SECURITY AGREEMENT
This
SECURITY AGREEMENT, dated as of May 22, 2007 (this “Agreement”),
is
among QPC Lasers, Inc., a Nevada corporation (the “Debtor”),
and
the holders of the Company’s 10% Secured Convertible Debentures due May 22, 2009
and issued on May 22, 2007 in the original aggregate principal amount of up
to
$10,554,500 (collectively, the “Debentures”)
signatory hereto, their endorsees, transferees and assigns (collectively, the
“Secured
Parties”).
WITNESSETH:
WHEREAS,
pursuant to the Purchase Agreement (as defined in the Debentures), the Secured
Parties have severally agreed to extend the loans to the Debtor evidenced by
the
Debentures;
WHEREAS,
in order to induce the Secured Parties to extend the loans evidenced by the
Debentures, Debtor has agreed to execute and deliver to the Secured Parties
this
Agreement and to grant the Secured Parties, pari passu
with each other Secured Party and through the Agent, a security interest in
certain property of Debtor to secure the prompt payment, performance and
discharge in full of all of its obligations under the Debentures.
WHEREAS,
this Agreement is subject to that certain Inter-Creditor, Waiver and Amendment
Agreement, dated as of the date hereof, by and among the Company, the purchasers
signatory to the April 2007 Purchase Agreement and the other April 2007
Documents (as such terms are defined below) and the Secured
Parties.
NOW,
THEREFORE, in consideration of the agreements herein contained and for other
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto hereby agree as follows:
1.
Certain
Definitions.
As used in this Agreement, the following terms shall have the meanings set
forth
in this Section 1. Terms used but not otherwise defined in this Agreement that
are defined in Article 9 of the UCC (such as “account”, “chattel paper”,
“commercial tort claim”, “deposit account”, “document”, “equipment”, “fixtures”,
“general intangibles”, “goods”, “instruments”, “inventory”, “investment
property”, “letter-of-credit rights”, “proceeds” and “supporting obligations”)
shall have the respective meanings given such terms in Article 9 of the
UCC.
(a) “April
2007 Documents”
means the Securities Purchase Agreement, dated as of April 16, 2007, by and
among the Company and the buyers signatory thereto (the “April
2007 Purchase Agreement”),
the Security Agreement (as defined in the April 2007 Purchase Agreement) (the
“April
2007 Security Agreement”),
the Debentures (as defined in the April 2007 Purchase Agreement) (the
“April
2007 Debentures”)
and the other Transaction Documents (as defined in the April 2007 Purchase
Agreement), as such documents may be amended from time to time.
(b) “Collateral”
means the collateral in which the Secured Parties are granted a security
interest by this Agreement and which shall include the following personal
property of the Debtor, whether presently owned or existing or hereafter
acquired or coming into existence, wherever situated, and all additions and
accessions thereto and all substitutions and replacements thereof, and all
proceeds, products and accounts thereof, including, without limitation, all
proceeds from the sale or transfer of the Collateral and of insurance covering
the same and of any tort claims in connection therewith,
and all dividends, interest, cash, notes, securities, equity interest or other
property at any time and from time to time acquired, receivable or otherwise
distributed in respect of, or in exchange for, any or all of the Pledged
Securities (as defined below):
(i) All
goods, including, without limitation, (A) all machinery, equipment, computers,
motor vehicles, trucks, tanks, boats, ships, appliances, furniture, special
and
general tools, fixtures, test and quality control devices and other equipment
of
every kind and nature and wherever situated, together with all documents of
title and documents representing the same, all additions and accessions thereto,
replacements therefor, all parts therefor, and all substitutes for any of the
foregoing and all other items used and useful in connection with Debtor’s
business and all improvements thereto; and (B) all inventory;
(ii) All
contract rights and other general intangibles, including, without limitation,
all partnership interests, membership interests, stock or other securities,
rights
under any of the Organizational Documents, agreements related to the Pledged
Securities, licenses,
distribution and other agreements, computer software (whether “off-the-shelf”,
licensed from any third party or developed by Debtor), computer software
development rights, leases, franchises, customer lists, quality control
procedures, grants and rights, goodwill, trademarks, service marks, trade
styles, trade names, patents, patent applications, copyrights, and income tax
refunds;
(iii) All
accounts, together with all instruments, all documents of title representing
any
of the foregoing, all rights in any merchandising, goods, equipment, motor
vehicles and trucks which any of the same may represent, and all right, title,
security and guaranties with respect to each account, including any right of
stoppage in transit;
(iv) All
documents, letter-of-credit rights, instruments and chattel paper;
(v) All
commercial tort claims;
(vi) All
deposit accounts and all cash (whether or not deposited in such deposit
accounts);
(vii) All
investment property;
(viii) All
supporting obligations; and
(ix) All
files, records, books of account, business papers, and computer programs;
and
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(x) the
products and proceeds of all of the foregoing Collateral set forth in clauses
(i)-(ix) above.
Without
limiting the generality of the foregoing, the “Collateral”
shall include all investment property and general intangibles respecting
ownership and/or other equity interests in each subsidiary of Debtor, including,
without limitation, the Debtor’s equity interest in QPC, including, without
limitation, the shares of capital stock and the other equity interests listed
on
Schedule
H
hereto (as the same may be modified from time to time pursuant to the terms
hereof), and any other shares of capital stock and/or other equity interests
of
any other direct or indirect subsidiary of Debtor obtained in the future, and,
in each case, all certificates representing such shares and/or equity interests
and, in each case, all rights, options, warrants, stock, other securities and/or
equity interests that may hereafter be received, receivable or distributed
in
respect of, or exchanged for, any of the foregoing and all rights arising under
or in connection with the Pledged Securities, including, but not limited to,
all
dividends, interest and cash.
Notwithstanding
the foregoing, nothing herein shall be deemed to constitute an assignment of
any
asset which, in the event of an assignment, becomes void by operation of
applicable law or the assignment of which is otherwise prohibited by applicable
law (in each case to the extent that such applicable law is not overridden
by
Sections 9-406, 9-407 and/or 9-408 of the UCC or other similar applicable law);
provided,
however,
that to the extent permitted by applicable law, this Agreement shall create
a
valid security interest in such asset and, to the extent permitted by applicable
law, this Agreement shall create a valid security interest in the proceeds
of
such asset.
