SECURITY AGREEMENT
Exhibit
10.14
EXHIBIT
E
This
SECURITY AGREEMENT, dated as of November ___, 2008 (this “Agreement”), is
among Capital Growth Systems, Inc., a Florida 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 Original Issue Discount Secured Convertible
Debentures due seven years following their initial issuance, in the original
aggregate principal amount of up to $17,325,000 (collectively, the
“Debentures”) signatory hereto, their endorsees, transferees and assigns
(collectively, the “Secured Parties”).
W
I T N E S S E T H:
WHEREAS,
pursuant to the Purchase Agreement (as defined in the Debentures), the Secured
Parties have severally agreed to extend the loans to the Company evidenced
by
the Debentures;
WHEREAS,
pursuant to a certain Subsidiary Guarantee, dated as of the date hereof (the
“Guarantee”), the Guarantors
have
jointly and severally agreed to guarantee
and act
as surety for payment of such Debentures; and
WHEREAS,
in order to induce the Secured Parties to extend the loans evidenced by the
Debentures, each Debtor has agreed to execute and deliver to the Secured
Parties
this Agreement and to grant the Secured Parties, pari
passu with each other Secured Party and through the Agent (as defined in
Section
18 hereof), a security interest in certain property of such Debtor to secure
the
prompt payment, performance and discharge in full of all of the Company’s
obligations under the
Debentures and the Guarantors’ obligations under the Guarantee.
NOW,
THEREFORE, in consideration of the agreements herein contained and for other
good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged,
the
parties hereto hereby agree as follows:
1.
Certain
Definitions.
As used in this Agreement, the following terms shall have the meanings
set forth in this Section 1. Terms used but not otherwise defined in this
Agreement that are defined in Article 9 of the UCC (such as “account”, “chattel
paper”, “commercial tort claim”, “deposit account”, “document”, “equipment”,
“fixtures”, “general intangibles”, “goods”, “instruments”, “inventory”,
“investment property”, “letter-of-credit rights”, “proceeds” and “supporting
obligations”) shall have the respective meanings given such terms in Article 9
of the UCC.
(a)
“Collateral”
means the collateral in which the Secured Parties are granted a security
interest by this Agreement and which shall include 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
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(x) the
products and proceeds of all of the foregoing Collateral set forth in clauses
(i)-(ix) above.
Without
limiting the generality of the foregoing, the “Collateral”
shall include all investment property and general intangibles respecting
ownership and/or other equity interests in each Guarantor, including, without
limitation, the shares of capital stock and the other equity interests listed
on
Schedule
H
hereto (as the same may be modified from time to time pursuant to the terms
hereof), and any other shares of capital stock and/or other equity interests
of
any other direct or indirect subsidiary of any Debtor obtained in the future,
and, in each case, all certificates representing such shares and/or equity
interests and, in each case, all rights, options, warrants, stock, other
securities and/or equity interests that may hereafter be received, receivable
or
distributed in respect of, or exchanged for, any of the foregoing and all
rights
arising under or in connection with the Pledged Securities, including, but
not
limited to, all dividends, interest and cash.
Notwithstanding anything to the contrary contained herein, upon the sale
or
licensing by Nexvu Technologies, LLC (“Nexvu”),
of any of its, assets, personal, real or intellectual property on terms and
conditions unanimously approved by the Board of Directors in good faith,
the
Secured Parties agree to release their Lien on the Collateral owned directly
by
Nexvu on the date hereof from its security interest herein to the extent
subject
to such sale or licensing.
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.
Notwithstanding
the foregoing, the term Collateral shall not include any equipment owned
by any
of the Debtors or Vanco Direct USA, LLC, a Delaware limited liability company
(“Vanco”),
which is used in connection with the delivery of telecommunications services
as
part of the business operations of the Debtors and Vanco to the extent the
grant
of security interest in such equipment would be prohibited under applicable
state regulations, and to the extent such equipment is excluded from the
definition of “collateral” and the security interest granted to the Xxxxxx
Purchasers under the Xxxxxx Loan Agreement.
(b)
“Intellectual
Property”
means the collective reference to all rights, priorities and privileges relating
to intellectual property, whether arising under United States, multinational
or
foreign laws or otherwise, including, without limitation, (i) all copyrights
arising under the laws of the United States, any other country or any political
subdivision thereof, whether registered or unregistered and whether published
or
unpublished, all registrations and recordings thereof, and all applications
in
connection therewith, including, without limitation, all registrations,
recordings and applications in the United States Copyright Office, (ii) all
letters patent of the United States, any other country or any political
subdivision thereof, all reissues and extensions thereof, and all applications
for letters patent of the United States or any other country and all divisions,
continuations and continuations-in-part thereof, (iii) all trademarks, trade
names, corporate names, company names, business names, fictitious business
names, trade dress, service marks, logos, domain names and other source or
business identifiers, and all goodwill associated therewith, now existing
or
hereafter adopted or acquired, all registrations and recordings thereof,
and all
applications in connection therewith, whether in the United States Patent
and
Trademark Office or in any similar office or agency of the United States,
any
State thereof or any other country or any political subdivision thereof,
or
otherwise, and all common law rights related thereto, (iv) all trade secrets
arising under the laws of the United States, any other country or any political
subdivision thereof, (v) all rights to obtain any reissues, renewals or
extensions of the foregoing, (vi) all licenses for any of the foregoing,
and
(vii) all causes of action for infringement of the foregoing.
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(c) “Majority
in Interest”
means, at any time of determination, a 67% or more majority in interest (based
on then-outstanding principal amounts of Debentures at the time of such
determination) of the Secured Parties.
(d) “Necessary
Endorsement”
means undated stock powers endorsed in blank or other proper instruments
of
assignment duly executed and such other instruments or documents as the Agent
(as that term is defined below) may reasonably request.
(e)
“Obligations”
means all of the liabilities and obligations (primary, secondary, direct,
contingent, sole, joint or several) due or to become due, or that are now
or may
be hereafter contracted or acquired, or owing to, of any Debtor to the Secured
Parties, including, without limitation, all obligations under this Agreement,
the Debentures, the Guarantee
and any other instruments, agreements or other documents executed and/or
delivered in connection herewith or therewith, in each case, whether now
or
hereafter existing, voluntary or involuntary, direct or indirect, absolute
or
contingent, liquidated or unliquidated, whether or not jointly owed with
others,
and whether or not from time to time decreased or extinguished and later
increased, created or incurred, and all or any portion of such obligations
or
liabilities that are paid, to the extent all or any part of such payment
is
avoided or recovered directly or indirectly from any of the Secured Parties
as a
preference, fraudulent transfer or otherwise as such obligations may be amended,
supplemented, converted, extended or modified from time to time. Without
limiting the generality of the foregoing, the term “Obligations” shall include,
without limitation: (i) principal of, and interest on the Debentures 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 Debentures, the Guarantee 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.
