INTELLECTUAL PROPERTY SECURITY AGREEMENT
Exhibit 4.10
INTELLECTUAL PROPERTY SECURITY AGREEMENT, dated as of March 13, 2006 (this
“Agreement”), among Telecommunication Systems, Inc., a Maryland corporation (the
“Company” or the “Debtor”) and Bonanza Master Fund, Ltd. as agent (the “Agent”) for
the holders of the Company’s Secured Notes due March 13, 2009 in the original aggregate principal
amount of $10,000,000 (together with any additional such Notes issued as interest on the existing
Notes, the “Notes”), signatory hereto, their endorsees, transferees and assigns
(collectively referred to as, the “Secured Parties”).
W I T N E S S E T H:
WHEREAS, pursuant to the Notes, the Secured Parties have severally agreed to extend the loans
to the Company evidenced by the Notes; and
WHEREAS, in order to induce the Secured Parties to extend the loans evidenced by the Notes,
Debtor has agreed to execute and deliver to the Agent this Agreement and to grant the Agent for the
benefit of the Secured Parties, a first priority perfected security interest in the Collateral (as
defined herein) to secure the prompt payment, performance and discharge in full of all of the
Company’s obligations under the Notes.
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. Capitalized terms used but not otherwise defined in this Agreement
that are defined in Article 9 of the UCC shall have the respective meanings given such terms in
Article 9 of the UCC.
(a) “Collateral” means Debtor’s Intellectual Property existing on the date of
this Agreement, wherever situated, and all Proceeds of any sale or other disposition
thereof outside of the ordinary course of business, including, without limitation, all
proceeds from insurance covering the same and of any tort claims in connection therewith.
(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
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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, but only to the extent that the inclusion
thereof in this Agreement does not and will not cause a default under the terms of any
agreements in respect of the such license (except that all rights to payment in respect of
such licenses shall be included in the definition of Intellectual Property), and (vii) all
causes of action for infringement of the foregoing.
(c) “Majority in Interest” means (i) the Secured Parties who, together with
their respective Affiliates, hold a majority of the Notes outstanding at the time of
determination, (ii) SRB Management, L.P. as long as (A) it and its Affiliates, (B) WS
Capital Management, L.P. and its Affiliates and (C) WS Ventures Management, L.P. and its
Affiliates collectively hold at least $2,000,000 in aggregate principal amount of the Notes
outstanding at the time of determination, and (iii) Bonanza Master Fund Ltd. as long as it,
together with its Affiliates, holds at least $3,000,000 in aggregate principal amount of
the Notes outstanding at the time of determination.
(d) “Note Purchase Agreement” means the Note Purchase Agreement dated as of
the date hereof by and among Debtor and the Secured Parties signatory thereto.
(e) “Obligations” means (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 Debtor from time to time under or in connection with
this Agreement, the Notes and the Note Purchase Agreement; 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 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
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such Debtor (such as bylaws, a partnership agreement or an operating, limited
liability or members agreement).
(g) “Release Collateral” shall mean all of the following:
(i) all letters patent of the United States or any other country or political
subdivision thereof, and all applications for letters patent of the United States or any
other country, that are listed on Schedule E-1 attached hereto;
(ii) all re-issues, continuations, divisions, continuations-in-part, renewals or
extensions of the patents and applications referred to in preceding clause (i);
(iii) the inventions disclosed or claimed in preceding clauses (i) and (ii), including
the right to make, use, practice and/or sell (or license or otherwise transfer or dispose
of) the inventions disclosed or claimed in preceding clauses (i) and (ii);
(iv) the right to make and prosecute applications for the patents and applications
referred to in preceding clauses (i), (ii) and (iii); and
(v) Proceeds of any property described in the preceding clauses of this definition of
Release Collateral.
(h) “Silicon Valley Bank” means Silicon Valley Bank, and
its successors and assigns.
(i) “Subordination Agreement” means the Subordination Agreement, dated of even
date herewith, among Silicon Valley Bank and the Secured Parties.
(j) “UCC” means the Uniform Commercial Code of the State of Maryland and or
any other applicable law of any state or states which has jurisdiction with respect to all,
or any portion of, the Collateral or this Agreement, from time to time. It is the intent
of the parties that defined terms in the UCC should be construed in their broadest sense so
that the term “Collateral” will be construed in its broadest sense. Accordingly if there
are, from time to time, changes to defined terms in the UCC that broaden the definitions,
they are incorporated herein and if existing definitions in the UCC are broader than the
amended definitions, the existing ones shall be controlling.