(c) “Intellectual
Property”
means the collective reference to all rights, priorities and privileges relating
to intellectual property, whether arising under United States, multinational
or
foreign laws or otherwise, including, without limitation, (i) all copyrights
arising under the laws of the United States, any other country or any political
subdivision thereof, whether registered or unregistered and whether published
or
unpublished, all registrations and recordings thereof, and all applications
in
connection therewith, including, without limitation, all registrations,
recordings and applications in the United States Copyright Office, (ii) all
letters patent of the United States, any other country or any political
subdivision thereof, all reissues and extensions thereof, and all applications
for letters patent of the United States or any other country and all divisions,
continuations and continuations-in-part thereof, (iii) all trademarks, trade
names, corporate names, company names, business names, fictitious business
names, trade dress, service marks, logos, domain names and other source or
business identifiers, and all goodwill associated therewith, now existing or
hereafter adopted or acquired, all registrations and recordings thereof, and
all
applications in connection therewith, whether in the United States Patent and
Trademark Office or in any similar office or agency of the United States, any
State thereof or any other country or any political subdivision thereof, or
otherwise, and all common law rights related thereto, (iv) all trade secrets
arising under the laws of the United States, any other country or any political
subdivision thereof, (v) all rights to obtain any reissues, renewals or
extensions of the foregoing, (vi) all licenses for any of the foregoing, and
(vii) all causes of action for infringement of the foregoing.
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(d) “Majority
in Interest”
means, at any time of determination, the majority in interest (based on
then-outstanding principal amounts of Debentures at the time of such
determination) of the Secured Parties.
(e) “Necessary
Endorsement”
means undated stock powers endorsed in blank or other proper instruments of
assignment duly executed and such other instruments or documents as the Agent
(as that term is defined below) may reasonably request.
(f) “Obligations”
means all of the liabilities
and obligations (primary, secondary, direct, contingent, sole, joint or several)
due or to become due, or that are now or may be hereafter contracted or
acquired, or owing to, of Debtor to the Secured Parties, under
this Agreement, the Debentures, and any other instruments, agreements or other
documents executed and/or delivered in connection herewith or therewith, in
each
case, whether now or hereafter existing, voluntary or involuntary, direct or
indirect, absolute or contingent, liquidated or unliquidated, whether or not
jointly owed with others, and whether or not from time to time decreased or
extinguished and later increased, created or incurred, and all or any portion
of
such obligations or liabilities that are paid, to the extent all or any part
of
such payment is avoided or recovered directly or indirectly from any of the
Secured Parties as a preference, fraudulent transfer or otherwise as such
obligations may be amended, supplemented, converted, extended or modified from
time to time. Without limiting the generality of the foregoing, the term
“Obligations” shall include, without limitation: (i) principal of, and interest
on the Debentures and the loans extended pursuant thereto; (ii) any and all
other fees, indemnities, costs, obligations and liabilities of the Debtor from
time to time under or in connection with this Agreement, the Debentures, and
any
other instruments, agreements or other documents executed and/or delivered
in
connection herewith or therewith; and (iii) all amounts (including but not
limited to post-petition interest) in respect of the foregoing that would be
payable but for the fact that the obligations to pay such amounts are
unenforceable or not allowable due to the existence of a bankruptcy,
reorganization or similar proceeding involving Debtor.
(g) “Organizational
Documents”
means with respect to Debtor or QPC, the documents by which Debtor or QPC 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 Debtor or QPC (such
as
bylaws, a partnership agreement or an operating, limited liability or members
agreement).
(h) “Pledged
Securities”
shall have the meaning ascribed to such term in Section 4(i).
(i) “QPC”
means Quintessence Photonics Corporation, a Delaware corporation.
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(j) “UCC”
means the Uniform Commercial Code of the State of New York and or any other
applicable law of any state or states which has jurisdiction with respect to
all, or any portion of, the Collateral or this Agreement, from time to time.
It
is the intent of the parties that defined terms in the UCC should be construed
in their broadest sense so that the term “Collateral” will be construed in its
broadest sense. Accordingly if there are, from time to time, changes to defined
terms in the UCC that broaden the definitions, they are incorporated herein
and
if existing definitions in the UCC are broader than the amended definitions,
the
existing ones shall be controlling.
2. Grant
of Security Interest in Collateral.
As an inducement for the Secured Parties to extend the loans as evidenced by
the
Debentures and to secure the complete and timely payment, performance and
discharge in full, as the case may be, of all of the Obligations, Debtor hereby
unconditionally and irrevocably pledges, grants and hypothecates to the Secured
Parties a security interest in and to, a lien upon and a right of set-off
against all of their respective right, title and interest of whatsoever kind
and
nature in and to, the Collateral (a “Security
Interest”
and, collectively, the “Security
Interests”).
3. Delivery
of Certain Collateral.
Contemporaneously or prior to the execution of this Agreement, Debtor shall
deliver or cause to be delivered to the Agent (a) any and all certificates
and
other instruments representing or evidencing the Pledged Securities, and (b)
any
and all certificates and other instruments or documents representing any of
the
other Collateral, in each case, together with all Necessary Endorsements. The
Debtor is, contemporaneously with the execution hereof, delivering to Agent,
or
has previously delivered to Agent, a true and correct copy of each
Organizational Document governing any of the Pledged Securities.
4. Representations,
Warranties, Covenants and Agreements of the Debtor.
Except as set forth under the corresponding section of the disclosure schedules
delivered to the Secured Parties concurrently herewith (the “Disclosure
Schedules”),
which Disclosure Schedules shall be deemed a part hereof, Debtor represents
and
warrants to, and covenants and agrees with, the Secured Parties as
follows:
(a)
Debtor has the requisite corporate, partnership, limited liability company
or
other power and authority to enter into this Agreement and otherwise to carry
out its obligations hereunder. The execution, delivery and performance by 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. Except as specifically set forth on Schedule
A,
Debtor is the record owner of the real property where such Collateral is
located, and there exist no mortgages or other liens on any such real property
except for Permitted Liens (as defined in the Debentures). Except as disclosed
on Schedule
A,
none of such Collateral is in the possession of any consignee, bailee,
warehouseman, agent or processor.
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(c) Except
for Permitted Liens (as defined in the Purchase Agreement) and 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 any Debtor in the ordinary course of
business), free and clear of any liens, security interests, encumbrances, rights
or claims, and are fully authorized to grant the Security Interests. Except
as
set forth on Schedule
B
attached hereto or in connection with a Permitted Lien, there is not on file
in
any governmental or regulatory authority, agency or recording office an
effective financing statement, security agreement, license or transfer or any
notice of any of the foregoing (other than those that will be filed in favor
of
the Secured Parties pursuant to this Agreement) covering or affecting any of
the
Collateral. Except as set forth on Schedule
B
attached hereto and except pursuant to this Agreement or in connection with
a
Permitted Lien, as 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 other financing statement or other document or instrument (except
to
the extent filed or recorded in favor of the Secured Parties pursuant to the
terms of this Agreement).