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(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
Interests”
shall have the meaning ascribed to such term in Section 4(j).
(h)
“Pledged
Securities”
shall have the meaning ascribed to such term in Section 4(i).
(i) “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
Debentures and to secure the complete and timely payment, performance and
discharge in full, as the case may be, of all of the Obligations, each Debtor
hereby unconditionally and irrevocably pledges, grants and hypothecates to
the
Secured Parties a 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.
Immediately upon the Senior Creditor Repayment (as defined in the Xxxxxx
Intercreditor Agreement), each Debtor shall deliver or cause to be delivered
to
the Agent (a) any and all
certificates and other instruments representing or evidencing the
Pledged Securities, and (b) any and all certificates and other instruments
or
documents representing any of the other Collateral, in each case, together
with
all Necessary Endorsements. The Debtors are, contemporaneously with the
execution hereof, delivering to Agent, or have previously delivered to Agent,
a
true and correct copy of each Organizational Document governing any of the
Pledged Securities.
4. Representations,
Warranties, Covenants and Agreements of the Debtors.
Except as set forth under the corresponding section of the disclosure schedules
delivered to the Secured Parties concurrently herewith (the “Disclosure
Schedules”),
which Disclosure Schedules shall be deemed a part hereof, each Debtor represents
and warrants to, and covenants and agrees with, the Secured Parties as
follows:
5
(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. No Debtor owns any real property. Except as disclosed on
Schedule
A,
none of such Collateral is in the possession of any consignee, bailee,
warehouseman, agent or processor.
(c)
Except
for Permitted Liens (as defined in the Debentures) and except as set forth
on
Schedule
B
attached hereto, the Debtors are the sole owner of the Collateral (except
for
non-exclusive licenses granted by any Debtor in the ordinary course of
business), free and clear of any liens, security interests, encumbrances,
rights
or claims, and are fully authorized to grant the Security Interests. Except
as
set forth on Schedule
C
attached hereto, there is not on file in any governmental or regulatory
authority, agency or recording office an effective financing statement, security
agreement, license or transfer or any notice of any of the foregoing (other
than
those that will be filed in favor of the Secured Parties pursuant to this
Agreement) covering or affecting any of the Collateral. Except as set forth
on
Schedule
C
attached hereto and except pursuant to this Agreement, as
long as this Agreement shall be in effect, the Debtors shall not execute
and
shall not knowingly permit to be on file in any such office or agency any
other
financing statement or other document or instrument (except to the extent
filed
or recorded in favor of the Secured Parties pursuant to the terms of this
Agreement or as permitted in connection with any permitted purchase money
security interests or capital leases that are permitted under the
Debentures).
(d)
No
written claim has been received that any Collateral or any Debtor's use of
any
Collateral violates the rights of any third party. There has been no adverse
decision to any Debtor's claim of ownership rights in or exclusive rights
to use
the Collateral in any jurisdiction or to any Debtor's right to keep and maintain
such Collateral in full force and effect, and there is no proceeding involving
said rights pending or, to the best knowledge of any Debtor, threatened before
any court, judicial body, administrative or regulatory agency, arbitrator
or
other governmental authority.
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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 lien in the Collateral.
(f)
This
Agreement creates in favor of the Secured Parties a valid security interest
in
the Collateral, subject only to Permitted Liens (as defined in the Debentures)
securing the payment and performance of the Obligations. Upon making the
filings
described in the immediately following paragraph, all security interests
created
hereunder in any Collateral which may be perfected by filing Uniform Commercial
Code financing statements shall have been duly perfected. Except for the
filing
of the Uniform Commercial Code financing statements referred to in the
immediately following paragraph, the recordation of the Intellectual Property
Security Agreement (as defined in
Section 4(p) hereof) with respect to copyrights and copyright applications
in
the United States Copyright Office referred to in paragraph (m),
with respect to patents and trademarks filed with the US Patent and Trademark
Office with respect to federally registered patents and trademarks and pending
applications for federal registration of patents and trademarks,
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 Agent and the Secured Parties
hereunder.
(g)
Each
Debtor hereby authorizes the Agent to file one or more financing statements
under the UCC, with respect to the Security Interests, with the proper filing
and recording agencies in any jurisdiction deemed proper by it.
(h)
The
execution, delivery and performance of this Agreement by the Debtors does
not
(i) violate any of the provisions of any Organizational Documents of any
Debtor
or any judgment, decree, order or award of any court, governmental body or
arbitrator or any applicable law, rule or regulation applicable to any Debtor
or
(ii) conflict with, or constitute a default (or an event that with notice
or
lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation (with or without
notice, lapse of time or both) of, any agreement, credit facility, debt or
other
instrument (evidencing any Debtor's debt or otherwise) or other understanding
to
which any Debtor is a party or by which any property or asset of any
Debtor
is bound or affected. If any, all required consents (including, without
limitation, from stockholders or creditors of any Debtor) necessary
for any Debtor to enter into and perform its obligations hereunder
have been obtained.
7
(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 (as defined in the Debentures).
(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 (as defined in the Debentures), each Debtor shall at
all
times maintain the liens and Security Interests
provided for hereunder as valid and perfected liens
and security interests in the Collateral in favor of the Secured Parties
until
this Agreement and the Security Interest hereunder shall be terminated pursuant
to Section 14 hereof. Each Debtor hereby agrees to defend the same against
the
claims of any and all persons and entities. Each Debtor shall safeguard and
protect all Collateral for the account of the Secured Parties. At the request
of
the Agent, each Debtor will sign and deliver to the Agent on behalf of the
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 Agent
and
will pay the cost of filing the same in all public offices wherever filing
is,
or is deemed by the Agent to be, necessary or desirable to effect the rights
and
obligations provided for herein. Without limiting the generality of the
foregoing, each Debtor shall pay all fees, taxes and other amounts necessary
to
maintain the Collateral and the Security Interests hereunder, and each Debtor
shall obtain and furnish to the Agent from time to time, upon demand, such
releases and/or subordinations of claims and liens which may be required
to
maintain the priority of the Security Interests
hereunder.
(l)
Except
as expressly permitted in Section 1 with respect to licenses and transfers
by
Nexvu, 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.
