EXHIBIT 10.17
SECURITY AGREEMENT
This SECURITY AGREEMENT (this "Agreement") is made effective as of
December 18, 2001 ("Effective Date") by and between Sonicport, Inc., a Nevada
corporation (the "Borrower"), and those individuals listed on Exhibit A attached
hereto and incorporated herein (collectively "Lenders" or individually a
"Lender").
Lenders previously collectively loaned to Borrower the sum of One
Million Seven Hundred Seventy-five Thousand Dollars ($1,775,000) pursuant to
those six (6) certain Convertible Promissory Notes listed on Exhibit B attached
hereto and incorporated herein (collectively the "Notes" or individually a
"Note"). Pursuant to the terms of the Notes and the transactions by which the
Notes were issued by Borrower to Lenders, the Notes were to have been secured by
a lien upon and security interest in all of the assets of Borrower pursuant to
Security Agreements that were to have been executed and delivered by Borrower to
each Lender at the time of issuance by Borrower of each Note to a Lender.
However, said Security Agreements were inadvertently never delivered by Borrower
to the Lenders, and Borrower is, as of the Effective Date, now in payment of
certain payments due to Lenders under the Notes, which default constitutes and
"Event of Default" as defined in the Notes. In order to (a) satisfy Borrower's
obligation to Lenders to execute and deliver to each Lender a Security Agreement
granting to each Lender a lien upon and security interest in all of Borrower's
assets to secure Borrower's obligations to Lenders under the Notes, and (b)
induce Lenders to enter into that certain Forbearance Agreement of even date
herewith (the "Forbearance Agreement") and forbear from accelerating all sums
due to Lenders under the Notes and pursue other remedies available to Lenders
under the Notes as a result of the occurrence of an Event of Default, and (c)
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, Borrower has agreed to execute and deliver to Lenders
this Security Agreement and to pledge and grant to Lenders hereby a security
interest in and lien upon the Collateral (as hereinafter defined) as security
for the Secured Obligations (as hereinafter defined) due to Lenders under the
Notes, and Lenders have agreed to accept the security interests created by this
Agreement. Accordingly, Borrower and Lenders hereby agree as follows:
Section 1. DEFINITIONS AND INTERPRETATION.
1.01 CERTAIN DEFINED TERMS. Unless otherwise defined, all capitalized
terms used in this Agreement that are defined in the Notes (including those
terms incorporated by reference) shall have the respective meanings assigned to
them in the Notes. In addition, the following terms shall have the following
meanings under this Agreement:
"ACCOUNTS" shall have the meaning assigned to that term in Section
2.01(b).
"BASIC DOCUMENT" shall mean any of the Notes and any other document or
instrument evidencing an obligation of Borrower in connection with such Notes.
"COPYRIGHT COLLATERAL" shall mean all Copyrights, whether now owned or
hereafter acquired by Borrower, including each Copyright identified in Annex 2.
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"COPYRIGHTS" shall mean, collectively, (a) all copyrights, copyright
registrations and applications for copyright registrations, (b) all renewals and
extensions of all copyrights, copyright registrations and applications for
copyright registration and (c) all rights, now existing or hereafter coming into
existence, (i) to all income, royalties, damages and other payments (including
in respect of all past, present or future infringements) now or hereafter due or
payable under or with respect to any of the foregoing, (ii) to ▇▇▇ for all past,
present and future infringements with respect to any of the foregoing and (iii)
otherwise accruing under or pertaining to any of the foregoing throughout the
world.
"DOCUMENTS" shall have the meaning assigned to that term in Section
2.01(f).
"DOMAIN REGISTRATION" shall mean any registration of a second level
domain or third level domain in the case of certain foreign domains under the
Domain Name System for symbolic addresses as established for usage on the
Internet, whether under United States registry or the registry of any other
jurisdiction.
"EQUIPMENT" shall have the meaning assigned to that term in Section
2.01(e).
"EVENT OF DEFAULT" shall mean the occurrence of any uncured default or
failure by Borrower to perform under any Basic Document, any breach of warranty
given by Borrower hereunder, following 3 days written notice from Lenders'
Agent, any uncured failure on the part of Borrower to perform any obligation
under this Security Agreement and/or any uncured failure on the part of Borrower
to perform any Secured Obligation.