(d) No
written claim has been received that any Collateral or Debtor's use of any
Collateral violates the rights of any third party. There has been no adverse
decision to 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) Debtor
shall at all times maintain its books of account and records relating to the
Collateral at its principal place of business and its Collateral at the
locations set forth on Schedule
A
attached hereto and may not relocate such books of account and records or
tangible Collateral unless it delivers to the Secured Parties at least 30 days
prior to such relocation (i) written notice of such relocation and the new
location thereof (which must be within the United States) and (ii) evidence
that
appropriate financing statements under the UCC and other necessary documents
have been filed and recorded and other steps have been taken to perfect the
Security Interests to create in favor of the Secured Parties a valid, perfected
and continuing perfected first priority lien in the Collateral (subject only
to
Permitted Liens and the lien disclosed on Schedule B
attached hereto).
(f) This
Agreement creates in favor of the Secured Parties a valid security interest
in
the Collateral, subject only to Permitted Liens (as defined in the Purchase
Agreement) and the liens on Schedule B
attached hereto securing the payment and performance of the Obligations. Upon
making the filings described in the immediately following paragraph, all
security interests created hereunder in any Collateral which may be perfected
by
filing Uniform Commercial Code financing statements shall have been duly
perfected. Except for the filing of the Uniform Commercial Code financing
statements referred to in the immediately following paragraph, the recordation
of the Intellectual Property Security Agreement (as defined below) with respect
to copyrights and copyright applications in the United States Copyright Office
referred to in paragraph (m), the
execution and delivery of deposit account control agreements satisfying the
requirements of Section 9-104(a)(2) of the UCC with respect to each deposit
account of the Debtor,
and the delivery of the certificates and other instruments provided in Section
3,
no action is necessary to create, perfect or protect the security interests
created hereunder. Without limiting the generality of the foregoing, except
for
the filing of said financing statements, the recordation of said Intellectual
Property Security Agreement, and the execution and delivery of said deposit
account control agreements, no consent of any third parties and no
authorization, approval or other action by, and no notice to or filing with,
any
governmental authority or regulatory body is required for (i) the execution,
delivery and performance of this Agreement, (ii) the creation or perfection
of
the Security Interests created hereunder in the Collateral or (iii) the
enforcement of the rights of the Agent and the Secured Parties
hereunder.
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(g) Debtor
hereby authorizes the Agent to file one or more financing statements under
the
UCC, with respect to the Security Interests, with the proper filing and
recording agencies in any jurisdiction deemed proper by it.
(h) The
execution, delivery and performance of this Agreement by the Debtor does not
(i)
violate any of the provisions of any Organizational Documents of 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. If
any, all required consents (including, without limitation, from stockholders
or
creditors of Debtor) necessary for Debtor to enter into and perform its
obligations hereunder have been obtained.
(i) The
capital stock and other equity interests listed on Schedule
H
hereto (the “Pledged
Securities”)
represent all of the capital stock and other equity interests of QPC, and
represent all capital stock and other equity interests owned, directly or
indirectly, by the Debtor. All of the Pledged Securities are validly issued,
fully paid and nonassessable, and the Debtor is the legal and beneficial owner
of the Pledged Securities, free and clear of any lien, security interest or
other encumbrance except for the security interests created by this Agreement
and other Permitted Liens (as defined in the Purchase Agreement) and the liens
disclosed on Schedule B
attached hereto.
(j) The
ownership and other equity interests in partnerships and limited liability
companies (if any)
included in the Collateral
(the “Pledged
Interests”)
by their express terms do not provide that they are securities governed by
Article 8 of the UCC and are not held in a securities account or by any
financial intermediary.
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(k) Except
for Permitted Liens (as defined in the Purchase Agreement) and
the liens disclosed on Schedule B
attached hereto,
Debtor shall at all times maintain the liens and Security Interests provided
for
hereunder as valid and perfected first priority liens (to the extent such
perfection and priority can be achieved with the filing of financing statements
under the UCC or the delivery of the certificates representing the Pledged
Interests) and security interests in the Collateral in favor of the Secured
Parties until this Agreement and the Security Interest hereunder shall be
terminated pursuant to Section 11 hereof. Debtor hereby agrees to defend the
same against the claims of any and all persons and entities. Debtor shall
safeguard and protect all Collateral for the account of the Secured Parties.
At
the request of the Agent, Debtor will sign and deliver to the Agent on behalf
of
the Secured Parties at any time or from time to time one or more financing
statements pursuant to the UCC in form reasonably satisfactory to the Agent
and
will pay the cost of filing the same in all public offices wherever filing
is,
or is deemed by the Agent to be, necessary or desirable to effect the rights
and
obligations provided for herein. Without limiting the generality of the
foregoing, Debtor shall pay all fees, taxes and other amounts necessary to
maintain the Collateral and the Security Interests 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 Interests hereunder.
(l) Debtor
will not transfer, pledge, hypothecate, encumber, license, sell or otherwise
dispose of any of the Collateral (except for Permitted Transfers (as defined
in
the Purchase Agreement)) without the prior written consent of a Majority
in Interest.
(m) Debtor
shall keep and preserve its equipment, inventory and other tangible Collateral
in good condition, repair and order and shall not operate or locate any such
Collateral (or cause to be operated or located) in any area excluded from
insurance coverage.
(n) Debtor
shall, within ten (10) days of obtaining knowledge thereof, advise the Secured
Parties promptly, in sufficient detail, of any material adverse change in the
Collateral, and of the occurrence of any event which would have a material
adverse effect on the value of the Collateral or on the Secured Parties’
security interest, through the Agent, therein.
(o) Debtor
shall promptly execute and deliver to the Agent such further deeds, mortgages,
assignments, security agreements, financing statements or other instruments,
documents, certificates and assurances and take such further action as the
Agent
may from time to time request and may in its sole discretion deem necessary
to
perfect, protect or enforce the Secured Parties’ security interest in the
Collateral including, without limitation, if applicable, the execution and
delivery of a separate security agreement with respect to each Debtor’s
Intellectual Property (“Intellectual
Property Security Agreement”)
in which the Secured Parties have been granted a security interest hereunder,
substantially in a form reasonably acceptable to the Agent, which Intellectual
Property Security Agreement, other than as stated therein, shall be subject
to
all of the terms and conditions hereof.
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(p) Debtor
shall permit the Agent and its representatives and agents to inspect the
Collateral during normal business hours and upon reasonable prior notice, and
to
make copies of records pertaining to the Collateral as may be reasonably
requested by the Agent from time to time.
(q) Debtor
shall take all steps reasonably necessary to diligently pursue and seek to
preserve, enforce and collect any rights, claims, causes of action and accounts
receivable in respect of the Collateral.
