SECURITY AGREEMENT
SECURITY
AGREEMENT (this “Agreement”),
dated
as of January 5, 2007, by and among The Xxxxxxx Xxxxxx Group, a Florida
corporation (“Company”),
and
the secured parties signatory hereto and their respective endorsees, transferees
and assigns (collectively, the “Secured
Party”).
WITNESSETH:
WHEREAS,
pursuant to a Securities Purchase Agreement, dated the date hereof, between
Company and the Secured Party (the “Purchase
Agreement”),
Company has agreed to issue to the Secured Party and the Secured Party has
agreed to purchase from Company certain of Company’s 6% Callable Secured
Convertible Notes, due three years from the date of issue (the “Notes”),
which
are convertible into shares of Company’s Common Stock, par value $.00001 per
share (the “Common
Stock”).
In
connection therewith, Company shall issue the Secured Party certain Common
Stock
purchase warrants (the “Warrants”);
and
WHEREAS,
in order to induce the Secured Party to purchase the Notes, Company has agreed
to execute and deliver to the Secured Party this Agreement for the benefit
of
the Secured Party and to grant to it a first priority security interest in
certain property of Company to secure the prompt payment, performance and
discharge in full of all of Company’s obligations under the Notes and exercise
and discharge in full of Company’s obligations under the Warrants.
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 “general
intangibles”
and
“proceeds”)
shall
have the respective meanings given such terms in Article 9 of the
UCC.
(a) “Collateral”
means
the collateral in which the Secured Party is granted a security interest by
this
Agreement and which shall include the following, whether presently owned or
existing or hereafter acquired or coming into existence, 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:
(i) All
Goods
of the Company, including, without limitations, 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 the Company’s businesses and all improvements thereto
(collectively, the “Equipment”);
and
(ii) All
Inventory of the Company; and
(iii) All
of
the Company’s contract rights and general intangibles, including, without
limitation, all partnership interests, stock or other securities, licenses,
distribution and other agreements, 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, deposit accounts, and income tax refunds
(collectively, the “General
Intangibles”);
and
(iv) All
Receivables of the Company including all insurance proceeds, and rights to
refunds or indemnification whatsoever owing, 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 Receivable, including any right of stoppage in transit; and
(v) All
of
the Company’s documents, instruments and chattel paper, files, records, books of
account, business papers, computer programs and the products and proceeds of
all
of the foregoing Collateral set forth in clauses (i)-(iv) above.
Notwithstanding
the foregoing, the Collateral shall not include (I) any and all of the following
assets (the "Deemed Excluded Assets"), unless the Company provides written
notice to the Secured Parties that any such Deemed Excluded Asset should be
included in the Collateral: (a) any rights under contracts, leases or
intellectual property rights if the terms of such contract, lease or
intellectual property right, or the terms of any right granted by the Company
with respect thereto, prohibit the collateral assignment or granting of a
security interest in the Company's right in the same; or (b) any restricted
cash
or cash equivalents or any certificates of deposit, whether now owned by the
Company or hereafter acquired, that secure the Company's obligations with
respect to letters of credit, performance or surety bonds or similar
obligations; (II) any asset (an "Optional Excluded Asset", together with the
Deemed Excluded Assets, the “Excluded Assets”), for which the Company has
provided a written notice of exclusion (a "Notice of Exclusion"), specifically
identifying the asset (or class of assets) and stating that it is excluded
from
the meaning of Collateral under this Agreement; provided that the Company shall
only be entitled to deliver a Notice of Exclusion if the Optional Excluded
Asset
is to be used as collateral to secure obligations of the Company to other
parties in connection with bona fide commercial or financing transactions with
such a third party; and provided, further, that after giving effect to such
Notice of Exclusion, the total book value of the Collateral securing the Secured
Obligations pursuant to this Agreement, less the total aggregate principal
amount of all secured indebtedness of the Company for money borrowed (excluding
the Secured Obligations) which is secured by the Collateral, in each case
determined in accordance with generally accepted accounting procedures, would
exceed the then-outstanding principal amount of the Notes; or (III) any proceeds
of any Excluded Asset.