2. Grant of Perfected First Priority Security Interest. 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, Debtor
hereby unconditionally and irrevocably pledges, grants and hypothecates to the Agent for the
benefit of the Secured Parties a continuing and
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perfected security interest in and to, a lien upon all of their respective right, title and
interest of whatsoever kind and nature in and to, the Collateral (the “Security Interest”).
Secured Parties acknowledge that the Collateral may be subject to certain rights of Silicon
Valley Bank pursuant to certain loan documents from the Debtor in favor of Silicon Valley Bank.
3. Intentionally Omitted.
4. Representations, Warranties, Covenants and Agreements of the Debtor. Debtor represents and
warrants to, and covenants and agrees with, the Secured Parties as follows:
(a) Debtor has the requisite corporate power and authority to enter into this
Agreement and otherwise to carry out its obligations hereunder. The execution, delivery and
performance by Debtor of this Agreement and the filings contemplated therein have been duly
authorized by all necessary action on the part of Debtor and no further action is required
by Debtor. This Agreement has been duly executed by Debtor. This Agreement constitutes
the legal, valid and binding obligation of Debtor, enforceable against 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 Debtor has no place of business or offices where its 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.
(c) Except as set forth on Schedule B attached hereto, the Debtor is the sole
owner of the Collateral (except for non-exclusive licenses granted by Debtor in the
ordinary course of business), free and clear of any liens, security interests,
encumbrances, rights or claims, and is fully authorized to grant the Security Interest.
There is not on file in any governmental or regulatory authority, agency or recording
office an effective financing statement, security agreement, license or transfer or any
notice of any of the foregoing (other than those that will be filed in favor of the Secured
Parties pursuant to this Agreement) covering or affecting any of the Collateral. So long
as this Agreement shall be in effect, the Debtor shall not execute and shall not knowingly
permit to be on file in any such office or agency any such financing statement or other
document or instrument (except to the extent filed or recorded in favor of the Secured
Parties pursuant to the terms of this Agreement). In the event that there is on file on
the date hereof in any governmental or regulatory authority, agency or recording office an
effective financing statement, security agreement, license or other 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 the Collateral, Debtor shall be permitted a period of
thirty (30) days after becoming aware thereof in which to
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have such financing statement, security agreement, license or transfer or notice
terminated and released of record.
(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
Debtor’s claim of ownership rights in or exclusive rights to use the Collateral in any
jurisdiction or to 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 Debtor, threatened before any court, judicial body, administrative or regulatory agency,
arbitrator or other governmental authority.
(e) This Agreement creates in favor of the Agent for the benefit of the Secured
Parties a valid security interest in the Collateral, 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, no action is necessary to create or
perfect the security interests created hereunder. Without limiting the generality of the
foregoing, except for the filing of said financing statements, no consent of any third
parties and no authorization, approval or other action by, and no notice to or filing with,
any governmental authority or regulatory body is required for (i) the execution, delivery
and performance of this Agreement, (ii) the creation or perfection of the Security
Interests created hereunder in the Collateral or (iii) the enforcement of the rights of the
Secured Parties hereunder, other than as set forth in the Subordination Agreement.
(f) Debtor hereby authorizes the Agent on behalf of the Secured Parties to file one or
more financing statements under the UCC, with respect to the Security Interest with the
proper filing and recording agencies in any jurisdiction deemed proper by them.
(g) The execution, delivery and performance of this Agreement by the Debtor does not
(i) violate any of the provisions of any Organizational Documents of the Debtor or any
judgment, decree, order or award of any court, governmental body or arbitrator or any
applicable law, rule or regulation applicable to 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 Debtor’s debt or otherwise) or other
understanding to which Debtor is a party or by which any property or asset of Debtor is
bound or affected. No consent (including, without limitation, from stockholders or
creditors of Debtor)
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which has not been obtained is required for Debtor to enter into and perform its
obligations hereunder.
(h) Debtor shall at all times maintain the liens and Security Interest provided for
hereunder as valid and perfected first priority liens and security interests in the
Collateral in favor of the Agent until this Agreement and the Security Interest hereunder
shall be terminated pursuant to Section 11 hereof. Debtor hereby agrees to defend the same
against the claims of any and all persons and entities. At the request of the Agent,
Debtor will pay the cost of filing UCC financing statements in appropriate form 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, Debtor shall pay all fees, taxes and other amounts necessary to maintain
the Collateral and the Security Interest hereunder, and 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 Interest hereunder;
provided, however, that nothing in this clause (h) shall obligate the Debtor to take any
action with respect to the Subordination Agreement.