"GOVERNMENTAL APPROVAL" shall mean an approval by a Governmental
Person, documented as is required by law, or to the extent the form of
documentation is not dictated by law, as documented in accordance with
prevailing industry practices.
"GOVERNMENTAL PERSON" shall mean any local, state, or national
government or officer or agency thereof.
"INSTRUMENTS" shall have the meaning assigned to that term in Section
2.01(c).
"INTELLECTUAL PROPERTY" shall mean all Copyright Collateral, all Patent
Collateral and all Trademark Collateral, together with (a) all inventions,
processes, production methods, proprietary information, know-how and trade
secrets; (b) all licenses or user or other agreements granted to Borrower with
respect to any of the foregoing, in each case whether now or hereafter owned or
used, including the licenses or other agreements with respect to the Copyright
Collateral, the Patent Collateral or the Trademark Collateral listed in Annex 5;
(c) all information, customer lists, identification of suppliers, data, plans,
blueprints, specifications, designs, drawings, recorded knowledge, surveys,
engineering reports, test reports, manuals, materials standards, processing
standards, performance standards, catalogs, computer and automatic machinery
software and programs; (d) all field repair data, sales data and other
information relating to sales or service of products now or hereafter
manufactured; (e) all accounting information and all media in which or on which
any information or knowledge or data or records may be recorded or stored and
all computer programs used for the compilation or printout of such information,
knowledge, records or data; (f) all Governmental Approvals now held or hereafter
obtained by any Borrower in respect of any of the foregoing; and (g) all causes
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of action, claims and warranties now owned or hereafter acquired by Borrower in
respect of any of the foregoing. It is understood that Intellectual Property
shall include all of the foregoing owned or acquired by Borrower on a worldwide
basis.
"INVENTORY" shall have the meaning assigned to that term in Section
2.01(d).
"ISSUERS" shall mean, collectively, each Subsidiary, directly or
indirectly, of the Company that is the issuer (as defined in the Uniform
Commercial Code) of any shares of capital stock now owned or hereafter acquired
by Borrower, including the respective corporations identified in Annex 1 under
the caption "ISSUER."
"LENDERS' AGENT" shall mean ▇▇▇▇▇ ▇▇▇▇▇▇▇ when acting for and on behalf
of Lenders collectively.
"PATENT COLLATERAL" shall mean all patents, whether now owned or
hereafter acquired by Borrower, including without limitation each Patent
identified in Annex 3.
"PATENTS" shall mean, collectively, (a) all patents and patent
applications, including without limitation provisional applications,
non-provisional applications and PCT applications, (b) all reissues, divisions,
continuations, renewals, extensions and continuations-in-part of all patents or
patent applications and (c) all rights, now existing or hereafter coming into
existence, (i) to all income, royalties, damages, and other payments (including
in respect of all past, present and future infringements) now or hereafter due
or payable under or with respect to any of the foregoing, (ii) to ▇▇▇ for all
past, present and future infringements with respect to any of the foregoing and
(iii) otherwise accruing under or pertaining to any of the foregoing throughout
the world, including all inventions and improvements described or discussed in
all such patents and patent applications.
"PLEDGED STOCK" shall have the meaning assigned to that term in Section
2.01(a).
"SECURED OBLIGATIONS" shall mean any and all obligations of Borrower
under this Agreement and for the performance of its agreements, covenants and
undertakings under or in respect of any, some or all of the Notes and any other
agreements executed by Borrower in connection with any and all such Notes.
"STOCK COLLATERAL" shall have the meaning assigned to that term in
Section 2.01(a).
"TRADEMARK COLLATERAL" shall mean all Trademarks, whether now owned or
hereafter acquired by Borrower, including each Trademark identified in Annex 4.
Notwithstanding the foregoing, the Trademark Collateral shall not include any
Trademark that would be rendered invalid, abandoned, void or unenforceable by
reason of its being included as part of the Trademark Collateral.