(r) Debtor
shall promptly notify the Secured Parties in sufficient detail upon becoming
aware of any attachment, garnishment, execution or other legal process levied
against any Collateral and of any other information received by Debtor that
may
materially affect the value of the Collateral, the Security Interest or the
rights and remedies of the Secured Parties hereunder.
(s) All
information heretofore, herein or hereafter supplied to the Secured Parties
by
or on behalf of Debtor with respect to the Collateral is accurate and complete
in all material respects as of the date furnished.
(t) The
Debtor shall at all times preserve and keep in full force and effect its valid
existence and good standing and any rights and franchises material to its
business.
(u) 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 30 days prior written notice to the Secured Parties of such change and,
at
the time of such written notification, Debtor provides any financing statements
or fixture filings necessary to perfect and continue the perfection of the
Security Interests granted and evidenced by this Agreement.
(v) Except
in the ordinary course of business, Debtor may not consign any of its inventory
or sell any of its inventory on xxxx and hold, sale or return, sale on approval,
or other conditional terms of sale without the consent of the
Agent which shall not be unreasonably withheld.
(w) Debtor
may not relocate its chief executive office to a new location without providing
30 days prior written notification thereof to the Secured Parties and so long
as, at the time of such written notification, Debtor provides any financing
statements or fixture filings necessary to perfect and continue the perfection
of the Security Interests granted and evidenced by this Agreement.
(x) Debtor
was organized and remains organized solely under the laws of the state set
forth
next to Debtor’s name in Schedule
D
attached hereto, which Schedule
D
sets forth Debtor’s organizational identification number or, if Debtor does not
have one, states that one does not exist.
(y) (i)
The actual name of Debtor is the name set forth in Schedule
D
attached hereto; (ii) Debtor doesn’t have any trade names except as set forth on
Schedule
E
attached hereto; (iii) Debtor has not used any name other than that stated
in
the preamble hereto or as set forth on Schedule
E
for the preceding five years; and (iv) no entity has merged into Debtor or
been
acquired by Debtor within the past five years except as set forth on
Schedule
E.
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(z) At
any time and from time to time that any Collateral consists of instruments,
certificated securities or other items that require or permit possession by
the
secured party to perfect the security interest created hereby, the Debtor shall
deliver such Collateral to the Agent upon the Agent’s reasonable
request.
(aa) Debtor,
in its capacity as issuer, hereby agrees to comply with any and all orders
and
instructions of Agent regarding the Pledged Interests consistent with the terms
of this Agreement without the further consent of Debtor as contemplated by
Section 8-106 (or any successor section) of the UCC. Further, Debtor agrees
that
it shall not enter into a similar agreement (or one that would confer “control”
within the meaning of Article 8 of the UCC) with any other person or
entity.
(bb) Upon
the Agent’s reasonable request, Debtor shall cause all tangible chattel paper
constituting Collateral to be delivered to the Agent, or, if such delivery
is
not possible, then to cause such tangible chattel paper to contain a legend
noting that it is subject to the security interest created by this Agreement.
To
the extent that any Collateral consists of electronic chattel paper, upon the
Agent’s written request, the Debtor shall cause the underlying chattel paper to
be “marked” within the meaning of Section 9-105 of the UCC (or successor section
thereto).
(cc) If
there is any investment property or deposit account included as Collateral
that
can be perfected by “control” through an account control agreement, upon the
Agent’s reasonable request, the Debtor shall cause such an account control
agreement, in form and substance in each case satisfactory to the Agent, to
be
entered into and delivered to the Agent for the benefit of the Secured Parties;
provided that the parties agree that Debtor shall not be required to deliver
an
account control agreement with respect to any deposit account with an average
daily closing balance of less than $10,000.
(dd) To
the extent that any Collateral consists of letter-of-credit rights, the Debtor
shall cause the issuer of each underlying letter of credit to consent to an
assignment of the proceeds thereof to the Secured Parties.
(ee) To
the extent that any Collateral is in the possession of any third party, the
Debtor shall join with the Agent in notifying such third party of the Secured
Parties’ security interest in such Collateral and shall use its best efforts to
obtain an acknowledgement and agreement from such third party with respect
to
the Collateral, in form and substance reasonably satisfactory to the
Agent.
(ff) If
Debtor shall at any time hold or acquire a commercial tort claim, 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
Agent.
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(gg) Debtor
shall immediately provide written notice to the Secured Parties of any and
all
accounts which arise out of contracts with any governmental authority and,
to
the extent necessary to perfect or continue the perfected status of the Security
Interests in such accounts and proceeds thereof, shall execute and deliver
to
the Agent an assignment of claims for such accounts and cooperate with the
Agent
in taking any other steps required, in its judgment, under the Federal
Assignment of Claims Act or any similar federal, state or local statute or
rule
to perfect or continue the perfected status of the Security Interests in such
accounts and proceeds thereof.
(hh) Debtor
shall vote the Pledged Securities to comply with the covenants and agreements
set forth herein and in the Debentures.
(ii) Debtor
shall register the pledge of the applicable Pledged Securities on the books
of
Debtor. Debtor shall register the pledge of the Pledged Securities in the name
of the Secured Parties on its books. Further, except with respect to
certificated securities delivered to the Agent, the Debtor shall deliver to
Agent an acknowledgement of pledge (which, where appropriate, shall comply
with
the requirements of the relevant UCC with respect to perfection by registration)
signed by the issuer of the applicable Pledged Securities, which acknowledgement
shall confirm that: (a) it has registered the pledge on its books and records;
and (b) at any time directed by Agent during the continuation of an Event of
Default, such issuer will transfer the record ownership of such Pledged
Securities into the name of any designee of Agent, will take such steps as
may
be necessary to effect the transfer, and will comply with all other instructions
of Agent regarding such Pledged Securities without the further consent of the
Debtor.
(jj) In
the event that, upon an occurrence of an Event of Default, Agent shall sell
all
or any of the Pledged Securities to another party or parties (herein called
the
“Transferee”)
or shall purchase or retain all or any of the Pledged Securities, Debtor shall,
to the extent applicable: (i) deliver to Agent or the Transferee, as the case
may be, the articles of incorporation, bylaws, minute books, stock certificate
books, corporate seals, deeds, leases, indentures, agreements, evidences of
indebtedness, books of account, financial records and all other Organizational
Documents and records of the Debtor and its direct and indirect subsidiaries;
(ii) use its best efforts to obtain resignations of the persons then serving
as
officers and directors of the Debtor and its direct and indirect subsidiaries,
if so requested; and (iii) use its best efforts to obtain any approvals that
are
required by any governmental or regulatory body in order to permit the sale
of
the Pledged Securities to the Transferee or the purchase or retention of the
Pledged Securities by Agent and allow the Transferee or Agent to continue the
business of the Debtor and its direct and indirect subsidiaries.