(i) Debtor will not transfer, pledge, hypothecate, encumber, license, sell or
otherwise dispose of any of the Collateral (other than Release Collateral and licenses
granted by a Debtor in its ordinary course of business) without the prior written consent
of the Agent, which consent shall not be unreasonably withheld, conditioned or delayed, it
being acknowledged that the legitimate interests of the Agent and the Debtor may differ
with respect to the desirability of any given proposed disposition.
(j) Debtor shall, within thirty (30) days of obtaining knowledge thereof, advise the
Secured Parties promptly, in sufficient detail, of any substantial change in the
Collateral, and of the occurrence of any event which would have a material adverse effect
on the value of the Collateral (other than the Release Collateral) or on the Secured
Parties’ security interest therein.
(k) Upon the Agent’s written request, Debtor shall execute and deliver to Agent such
instruments and documents, in form and substance reasonably satisfactory to Debtor (and for
so long as Debtor is indebted to Silicon Valley Bank, Silicon Valley Bank), as may be
necessary for Agent to confirm the creation or perfection of, or to give public notice of,
the Security Interest granted under this Agreement; provided that unless an Event of
Default has occurred and is continuing (i) Debtor shall not be required to execute or
deliver to Agent any instrument or other document to be recorded with any public office
other than the appropriate public office for filing financing statements under the UCC and
(ii) the Agent shall not make any filing in any office other than the appropriate public
office for filing financing statements under the UCC.
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(l) Intentionally Omitted.
(m) Debtor shall promptly notify the Agent 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 Debtor that may materially affect the value of the
Collateral, the Security Interest or the rights and remedies of the Agent hereunder.
(n) Intentionally Omitted.
(o) Debtor will not 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 10 days
prior written notice to the Agent of such change and, at the time of such written
notification, Debtor provides any financing statements necessary to perfect and continue
perfected the perfected security interest granted and evidenced by this Agreement.
(p) Debtor was organized and remains organized solely under the laws of the state set
forth next to Debtor’s name in the first paragraph of this Agreement. Schedule C
attached hereto sets forth Debtor’s organizational identification number or, if Debtor does
not have one, states that one does not exist.
(q) (i) The actual name of Debtor is the name set forth in the preamble above; (ii)
Debtor does not have any trade names except as set forth on Schedule D attached
hereto; (iii) Debtor has not used any name other than that stated in the preamble hereto or
as set forth on Schedule D for the preceding five years; and (iv) no entity has
merged into Debtor or been acquired by Debtor within the past five years except as set
forth on Schedule D.
(r) If Debtor shall at any time hold or acquire a commercial tort claim in respect of
any Collateral, Debtor shall promptly notify the Secured Parties in a writing signed by
Debtor of the particulars thereof and grant to the Secured Parties in such writing a
security interest therein and in the proceeds thereof, all upon the terms of this
Agreement, with such writing to be in form and substance satisfactory to the Secured
Parties.
(s) Without limiting the generality of the other obligations of the Debtor hereunder,
Debtor shall, upon the written request of the Agent upon the occurrence and during the
continuance of any Event of Default, promptly (i) cause to be registered at the United
States Copyright Office all of its material copyrights and (ii) cause the Security Interest
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,
(provided, that
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no such recordation shall be required prior to the occurrence of an Event of Default).
(t) Schedule E attached hereto lists all of the patents, patent applications,
trademarks, trademark applications, registered copyrights, and domain names owned by the
Debtor as of the date hereof. Schedule E lists all material licenses in favor of
Debtor for the use of any patents, trademarks, copyrights and domain names as of the date
hereof. All material patents and trademarks of the Debtor have been duly recorded at the
United States Patent and Trademark Office.
5. RELEASE COLLATERAL.
(a) Notwithstanding anything to the contrary set forth in this Agreement or in any other
Transaction Document, the Agent, and, if requested by the Debtor, each Secured Party shall release
and terminate any and all liens and security interests that the Agent or any Secured Party has or
may have in the Release Collateral within ten (10) days after Debtor’s written request for such
release and termination in preparation for Debtor’s sale, license or other disposition of all or
any portion of the Release Collateral to any Person from time to time, and in connection therewith,
and within ten (10) days after Debtor’s written request for any such release and termination, the
Agent, and if so requested by the Debtor, each Secured Party shall:
(i) execute and deliver to Debtor a written instrument prepared by Debtor in form and
substance satisfactory to Debtor to confirm that Secured Party’s liens and security
interests in the Release Collateral will be fully released and terminated upon such
disposition and that all of Agent’s and each Secured Party’s right, title and interest in
such Release Collateral has been so assigned back to Debtor;
(ii) execute such Uniform Commercial Code financing statement amendments prepared by
Debtor as may be necessary in the appropriate public filing office(s) to release the
Release Collateral from any filed financing statement on which Agent or any Secured Party
is a secured party and which describes collateral that includes, or in Debtor’s judgment
may include, the Release Collateral; and
(iii) execute for filing with the United States Patent and Trademark Office such
written instruments and documents prepared by Debtor as may be necessary or appropriate in
Debtor’s judgment to fully release and terminate of record Agent’s or each Secured Party’s
lien and security interest in the Release Collateral and to assign all of Agent’s or each
Secured Party’s right, title and interest in such Release Collateral back to Debtor.