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(b) “Company”
shall
mean, collectively, Company and all of the subsidiaries of Company, a list
of
which is contained in Schedule
A,
attached hereto.
(c) “Obligations”
means
all of the Company’s obligations under this Agreement and the Notes, 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 decreased, created or incurred, and all or any portion
of
such obligations or liabilities that are paid, to the extent all or any part
of
such payment is avoided or recovered directly or indirectly from the Secured
Party as a preference, fraudulent transfer or otherwise as such obligations
may
be amended, supplemented, converted, extended or modified from time to
time.
(d) “UCC”
means
the Uniform Commercial Code, as currently in effect in the State of New
York.
2. Grant
of Security Interest.
As an
inducement for the Secured Party to purchase 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, the Company hereby, unconditionally and
irrevocably, pledges, grants and hypothecates to the Secured Party, a continuing
security interest in, a continuing first lien upon, an unqualified right to
possession and disposition of and a right of set-off against, in each case
to
the fullest extent permitted by law, all of the Company’s right, title and
interest of whatsoever kind and nature in and to the Collateral (other than
the
Excluded Assets), subject to any current UCC-1 on file for the assets on the
Company’s subsidiary (the “Security
Interest”).
3. Representations,
Warranties, Covenants and Agreements of the Company.
The
Company represents and warrants to, and covenants and agrees with, the Secured
Party as follows:
(a) The
Company has the requisite corporate power and authority to enter into this
Agreement and otherwise to carry out its obligations thereunder. The execution,
delivery and performance by the Company of this Agreement and the filings
contemplated therein have been duly authorized by all necessary action on the
part of the Company and no further action is required by the Company. This
Agreement constitutes a legal, valid and binding obligation of the Company
enforceable in accordance with its terms, except as enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditor’s rights generally.
(b) The
Company represents and warrants that it has no place of business or offices
where its 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;
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(c) The
Company is the sole owner of the Collateral (except for non-exclusive licenses
granted by the Company 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 in and to pledge the Collateral,
except as set forth on Schedule
C.
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 have been filed
in
favor of the Secured Party pursuant to this Agreement) covering or affecting
any
of the Collateral, except as set forth on Schedule
C.
So long
as this Agreement shall be in effect, the Company 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 Party pursuant to the terms of this
Agreement), except as set forth on Schedule
C.
(d) No
part
of the Collateral has been judged invalid or unenforceable. No written claim
has
been received that any Collateral or the Company’s use of any Collateral
violates the rights of any third party. There has been no adverse decision
to
the Company’s claim of ownership rights in or exclusive rights to use the
Collateral in any jurisdiction or to the Company’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 the Company, threatened before
any court, judicial body, administrative or regulatory agency, arbitrator or
other governmental authority.
(e) The
Company 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 Party 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 and other necessary documents have been filed
and recorded and other steps have been taken to perfect the Security Interest
to
create in favor of the Secured Party valid, perfected and continuing first
priority liens in the Collateral.
(f) This
Agreement creates in favor of the Secured Party a valid security interest in
the
Collateral securing the payment and performance of the Obligations and, upon
making the filings described in the immediately following sentence, a perfected
first priority security interest in such Collateral. Except for the filing
of
financing statements on Form-1 under the UCC with the jurisdictions indicated
on
Schedule
B,
attached hereto, no authorization or approval of or filing with or notice to
any
governmental authority or regulatory body is required either (i) for
the grant by the Company of, or the effectiveness of, the Security Interest
granted hereby or for the execution, delivery and performance of this Agreement
by the Company or (ii) for
the perfection of or exercise by the Secured Party of its rights and remedies
hereunder.
(g) On
the
date of execution of this Agreement, the Company will deliver to the Secured
Party one or more executed UCC financing statements on Form-1 with respect
to
the Security Interest for filing with the jurisdictions indicated on
Schedule
B,
attached hereto and in such other jurisdictions as may be requested by the
Secured Party.