(kk) Without
limiting the generality of the other obligations of the Debtor hereunder, Debtor
shall promptly (i) cause to be registered at the United States Copyright Office
all of its material copyrights, (ii) cause the security interest contemplated
hereby with respect to all Intellectual Property registered at the United States
Copyright Office or United States Patent and Trademark Office to be duly
recorded at the applicable office, and (iii) give the Agent notice whenever
it
acquires (whether absolutely or by license) or creates any additional material
Intellectual Property.
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(ll) Debtor
will from time to time, at its expense, promptly execute and deliver all such
further instruments and documents, and take all such further action as may
be
necessary or desirable, or as the Agent may reasonably request, in order to
perfect and protect any security interest granted or purported to be granted
hereby or to enable the Secured Parties to exercise and enforce their rights
and
remedies hereunder and with respect to any Collateral or to otherwise carry
out
the purposes of this Agreement; provided that the parties agree that Debtor
shall not be required to deliver an account control agreement with respect
to
any deposit account with an average daily closing balance of less than
$10,000.
(mm) Schedule
F
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
F
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 and all material copyrights of the Debtor
have been duly recorded at the United States Copyright Office.
(nn) Except
as set forth on Schedule
G
attached hereto, none of the account debtors or other persons or entities
obligated on any of the Collateral is a governmental authority covered by the
Federal Assignment of Claims Act or any similar federal, state or local statute
or rule in respect of such Collateral.
5. Effect
of Pledge on Certain Rights. If
any of the Collateral subject to this Agreement consists of nonvoting equity
or
ownership interests (regardless of class, designation, preference or rights)
that may be converted into voting equity or ownership interests upon the
occurrence of certain events (including, without limitation, upon the transfer
of all or any of the other stock or assets of the issuer), it is agreed that
the
pledge of such equity or ownership interests pursuant to this Agreement or
the
enforcement of any of Agent’s rights hereunder shall not be deemed to be the
type of event which would trigger such conversion rights notwithstanding any
provisions in the Organizational Documents or agreements to which Debtor is
subject or to which Debtor is party.
6. Defaults.
The following events shall be “Events
of Default”:
(a) The
occurrence of an Event of Default (as defined in the Debentures) under the
Debentures;
(b) Any
representation or warranty of any Debtor in this Agreement shall prove to have
been incorrect in any material respect when made;
(c) The
failure by Debtor to observe or perform any of its obligations hereunder for
five (5) 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.
(a) Upon
the occurrence of any Event of Default and at any time thereafter, Debtor shall,
upon receipt of any revenue, income,
dividend, interest
or other sums subject to the Security Interests, whether payable pursuant to
the
Debentures or otherwise, or of any check, draft, note, trade acceptance or
other
instrument evidencing an obligation to pay any such sum, hold the same in trust
for the Secured Parties and shall forthwith endorse and transfer any such sums
or instruments, or both, to the Secured Parties, pro-rata in proportion to
their
respective then-currently outstanding principal amount of Debentures for
application to the satisfaction of the Obligations (and if any Debenture is
not
outstanding, pro-rata in proportion to the initial purchases of the remaining
Debentures).
(b) If
Debtor shall become entitled to receive or shall receive any securities or
other
property (including, without limitation, shares of Pledged Securities or
instruments representing Pledged Securities acquired after the date hereof,
or
any options, warrants, rights or other similar property or certificates
representing a dividend, or any distribution in connection with any
recapitalization, reclassification or increase or reduction of capital, or
issued in connection with any reorganization of such Debtor or any of its direct
or indirect subsidiaries) in respect of the Pledged Securities (whether as
an
addition to, in substitution of, or in exchange for, such Pledged Securities
or
otherwise), Debtor agrees to (i) accept the same as the agent of the Secured
Parties; (ii) hold the same in trust on behalf of and for the benefit of the
Secured Parties; and (iii) to deliver any and all certificates or instruments
evidencing the same to Agent on or before the close of business on the fifth
business day following the receipt thereof by Debtor, in the exact form received
together with the Necessary Endorsements, to be held by Agent subject to the
terms of this Agreement as Collateral.
8. Rights
and Remedies Upon Default.
(a) Upon
the occurrence of any Event of Default and at any time thereafter, the Secured
Parties, acting through the Agent, shall have the right to exercise all of
the
remedies conferred hereunder and under the Debentures, and the Secured Parties
shall have all the rights and remedies of a secured party under the UCC. Without
limitation, the Agent, for the benefit of the Secured Parties, shall have the
following rights and powers:
(i) The
Agent shall have the right to take possession of the Collateral and, for that
purpose, enter, with the aid and assistance of any person, any premises where
the Collateral, or any part thereof, is or may be placed and remove the same,
and 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
respective premises and facilities for the purpose of the Agent taking
possession of, removing or putting the Collateral in saleable or disposable
form.
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(ii) Upon
notice to the Debtor by Agent, all rights of Debtor to exercise the voting
and
other consensual rights which it would otherwise be entitled to exercise and
all
rights of Debtor to receive the dividends and interest which it would otherwise
be authorized to receive and retain, shall cease. Upon such notice, Agent shall
have the right to receive, for the benefit of the Secured Parties, any interest,
cash dividends or other payments on the Collateral and, at the option of Agent,
to exercise in such Agent’s discretion all voting rights pertaining thereto.
Without limiting the generality of the foregoing, Agent shall have the right
(but not the obligation) to exercise all rights with respect to the Collateral
as it were the sole and absolute owner thereof, including, without limitation,
to vote and/or to exchange, at its sole discretion, any or all of the Collateral
in connection with a merger, reorganization, consolidation, recapitalization
or
other readjustment concerning or involving the Collateral or Debtor or any
of
its direct or indirect subsidiaries.
(iii) The
Agent shall have the right to operate the business of Debtor using the
Collateral and shall have the right to assign, sell, lease or otherwise dispose
of and deliver all or any part of the Collateral, at public or private sale
or
otherwise, either with or without special conditions or stipulations, for cash
or on credit or for future delivery, in such parcel or parcels and at such
time
or times and at such place or places, and upon such terms and conditions as
the
Agent may deem commercially reasonable, all without (except as shall be required
by applicable statute and cannot be waived) advertisement or demand upon or
notice to Debtor or right of redemption of a Debtor, which are hereby expressly
waived. Upon each such sale, lease, assignment or other transfer of Collateral,
the Agent, for the benefit of the Secured Parties, may, unless prohibited by
applicable law which cannot be waived, purchase all or any part of the
Collateral being sold, free from and discharged of all trusts, claims, right
of
redemption and equities of Debtor, which are hereby waived and
released.