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(b) Debtor shall not be required to pay Agent or any Secured Party any fee or other amount for
or in connection with any release or termination requested by Debtor under this Section 5 (or for
performance of Agent’s or any Secured Party’s obligations under this Section 5) and Debtor shall
not be required to make any payment or prepayment of any obligations (under the Notes or otherwise)
upon, or with any Proceeds of, any sale, license or other disposition of any Release Collateral.
(c) If the Agent or any Secured Party shall fail to comply with the requirements of this
Section 5, Debtor is hereby authorized to prepare, execute (as necessary) and file in the
appropriate Uniform Commercial Code financing statement records and with the United States Patent
and Trademark Office such financing statement amendments and other instruments and documents as may
be necessary to release and terminate all of Agent’s and each Secured Party’s right, title and
interest in the Release Collateral of record and in fact and to re-assign the Release Collateral
back to Debtor. Agent and each Secured Party hereby grants Debtor Agent’s and such Secured Party’s
power of attorney and authorization to execute, deliver and file such instruments and documents in
Agent’s or such Secured Party’s name for the purposes described in this Section 5, which power is
coupled with an interest and is irrevocable.
(d) Each Secured Party hereby irrevocably agrees that the Agent’s release and termination of
any lien or security interest in the Release Collateral as provided in this Section 5 shall
constitute a full and complete release and termination of any and all right, title and interest
(including any lien or security interest) that such Secured Party may have or claim in the Release
Collateral and that any actions taken by Agent under this Section 5 shall be binding on each
Secured Party.
(e) The Secured Parties hereby irrevocably authorize and direct the Agent to perform the
Agent’s obligations under this Section 5 without any requirement of notice to, or consent or
authorization from, any Secured 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 material representation or warranty of any Debtor in this Agreement or the
Note Purchase Agreement shall prove to have been incorrect in any material respect when
made;
(c) The failure by Debtor to observe or perform any of its obligations hereunder for
thirty (30) days after delivery to 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 Debtor is using best efforts to cure same in a timely fashion; or
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(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
Debtor, or a proceeding shall be commenced by Debtor, or by any governmental authority
having jurisdiction over Debtor, seeking to establish the invalidity or unenforceability
thereof, or Debtor shall deny that Debtor has any liability or obligation purported to be
created under this Agreement.
7. Duty To Hold In Trust. Upon and during the occurrence of any Event of Default, Debtor
shall, upon receipt of any Proceeds of any sale or other disposition of Collateral other than the
Release Collateral, Debtor shall hold the same in trust for the Secured Parties and shall forthwith
endorse and transfer any such sums or instruments evidencing such sums, or both, to the Agent for
the benefit of the Secured Parties, pro-rata in proportion to their initial purchases of Notes for
application to the satisfaction of the Obligations (and if any Notes are not outstanding, pro-rata
in proportion to the initial purchases of the remaining Notes).
8. Rights and Remedies Upon Default.
(a) Upon the occurrence and during the continuance of any Event of Default, the Agent
shall have the right to exercise all of the remedies conferred hereunder, and the Agent
shall have all the rights and remedies of a secured party under the UCC. Without
limitation, the Agent 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 Debtor shall assemble the Collateral and make it available to the Agent at
places which the Agent shall reasonably select, whether at Debtor’s premises or
elsewhere, and make available to the Agent, without rent, all of Debtor’s 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 Debtor by Agent, all rights of Debtor to receive
payments or other sums from the sale of Collateral (but not any revenue, income or
other sums which arise in the ordinary course of business from the use of
Collateral) shall, at the option of Agent, be delivered to Agent. 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 if it were the
sole and absolute owner thereof.
(iii) The Agent 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
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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 shall be commercially reasonable, all without (except as shall be
required by applicable statute) advertisement or demand upon or notice to Debtor or
right of redemption of Debtor. Upon each such sale, lease, assignment or other
transfer of Collateral, the Agent may, unless prohibited by applicable law,
purchase all or any part of the Collateral being sold, free from and discharged of
all trusts, claims, right of redemption and equities of Debtor, which are hereby
waived and released.