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(h) Except
as
set forth on Schedule
C,
the
execution, delivery and performance of this Agreement does not conflict with
or
cause a breach or default, or an event that with or without the passage of
time
or notice, shall constitute a breach or default, under any agreement to which
the Company is a party or by which the Company is bound. No consent (including,
without limitation, from stock holders or creditors of the Company) is required
for the Company to enter into and perform its obligations
hereunder.
(i) The
Company 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 Secured Party until this Agreement and the
Security Interest hereunder shall terminate pursuant to Section 11. The Company
hereby agrees to defend the same against any and all persons. The Company shall
safeguard and protect all Collateral for the account of the Secured Party.
At
the request of the Secured Party, the Company will sign and deliver to the
Secured Party at any time or from time to time one or more financing statements
pursuant to the UCC (or any other applicable statute) in form reasonably
satisfactory to the Secured Party and will pay the cost of filing the same
in
all public offices wherever filing is, or is deemed by the Secured Party to
be,
necessary or desirable to effect the rights and obligations provided for herein.
Without limiting the generality of the foregoing, the Company shall pay all
fees, taxes and other amounts necessary to maintain the Collateral and the
Security Interest hereunder, and the Company shall obtain and furnish to the
Secured Party 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.
(j) (i)
The
Company will not transfer, pledge, hypothecate, encumber, license (except for
non-exclusive licenses granted and sales made by the Company in the ordinary
course of business), sell or otherwise dispose of any of the Collateral without
the prior written consent of the Secured Party. (ii) The Secured Parties each
agree that nothing set forth herein is intended or shall be construed to
prohibit or limit in any way the right and ability of the Company (i) to sell,
assign, transfer, license, sublease or otherwise dispose of, or grant any option
or other interest or right with respect to, any of the Collateral (other than
dividends to the Company's stockholders that are prohibited under the terms
of
the Notes), (ii) to grant, create or suffer to exist any Lien, charge or
security interest upon or with respect to any of the Collateral; (iii) to amend,
modify or replace any contracts included in the Collateral or to waive any
rights thereunder, or (iv) other than as expressly set forth herein, to enter
into any other transactions with respect to the Collateral, and the consent
of
the Secured Parties shall not be required for any of the foregoing.
Notwithstanding the foregoing, the Company may not sell, assign, transfer or
otherwise dispose of any Collateral having a book value (i) in excess of $50,000
in a single transaction or series of related transactions or (ii) in excess
of
$200,000 in the aggregate during the term of the Notes, unless either (x) the
proceeds thereof shall constitute Collateral in which the Secured Parties shall
have a valid and perfected security interest; (y) the Company applies the
proceeds thereof to repay indebtedness that is secured by a Lien which is senior
to the Secured Parties' security interest in the Collateral, or (z) after giving
effect to such sale, assignment, transfer or other disposition, the total book
value of the Collateral securing the Secured Obligations pursuant to this
Agreement, less the total aggregate principal amount of all secured indebtedness
of the Company for money borrowed (excluding the Secured Obligations) which
is
secured by the Collateral, in each case determined in accordance with generally
accepted accounting principles, would exceed the then-outstanding principal
amount of the Notes.
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(k) The
Company 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.
(l) The
Company shall, within ten (10) days of obtaining knowledge thereof, advise
the
Secured Party 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 or on the Secured Party’s security
interest therein.
(m) The
Company shall promptly execute and deliver to the Secured Party such further
deeds, mortgages, assignments, security agreements, financing statements or
other instruments, documents, certificates and assurances and take such further
action as the Secured Party may from time to time request and may in its sole
discretion deem necessary to perfect, protect or enforce its security interest
in the Collateral including, without limitation, the execution and delivery
of a
separate security agreement with respect to the Company’s intellectual property
(“Intellectual
Property Security Agreement”)
in
which the Secured Party has been granted a security interest hereunder,
substantially in a form acceptable to the Secured Party, which Intellectual
Property Security Agreement, other than as stated therein, shall be subject
to
all of the terms and conditions hereof.