(iv) The
Agent shall have the right (but not the obligation) to notify any account
debtors and any obligors under instruments or accounts to make payments directly
to the Agent, on behalf of the Secured Parties, and to enforce the Debtor’s
rights against such account debtors and obligors.
(v) The
Agent, for the benefit of the Secured Parties, may (but is not obligated to)
direct any financial intermediary or any other person or entity holding any
investment property to transfer the same to the Agent, on behalf of the Secured
Parties, or its designee.
14
(vi) 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 Secured Parties or any
designee or any purchaser of any Collateral.
(b) The
Agent shall comply with any applicable law in connection with a disposition
of
Collateral and such compliance will not be considered adversely to affect the
commercial reasonableness of any sale of the Collateral. The Agent may sell
the
Collateral without giving any warranties and may specifically disclaim such
warranties. If the Agent sells any of the Collateral on credit, the 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, 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 following
an Event of Default, any Intellectual Property now owned or hereafter acquired
by Debtor, and wherever the same may be located, and including in such license
access to all media in which any of the licensed items may be recorded or stored
and to all computer software and programs used for the compilation or printout
thereof.
9. Applications
of Proceeds.
The proceeds of any such sale, lease or other disposition of the Collateral
hereunder or from payments made on account of any insurance policy insuring
any
portion of the Collateral shall be applied first, to the expenses of retaking,
holding, storing, processing and preparing for sale, selling, and the like
(including, without limitation, any taxes, fees and other costs incurred in
connection therewith) of the Collateral, to the reasonable attorneys’ fees and
expenses incurred by the Agent in enforcing the Secured Parties’ rights
hereunder and in connection with collecting, storing and disposing of the
Collateral, and then to satisfaction of the Obligations pro rata among the
Secured Parties (based on then-outstanding principal amounts of Debentures
at
the time of any such determination), and to the payment of any other amounts
required by applicable law, after which the Secured Parties shall pay to the
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 18% per annum
or
the lesser amount permitted by applicable law (the “Default Rate”), and the
reasonable fees of any attorneys employed by the Secured Parties to collect
such
deficiency. To the extent permitted by applicable law, Debtor waives all claims,
damages and demands against the Secured Parties arising out of the repossession,
removal, retention or sale of the Collateral, unless due solely to the gross
negligence or willful misconduct of the Secured Parties as determined by a
final
judgment (not subject to further appeal) of a court of competent
jurisdiction.
15
10. Securities
Law Provision.
Debtor recognizes that Agent may be limited in its ability to effect a sale
to
the public of all or part of the Pledged Securities by reason of certain
prohibitions in the Securities Act of 1933, as amended, or other federal or
state securities laws (collectively, the “Securities
Laws”),
and may be compelled to resort to one or more sales to a restricted group of
purchasers who may be required to agree to acquire the Pledged Securities for
their own account, for investment and not with a view to the distribution or
resale thereof. Debtor agrees that sales so made may be at prices and on terms
less favorable than if the Pledged Securities were sold to the public, and
that
Agent has no obligation to delay the sale of any Pledged Securities for the
period of time necessary to register the Pledged Securities for sale to the
public under the Securities Laws. Debtor shall cooperate with Agent in its
attempt to satisfy any requirements under the Securities Laws (including,
without limitation, registration thereunder if requested by Agent) applicable
to
the sale of the Pledged Securities by Agent.
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
any expenses of any searches reasonably required by the Agent. The Debtor shall
also pay all other claims and charges which in the reasonable opinion of the
Agent is reasonably likely to prejudice, imperil or otherwise affect the
Collateral or the Security Interests therein. The Debtor will also, upon demand,
pay to the Agent the amount of any and all reasonable expenses, including the
reasonable fees and expenses of its counsel and of any experts and agents,
which
the Agent, for the benefit of the Secured Parties, may incur in connection
with
(i) the enforcement of this Agreement, (ii) the custody or preservation of,
or
the sale of, collection from, or other realization upon, any of the Collateral,
or (iii) the exercise or enforcement of any of the rights of the Secured Parties
under the Debentures. Unless paid within ten (10) days after written notice
from
the Agent to the Debtor, any fees payable hereunder shall be added to the
principal amount of the Debentures and shall bear interest at the Default
Rate.
12. Responsibility
for Collateral.
The 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
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.
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13. Security
Interests Absolute.
All rights of 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 Debentures or any agreement entered
into in connection with the foregoing, or any portion hereof or thereof; (b)
any
change in the time, manner or place of payment or performance of, or in any
other term of, all or any of the Obligations, or any other amendment or waiver
of or any consent to any departure from the Debentures or any other agreement
entered into in connection with the foregoing; (c) any exchange, release or
nonperfection of any of the Collateral, or any release or amendment or waiver
of
or consent to departure from any other collateral for, or any guarantee, or
any
other security, for all or any of the Obligations; (d) any action by the Secured
Parties to obtain, adjust, settle and cancel in its sole discretion any
insurance claims or matters made or arising in connection with the Collateral;
or (e) any other circumstance which might otherwise constitute any legal or
equitable defense available to Debtor, or a discharge of all or any part of
the
Security Interests granted hereby. Until the Obligations shall have been paid
and performed in full, the rights of the Secured Parties shall continue even
if
the Obligations are barred for any reason, including, without limitation, the
running of the statute of limitations or bankruptcy. Debtor expressly waives
presentment, protest, notice of protest, demand, notice of nonpayment and demand
for performance. In the event that at any time any transfer of any Collateral
or
any payment received by the Secured Parties hereunder shall be deemed by final
order of a court of competent jurisdiction to have been a voidable preference
or
fraudulent conveyance under the bankruptcy or insolvency laws of the United
States, or shall be deemed to be otherwise due to any party other than the
Secured Parties, then, in any such event, 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 Secured Parties
to
proceed against any other person or entity
or to
apply any Collateral which the Secured Parties may hold at any time, or to
marshal assets, or to pursue any other remedy. Debtor waives any defense arising
by reason of the application of the statute of limitations to any obligation
secured hereby.
14. Term
of Agreement.
This Agreement and the Security Interests shall terminate on the date on which
all payments under the Debentures have been indefeasibly paid in full and all
other Obligations have been paid or discharged; provided, however, that all
indemnities of the 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.