(iv) Intentionally Omitted.
(v) The Agent may (but is not obligated to) transfer any or all Intellectual
Property registered in the name of Debtor at the United States Patent and Trademark
Office and/or Copyright Office into the name of the Agent or any designee or any
purchaser of any Collateral.
(b) The Agent may comply with any applicable law in connection with a disposition of
Collateral and such compliance will not be considered adversely to affect the commercial
reasonableness of any sale of the Collateral. The 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 Debtor will only be credited with payments actually
made by the purchaser. In addition, 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.
(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, upon the
occurrence and during the continuance of any Event of Default, 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 Debtor) to use,
license or sublicense any Intellectual Property, and wherever the same may be located, and
including in such license access to all media in which any of the licensed items may be
recorded or stored and to all computer software and programs used for the compilation or
printout thereof.
9. Applications of Proceeds. The proceeds of any such sale, lease or other disposition of the
Collateral hereunder shall be applied first, to the expenses of retaking, holding, storing,
processing and preparing for sale, selling, and the like (including, without limitation, any taxes,
fees and other costs incurred in connection therewith) of the Collateral, to the reasonable
attorneys’ fees and expenses incurred by the Agent or the Secured Parties in enforcing their rights
hereunder and in connection with collecting,
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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
Agent on behalf of the Secured Parties shall pay to the 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 Debtor will be liable for the
deficiency, together with interest thereon, at the rate of 14% 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,
Debtor waives all claims, damages and demands against the Agent and 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. Intentionally Omitted.
11. Costs and Expenses. 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 upon and during the continuance of an Event of Default,
any expenses of any searches reasonably required by the Secured Parties. The Debtor will also,
upon demand, pay to the Secured Parties the amount of any and all reasonable expenses, including
the reasonable fees and expenses of its counsel and of any experts and agents, which the Secured
Parties may incur upon the occurrence and during the continuance of an Event of Default 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.
12. Responsibility for Collateral. The Debtor assumes 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) Debtor shall remain
obligated and liable under each contract or agreement included in the Collateral to be observed or
performed by 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 Debtor under or pursuant to any such
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contract or agreement, to make inquiry as to the nature or sufficiency of any payment received by
the Agent or any Secured Party in respect of the Collateral or as to the sufficiency of any
performance by any party under any such contract or agreement, to present or file any claim, to
take any action to enforce any performance or to collect the payment of any amounts which may have
been assigned to the Agent or to which the Agent or any Secured Party may be entitled at any time
or times.
13. Security Interest Absolute. All rights of the Agent and the Secured Parties and all
obligations of the Debtor hereunder, shall be absolute and unconditional, irrespective of: (a) any
lack of validity or enforceability of this Agreement, the Notes, the Obligations 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 guaranty, or any other security, for all or any of
the Obligations; (d) any action by the Agent or 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 Debtor, or a discharge of all or any part of the Security Interest
granted hereby. Until the Obligations shall have been paid and performed in full, the rights of
the Agent and 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. 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 Agent or 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 Agent or the Secured Parties, then, in any such event, 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. Debtor waives
all right to require the Agent or the Secured Parties to proceed against any other person or entity
or to apply any Collateral which the Agent or the Secured Parties may hold at any time, or to
marshal assets, or to pursue any other remedy. Debtor waives any defense arising by reason of the
application of the statute of limitations to any obligation secured hereby.
14. Term of Agreement. This Agreement and the Security Interest shall terminate on the date
on which all payments of principal, accrued and unpaid interest and any other amounts due under the
Notes have been indefeasibly paid in full; provided, however, that all indemnities of the Debtor
contained in this Agreement (including, without limitation, Annex A hereto) shall survive and
remain operative and in full force and effect regardless of the termination of this Agreement.
Upon payment in full of all of
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the outstanding principal amount of the Notes, together with all accrued and unpaid interest, and
any other amounts due under the Notes, the Agent shall prepare and file such Uniform Commercial
Code financing statement amendments, and shall prepare, execute and file such other documents or
instruments, as may be necessary to terminate of record and in fact any security interest in or
lien on the Collateral under this Agreement. Each Secured Party irrevocably agrees that the
Agent’s termination and release of any lien or security interest in the Collateral as provided in
this Section 14 shall constitute a full and complete termination and release or any and all right,
title and interest (including any lien or security interest) that such Secured Party may have or
claim in the Collateral and that any actions taken by Agent under this Section 14 shall be binding
on each Secured Party. The Secured Parties hereby irrevocably authorize and direct the Agent to
perform the Agent’s obligations under this Section 14 without any requirement or notice to, or
consent or authorization from, any Secured Party.