8
(m) Each
Debtor shall keep and preserve its equipment, inventory and other tangible
Collateral in good condition, repair and order and shall not operate or locate
any such Collateral (or cause to be operated or located) in any area excluded
from insurance coverage.
(n) Each
Debtor shall maintain with financially sound and reputable insurers, insurance
with respect to the Collateral, including Collateral hereafter
acquired,
against loss or damage of the kinds and in the amounts customarily insured
against by entities of established reputation having similar properties
similarly situated and in such amounts as are customarily carried under similar
circumstances by other such entities and otherwise as is prudent for entities
engaged in similar businesses but in any event sufficient to cover the full
replacement cost thereof. Each Debtor shall cause each insurance policy issued
in connection herewith to provide, and the insurer issuing such policy to
certify to the Agent, that (a) the Agent will be named as lender loss payee
and
additional insured under each such insurance policy; (b) if such insurance
be
proposed to be cancelled or materially changed for any reason whatsoever,
such
insurer will promptly notify the Agent and such cancellation or change shall
not
be effective as to the Agent for at least thirty (30) days after receipt
by the
Agent of such notice, unless the effect of such change is to extend or increase
coverage under the policy; and (c) the Agent will have the right (but no
obligation) at its election to remedy any default in the payment of premiums
within thirty (30) days of notice from the insurer of such default. If no
Event
of Default (as defined in the Debentures) 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,
and except as set forth below, 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 Agent on
behalf
of the Secured Parties and, if received by such Debtor, shall be held in
trust
for the Secured Parties and immediately paid over to the Agent unless otherwise
directed in writing by the Agent.
Notwithstanding anything to the contrary contained herein, so long as no
Event
of Default (as defined in the Debentures) exists, Company may apply payments
in
excess of $100,000 to repair or replace switching or routing equipment, for
the
purpose of restoring or establishing new customary circuits to address the
casualty loss related to such equipment.
Copies of such policies or the related certificates, in each case, naming
the
Agent as lender loss payee and additional insured shall be delivered to the
Agent at least annually and at the time any new policy of insurance is
issued.
(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 Agent, therein.
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(p)
Each
Debtor shall promptly execute and deliver to the Agent such further deeds,
mortgages, assignments, security agreements, financing statements or other
instruments, documents, certificates and assurances and take such further
action
as the Agent
may from time to time request and may in its sole discretion deem necessary
to
perfect, protect or enforce the Secured Parties’ security interest in the
Collateral including, without limitation, if applicable, the execution and
delivery of a separate security agreement with respect to each Debtor’s
Intellectual Property (“Intellectual
Property Security Agreement”)
in which the Secured Parties have been granted a security interest hereunder,
substantially in a form reasonably acceptable to the Agent, which Intellectual
Property Security Agreement, other than as stated therein, shall be subject
to
all of the terms and conditions hereof.
(q)
Each
Debtor shall permit the 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 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.
(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 Agent which shall not be unreasonably
withheld.
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(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 Agent.
(bb)
Each
Debtor, in its capacity as issuer, hereby agrees to comply with any and all
orders and instructions of Agent regarding the Pledged Interests consistent
with
the terms of this Agreement without the further consent of any Debtor as
contemplated by Section 8-106 (or any successor section) of the UCC. Further,
each Debtor agrees that it shall not enter into a similar agreement (or one
that
would confer “control” within the meaning of Article 8 of the UCC) with any
other person or entity.
(cc) Each
Debtor shall cause all tangible chattel paper constituting Collateral to
be
delivered to the Agent, or, if such delivery is not possible, then to cause
such
tangible chattel paper to contain a legend noting that it is subject to the
security interest created by this Agreement. To the extent that any Collateral
consists of electronic chattel paper, the applicable Debtor shall cause the
underlying chattel paper to be “marked” within the meaning of Section 9-105 of
the UCC (or successor section thereto).
(dd) If
there is any investment property or deposit account included as Collateral
that
can be perfected by “control” through an account control agreement, the
applicable Debtor shall cause such an account control agreement, in form
and
substance in each case satisfactory to the Agent, to be entered into and
delivered to the
Agent for the benefit of the Secured Parties.
11
(ee)
To
the extent that any Collateral consists of letter-of-credit rights, the
applicable Debtor shall cause the issuer of each underlying letter of credit
to
consent to an assignment of the proceeds thereof to the Secured
Parties.
(ff)
To
the extent that any Collateral is in the possession of any third party, the
applicable Debtor shall join with the Agent in notifying such third party
of the
Secured Parties’ security interest in such Collateral and shall use its best
efforts to obtain an acknowledgement and agreement from such third party
with
respect to the Collateral, in form and substance reasonably satisfactory
to the
Agent.
(gg) If
any Debtor shall at any time hold or acquire a commercial tort claim, such
Debtor shall promptly notify the Secured Parties in a writing signed by such
Debtor of the particulars thereof and grant to the Secured Parties in such
writing a security interest therein and in the proceeds thereof, all upon
the
terms of this Agreement, with such writing to be in form and substance
satisfactory to the Agent.
(hh) Each
Debtor shall immediately provide written notice to the Secured Parties of
any
and all accounts which arise out of contracts with any governmental authority
and, to the extent necessary to perfect or continue the perfected status
of the
Security Interests
in such accounts and proceeds thereof, shall execute and deliver to the Agent
an
assignment of claims for such accounts and cooperate with the Agent in taking
any other steps required, in its judgment, under the Federal Assignment of
Claims Act or any similar federal, state or local statute or rule to perfect
or
continue the perfected status of the Security Interests
in such accounts and proceeds thereof.
(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
Agent
may reasonably request. Upon delivery of the foregoing to the Agent, the
Additional Debtor shall be and become a party to this Agreement with the
same
rights and obligations as the Debtors, for all purposes hereof as fully and
to
the same extent as if it were an original signatory hereto and shall be deemed
to have made the representations, warranties and covenants set forth herein
as
of the date of execution and delivery of such Additional Debtor Joinder,
and all
references herein to the “Debtors” shall be deemed to include each Additional
Debtor.
(jj)
Each
Debtor shall vote the Pledged Securities to comply with the covenants and
agreements set forth herein and in the Debentures.
12
(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 Agent, the applicable Debtor shall
deliver to Agent an acknowledgement of pledge (which, where appropriate,
shall
comply with the requirements of the relevant UCC with respect to perfection
by
registration) signed by the issuer of the applicable Pledged Securities,
which
acknowledgement shall confirm that: (a) it has registered the pledge on its
books and records; and (b) at any time directed by Agent during the continuation
of an Event of Default, subject to the rights of the Xxxxxx Purchasers under
the
Xxxxxx Loan Agreement, such issuer will transfer the record ownership of
such
Pledged Securities into the name of any designee of Agent, will take such
steps
as may be necessary to effect the transfer, and will comply with all other
instructions of Agent regarding such Pledged Securities without the further
consent of the applicable Debtor.