"TRADEMARKS" shall mean, collectively, (a) all trade names, trademarks
and service marks, logos, trademark and service ▇▇▇▇ registrations and
applications for trademark and service ▇▇▇▇ registrations, (b) all renewals and
extensions of any of the foregoing and (c) all rights, now existing or hereafter
coming into existence, (i) to all income, royalties, damages and other payments
(including in respect of all past, present and future infringements) now or
hereafter due
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or payable under or with respect to any of the foregoing, (ii) to ▇▇▇ for all
past, present and future infringements with respect to any of the foregoing and
(iii) otherwise accruing under or pertaining to any of the foregoing throughout
the world, together, in each case, with the product lines and goodwill of the
business connected with the use of, or otherwise symbolized by, each such trade
name, trademark and service ▇▇▇▇.
"UNIFORM COMMERCIAL CODE" shall mean the Uniform Commercial Code as in
affect in the State of California from time to time or, by reason of mandatory
application, any other applicable jurisdiction.
1.02 INTERPRETATION. In this Agreement, unless otherwise indicated, the
singular includes the plural and plural the singular; words importing either
gender include the other gender; references to statutes or regulations are to be
construed as including all statutory or regulatory provisions consolidating,
amending or replacing the statute or regulation referred to; references to
"writing" include printing, typing, lithography and other means of reproducing
words in a tangible visible form; the words "including," "includes" and
"include" shall be deemed to be followed by the words "without limitation";
references to articles, sections (or subdivisions of sections), exhibits,
annexes or schedules are to this Agreement; references to agreements and other
contractual instruments shall be deemed to include all subsequent amendments,
extensions and other modifications to such instruments (without, however,
limiting any prohibition on any such amendments, extensions and other
modifications by the terms of any Basic Document); and references to persons
include their respective permitted successors and assigns and, in the case of
Governmental Persons, Persons succeeding to their respective functions and
capacities.
Section 2. COLLATERAL.
2.01 GRANT. As collateral security for the prompt payment in full when
due (whether at stated maturity, by acceleration or otherwise) and performance
of the Secured Obligations, Borrower hereby pledges and grants to Lenders a
security interest in all of Borrower's right, title and interest in and to the
following property, whether now owned or hereafter acquired by Borrower and
whether now existing or hereafter coming into existence (collectively, the
"COLLATERAL"):
(a) With respect to any shares of stock held by Borrower,
(i) all of the shares of capital stock of the Issuers
represented by the respective certificates identified in Annex 1 under the name
of such Borrower or held of record for the benefit of Borrower and all other
shares of capital stock of whatever class of the Issuers, now owned or hereafter
acquired by Borrower, together with in each case the certificates representing
the same (collectively, the "PLEDGED STOCK");
(ii) all shares, securities, moneys or property representing a
dividend on, or a distribution or return of capital in respect of any of the
Pledged Stock, resulting from a split-up, revision, reclassification or other
like change of any of the Pledged Stock or otherwise received in exchange for
any of the Pledged Stock and all equity rights issued to the holders of, or
otherwise in respect of, any of the Pledged Stock; and
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(iii) without affecting the obligations of Borrower under any
provision prohibiting such action under any Basic Document, in the event of any
consolidation or merger in which any Issuer is not the surviving corporation,
all shares of each class of the capital stock of the successor corporation
(unless such successor corporation is the Borrower itself) formed by or
resulting from such consolidation or merger (collectively, and together with the
property described in clauses (i) and (ii) above, the "STOCK COLLATERAL");
(b) all accounts and general intangibles (each as defined in the
Uniform Commercial Code) of Borrower constituting a right to the payment of
money, whether or not earned by performance, including all moneys due and to
become due to Borrower in repayment of any loans or advances, in payment for
goods (including Inventory and Equipment) sold or leased or for services