15. Power of Attorney; Further Assurances.
(a) 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, the
various Secured Parties or 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 or any
of the Secured Parties; (ii) to sign and endorse any financing statement pursuant to the
UCC or any invoice, 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 Debtor, 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 reasonably necessary to protect, preserve and
realize upon the Collateral and the Security Interest granted therein in order to effect
the intent of this Agreement and the Notes all as fully and effectually as the Debtor might
or could do; and 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 Debtor is subject or to which Debtor is a party other than
those in favor of Silicon Valley Bank. Without limiting the generality of the foregoing,
upon and during the continuance of an Event of Default, the Agent is specifically
authorized to execute and file any applications
- 14 -
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, Debtor will file with the proper filing office 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 Interest granted hereunder. Notwithstanding anything to the contrary set forth in
this Agreement or otherwise, (1) Debtor shall not be required to maintain or make any
filings to maintain any Collateral that Debtor deems to be not material to Debtor’s
business, and (2) Debtor shall not be required to make any filing other than the filing of
one or more financing statements under the UCC to perfect the Security Interest unless an
Event of Default has occurred and is continuing.
(c) Upon the occurrence and during the continuance of any Event of Default, Debtor
hereby irrevocably appoints the Secured Parties as Debtor’s attorney-in-fact, with full
authority in the place and instead of Debtor and in the name of Debtor, in the Agent’s
discretion, to take any action and to execute any instrument which the Secured Parties may
deem necessary or advisable to accomplish the purposes of this Agreement, including the
filing, in its sole discretion, of one or more financing or continuation statements and
amendments thereto, relative to any of the Collateral without the signature of Debtor where
permitted by law, and ratifies all such actions taken by the Agent. This power of attorney
is coupled with an interest and shall be irrevocable for the term of this Agreement and
thereafter as long as any of the Obligations shall be outstanding.
16. Notices. Any notice required or permitted by or in connection with this Agreement shall be
in writing and shall be made by facsimile, or by hand delivery, or by overnight delivery service,
or by certified mail, return receipt requested, postage prepaid, addressed to Agent or Debtor at
the appropriate address set forth below or to such other address as may be hereafter specified by
written notice given by Agent or Debtor. Notice shall be considered given as of the earlier of the
date of actual receipt, or the date of the facsimile transmission without error, or the date of
hand delivery, or one (1) business day after delivery to a nationally recognized overnight delivery
service, or three (3) business days after the date of mailing, independent of the date of actual
delivery or whether delivery is ever in fact made, as the case may be, provided the giver of notice
can establish that notice was given as provided herein.
| If to Agent: | Bonanza Master Fund, Ltd. | |||
| 000 Xxxxxxxx Xxxxx, Xxxxx 000 | ||||
| Xxxxxx, Xxxxx 00000 Attn: Bernay Box |
||||
| Facsimile No.: 000-000-0000 |
- 15 -
| If to Debtor: | Telecommunications Systems, Inc. | |||
| 000 Xxxx Xxxxxx | ||||
| Xxxxxxxxx, Xxxxxxxx 00000 | ||||
| Attn: Chief Financial Officer | ||||
| Facsimile No.: 000-000-0000 |
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 or the Secured Parties shall have the
right, in their 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 Agent’s or the
Secured Parties’ rights and remedies hereunder.
18. Appointment of Agent. The Secured Parties hereby appoint Bonanza Master Fund, Ltd. to act
as their agent (“Bonanza” 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 Bonanza may not be removed as Agent unless Bonanza shall then hold less than
$2,000,000 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 $2,000,000 principal amount of Notes. The
Agent shall have the rights, responsibilities and immunities set forth in Annex A hereto.
19. Miscellaneous.
(a) No course of dealing between the Debtor 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 constitutes the entire agreement of the parties with respect to the
subject matter hereof and is intended to supersede all prior negotiations, understandings
and agreements with respect thereto. Except as specifically set forth in this Agreement, no
provision of this Agreement may be modified or amended except by a written agreement
specifically referring to this Agreement and signed by a Majority in Interest and Debtor.