(ll)
In
the event that, upon an occurrence of an Event of Default, subject to the
rights
of the Xxxxxx Purchasers under the Xxxxxx Loan Agreement, 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 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 Agent and allow the
Transferee or Agent to continue the business of the Debtors and their direct
and
indirect subsidiaries.
(mm) Without
limiting the generality of the other obligations of the Debtors hereunder,
each
Debtor shall promptly (i) cause to be registered at the United States Copyright
Office all of its material copyrights, (ii) cause the security interest
contemplated hereby with respect to all Intellectual Property registered
at the
United States Copyright Office or United States Patent and Trademark Office
to
be duly recorded at the applicable office, and (iii) give the Agent notice
whenever it acquires (whether absolutely or by license) or creates any
additional material Intellectual Property.
(nn) Each
Debtor will from time to time, at the joint and several expense of the Debtors,
promptly execute and deliver all such further instruments and documents,
and
take all such further action as may be necessary or desirable, or as the
Agent
may reasonably request, in order to perfect and protect any security interest
granted or purported to be granted hereby or to enable the Secured Parties
to
exercise and enforce their rights and remedies hereunder and with respect
to any
Collateral or to otherwise carry out the purposes of this
Agreement.
13
(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 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 Debentures) under
the
Debentures;
(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 Business 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.
14
7. Duty
To Hold In Trust.
(a) Upon
the occurrence of any Event of Default and at any time thereafter, each Debtor
shall, upon receipt of any revenue, income,
dividend, interest
or other sums subject to the Security Interests, whether payable pursuant
to the
Debentures 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 Debentures for application to the satisfaction of the Obligations (and
if any
Debenture is not outstanding, pro-rata in proportion to the initial purchases
of
the remaining Debentures).
(b) If
any Debtor shall become entitled to receive or shall receive any securities
or
other property (including, without limitation, shares of Pledged Securities
or
instruments representing Pledged Securities acquired after the date hereof,
or
any options, warrants, rights or other similar property or certificates
representing a dividend, or any distribution in connection with any
recapitalization, reclassification or increase or reduction of capital, or
issued in connection with any reorganization of such Debtor or any of its
direct
or indirect subsidiaries) in respect of the Pledged Securities (whether as
an
addition to, in substitution of, or in exchange for, such Pledged Securities
or
otherwise), such Debtor agrees to (i) accept the same as the agent of the
Secured Parties; (ii) hold the same in trust on behalf of and for the benefit
of
the Secured Parties; and (iii) to deliver any and all certificates or
instruments evidencing the same to 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
Agent subject to the terms of this Agreement as Collateral.
8. Rights
and Remedies Upon Default.
(a) Upon
the occurrence of any Event of Default and at any time thereafter, the Secured
Parties, acting through the Agent, shall have the right to exercise all of
the
remedies conferred hereunder and under the Debentures, and the Secured Parties
shall have all the rights and remedies of a secured party under the UCC.
Without
limitation, the Agent,
for the benefit of the Secured Parties, shall have the following rights and
powers:
(i)
The Agent shall have the right to take possession of the Collateral and,
for
that purpose, enter, with the aid and assistance of any person, any premises
where the Collateral, or any part thereof, is or may be placed and remove
the
same, and each Debtor shall assemble the Collateral and make it available
to the
Agent at places which the Agent shall reasonably select, whether at such
Debtor's premises or elsewhere, and make available to the Agent, without
rent,
all of such Debtor’s respective premises and facilities for the purpose of the
Agent taking possession of, removing or putting the Collateral in saleable
or
disposable form.
(ii) Upon
notice to the Debtors by Agent, all rights of each Debtor to exercise the
voting
and other consensual rights which it would otherwise be entitled to exercise
and
all rights of each Debtor to receive the dividends and interest which it
would
otherwise be authorized to receive and retain, shall cease. Upon such notice,
Agent shall have the right to receive, for the benefit of the Secured Parties,
any interest, cash dividends or other payments on the Collateral and, at
the
option of Agent, to exercise in such Agent’s discretion all voting rights
pertaining thereto. Without limiting the generality of the foregoing, Agent
shall have the right (but not the obligation) to exercise all rights with
respect to the Collateral as it were the sole and absolute owner thereof,
including, without limitation, to vote and/or to exchange, at its sole
discretion, any or all of the Collateral in connection with a merger,
reorganization, consolidation, recapitalization or other readjustment concerning
or involving the Collateral or any Debtor or any of its direct or indirect
subsidiaries.
15
(iii)
The Agent shall have the right to operate the business of each Debtor using
the
Collateral and shall have the right to assign, sell, lease or otherwise dispose
of and deliver all or any part of the Collateral, at public or private sale
or
otherwise, either with or without special conditions or stipulations, for
cash
or on credit or for future delivery, in such parcel or parcels and at such
time
or times and at such place or places, and upon such
terms and conditions as the Agent may deem commercially reasonable, all without
(except as shall be required by applicable statute and cannot be waived)
advertisement or demand upon or notice to any Debtor or right of redemption
of a
Debtor, which are hereby expressly waived. Upon each such sale, lease,
assignment or other transfer of Collateral, the Agent, for the benefit of
the
Secured Parties, may, unless prohibited by applicable law which cannot be
waived, purchase all or any part of the Collateral being sold, free from
and
discharged of all trusts, claims, right of redemption and equities of any
Debtor, which are hereby waived and released.
(iv) The
Agent shall have the right (but not the obligation) to notify any account
debtors and any obligors under instruments or accounts to make payments directly
to the Agent,
on behalf of the Secured Parties, and to enforce the Debtors’ rights against
such account debtors and obligors.
(v) The
Agent, for the benefit of the Secured Parties,
may (but is not obligated to) direct any financial intermediary or any other
person or entity holding any investment property to transfer the same to
the
Agent, on behalf of the Secured Parties, or its designee.
(vi) The
Agent may (but is not obligated to) transfer any or all Intellectual Property
registered in the name of any Debtor at the United States Patent and Trademark
Office and/or Copyright Office into the name of the Secured Parties or any
designee or any purchaser of any Collateral.