rendered, in payment of tax refunds and in payment of any guarantee of any of
the foregoing (collectively, the "ACCOUNTS");
(c) all instruments, chattel paper or letters of credit (each as
defined in the Uniform Commercial Code) of Borrower evidencing, representing,
arising from or existing in respect of, relating to, securing or otherwise
supporting the payment of, any of the Accounts (collectively, the
"INSTRUMENTS");
(d) all inventory (as defined in the Uniform Commercial Code) and all
other goods of Borrower that are held by Borrower for sale, lease or furnishing
under a contract of service (including to its Subsidiaries or Affiliates), that
are so leased or furnished or that constitute raw materials, work in process or
material used or consumed in its business, including all spare parts and related
supplies, all goods obtained by Borrower in exchange for any such goods, all
products made or processed from any such goods and all substances, if any,
commingled with or added to any such goods (collectively, the "INVENTORY");
(e) all equipment (as defined in the Uniform Commercial Code) and all
other goods of Borrower that are used or bought for use primarily in its
business, including all spare parts and related supplies, all goods obtained by
Borrower in exchange for any such goods, all substances, if any, commingled with
or added to much goods and all upgrades and other improvements to such goods, in
each case to the extent not constituting Inventory (collectively, the
"Equipment");
(f) all documents of title (as defined in the Uniform Commercial Code)
or other receipts of Borrower covering, evidencing or representing Inventory or
Equipment (collectively, the "DOCUMENTS");
(g) all contracts and other agreement of Borrower relating to the sale
or other disposition of all or any part of the Inventory, Equipment or Documents
and all rights, warranties, claims and benefits of Borrower against any Person
arising out of, relating to or in connection with all or any part of the
Inventory, Equipment or Documents of Borrower, including any such rights,
warranties, claims or benefits against any Person storing or transporting any
such Inventory or Equipment or issuing any such Documents;
(h) all other accounts or general intangibles of Borrower not
constituting Accounts, including, to the extent related to all or any part of
the other collateral, all books, correspondence, credit files, records,
invoices, tapes, cards, computer runs and other papers and
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documents in the possession or under the control of Borrower or any computer
bureau or service company from time to time acting for Borrower;
(i) all other tangible and intangible property of Borrower, including
all Intellectual Property; and
(j) all proceeds and products in whatever form of all or any part of
the other Collateral, including all proceeds of insurance and all condemnation
awards and all other compensation for any Loss or destruction with respect to
all or any part of the other Collateral (together with all rights to recover and
proceed with respect to the same), and all accessories to, substitutions, for
and replacements of all or any part of the other Collateral.
2.02 INTELLECTUAL PROPERTY. For the purpose of enabling the Lenders to
exercise their rights, remedies, powers and privileges under Section 6 at such
time or times as the Lenders shall be lawfully entitled to exercise such rights,
remedies, powers and privileges, and for no other purpose, Borrower hereby
grants to Lenders, to the extent assignable, an irrevocable, nonexclusive
license (exercisable without payment of royalty or other compensation to
Borrower) to use, assign, license or sublicense any of the Intellectual Property
of Borrower, together with reasonable access to all media in which any of the
licensed items may be recorded or stored and to all computer programs used for
the compilation or printout of such items.
2.03 PERFECTION. Concurrently with the execution and delivery of this
Agreement, as may be necessary and to the extent reasonably requested by
Lenders, Borrower shall (i) file such financing statements and other documents
in such offices to perfect and establish the priority of the Liens granted by
this Agreement, (ii) deliver and pledge to the Lenders' Agent any and all
Instruments, endorsed or accompanied by such instruments of assignment and
transfer in such form and substance as the Lender may request, (iii) deliver to
Lenders' Agent all certificates identified in Annex 1, accompanied by undated
stock powers duly executed in blank and (iv) take all such other actions as
shall be necessary or as Lenders' Agent may request, to perfect and establish
the priority of the Liens granted by this Agreement.
