of
business on the fifth business day following the receipt thereof by such Debtor,
in the exact form received together with the Necessary Endorsements, to be held
by Collateral Agent subject to the terms of this Agreement as
Collateral.
8. Rights and Remedies Upon
Default.
(a)
Subject only to the rights of the Existing Secured Parties under the
Existing Security Agreement, upon the occurrence of any Event of Default and at
any time thereafter, the Secured Parties, acting through the Collateral Agent,
shall have the right to exercise all of the remedies conferred hereunder and
under the Notes, and the Secured Parties shall have all the rights and remedies
of a secured party under the UCC. Without limitation, the Collateral Agent, for
the benefit of the Secured Parties, subject only to the rights of the Existing
Secured Parties under the Existing Security Agreement, shall have the following
rights and powers:
(i) The
Collateral 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
Collateral Agent at places which the Collateral Agent shall reasonably select,
whether at such Debtor's premises or elsewhere, and make available to the
Collateral Agent, without rent, all of such Debtor’s respective premises and
facilities for the purpose of the Collateral Agent taking possession of,
removing or putting the Collateral in saleable or disposable form.
(ii) Upon
notice to the Debtors by Collateral 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, Collateral 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 Collateral Agent, to exercise in such
Collateral Agent’s discretion all voting rights pertaining thereto. Without
limiting the generality of the foregoing, Collateral 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.
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(iii) The
Collateral 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 Collateral 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 Collateral 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.
(iv) The
Collateral 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 Collateral Agent, on behalf of the Secured Parties, and to
enforce the Debtors’ rights against such account debtors and
obligors.
(v) The
Collateral 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 Collateral Agent, on
behalf of the Secured Parties, or its designee.
(vi) The
Collateral 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
Collateral 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
Collateral Agent may sell the Collateral without giving any warranties and may
specifically disclaim such warranties. If the Collateral 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 any and all rights that
it may have to a judicial hearing in advance of the enforcement of any of the
Collateral 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 Collateral 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 Collateral Agent, for the benefit of the
Collateral 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 and subject only to the
rights of the Existing Secured Parties under the Existing Security Agreement,
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.
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9.
Applications of
Proceeds. Subject only to the rights of the Existing Secured Parties
under the Existing Security Agreement, 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 Collateral 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-outstanding
principal amounts of Notes 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 18% 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 Collateral Agent may be limited in its ability to effect
a sale to the public of all or part of the Pledged Securities by reason of
certain prohibitions in the Securities Act of 1933, as amended, or other federal
or state securities laws (collectively, the “ Securities Laws ”),
and may be compelled to resort to one or more sales to a restricted group of
purchasers who may be required to agree to acquire the Pledged Securities for
their own account, for investment and not with a view to the distribution or
resale thereof. Each Debtor agrees that sales so made may be at prices and on
terms less favorable than if the Pledged Securities were sold to the public, and
that Collateral Agent has no obligation to delay the sale of any Pledged
Securities for the period of time necessary to register the Pledged Securities
for sale to the public under the Securities Laws. Each Debtor shall cooperate
with Collateral Agent in its attempt to satisfy any requirements under the
Securities Laws (including, without limitation, registration thereunder if
requested by Collateral Agent) applicable to the sale of the Pledged Securities
by Collateral Agent.
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 Collateral Agent. The
Debtors shall also pay all other claims and charges which in the reasonable
opinion of the Collateral Agent is reasonably likely to prejudice, imperil or
otherwise affect the Collateral or the Security Interests therein. The Debtors
will also, upon demand, pay to the Collateral 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 Collateral Agent, for the benefit of
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 Notes. Until
so paid, any fees payable hereunder shall be added to the principal amount of
the Notes and shall bear interest at the Default Rate.
15
12. Responsibility for Collateral.
The Debtors assume all liabilities and responsibility in connection with all
Collateral, and the Obligations shall in no way be affected or diminished by
reason of the loss, destruction, damage or theft of any of the Collateral or its
unavailability for any reason. Without limiting the generality of the foregoing,
(a) neither the Collateral 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 Collateral 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 Collateral Agent or any
Secured Party of any payment relating to any of the Collateral, nor shall the
Collateral 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 Collateral 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 Collateral Agent or to which the Collateral 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 the Debtors hereunder,
shall be absolute and unconditional, irrespective of: (a) any lack of validity
or enforceability of this Agreement, the Notes or any agreement entered into in
connection with the foregoing, or any portion hereof or thereof; (b) any change
in the time, manner or place of payment or performance of, or in any other term
of, all or any of the Obligations, or any other amendment or waiver of or any
consent to any departure from the Notes 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 or bankruptcy. Each Debtor
expressly waives presentment, protest, notice of protest, demand, notice of
nonpayment and demand for performance. In the event that at any time any
transfer of any Collateral or any payment received by the Secured Parties
hereunder shall be deemed by final order of a court of competent jurisdiction to
have been a voidable preference or fraudulent conveyance under the bankruptcy or
insolvency laws of the United States, or shall be deemed to be otherwise due to
any party other than the Secured Parties, then, in any such event, each Debtor’s
obligations hereunder shall survive cancellation of this Agreement, and shall
not be discharged or satisfied by any prior payment thereof and/or cancellation
of this Agreement, but shall remain a valid and binding obligation enforceable
in accordance with the terms and provisions hereof. Each Debtor waives all right
to require the Secured Parties to proceed against any other person or entity or
to apply any Collateral which the Secured Parties may hold at any time, or to
marshal assets, or to pursue any other remedy. Each Debtor waives any defense
arising by reason of the application of the statute of limitations to any
obligation secured hereby.