(b) The
Agent shall comply with any applicable law in connection with a disposition
of
Collateral and such compliance will not be considered adversely to affect
the
commercial reasonableness of any sale of the Collateral. The Agent may sell
the
Collateral without giving any warranties and may specifically disclaim such
warranties. If the Agent sells any of the Collateral on credit, the Debtors
will
only be credited with payments actually made by the purchaser. In addition,
each
Debtor waives any and all rights that it may have to a judicial hearing in
advance of the enforcement of any of the Agent’s rights and remedies hereunder,
including, without limitation, its right following an Event of Default to
take
immediate possession of the Collateral and to exercise its rights and remedies
with respect thereto.
16
(c) For
the purpose of enabling the Agent to further exercise rights and remedies
under
this Section 8 or elsewhere provided by agreement or applicable law, each
Debtor
hereby grants to the Agent, for the benefit of the Agent and the Secured
Parties, an irrevocable, nonexclusive license (exercisable without payment
of
royalty or other compensation to such Debtor) to use, license or sublicense
following an Event of Default, any Intellectual Property now owned or hereafter
acquired by such Debtor, and wherever the same may be located, and including
in
such license access to all media in which any of the licensed items may be
recorded or stored and to all computer software and programs used for the
compilation or printout thereof.
9. Applications
of Proceeds.
The proceeds of any such sale, lease or other disposition of the Collateral
hereunder or from payments made on account of any insurance policy insuring
any
portion of the Collateral shall be applied first, to the expenses of retaking,
holding, storing, processing and preparing for sale, selling, and the like
(including, without limitation, any taxes, fees and other costs incurred
in
connection therewith) of the Collateral, to the reasonable attorneys’ fees and
expenses incurred by the Agent
in enforcing the Secured Parties’ rights hereunder and in connection with
collecting, storing and disposing of the Collateral, and then to satisfaction
of
the Obligations pro rata among the Secured Parties (based on then-outstanding
principal amounts of Debentures at the time of any such determination), and
to
the payment of any other amounts required by applicable law, after which
the
Secured Parties shall pay to the applicable Debtor any surplus proceeds.
If,
upon the sale, license or other disposition of the Collateral, the proceeds
thereof are insufficient to pay all amounts to which the Secured Parties
are
legally entitled, the Debtors will be liable for the deficiency, together
with
interest thereon, at the rate of 16% per annum or the lesser amount permitted
by
applicable law (the “Default
Rate”),
and the reasonable fees of any attorneys employed by the Secured Parties
to
collect such deficiency. To the extent permitted by applicable law, each
Debtor
waives all claims, damages and demands against the Secured Parties arising
out
of the repossession, removal, retention or sale of the Collateral, unless
due
solely to the gross negligence or willful misconduct of the Secured Parties
as
determined by a final judgment (not subject to further appeal) of a court
of
competent jurisdiction.
10. Securities
Law Provision.
Each Debtor recognizes that Agent may be limited in its ability to effect
a sale
to the public of all or part of the Pledged Securities 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 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 Agent
in its
attempt to satisfy any requirements under the Securities Laws (including,
without limitation, registration thereunder if requested by Agent) applicable
to
the sale of the Pledged Securities by Agent.
17
11. Costs
and Expenses.
Each Debtor agrees to pay all reasonable out-of-pocket fees, costs and expenses
incurred in connection with any filing required hereunder, including without
limitation, any financing statements pursuant to
the UCC, continuation statements, partial releases and/or termination statements
related thereto or any expenses of any searches reasonably
required by the Agent. The Debtors shall also pay all other claims and charges
which in the reasonable opinion of the
Agent
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 Agent the amount
of any
and all reasonable expenses, including the reasonable fees and expenses of
its
counsel and of any experts and agents, which the Agent, for the benefit of
the
Secured Parties, may incur in connection with the creation, perfection,
protection, satisfaction, foreclosure, collection or enforcement of the Security
Interest and the preparation, administration, continuance, amendment or
enforcement of this Agreement and pay to the Agent the amount of any and
all
reasonable expenses, including the reasonable fees and expenses of its counsel
and of any experts and agents, which the Agent, for the benefit of the Secured
Parties,
and the Secured Parties may incur in connection with (i) the enforcement
of this
Agreement, (ii) the custody or preservation of, or the sale of, collection
from,
or other realization upon, any of the Collateral, or (iii) the exercise or
enforcement of any of the rights of the Secured Parties under the Debentures.
Until so paid, any fees payable hereunder shall be added to the principal
amount
of the Debentures and shall bear interest at the Default Rate.
12. Responsibility
for Collateral.
The Debtors assume all liabilities and responsibility in connection with
all
Collateral, and the Obligations shall in no way be affected or diminished
by
reason of the loss, destruction, damage or theft of any of the Collateral
or its
unavailability for any reason. Without limiting the generality of the foregoing,
(a) neither the Agent nor any Secured Party (i) has any duty (either before
or
after an Event of Default) to collect any amounts in respect of the Collateral
or to preserve any rights relating to the Collateral, or (ii) has any obligation
to clean-up or otherwise prepare the Collateral for sale, and (b) each Debtor
shall remain obligated and liable under each contract or agreement included
in
the Collateral to be observed or performed by such Debtor thereunder. Neither
the Agent nor any Secured Party shall have any obligation or liability under
any
such contract or agreement by reason of or arising out of this Agreement
or the
receipt by the Agent or any Secured Party of any payment relating to any
of the
Collateral, nor shall the Agent or any Secured Party be obligated in any
manner
to perform any of the obligations of any Debtor under or pursuant to any
such
contract or agreement, to make inquiry as to the nature or sufficiency of
any
payment received by the Agent or any Secured Party in respect of the Collateral
or as to the sufficiency of any performance by any party under any such contract
or agreement, to present or file any claim, to take any action to enforce
any
performance or to collect the payment of any amounts which may have been
assigned to the Agent or to which the Agent or any Secured Party may be entitled
at any time or times.
18
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 Debentures or any agreement entered
into in connection with the foregoing, or any portion hereof or thereof;
(b) any
change in the time, manner or place of payment or performance of, or in any
other term of, all or any of the Obligations, or any other amendment or waiver
of or any consent to any departure from the Debentures or any other agreement
entered into in connection with the foregoing; (c) any exchange, release
or
nonperfection of any of the Collateral, or any release or amendment or waiver
of
or consent to departure from any other
collateral for, or any 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 Debentures have been indefeasibly paid in full and
all
other Obligations have been paid or discharged; provided, however, that all
indemnities of the Debtors contained in this Agreement (including, without
limitation, Annex B hereto) shall survive and remain operative and in full
force
and effect regardless of the termination of this Agreement.