(n) The
Company shall permit the Secured Party and its representatives and agents to
inspect the Collateral at any time, and to make copies of records pertaining
to
the Collateral as may be requested by the Secured Party from time to
time.
(o) The
Company will 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.
(p) The
Company shall promptly notify the Secured Party 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 the
Company that may materially affect the value of the Collateral, the Security
Interest or the rights and remedies of the Secured Party hereunder.
(q) All
information heretofore, herein or hereafter supplied to the Secured Party by
or
on behalf of the Company with respect to the Collateral is accurate and complete
in all material respects as of the date furnished.
(r) Schedule
A
attached
hereto contains a list of all of the subsidiaries of Company.
4. 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;
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(b) Any
representation or warranty of the Company in this Agreement or in the
Intellectual Property Security Agreement shall prove to have been incorrect
in
any material respect when made; and
(c) The
failure by the Company to observe or perform any of its obligations hereunder
or
in the Intellectual Property Security Agreement for ten (10) days after receipt
by the Company of notice of such failure from the Secured Party.
5. Duty
To Hold In Trust.
Upon
the occurrence of any Event of Default and at any time thereafter, the Company
shall, upon receipt by it of any revenue, income or other sums subject to the
Security Interest, whether payable pursuant to the Notes or otherwise, or of
any
check, draft, note, trade acceptance or other instrument evidencing an
obligation to pay any such sum, hold the same in trust for the Secured Party
and
shall forthwith endorse and transfer any such sums or instruments, or both,
to
the Secured Party for application to the satisfaction of the
Obligations.
6. Rights
and Remedies Upon Default.
Upon
occurrence of any Event of Default and at any time thereafter, the Secured
Party
shall have the right to exercise all of the remedies conferred hereunder and
under the Notes, and the Secured Party shall have all the rights and remedies
of
a secured party under the UCC and/or any other applicable law (including the
Uniform Commercial Code of any jurisdiction in which any Collateral is then
located). Without limitation, the Secured Party shall have the following rights
and powers:
(a) The
Secured Party 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 the Company shall assemble the Collateral and make it available to
the
Secured Party at places which the Secured Party shall reasonably select, whether
at the Company’s premises or elsewhere, and make available to the Secured Party,
without rent, all of the Company’s respective premises and facilities for the
purpose of the Secured Party taking possession of, removing or putting the
Collateral in saleable or disposable form.
(b) The
Secured Party shall have the right to operate the business of the Company 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 Secured Party 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 the Company or right of redemption
of
the Company, which are hereby expressly waived. Upon each such sale, lease,
assignment or other transfer of Collateral, the Secured Party 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 the Company, which are hereby waived and released.
(c) The
remedies provided in this Section 6 shall only be exercised or otherwise
enforced with the written consent of Secured Parties holding at least 66-2/3%
of
the outstanding aggregate principal amount of the Secured Obligations ("Majority
Secured Parties"). The Majority Secured Parties may appoint an agent (the
"Agent") that, at the direction of Majority Secured Parties, shall have the
right to exercise any right or remedy of the Secured Parties, on behalf of
all
Secured Parties, under this Agreement, including, without limitation, all rights
and remedies of a secured party under the N.Y. Uniform Commercial Code. If
an
Agent is so appointed:
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(i)
At
the direction of the Majority Secured Parties, the Agent shall proceed with
the
enforcement of the Secured Parties' rights against the Collateral for the
benefit of the Secured Parties under the Notes. Any repossession, sale or
distribution of proceeds of Collateral shall be accomplished as required by
this
Agreement, the Securities Purchase Agreement, the Registration Rights Agreement,
the Notes and the Warrants (collectively the “Transaction Documents” and
applicable law. The Agent is authorized to exercise all rights and remedies
of
the Secured Parties under the Transaction Documents, provided that, absent
exigent circumstances where action is determined by the Agent to be necessary
to
protect Collateral, the Agent shall not proceed to enforce the Secured Parties'
rights and remedies against the Collateral or the Company by foreclosure,
judicial action or the like ("Enforcement Action"), unless and until directed
to
do so by the Majority Secured Parties. Unless the Agent shall request further
guidance or consents, any direction by the Majority Secured Parties to begin
Enforcement Action may merely state that the Agent shall begin enforcement,
and
need not specify the manner in which enforcement should proceed. Once the Agent
receives an enforcement direction from the Majority Secured Parties, all
decisions as to how to proceed to enforce the Secured Parties' rights and
remedies, including, without limitation, the methods and timing of proceeding,
may be made by the Agent in its good faith business judgment, with such
consultation with the Secured Parties as the Agent in its sole discretion deems
reasonable under the circumstances. In the event of one or more foreclosure
sales, the Agent shall have the right to bid in the claim of each Secured Party
on behalf of each Secured Party in respect of its respective Note.