- 16 -
(d) In the event any provision of this Agreement is held to be invalid, prohibited or
unenforceable in any jurisdiction for any reason, unless such provision is narrowed by
judicial construction, this Agreement shall, as to such jurisdiction, be construed as if
such invalid, prohibited or unenforceable provision had been more narrowly drawn so as not
to be invalid, prohibited or unenforceable. If, notwithstanding the foregoing, any
provision of this Agreement is held to be invalid, prohibited or unenforceable in any
jurisdiction, such provision, as to such jurisdiction, shall be ineffective to the extent
of such invalidity, prohibition or unenforceability without invalidating the remaining
portion of such provision or the other provisions of this Agreement and without affecting
the validity or enforceability of such provision or the other provisions of this Agreement
in any other jurisdiction.
(e) No waiver of any breach or default or any right under this Agreement shall be
considered valid unless in writing and signed by a Majority in Interest and the Debtor, and
no such waiver shall be deemed a waiver of any subsequent breach or default or right,
whether of the same or similar nature or otherwise.
(f) This Agreement shall be binding upon and inure to the benefit of each party
hereto and its successors and assigns.
(g) Intentionally Omitted.
(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. 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. 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
- 17 -
right to serve process in any manner permitted by law. Each party hereto hereby
irrevocably waives, to the fullest extent permitted by applicable law, any and all right to
trial by jury in any legal proceeding arising out of or relating to this Agreement or the
transactions contemplated hereby. If any party shall commence a proceeding to enforce any
provisions of this Agreement, then the prevailing party in such proceeding shall be
reimbursed by the other party for its reasonable attorney’s fees and other costs and
expenses incurred with the investigation, preparation and prosecution of such proceeding.
(i) This Agreement may be executed in any number of counterparts, each of which when
so executed shall be deemed to be an original and, all of which taken together shall
constitute one and the same Agreement. In the event that any signature is delivered by
facsimile transmission, such signature shall create a valid binding obligation of the party
executing (or on whose behalf such signature is executed) the same with the same force and
effect as if such facsimile signature were the original thereof.
(j) Debtor shall indemnify, reimburse and hold harmless the Agent and the Secured
Parties and their respective partners, members, shareholders, officers, directors,
employees and agents (collectively, “Indemnitees”) from and against any and all
losses, claims, liabilities, damages, penalties, suits, costs and expenses, of any kind or
nature, (including fees relating to the cost of investigating and defending any of the
foregoing) imposed on, incurred by or asserted against such Indemnitee in any way related
to or arising from or alleged to arise from this Agreement or the Collateral, except any
such losses, claims, liabilities, damages, penalties, suits, costs and expenses which
result from the gross negligence or willful misconduct of the Indemnitee as determined by a
final, nonappealable decision of a court of competent jurisdiction. This indemnification
provision is in addition to, and not in limitation of, any other indemnification provision
in the Notes, the Purchase 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.
[SIGNATURE PAGES FOLLOW]
- 18 -
IN WITNESS WHEREOF, the parties hereto have caused this Security Agreement to be duly executed
on the day and year first above written.
| TeleCommunication Systems, Inc. | ||||||
| By: | /s/ Xxxxxx X. Xxxxxx, Xx. | |||||
| Name: Xxxxxx X. Xxxxxx, Xx. | ||||||
| Title: Senior Vice President and Chief Financial Officer | ||||||
| Bonanza Master Fund, Ltd., as Agent | ||||||
| By: | /s/ Xxxxx Xxxxx | |||||
| Name: Xxxxx Xxxxx | ||||||
| Title: Partner | ||||||
[SIGNATURE PAGE OF HOLDERS FOLLOWS]
- 19 -
[SIGNATURE PAGE OF SECURED PARTIES TO TSYS SA]
| Name of Investing Entity: Bonanza Master Fund, Ltd. Signature of Authorized Signatory of Investing entity: /s/ Xxxxx Xxxxx |
||
| Name of Authorized Signatory: Xxxxx Xxxxx | ||
| Title of Authorized Signatory: Partner |
- 20 -
[SIGNATURE PAGE OF SECURED PARTIES TO TSYS SA]
| HHMI Investments, L.P. | ||||||
| By: | WS Capital Management, L.P., | |||||
| Investment Manager | ||||||
| By: WS Capital, L.L.C., General Partner | ||||||
| By: | /s/ Xxxx X. Xxxxxx | |||||
| Name: Xxxx X. Xxxxxx | ||||||
| Title: Member | ||||||
- 21 -
[SIGNATURE PAGE OF SECURED PARTIES TO TSYS SA]