2.04 PRESERVATION AND PROTECTION OF SECURITY INTERESTS. Upon Lenders'
Agent's request, Borrower shall:
(a) upon the acquisition by Borrower of any Stock Collateral after the
Effective Date promptly either (x) transfer and deliver to Lenders' Agent all
such Stock Collateral (together with the certificates representing such Stock
Collateral securities duly endorsed in blank or accompanied by undated stock
powers duly executed in blank) or (y) take such other action as Lenders shall
deem necessary or appropriate to perfect, and establish the priority of, the
Liens granted by this Agreement in such Stock Collateral;
(b) upon the acquisition by Borrower of any Instrument after the
Effective Date promptly deliver and pledge to Lenders' Agent all such
Instruments, endorsed or accompanied by such instruments of assignment and
transfer in such form and substance as Lenders may request:
(c) upon the acquisition after the Effective Date by Borrower of any
Equipment covered by a certificate of title or ownership, promptly cause
Lenders' Agent to be listed as the
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lienholder on such certificate of title and within 120 days of the acquisition
of such Equipment deliver evidence of the same to Lenders' Agent;
(d) upon Borrower's acquiring, or otherwise becoming entitled to the
benefits of, any Copyright (or copyrightable material), Patent (or patentable
invention), Trademark (or associated goodwill) or other Intellectual Property or
upon or prior to Borrower's filing, either directly or through any agent,
licensee or other designee, of any application with any Governmental Person for
any Copyright, Patent, Trademark, or other Intellectual Property, in each case
after the Effective Date, execute and deliver such contracts, agreements and
other instruments as Lenders may request to evidence, validate, perfect and
establish the priority of the Liens granted by this Agreement in such and any
related Intellectual Property and, if requested by Lenders' Agent, amend Annexes
2, 3 or 4 (as the case may be) to reflect the inclusion of any such Intellectual
Property as part of the Collateral (it being understood that the failure to
amend any such Annex shall not affect the Liens granted by this Agreement on any
such Intellectual Property); and
(e) give, execute, deliver, file or reword any and all financing
statements, notices, contracts, agreements or other instruments, obtain any and
all Governmental Approvals and take any and all steps that may be necessary or
as Lenders' Agent may request to create, perfect, establish the priority of, or
to preserve the validity, perfection or priority (subject only to such permitted
Liens) of, the Liens granted by this Agreement or to enable Lenders to exercise
and enforce Lenders' rights, remedies, powers and privileges under this
Agreement with respect to such Liens, including causing any or all of the Stock
Collateral to be transferred of record into the name of Lenders' Agent or its
nominee, PROVIDED that notices to account debtors in respect of any Accounts or
Instruments shall be subject to the provisions of Section 3.02.
2.05 ATTORNEY-IN-FACT. Upon the occurrence of an Event of Default:
(a) Subject to the rights of Borrower under Sections 2.06, 2.07, 2.08
and 2.09, Lenders are each hereby appointed the attorney-in-fact of Borrower for
the purpose of carrying out the provisions of this Agreement and taking any
action and executing any instruments which Lenders may deem necessary or
advisable to accomplish the purposes of this Agreement, to preserve the
validity, perfection and priority or the Liens granted by this Agreement and to
exercise its rights, remedies, powers and privileges under this Agreement. This
appointment as attorney-in-fact is irrevocable and coupled with an interest.
Without limiting the generality of the foregoing, Lenders shall be entitled
under this Agreement upon the occurrence and continuation of any Event of
Default to (i) ask, demand, collect, ▇▇▇ for, recover, receive and give receipt
and discharge for amounts due and to become due under and in respect of all or
any part of the Collateral; (ii) receive, endorse and collect any Instruments or
other drafts, instruments, documents and chattel paper in connection with clause
(i) above (including any draft or check representing the proceeds of insurance
or the return of unearned premiums); (iii) file any claims or take any action or
proceeding that Lenders' Agent may deem necessary or advisable for the
collection of all or any part of the Collateral, including the collection of any
compensation due and to become due under any contract or agreement with respect
to all or any part of the Collateral; and (iv) execute, in connection with any
sale or disposition of the Collateral under Section 6, any endorsements,
assignments, bills of sale or other instruments of conveyance or transfer with
respect to all or any part of the Collateral.
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(b) Without limiting the rights and powers of Lenders under Section
2.05(a), if Lenders are unable for any reason to secure Borrower's signature for
the purpose of executing and filing all such contracts, agreements and other
documents as are contemplated by Section 2.04(d), Borrower hereby appoints each
Lender as its attorney-in-fact, effective the Effective Date and terminating
upon the termination of this Agreement, for the purpose of executing and filing
all such contracts, agreements and other documents as are contemplated by
Section 2.04(e). This appointment as attorney-in-fact is irrevocable and coupled
with an interest.
2.06 SPECIAL PROVISIONS RELATING TO STOCK COLLATERAL.
(a) So long as no Event of Default shall have occurred and be
continuing, Borrower shall have the right to exercise all voting, consensual and
other powers of ownership pertaining to the Stock Collateral for all purposes
not inconsistent with the terms of any Basic Document, PROVIDED that Borrower
agrees that it will not vote the Stock Collateral in any manner that is
inconsistent with the terms of any Basic Document; and Lenders' Agent shall, at
Borrower's expense, execute and deliver to Borrower or cause to be executed and
delivered to Borrower all such proxies, powers of attorney, dividend and other
orders and other instruments, without recourse, as Borrower may reasonably
request for the purpose of enabling Borrower to exercise its rights and powers
which it is entitled to exercise pursuant to this Section 2.06(a).