14. Term of Agreement. This
Agreement and the Security Interests shall terminate on the date on which all
payments under the Notes 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 (including, without
limitation, Annex B hereto) shall survive and remain operative and in full force
and effect regardless of the termination of this Agreement.
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15. Power of Attorney; Further
Assurances.
(a) Subject
only to the rights of the Existing Secured Parties under the Existing Security
Agreement, each Debtor authorizes the Collateral Agent, and does hereby make,
constitute and appoint the Collateral 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 Collateral 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
Collateral 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 Collateral 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 Collateral
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 Notes 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 Collateral 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 Collateral Agent the grant or perfection
of a perfected security interest in all the Collateral under the
UCC.
(c) Each
Debtor hereby irrevocably appoints the Collateral 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 Collateral Agent’s
discretion, to take any action and to execute any instrument which the
Collateral 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 Collateral 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.
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16. Notices. All notices,
requests, demands and other communications hereunder shall be subject to the
notice provision of the Subscription Agreement (as such term is defined in the
Notes).
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 Collateral 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 Collateral Agent. The Secured
Parties hereby appoint Alpha Capital Anstalt to act as their agent (“Alpha” or “Collateral Agent”)
for purposes of exercising any and all rights and remedies of the Secured
Parties hereunder. Such appointment shall continue until revoked in writing by a
Majority in Interest, at which time a Majority in Interest shall appoint a new
Collateral Agent, provided that Alpha may not be removed as Collateral Agent
unless Alpha shall then hold less than $50,000 in principal amount of Notes;
provided, further, that such
removal may occur only if each of the other Secured Parties shall then hold not
less than an aggregate of $150,000 in principal amount of Notes. The Collateral
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 Notes 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 or by the Notes 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, contain 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 or,
in the case of a waiver, by the party against whom enforcement of any such
waived provision is sought.
(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.
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(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 to whom
such Secured Party assigns or transfers any Securities, provided such transferee
agrees in writing to be bound, with respect to the transferred Securities, by
the provisions of this Agreement that apply to the “Secured
Parties.”
(g) Each
party shall take such further action and execute and deliver such further
documents as may be necessary or appropriate in order to carry out the
provisions and purposes of this Agreement.
(h) All
questions concerning the construction, validity, enforcement and interpretation
of this Agreement shall be governed by and construed and enforced in accordance
with the internal laws of the State of New York, without regard to the
principles of conflicts of law thereof. Each Debtor agrees that all proceedings
concerning the interpretations, enforcement and defense of the transactions
contemplated by this Agreement and the Notes (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.
Each Debtor hereby irrevocably submits to the exclusive jurisdiction of the
state and federal courts sitting in the City of New York, Borough of Manhattan
for the adjudication of any dispute hereunder or in connection herewith or with
any transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any proceeding, any claim that it is not
personally subject to the jurisdiction of any such court, that such proceeding
is improper. Each party hereto hereby irrevocably waives personal service of
process and consents to process being served in any such proceeding by mailing a
copy thereof via registered or certified mail or overnight delivery (with
evidence of delivery) to such party at the address in effect for notices to it
under this Agreement and agrees that such service shall constitute good and
sufficient service of process and notice thereof. Nothing contained herein shall
be deemed to limit in any way any right to serve process in any manner permitted
by law. Each party hereto hereby irrevocably waives, to the fullest extent
permitted by applicable law, any and all right to trial by jury in any legal
proceeding arising out of or relating to this Agreement or the transactions
contemplated hereby. If any party shall commence a proceeding to enforce any
provisions of this Agreement, then the prevailing party in such proceeding shall
be reimbursed by the other party for its reasonable attorney’s fees and other
costs and expenses incurred with the investigation, preparation and prosecution
of such proceeding.
(i) This
Agreement may be executed in any number of counterparts, each of which when so
executed shall be deemed to be an original and, all of which taken together
shall constitute one and the same Agreement. In the event that any signature is
delivered by facsimile transmission, such signature shall create a valid binding
obligation of the party executing (or on whose behalf such signature is
executed) the same with the same force and effect as if such facsimile signature
were the original thereof.
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(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 Collateral 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 Notes, the Subscription Agreement (as such term
is defined in the Notes) 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 Collateral 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
Collateral 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 if its direct or indirect subsidiaries or
otherwise, unless and until any such Secured Party exercises its right to be
substituted for such Debtor as a partner or member, as applicable, pursuant
hereto.
(m) To
the extent that the grant of the security interest in the Collateral and the
enforcement of the terms hereof require the consent, approval or action of any
partner or member, as applicable, of any Debtor or any direct or indirect
subsidiary of any Debtor or compliance with any provisions of any of the
Organizational Documents, the Debtors hereby grant such consent and approval and
waive any such noncompliance with the terms of said documents.
[SIGNATURE
PAGES FOLLOW]
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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:
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Name:
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Title:
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ANDROMEDA
ENERGY INC.
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By:
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Name:
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Title:
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NANOBEAK
INC.
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By:
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Name:
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Title:
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[SIGNATURE
PAGE OF HOLDERS FOLLOWS]
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[SIGNATURE
PAGE OF HOLDERS TO MSGI SECURITY AGREEMENT]
Name of
Investing Entity: ______________________________________
Signature of Authorized Signatory of
Investing entity: ________________________________
Name of
Authorized Signatory:
__________________________________________________
Title of
Authorized Signatory:
___________________________________________________
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