| Xxxxxx Xxxxx International Fund, Ltd. | ||||||
| By: | WS | Capital Management, L.P., | ||||
| Attorney-in-fact | ||||||
| By: WS Capital, L.L.C., General Partner | ||||||
| By: | /s/ Xxxx X. Xxxxxx | |||||
| Name: Xxxx X. Xxxxxx | ||||||
| Title: Member | ||||||
- 22 -
[SIGNATURE PAGE OF SECURED PARTIES TO TSYS SA]
| Xxxxxx Xxxxx Capital, L.P. | ||||||
| By: | WS Capital Management, L.P., General Partner | |||||
| By: WS Capital, L.L.C., General Partner | ||||||
| By: | /s/ Xxxx X. Xxxxxx | |||||
| Name: Xxxx X. Xxxxxx | ||||||
| Title: Member | ||||||
- 23 -
[SIGNATURE PAGE OF SECURED PARTIES TO TSYS SA]
| Xxxxxx Xxxxx Capital (Q.P.), L.P. | ||||||
| By: | WS Capital Management, L.P., General Partner | |||||
| By: WS Capital, L.L.C., General Partner | ||||||
| By: | /s/ Xxxx X. Xxxxxx | |||||
| Name: Xxxx X. Xxxxxx | ||||||
| Title: Member | ||||||
- 24 -
[SIGNATURE PAGE OF SECURED PARTIES TO TSYS SA]
| SRB Greenway Capital, L.P. | ||||||
| By: | SRB Management, L.P., General Partner | |||||
| By: BC Advisors, L.L.C., General | ||||||
| Partner | ||||||
| By: | /s/ Xxxxxx X. Xxxxxx | |||||
| Name: Xxxxxx X. Xxxxxx | ||||||
| Title: Member | ||||||
- 25 -
[SIGNATURE PAGE OF SECURED PARTIES TO TSYS SA]
| SRB Greenway Capital QP, L.P. | ||||||
| By: | SRB Management, L.P., General Partner | |||||
| By: BC Advisors, L.L.C., General Partner | ||||||
| By: | /s/ Xxxxxx X. Xxxxxx | |||||
| Name: Xxxxxx X. Xxxxxx | ||||||
| Title: Member | ||||||
-26-
[SIGNATURE PAGE OF SECURED PARTIES TO TSYS SA]
| SRB Greenway Offshore Operating | ||||||
| Fund, L.P. | ||||||
| By: | SRB Management, L.P., General Partner | |||||
| By: BC Advisors, L.L.C., General Partner | ||||||
| By: | /s/ Xxxxxx X. Xxxxxx | |||||
| Name: Xxxxxx X. Xxxxxx | ||||||
| Title: Member | ||||||
- 27 -
ANNEX A
to
SECURITY
AGREEMENT
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 A
is attached (the “Agreement”)), by their acceptance of the benefits of the Agreement,
hereby designate Bonanza Capital Partners, Ltd. (“Bonanza” 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 Notes) 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 Debtor, 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,
- 28 -
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 Debtor 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 Debtor 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 Debtor, or the value of any of the
Collateral, or the existence or possible existence of any default or Event of Default under the
Agreement, the Notes or any of the other Transaction Documents.
4. Certain Rights of the Agent. The Agent shall have the right to take any action with
respect to the Collateral, on behalf of all of the Secured Parties. To the extent practical, the
Agent shall request instructions from the Secured Parties with respect to any material act or
action (including failure to act) in connection with the Agreement or any other Transaction
Document, and shall be entitled to act or refrain from acting in accordance with the instructions
of Secured Parties holding a majority in principal amount of Notes (based on then-outstanding
principal amounts of Notes at the time of any such determination); 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 Debtor 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.
- 29 -
6. Indemnification. To the extent that the Agent is not reimbursed and indemnified by the
Debtor, the Secured Parties will jointly and severally reimburse and indemnify the Agent, in
proportion to their initially purchased respective principal amounts of Notes, from and against any
and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature whatsoever which may be imposed on, incurred by or
asserted against the Agent in performing its duties hereunder or under the Agreement or any other
Transaction Document, or in any way relating to or arising out of the Agreement or any other
Transaction Document except for those determined by a final judgment (not subject to further
appeal) of a court of competent jurisdiction to have resulted solely from the Agent’s own gross
negligence or willful misconduct. Prior to taking any action hereunder as Agent, the Agent may
require each Secured Party to deposit with it sufficient sums as it determines in good faith is
necessary to protect the Agent for costs and expenses associated with taking such action.
7. Resignation by the Agent.
(a) The Agent may resign from the performance of all its functions and duties under
the Agreement and the other Transaction Documents at any time by giving 30 days’ prior
written notice (as provided in the Agreement) to the Debtor 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 Debtor 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 Debtor 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.
- 30 -