(b) So long as no Event of Default shall have occurred and be
continuing, Borrower shall be entitled to receive and retain any dividends on
the Stock Collateral paid in cash out of earned surplus.
(c) If any Event of Default shall have occurred and be continuing, and
whether or not Lenders exercise any available right to declare any Secured
Obligation due and payable or seek or pursues any other right, remedy, power or
privilege available to them under applicable law, this Agreement or any other
Basic Document, all dividends and other distributions on the Stock Collateral
shall be paid directly to Lenders' Agent and retained in a segregated account as
part of the Stock Collateral, subject to the terms of this Agreement, and, if
Lenders' Agent shall so request, Borrower agrees to execute and deliver to
Lenders and Lenders' Agent appropriate additional dividend, distribution and
other orders and instruments to that end, PROVIDED that if such Event of Default
is cured, any such dividend or distribution paid to Lenders prior to such cure
shall, upon request of Borrower (except to the extent applied to the Secured
Obligations), be returned by Lenders to Borrower.
2.07 USE OF INTELLECTUAL PROPERTY. Subject to such action not otherwise
constituting a Default and so long as no Event of Default shall have occurred
and be continuing, Borrower will be permitted to exploit, use, enjoy, protect,
license, sublicense, assign, sell, dispose of or take other actions with respect
to the Intellectual Property in the ordinary course of the business of Borrower.
In furtherance of the foregoing, so long as no Event of Default shall have
occurred and he continuing, Lenders shall from time to time, upon the request
of, and at the expense of, Borrower, execute and deliver any instruments,
certificates or other documents, in the form so requested, which Borrower shall
have certified are appropriate (in its judgment) to allow it to take any action
permitted above (including relinquishment of the license provided pursuant to
Section 2.02 as to any specific Intellectual Property). The exercise of rights,
remedies, powers and privileges under Section 5 by Lenders shall not terminate
the rights of the holders of any
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licenses or sublicenses theretofore granted by Borrower in accordance with the
first sentence of this Section 2.07.
2.08 INSTRUMENTS. So long as no Event of Default shall have occurred
and be continuing, Borrower may retain for collection in the ordinary course of
business any Instruments obtained by it in the ordinary course of business, and
Lenders shall, promptly upon the request of, and at the expense of, Borrower,
make appropriate arrangements for making any Instruments pledged by Borrower
available to Borrower for purposes of presentation, collection or renewal. Any
such arrangement shall be effected, to the extent deemed appropriate by Lenders,
against a trust receipt or like document.
2.09 USE OF COLLATERAL. So long as no Event of Default shall have
occurred and be continuing, Borrower shall, in addition to its rights
contemplated under Sections 2.06, 2.07 and 2.08 in respect of the Collateral, be
entitled to use and possess the other Collateral and to exercise its rights,
title and interest in all contracts, agreements, licenses and Governmental
Approvals, subject to the rights, remedies, powers and privileges of Lenders and
Lenders' Agent under Sections 3 and 6 and to such use, possession or exercise
not otherwise constituting a Default.
2.10 RIGHTS AND OBLIGATIONS.
(a) Borrower shall remain liable to perform its duties and obligations
under the contracts and agreements included in the Collateral in accordance with
their respective terms to the same extent as if this Agreement had not been
executed and delivered. The exercise by Lenders of any right, remedy, power or
privilege in respect of this Agreement shall not release Borrower from any of
its duties and obligations under such contracts and agreements. Neither Lenders
nor Lenders' Agent shall have any duty, obligation or liability under such
contracts and agreements or in respect to any Governmental Approval included in
the Collateral by reason of this Agreement or any other Basic Document, nor
shall Lenders or Lenders' Agent be obligated to perform any of the duties or
obligations of Borrower under any such contract or agreement or any such
Governmental Approval or to take any action to collect or enforce any claim (for
payment) under any such contract or agreement or Governmental Approval.