15.
Power
of Attorney; Further Assurances.
(a)
Each
Debtor authorizes the Agent, and does hereby make, constitute and appoint
the
Agent and its officers, agents, successors or assigns with full power of
substitution, as such Debtor’s true and lawful attorney-in-fact, with power, in
the name of the Agent
or such Debtor, to, after the occurrence and during the continuance of an
Event
of Default, (i) endorse any note, checks, drafts, money orders or other
instruments of payment (including payments payable under or in respect of
any
policy of insurance) in respect of the Collateral that may come into possession
of the Agent; (ii) to sign and endorse any financing statement pursuant to
the
UCC or any invoice, freight or express xxxx, xxxx of lading, storage or
warehouse receipts, drafts against debtors, assignments, verifications and
notices in connection with accounts, and other documents relating to the
Collateral; (iii) to pay or discharge taxes, liens, security interests or
other
encumbrances at any time levied or placed on or threatened against the
Collateral; (iv) to demand, collect, receipt for, compromise, settle and
xxx for
monies due in respect of the Collateral; (v) to transfer any Intellectual
Property or provide licenses respecting any Intellectual Property; and (vi)
generally, at the option of the Agent, and at the expense of the Debtors,
at any
time, or from time to time, to execute and deliver any and all documents
and
instruments and to do all acts and things which the Agent deems necessary
to
protect, preserve and realize upon the Collateral and the Security Interests
granted therein in order to effect the intent of this Agreement and the
Debentures all as fully and effectually as the Debtors might or could do;
and
each Debtor hereby ratifies all that said attorney shall lawfully do or cause
to
be done by virtue hereof. This power of attorney is coupled with an interest
and
shall be irrevocable for the term of this Agreement and thereafter as long
as
any of the Obligations shall be outstanding. The
designation set forth herein shall be deemed to amend and supersede any
inconsistent provision in the Organizational Documents or other documents
or
agreements to which any Debtor is 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.
19
(b)
On
a continuing basis, each Debtor will make, execute, acknowledge, deliver,
file
and record, as the case may be, with the proper filing and recording agencies
in
any jurisdiction, including, without limitation, the jurisdictions indicated
on
Schedule
C
attached hereto, all such instruments, and take all such action as may
reasonably be deemed necessary or advisable, or as reasonably requested
by the Agent, to perfect the Security Interests granted hereunder and otherwise
to carry out the intent and purposes of this Agreement, or for assuring and
confirming to the Agent the grant or perfection of a perfected security interest
in all the Collateral under the UCC.
(c)
Each
Debtor hereby irrevocably appoints the Agent as such Debtor’s attorney-in-fact,
with full authority in the place and instead of such Debtor and in the name
of
such Debtor, from time to time in the Agent’s discretion, to take any action and
to execute any instrument which the Agent may deem necessary or advisable
to
accomplish the purposes of this Agreement, including the filing, in its sole
discretion, of one or more financing or continuation statements and amendments
thereto, relative to any of the Collateral without the signature of such
Debtor
where permitted by law, which financing statements may (but need not) describe
the Collateral as “all assets” or “all personal property” or words of like
import, and ratifies all such actions taken by the Agent. This power of attorney
is coupled with an interest and shall be irrevocable for the term of this
Agreement and thereafter as long as any of the Obligations shall be
outstanding.
20
16. Notices.
All notices, requests, demands and other communications hereunder shall be
subject to the notice provision of the Purchase Agreement (as such term is
defined in the Debentures).
17. Other
Security.
To the extent that
the Obligations are now or hereafter secured by property other than the
Collateral or by the guarantee, endorsement or property of any other person,
firm, corporation or other entity,
then the Agent
shall have the right, in its sole discretion, to pursue, relinquish,
subordinate, modify or take any other action with respect thereto, without
in
any way modifying or affecting any of the Secured Parties’ rights and remedies
hereunder.
18. Appointment
of Agent.
The Secured Parties hereby appoint Midsummer Investment, Ltd. to act as their
agent (“Midsummer”
or “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 Agent, provided that Midsummer may not be removed as
Agent
unless Midsummer shall then hold less than $250,000 in principal amount of
Debentures;
provided,
further,
that such removal may occur only if each of the other Secured Parties shall
then
hold not less than an aggregate of $500,000 in principal amount of Debentures.
The
Agent shall have the rights, responsibilities and immunities set forth in
Annex
B
hereto.
19. Miscellaneous.
(a)
No
course of dealing between the Debtors and the Secured Parties, nor any failure
to exercise, nor any delay in exercising, on the part of the Secured Parties,
any right, power or privilege hereunder or under the Debentures 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 Debentures or by any other
agreements, instruments or documents or by law shall be cumulative and may
be
exercised singly or concurrently.
(c)
This
Agreement, 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 holding 67% or more of the principal amount of the Debentures
then outstanding 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.
21
(e)
No
waiver of any default with respect to any provision, condition or requirement
of
this Agreement shall be deemed to be a continuing waiver in the future or
a
waiver of any subsequent default or a waiver of any other provision, condition
or requirement hereof, nor shall any delay or omission of any party to exercise
any right hereunder in any manner impair the exercise of any such
right.
(f)
This
Agreement shall be binding upon and inure to the benefit of the parties and
their successors and permitted assigns. The Company and the Guarantors may
not
assign this Agreement or any rights or obligations hereunder without the
prior
written consent of each Secured Party (other than by merger). Any Secured
Party
may assign any or all of its rights under this Agreement to any Person (as
defined in the Purchase Agreement) to whom such Secured Party assigns or
transfers any Obligations, provided such transferee agrees in writing to
be
bound, with respect to the transferred Obligations, by the provisions of
this
Agreement that apply to the “Secured Parties.”
(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 Debentures (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.
22
(i)
This
Agreement may be executed in any number of counterparts, each of which when
so
executed shall be deemed to be an original and, all of which taken together
shall constitute one and the same Agreement. In the event that any signature
is
delivered by facsimile transmission, such signature shall create a valid
binding
obligation of the party executing (or on whose behalf such signature is
executed) the same with the same force and effect as if such facsimile signature
were the original thereof.
(j) All
Debtors shall jointly and severally be liable for the obligations of each
Debtor
to the Secured Parties hereunder.