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
Debtor’s true and lawful attorney-in-fact, with power, in the name of the Agent
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; (ii) to sign and endorse any financing statement pursuant to the UCC
or
any invoice, freight or express xxxx, xxxx of lading, storage or warehouse
receipts, drafts against debtors, assignments, verifications and notices in
connection with accounts, and other documents relating to the Collateral; (iii)
to pay or discharge taxes, liens, security interests or other encumbrances
at
any time levied or placed on or threatened against the Collateral; (iv) to
demand, collect, receipt for, compromise, settle and xxx for monies due in
respect of the Collateral; (v) to transfer any Intellectual Property or provide
licenses respecting any Intellectual Property; and (vi) generally, at the option
of the Agent, and at the expense of the 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 necessary to protect, preserve and realize
upon the Collateral and the Security Interests granted therein in order to
effect the intent of this Agreement and the Debentures all as fully and
effectually as the 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.
Without
limiting the generality of the foregoing, after the occurrence and during the
continuance of an Event of Default, each Secured Party is specifically
authorized to execute and file any applications for or instruments of transfer
and assignment of any patents, trademarks, copyrights or other Intellectual
Property with the United States Patent and Trademark Office and the United
States Copyright Office.
17
(b) On
a continuing basis, Debtor will make, execute, acknowledge, deliver, file and
record, as the case may be, with the proper filing and recording agencies in
any
jurisdiction, including, without limitation, the jurisdictions indicated on
Schedule
C
attached hereto, all such instruments, and take all such action as may
reasonably be requested by the Agent, to perfect the Security Interests granted
hereunder and otherwise to carry out the intent and purposes of this Agreement,
or for assuring and confirming to the Agent the grant or perfection of a
perfected security interest in all the Collateral under the UCC; provided that
the parties agree that Debtor shall not be required to deliver an account
control agreement with respect to any deposit account with an average daily
closing balance of less than $10,000.
(c) Debtor
hereby irrevocably appoints the Agent as Debtor’s attorney-in-fact, with full
authority in the place and instead of Debtor and in the name of Debtor, from
time to time in the Agent’s discretion, to take any action and to execute any
instrument which the Agent may deem necessary or advisable to perfect a security
interest granted under 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, which financing statements may (but need not) describe the
Collateral as “all assets” or “all personal property” or words of like import,
and ratifies all such actions taken by the Agent; provided that the parties
agree that Agent shall not exercise its power of attorney granted under this
paragraph for purposes of causing an account control agreement to be delivered
with respect to any deposit account of Debtor with an average daily closing
balance of less than $10,000. This power of attorney is coupled with an interest
and shall be irrevocable for the term of this Agreement and thereafter as long
as any of the Obligations shall be outstanding.
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16. Notices.
All notices, requests, demands and other communications hereunder shall be
subject to the notice provision of the Purchase Agreement (as such term is
defined in the Debentures).
17. Other
Security.
To the extent that the Obligations are now or hereafter secured by property
other than the Collateral or by the guarantee, endorsement or property of any
other person, firm, corporation or other entity, then the Agent shall have
the
right, in its sole discretion, to pursue, relinquish, subordinate, modify or
take any other action with respect thereto, without in any way modifying or
affecting any of the Secured Parties’ rights and remedies
hereunder.
18. Appointment
of Agent. The
Secured Parties hereby appoint Bristol Investment Fund, Ltd. to act as their
agent (“Bristol Investment” 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 Bristol Investment may not be removed as
Agent unless Bristol Investment shall then hold less than $50,000 in principal
amount of Debentures;
provided,
further,
that such removal may occur only if each of the other Secured Parties shall
then
hold not less than an aggregate of $50,000 in principal amount of Debentures.
The
Agent
shall have the rights, responsibilities and immunities set forth in Annex
A
hereto.
Notwithstanding anything herein to the contrary, as long as any obligations
remain outstanding to the Holders of the April 2007 Debentures, the Agent
irrevocably assigns its rights and duties under this Agreement to the Agent
under the April 2007 Security Agreement.
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 Debentures shall operate as
a
waiver thereof; nor shall any single or partial exercise of any right, power
or
privilege hereunder or thereunder preclude any other or further exercise thereof
or the exercise of any other right, power or privilege.
(b) All
of the rights and remedies of the Secured Parties with respect to the
Collateral, whether established hereby or by the Debentures or by any other
agreements, instruments or documents or by law shall be cumulative and may
be
exercised singly or concurrently.
(c) This
Agreement,
together with the exhibits and schedules hereto, contain the entire
understanding of the parties with respect to the subject matter hereof and
supersede all prior agreements and understandings, oral or written, with respect
to such matters, which the parties acknowledge have been merged into this
Agreement and the exhibits and schedules hereto.
No
provision of this Agreement may be waived, modified, supplemented or amended
except in a written instrument signed, in the case of an amendment, by the
Debtor and the Secured Parties holding 67% in principal amount of the then
outstanding Debentures or, in the case of a waiver, by the party against whom
enforcement of any such waived provision is sought.
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(d) If
any
term, provision, covenant or restriction of this Agreement is held by a court
of
competent jurisdiction to be invalid, illegal, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions set forth herein
shall remain in full force and effect and shall in no way be affected, impaired
or invalidated, and the parties hereto shall use their commercially reasonable
efforts to find and employ an alternative means to achieve the same or
substantially the same result as that contemplated by such term, provision,
covenant or restriction. It is hereby stipulated and declared to be the
intention of the parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of such that may
be
hereafter declared invalid, illegal, void or unenforceable.
(e) No
waiver
of any default with respect to any provision, condition or requirement of this
Agreement shall be deemed to be a continuing waiver in the future or a waiver
of
any subsequent default or a waiver of any other provision, condition or
requirement hereof, nor shall any delay or omission of any party to exercise
any
right hereunder in any manner impair the exercise of any such
right.
(f) This
Agreement shall be binding upon and inure to the benefit of the parties and
their successors and permitted assigns. The Debtor may not assign this Agreement
or any rights or obligations hereunder without the prior written consent of
each
Secured Party (other than by merger). Any Secured Party may assign any or all
of
its rights under this Agreement to any Person to whom such Secured Party assigns
or transfers any Debentures, provided such transferee agrees in writing to
be
bound, with respect to the transferred Securities, by the provisions of this
Agreement that apply to the “Secured Parties.”
(g) Each
party shall take such further action and execute and deliver such further
documents as may be necessary or appropriate in order to carry out the
provisions and purposes of this Agreement.
(h) All
questions concerning the construction, validity, enforcement and interpretation
of this Agreement shall be governed by and construed and enforced in accordance
with the internal laws of the State of New York, without regard to the
principles of conflicts of law thereof. Debtor agrees that all proceedings
concerning the interpretations, enforcement and defense of the transactions
contemplated by this Agreement and the Debentures (whether brought against
a
party hereto or its respective affiliates, directors, officers, shareholders,
partners, members, employees or agents) shall be commenced exclusively in the
state and federal courts sitting in the City of New York, Borough of Manhattan.