(ii)
Unless consented to by all of the Secured Parties, no Secured Party shall,
except through the Agent, collect, take possession of, foreclose upon, or
exercise any rights or remedies with respect to the Collateral or the Company,
judicially or non-judicially, in order to satisfy or collect any Secured
Obligations or attempt to do any of the foregoing.
(iii)
If
the Collateral is acquired by the Agent by foreclosure sale or otherwise, at
the
option of the Agent, title may be taken in the name of the Agent or in the
name
of a corporation affiliated with the Agent or other nominee designated by the
Agent, in any case, for the ratable benefit of the Secured Parties subject
to
the terms of this Agreement. Although the Agent shall consult with the Secured
Parties as to the general operation and disposition of any Collateral for which
title has been acquired through foreclosure or otherwise, the consent of the
Secured Parties shall not be required for matters and decisions by the Agent
relating to the management, operation, or repair of the Collateral so
acquired.
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(iv)
The
costs of repossession, sale, possession and management (including, without
limitation, any costs of holding any Collateral the title to which is acquired
by the Agent on behalf of the Secured Parties), and distribution pursuant to
this Section 6 (as further set forth herein) shall be an obligation of the
Company, and to the extent the Company does not cover such costs, shall be
borne
Pro Rata by the Secured Parties until repaid by the Company. Each Secured Party
shall reimburse the Agent for its Pro Rata share of all such costs promptly
upon
demand. Without limiting any obligations of one Secured Party to reimburse
the
Agent as contained herein, in the event of the Company's failure to pay taxes,
assessments, insurance premiums, claims against the Collateral or any other
amount required to be paid by the Company pursuant to any Transaction Documents,
the Agent may (but shall not be obligated to) advance amounts necessary to
pay
the same, and each Secured Party agrees to reimburse the Agent promptly upon
demand for its Pro Rata share of any such payments, provided Agent has advanced
such amounts with the approval of the Majority Secured Parties. "Pro Rata"means,
as to any Secured Party at any time, (a) with respect to the Secured
Obligations, the percentage equivalent at such time of (i) such Secured Party's
aggregate unpaid Secured Obligation amount under the Notes, divided by (ii)
the
combined aggregate unpaid Secured Obligation amount of all Notes of all Secured
Parties.
7. 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
Secured Party in enforcing its rights hereunder and in connection with
collecting, storing and disposing of the Collateral, and then to satisfaction
of
the Obligations, and to the payment of any other amounts required by applicable
law, after which the Secured Party shall pay to the Company 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 Party
is legally entitled, the Company will be liable for the deficiency, together
with interest thereon, at the rate of 15% per annum (the “Default
Rate”),
and
the reasonable fees of any attorneys employed by the Secured Party to collect
such deficiency. To the extent permitted by applicable law, the Company waives
all claims, damages and demands against the Secured Party arising out of the
repossession, removal, retention or sale of the Collateral, unless due to the
gross negligence or willful misconduct of the Secured Party.