(k) Each
Debtor shall indemnify, reimburse and hold harmless the Agent and the Secured
Parties and their respective partners, members, shareholders, officers,
directors, employees and agents (and any other persons with other titles
that
have similar functions) (collectively, “Indemnitees”)
from and against any and all losses, claims, liabilities, damages, penalties,
suits, costs and expenses, of any kind or nature, (including fees relating
to
the cost of investigating and defending any of the foregoing) imposed on,
incurred by or asserted against such Indemnitee in any way related to or
arising
from or alleged to arise from this Agreement or the Collateral, except any
such
losses, claims, liabilities, damages, penalties, suits, costs and expenses
which
result from the gross negligence or willful misconduct of the Indemnitee
as
determined by a final, nonappealable decision of a court of competent
jurisdiction. This indemnification provision is in addition to, and not in
limitation of, any other indemnification provision in the Debentures, the
Purchase Agreement (as such term is defined in the Debentures) or any other
agreement, instrument or other document executed or delivered in connection
herewith or therewith.
(l) Nothing
in this Agreement shall be construed to subject Agent or any Secured Party
to
liability as a partner in any Debtor or any if its direct or indirect
subsidiaries that is a partnership or as a member in any Debtor or any of
its
direct or indirect subsidiaries that is a limited liability company, nor
shall
Agent or any Secured Party be deemed to have assumed any obligations under
any
partnership agreement or limited liability company agreement, as applicable, of
any such Debtor or any 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.
23
(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]
24
IN
WITNESS WHEREOF, the parties hereto have caused this Security
Agreement to be duly executed on the day and year first above
written.
CAPITAL
GROWTH SYSTEMS, INC.
By:__________________________________________
Name:
Title:
Name:
Title:
FNS
2007, INC.
By:__________________________________________
Name:
Title:
Name:
Title:
NEXVU
TECHNOLOGIES, LLC
By:__________________________________________
Name:
Title:
Name:
Title:
20/20
TECHNOLOGIES, INC.
By:__________________________________________
Name:
Title:
Name:
Title:
20/20
TECHNOLOGIES I, LLC
By:__________________________________________
Name:
Title:
Name:
Title:
25
CENTREPATH,
INC.
By:__________________________________________
Name:
Title:
Name:
Title:
MAGENTA
NETLOGIC, LIMITED
By:__________________________________________
Name:
Title:
Name:
Title:
VANCO
DIRECT USA, LLC
By:__________________________________________
Name:
Title:
Name:
Title:
[ADD
NAME OF NEW SUBS]
[SIGNATURE
PAGE OF HOLDERS FOLLOWS]
26
[SIGNATURE
PAGE OF HOLDERS TO CGSY SA]
Name
of Investing Entity: __________________________
Signature
of Authorized Signatory of Investing entity:
_________________________
Name
of Authorized Signatory: _________________________
Title
of Authorized Signatory: __________________________
[SIGNATURE
PAGE OF HOLDERS FOLLOWS]
27
ANNEX
A
to
SECURITY
AGREEMENT
FORM
OF ADDITIONAL DEBTOR JOINDER
Security
Agreement dated as of November ___, 2008 made by
Capital
Growth Systems, Inc.
and
its subsidiaries party thereto from time to time, as Debtors
to
and in favor of
the
Secured Parties identified therein (the “Security
Agreement”)
Reference
is made to the Security Agreement as defined above; capitalized terms used
herein and not otherwise defined herein shall have the meanings given to
such
terms in, or by reference in, the Security Agreement.
The
undersigned hereby agrees that upon delivery of this Additional Debtor Joinder
to the Secured Parties referred to above, the undersigned shall (a) be an
Additional Debtor under the Security Agreement, (b) have all the rights and
obligations of the Debtors under the Security Agreement as fully and to the
same
extent as if the undersigned was an original signatory thereto and (c) be
deemed
to have made the representations and warranties set forth therein as of the
date
of execution and delivery of this Additional Debtor Joinder. WITHOUT LIMITING
THE GENERALITY OF THE FOREGOING, THE UNDERSIGNED SPECIFICALLY GRANTS TO THE
SECURED PARTIES A SECURITY INTEREST IN THE COLLATERAL AS MORE FULLY SET FORTH
IN
THE SECURITY AGREEMENT AND ACKNOWLEDGES AND AGREES TO THE WAIVER OF JURY
TRIAL
PROVISIONS SET FORTH THEREIN.
Attached
hereto are supplemental and/or replacement Schedules to the Security Agreement,
as applicable.
An
executed copy of this Joinder shall be delivered to the Secured Parties,
and the
Secured Parties may rely on the matters set forth herein on or after the
date
hereof. This Joinder shall not be modified, amended or terminated without
the
prior written consent of the Secured Parties.
IN
WITNESS WHEREOF, the undersigned has caused this Joinder to be executed in
the
name and on behalf of the undersigned.
[Name
of Additional Debtor]
By:
Name:
Title:
Address:
Dated:
ANNEX
B
to
SECURITY
AGREEMENT
THE
AGENT
1.
Appointment. The
Secured Parties (all capitalized terms used herein and not otherwise defined
shall have the respective meanings provided in the Security Agreement to
which
this Annex B is attached (the "Agreement")),
by their acceptance of the benefits of the Agreement, hereby designate
Midsummer
Investment Ltd. (“Midsummer”
or “Agent”)
as the Agent to act as specified herein and in the Agreement. Each Secured
Party
shall be deemed irrevocably to authorize the Agent to take such action on
its
behalf under the provisions of the Agreement and any other Transaction Document
(as such term is defined in the Purchase
Agreement) and to exercise such powers and to perform such duties hereunder
and
thereunder as are specifically delegated to or required of the Agent by the
terms hereof and thereof and such other powers as are reasonably incidental
thereto. The Agent may perform any of its duties hereunder by or through
its
agents or employees.
2.
Nature
of Duties.
The Agent shall have no duties or responsibilities except those expressly
set
forth in the Agreement. Neither the Agent nor any of its partners, members,
shareholders, officers, directors, employees or agents shall be liable for
any
action taken or omitted by it as such under the Agreement or hereunder or
in
connection herewith or therewith, be responsible for the consequence of any
oversight or error of judgment or answerable for any loss, unless caused
solely
by its or their gross negligence or willful misconduct as determined by a
final
judgment (not subject to further appeal) of a court of competent jurisdiction.
The duties of the Agent shall be mechanical and administrative in nature;
the
Agent shall not have by reason of the Agreement or any other Transaction
Document a fiduciary relationship in respect of any Debtor or any Secured
Party;
and nothing in the Agreement or any other Transaction Document, expressed
or
implied, is intended to or shall be so construed as to impose upon the Agent
any
obligations in respect of the Agreement or any other Transaction Document
except
as expressly set forth herein and therein.