Each Debtor hereby irrevocably submits to the exclusive jurisdiction of the
state and federal courts sitting in the City of New York, Borough of Manhattan
for the adjudication of any dispute hereunder or in connection herewith or
with
any transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any proceeding, any claim that it is not
personally subject to the jurisdiction of any such court, that such proceeding
is improper. Each party hereto hereby irrevocably waives personal service of
process and consents to process being served in any such proceeding by mailing
a
copy thereof via registered or certified mail or overnight delivery (with
evidence of delivery) to such party at the address in effect for notices to
it
under this Agreement and agrees that such service shall constitute good and
sufficient service of process and notice thereof. Nothing contained herein
shall
be deemed to limit in any way any right to serve process in any manner permitted
by law. Each party hereto hereby irrevocably waives, to the fullest extent
permitted by applicable law, any and all right to trial by jury in any legal
proceeding arising out of or relating to this Agreement or the transactions
contemplated hereby. 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.
20
(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 (and any other persons with other titles that have similar
functions) (collectively, “Indemnitees”)
from and against any and all losses, claims, liabilities, damages, penalties,
suits, costs and expenses, of any kind or nature, (including fees relating
to
the cost of investigating and defending any of the foregoing) imposed on,
incurred by or asserted against such Indemnitee in any way related to or arising
from or alleged to arise from this Agreement or the Collateral, except any
such
losses, claims, liabilities, damages, penalties, suits, costs and expenses
which
result from the gross negligence or willful misconduct of the Indemnitee as
determined by a final, nonappealable decision of a court of competent
jurisdiction. This indemnification provision is in addition to, and not in
limitation of, any other indemnification provision in the Debentures, the
Purchase Agreement (as such term is defined in the Debentures) or any other
agreement, instrument or other document executed or delivered in connection
herewith or therewith.
(k) Nothing
in this Agreement shall be construed to subject Agent or any Secured Party
to
liability as a partner in Debtor or any if its direct or indirect subsidiaries
that is a partnership or as a member in Debtor or any of its direct or indirect
subsidiaries that is a limited liability company, nor shall Agent or any Secured
Party be deemed to have assumed any obligations under any partnership agreement
or limited liability company agreement, as applicable, of any Debtor or any
if
its direct or indirect subsidiaries or otherwise, unless and until any such
Secured Party exercises its right to be substituted for Debtor as a partner
or
member, as applicable, pursuant hereto.
(l) To
the extent that the grant of the security interest in the Collateral and the
enforcement of the terms hereof require the consent, approval or action of
any
partner or member, as applicable, of Debtor or any direct or indirect subsidiary
of Debtor or compliance with any provisions of any of the Organizational
Documents, the Debtor hereby grants such consent and approval and waive any
such
noncompliance with the terms of said documents.
21
IN
WITNESS WHEREOF, the parties hereto have caused this Security
Agreement to be duly executed on the day and year first above
written.
|
QPC
LASERS, INC.
|
|
By:
_________________________________________
Name:
Title:
|
[SIGNATURE
PAGE OF HOLDERS FOLLOWS]
Name
of Investing Entity:_______________________________________________
Signature
of Authorized Signatory of Investing entity:_________________________
Name
of Authorized Signatory:___________________________________________
Title
of Authorized
Signatory:____________________________________________
[Holder’s
Signature Page to Security Agreement]
2
ANNEX
A
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
Bristol
Investment Fund, Ltd.
(“Bristol
Investment”
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 Debentures) 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 Debtor and its subsidiaries, and of the value of the
Collateral from time to time, and the Agent shall have no duty or
responsibility, either initially or on a continuing basis, to provide any
Secured Party with any credit, market or other information with respect thereto,
whether coming into its possession before any Obligations are incurred or at
any
time or times thereafter. The Agent shall not be responsible to the 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 Debentures or any of the other Transaction
Documents.
4. Certain
Rights of the Agent.
The Agent shall have the right to take any action with respect to the
Collateral, on behalf of all of the Secured Parties. To the extent practical,
the Agent shall request instructions from the Secured Parties with respect
to
any material act or action (including failure to act) in connection with the
Agreement or any other Transaction Document, and shall be entitled to act or
refrain from acting in accordance with the instructions of Secured Parties
holding a majority in principal amount of Debentures (based on then-outstanding
principal amounts of Debentures 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. Anything to the contrary notwithstanding, the Agent shall have no obligation
whatsoever to any Secured Party to assure that the Collateral exists or is
owned
by the Debtor or is cared for, protected or insured or that the liens granted
pursuant to the Agreement have been properly or sufficiently or lawfully
created, perfected, or enforced or are entitled to any particular
priority.
6. Indemnification.
To the extent that the Agent is not reimbursed and indemnified by the Debtor,
the Secured Parties will jointly and severally reimburse and indemnify the
Agent, in proportion to their initially purchased respective principal amounts
of Debentures, from and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind or nature whatsoever which may be imposed on, incurred by or
asserted against the Agent in performing its duties hereunder or under the
Agreement or any other Transaction Document, or in any way relating to or
arising out of the Agreement or any other Transaction Document except for those
determined by a final judgment (not subject to further appeal) of a court of
competent jurisdiction to have resulted solely from the Agent's own gross
negligence or willful misconduct. Prior to taking any action hereunder as Agent,
the Agent may require each Secured Party to deposit with it sufficient sums
as
it determines in good faith is necessary to protect the Agent for costs and
expenses associated with taking such action.
7. Resignation
by the Agent.
(a) The
Agent may resign from the performance of all its functions and duties under
the
Agreement and the other Transaction Documents at any time by giving 30 days'
prior written notice (as provided in the Agreement) to the 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.
8. Rights
with respect to Collateral.
Each Secured Party agrees with all other Secured Parties and the Agent (i)
that
it shall not, and shall not attempt to, exercise any rights with respect to
its
security interest in the Collateral, whether pursuant to any other agreement
or
otherwise (other than pursuant to this Agreement), or take or institute any
action against the Agent or any of the other Secured Parties in respect of
the
Collateral or its rights hereunder (other than any such action arising from
the
breach of this Agreement) and (ii) that such Secured Party has no other rights
with respect to the Collateral other than as set forth in this Agreement and
the
other Transaction Documents. Upon the acceptance of any appointment as Agent
hereunder by a successor Agent, such successor Agent shall thereupon succeed
to
and become vested with all the rights, powers, privileges and duties of the
retiring Agent and the retiring Agent shall be discharged from its duties and
obligations under the Agreement. After any retiring Agent’s resignation or
removal hereunder as Agent, the provisions of the Agreement including this
Annex
A shall inure to its benefit as to any actions taken or omitted to be taken
by
it while it was Agent.