8. Costs
and Expenses. The
Company agrees to pay all out-of-pocket fees, costs and expenses incurred in
connection with any filing required hereunder, including without limitation,
any
financing statements, continuation statements, partial releases and/or
termination statements related thereto or any expenses of any searches
reasonably required by the Secured Party. The Company shall also pay all other
claims and charges which in the reasonable opinion of the Secured Party might
prejudice, imperil or otherwise affect the Collateral or the Security Interest
therein. The Company will also, upon demand, pay to the Secured Party 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 Party 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 Party 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.
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9. Responsibility
for Collateral.
The
Company assumes all liabilities and responsibility in connection with all
Collateral, and the obligations of the Company hereunder or under the Notes
and
the Warrants 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.
10. Security
Interest Absolute.
All
rights of the Secured Party and all Obligations of the Company hereunder, shall
be absolute and unconditional, irrespective of: (a) any
lack of validity or enforceability of this Agreement, the Notes, the Warrants
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, the Warrants 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 Secured Party 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 the Company, 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 Secured Party shall continue even if the
Obligations are barred for any reason, including, without limitation, the
running of the statute of limitations or bankruptcy. The Company 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 Party 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 Party, then, in any such event, the Company’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. The Company waives all right
to
require the Secured Party to proceed against any other person or to apply any
Collateral which the Secured Party may hold at any time, or to marshal assets,
or to pursue any other remedy. The Company waives any defense arising by reason
of the application of the statute of limitations to any obligation secured
hereby.
11. Term
of Agreement.
This
Agreement and the Security Interest shall terminate on the date on which all
payments under the Notes have been made in full and all other Obligations have
been paid or discharged. Upon such termination, the Secured Party, at the
request and at the expense of the Company, will join in executing any
termination statement with respect to any financing statement executed and
filed
pursuant to this Agreement.
12. Notices.
All
notices, requests, demands and other communications hereunder shall be in
writing, with copies to all the other parties hereto, and shall be deemed to
have been duly given when (i) if
delivered by hand, upon receipt, (ii) if
sent by facsimile, upon receipt of proof of sending thereof, (iii) if
sent by nationally recognized overnight delivery service (receipt requested),
the next business day or (iv) if
mailed by first-class registered or certified mail, return receipt requested,
postage prepaid, four days after posting in the U.S. mails, in each case if
delivered to the following addresses:
10
|
If
to the Company:
|
The
Xxxxxxx Xxxxxx Group
|
| 000 Xxxxxx Xxxxxxx, Xxxxx 000 |
| Xxxxxxx, XX 00000 |
| Attention: Chief Executive Officer |
| Telephone: (000) 000-0000 |
| Facsimile: (000) 000-0000 |
| With a copy to: | Xxxxxxx, Savage, Kaplowitz, Wolf & Marcus, LLP |
| 000 Xxxxxxxxx Xxxxxx |
| Xxx Xxxx, Xxx Xxxx 00000 |
| Attention: Xxxxxx X. Xxxxxx, Esq. |
| Telephone: (000) 000-0000 |
| Facsimile: (000) 000-0000 |
| If to the Secured Party: |
AJW
Partners, LLC
|
| AJW Offshore, Ltd. |
| AJW Qualified Partners, LLC |
| New Millennium Capital Partners II, LLC |
| 0000 Xxxxxxxx Xxxxxxxxx |
| Xxxxx 000 |
| Xxxxxx, Xxx Xxxx 00000 |
| Attention: Xxxxx Xxxxxxxx |
| Facsimile: 000-000-0000 |
| With a copy to: |
Xxxxxxx
Xxxxx Xxxxxxx & Ingersoll, LLP
|
| 0000 Xxxxxx Xxxxxx, 00xx Xxxxx |
| Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000 |
| Attention: Xxxxxx X. Xxxxxxxx, Esq. |
| Facsimile: 000-000-0000 |
13. 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 Secured Party 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 Party’s rights and remedies hereunder.