3.
Lack
of Reliance on the Agent.
Independently and without reliance upon the Agent, each Secured Party, to
the
extent it deems appropriate, has made and shall continue to make (i) its
own
independent investigation of the financial condition and affairs of the Company
and its subsidiaries in connection with such Secured Party’s investment in the
Debtors, the creation and continuance of the Obligations, the transactions
contemplated by the Transaction Documents, and the taking or not taking of
any
action in connection therewith, and (ii) its own appraisal of the
creditworthiness of the Company and its subsidiaries, and of the value of
the
Collateral from time to time, and the Agent shall have no duty or
responsibility, either initially or on a continuing basis, to provide any
Secured Party with any credit, market or other information with respect thereto,
whether coming into its possession before any Obligations are incurred or
at any
time or times thereafter. The Agent shall not be responsible to the Debtors
or
any Secured Party for any recitals, statements, information, representations
or
warranties herein or in any document, certificate or other writing delivered
in
connection herewith, or for the execution, effectiveness, genuineness, validity,
enforceability, perfection, collectibility, priority or sufficiency of the
Agreement or any other Transaction Document, or for the financial condition
of
the Debtors or the value of any of the Collateral, or be required to make
any
inquiry concerning either the performance or observance of any of the terms,
provisions or conditions of the Agreement or any other Transaction Document,
or
the financial condition of the Debtors, or the value of any of the Collateral,
or the existence or possible existence of any default or Event of Default
under
the Agreement, the Debentures or any of the other Transaction
Documents.
4.
Certain
Rights of the Agent.
The Agent shall have the right to take any action with respect to the
Collateral, on behalf of all of the Secured Parties. To the extent practical,
the Agent shall request instructions from the Secured Parties with respect
to
any material act or action (including failure to act) in connection with
the
Agreement or any other Transaction Document, and shall be entitled to act
or
refrain from acting in accordance with the instructions of a
Majority in Interest; if such instructions are not provided despite the Agent’s
request therefor, the Agent shall be entitled to refrain from such act or
taking
such action, and if such action is taken, shall be entitled to appropriate
indemnification from the Secured Parties in respect of actions to be taken
by
the Agent; and the Agent shall not incur liability to any person or entity
by
reason of so refraining. Without limiting the foregoing, (a) no Secured Party
shall have any right of action whatsoever against the Agent as a result of
the
Agent acting or refraining from acting hereunder in accordance with the terms
of
the Agreement or any other Transaction Document, and the Debtors shall have
no
right to question or challenge the authority of, or the instructions given
to,
the Agent pursuant to the foregoing and (b) the Agent shall not be required
to
take any action which the Agent believes (i) could reasonably be expected
to
expose it to personal liability or (ii) is contrary to this Agreement, the
Transaction Documents or applicable law.
5.
Reliance.
The Agent shall be entitled to rely, and shall be fully protected in relying,
upon any writing, resolution, notice, statement, certificate, telex, teletype
or
telecopier message, cablegram, radiogram, order or other document or telephone
message signed, sent or made by the proper person or entity, and, with respect
to all legal matters pertaining to the Agreement and the other Transaction
Documents and its duties thereunder, upon advice of counsel selected by it
and
upon all other matters pertaining to this Agreement and the other Transaction
Documents and its duties thereunder, upon advice of other experts selected
by
it.
Anything to the contrary notwithstanding, the Agent shall have no obligation
whatsoever to any Secured Party to assure that the Collateral exists or is
owned
by the Debtors or is cared for, protected or insured or that the liens granted
pursuant to the Agreement have been properly or sufficiently or lawfully
created, perfected, or enforced or are entitled to any particular
priority.
6.
Indemnification.
To the extent that the Agent is not reimbursed and indemnified by the Debtors,
the Secured Parties will jointly and severally reimburse and indemnify the
Agent, in proportion to their initially purchased respective principal amounts
of Debentures, from and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind or nature whatsoever which may be imposed on, incurred by or
asserted against the Agent in performing its duties hereunder or under the
Agreement or any other Transaction Document, or in any way relating to or
arising out of the Agreement or any other Transaction Document except for
those
determined by a final judgment (not subject to further appeal) of a court
of
competent jurisdiction to have resulted solely from the Agent's own gross
negligence or willful misconduct. Prior to taking any action hereunder as
Agent,
the Agent may require each Secured Party to deposit with it sufficient sums
as
it determines in good faith is necessary to protect the Agent for costs and
expenses associated with taking such action.
7.
Resignation
by the Agent.
(a)
The Agent may resign from the performance of all its functions and duties
under
the Agreement and the other Transaction Documents at any time by giving 30
days'
prior written notice (as provided in the Agreement) to the Debtors and the
Secured Parties. Such resignation shall take effect upon the appointment
of a
successor Agent pursuant to clauses (b) and (c) below.
(b)
Upon any such notice of resignation, the Secured Parties, acting by
a Majority
in Interest,
shall appoint a successor Agent hereunder.
(c)
If a successor Agent shall not have been so appointed within said 30-day
period,
the Agent shall then appoint a successor Agent who shall serve as Agent until
such time, if any, as the Secured Parties appoint a successor Agent as provided
above. If a successor Agent has not been appointed within such 30-day period,
the Agent may petition any court of competent jurisdiction or may interplead
the
Debtors and the Secured Parties in a proceeding for the appointment of a
successor Agent, and all fees, including, but not limited to, extraordinary
fees
associated with the filing of interpleader and expenses associated therewith,
shall be payable by the Debtors on demand.
8.
Rights
with respect to Collateral.
Each Secured Party agrees with all other Secured Parties and the Agent (i)
that
it shall not, and shall not attempt to, exercise any rights with respect
to its
security interest in the Collateral, whether pursuant to any other agreement
or
otherwise (other than pursuant to this Agreement), or take or institute any
action against the Agent or any of the other Secured Parties in respect of
the
Collateral or its rights hereunder (other than any such action arising from
the
breach of this Agreement) and (ii) that such Secured Party has no other rights
with respect to the Collateral other than as set forth in this Agreement
and the
other Transaction Documents. Upon the acceptance of any appointment as Agent
hereunder by a successor Agent, such successor Agent shall thereupon succeed
to
and become vested with all the rights, powers, privileges and duties of the
retiring Agent and the retiring Agent shall be discharged from its duties
and
obligations under the Agreement. After any retiring Agent’s resignation or
removal hereunder as Agent, the provisions of the Agreement including this
Annex
B shall inure to its benefit as to any actions taken or omitted to be taken
by
it while it was Agent.