14. Miscellaneous.
(a) No
course
of dealing between the Company and the Secured Party, nor any failure to
exercise, nor any delay in exercising, on the part of the Secured Party, 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.
11
(b) All
of
the rights and remedies of the Secured Party 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 all the parties hereto.
(d) In
the
event that 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 the party giving such waiver, 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) 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) This
Agreement shall be construed in accordance with the laws of the State of New
York, except to the extent the validity, perfection or enforcement of a security
interest hereunder in respect of any particular Collateral which are governed
by
a jurisdiction other than the State of New York in which case such law shall
govern. Each of the parties hereto irrevocably submit to the exclusive
jurisdiction of any New York State or United States Federal court sitting in
Manhattan county over any action or proceeding arising out of or relating to
this Agreement, and the parties hereto hereby irrevocably agree that all claims
in respect of such action or proceeding may be heard and determined in such
New
York State or Federal court. The parties hereto agree that a final judgment
in
any such action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
The parties hereto further waive any objection to venue in the State of New
York
and any objection to an action or proceeding in the State of New York on the
basis of forum non conveniens.
12
(i) EACH
PARTY HERETO HEREBY AGREES TO WAIVE ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF
ANY
CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT. THE SCOPE
OF THIS WAIVER IS INTENDED TO BE ALL ENCOMPASSING OF ANY DISPUTES THAT MAY
BE
FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATER OF THIS AGREEMENT,
INCLUDING WITHOUT LIMITATION CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS
AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS. EACH PARTY HERETO ACKNOWLEDGES
THAT THIS WAIVER IS A MATERIAL INDUCEMENT FOR EACH PARTY TO ENTER INTO A
BUSINESS RELATIONSHIP, THAT EACH PARTY HAS ALREADY RELIED ON THIS WAIVER IN
ENTERING INTO THIS AGREEMENT AND THAT EACH PARTY WILL CONTINUE TO RELY ON THIS
WAIVER IN THEIR RELATED FUTURE DEALINGS. EACH PARTY FURTHER WARRANTS AND
REPRESENTS THAT IT HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL, AND THAT
SUCH PARTY HAS KNOWINGLY AND VOLUNTARILY WAIVES ITS RIGHTS TO A JURY TRIAL
FOLLOWING SUCH CONSULTATION. THIS WAIVER IS IRREVOCABLE, MEANING THAT,
NOTWITHSTANDING ANYTHING HEREIN TO THE CONTRARY, IT MAY NOT BE MODIFIED EITHER
ORALLY OR IN WRITING, AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS AND SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT. IN THE EVENT OF
A
LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY
THE
COURT.
(j) 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.
[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]
13
IN
WITNESS WHEREOF, the parties hereto have caused this Security Agreement to
be
duly executed on the day and year first above written.
| THE XXXXXXX RIVERS GROUP | ||
| |
|
|
| By: | ||
| Xxxxxxx Xxxxxxxx | ||
| Chief Executive Officer | ||
| AJW PARTNERS, LLC | ||
| By: SMS Group, LLC | ||
| |
|
|
| By: | ||
| Xxxxx X. Xxxxxxxx | ||
| Manager | ||
| AJW OFFSHORE, LTD. | ||
| By: First Street Manager II, LLC | ||
| |
|
|
| By: | ||
| Xxxxx X. Xxxxxxxx | ||
| Manager | ||
| AJW QUALIFIED PARTNERS, LLC | ||
| By: AJW Manager, LLC | ||
| |
|
|
| By: | ||
| Xxxxx X. Xxxxxxxx | ||
| Manager | ||
| NEW MILLENNIUM CAPITAL PARTNERS II, LLC | ||
| By: First Street Manager II, LLC | ||
| |
|
|
| By: | ||
| Xxxxx X. Xxxxxxxx | ||
| Manager | ||
14
SCHEDULE
A
Principal
Place of Business of the Company:
Locations
Where Collateral is Located or Stored:
List
of Subsidiaries of the Company:
15
SCHEDULE
B
Jurisdictions:
16