(b) No Lien granted by this Agreement in Borrower's right, title and
interest in any contract, agreement or Governmental Approval shall be deemed to
be a consent by Lenders to any such contract, agreement or Governmental
Approval.
(c) No reference in this Agreement to proceeds or to the sale or other
disposition of Collateral shall authorize Borrower to sell or otherwise dispose
of any Collateral except to the extent otherwise expressly permitted by the
terms of any Basic Document.
(d) Neither Lenders nor Lenders' Agent shall be required to take steps
necessary to preserve any rights against prior parties to any part of the
Collateral.
2.11 TERMINATION. When all Secured Obligations shall have been
satisfied in full and the commitments shall have expired or been terminated,
this Agreement shall terminate, Lenders and Lenders' Agent shall forthwith cause
to be assigned, transferred and delivered, against receipt but without any
recourse, warranty or representation whatsoever, any remaining
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Collateral and money received in prospect of the Collateral, to or on the order
of Borrower and to be released, canceled and granted back all license and rights
referred to in Section 2.02. Lenders and Lenders' Agent shall also execute and
deliver to Borrower upon such termination such Uniform Commercial Code
termination statements and such other documentation as shall be reasonably
requested by Borrower to effect the termination and release of the Liens granted
by this Agreement on the Collateral.
Section 3. REPRESENTATIONS AND WARRANTIES.
As of the Effective Date, Borrower represents and warrants to Lenders
as follows:
3.01 TITLE. Borrower is the sole beneficial owner of the Collateral in
which it purports to ▇▇▇▇▇ ▇ ▇▇▇▇ pursuant to this Agreement, and such
Collateral is free and clear of all Liens (and, with respect to the Stock
Collateral, of any equity rights in favor of any other Person). Upon their
filing or transfer of possession to Lenders or Lenders' Agent, the Liens granted
by this Agreement in favor of the Lenders will attach and constitute a perfected
security interest in all of such Collateral (other than Intellectual Property
registered or otherwise located outside of the United States of America) prior
to all other Liens.
3.02 PLEDGED STOCK.
(a) The Pledged Stock evidenced by the certificates identified in Annex
1 is duly authorized, validly existing, fully paid and nonassessable, and none
of such Pledged Stock is subject to any contractual restriction, or any
restriction under the charter or by-laws of the respective Issuer of such
Pledged Stock, upon the transfer of such Pledged Stock.
(b) The Pledged Stock evidenced by the certificates identified in Annex
1 constitutes all of the issued and outstanding shares of capital stock of any
class of the Issuers beneficially owned by Borrower on the Effective Date
(whether or not registered in the name of Borrower), and Annex 1 correctly
identifies, as at the Effective Date, the respective Issuers of such Pledged
Stock, the respective class and par value of the shares comprising such Pledged
Stock and the respective number of (and registered owners of) the shares
evidenced by each such certificate.
3.03 INTELLECTUAL PROPERTY.
(a) Annex 2 attached hereto and incorporated herein set forth
completely and correctly all Copyrights, Patents and Trademarks owned by
Borrower on the Effective Date; except pursuant to licenses and other user
agreements entered into by Borrower in the ordinary course of business and
listed in Annex 3, Borrower owns and possesses the right to use, and has done
nothing to authorize or enable any other Person to use, any Copyright, Patent or
Trademark listed in Annex 2; all registrations listed in Annex 2 are valid and
in full force and effect; and, except as may be set forth in Annex 3, Borrower
owns and possesses the right to use all Copyrights, Patents and Trademarks
listed in Annex 2.
(b) Annex 3 sets forth completely and correctly all licensee and other
user agreements included in the Intellectual Property on the Effective Date;
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(c) To Borrower's knowledge, (i) except as set forth in Annex 3, there
is no violation by others of any right of Borrower with respect to any
Copyright, Patent or Trademark listed in Annex 2 and (ii) Borrower is not
infringing in any respect upon any Copyright, Patent or Trademark of any other
Person; and no proceedings have been instituted are pending against Borrower or,
to Borrower's knowledge, have been threatened against, and no claim has been
received by, Borrower, alleging any such violation, except as may be set forth
in Annex 3.
(d) Borrower does not own any Trademarks registered in the United
States of America to which the last sentence of the definition of Trademark
Collateral applies.
Section 4. COVENANTS.
4.01 BOOKS AND RECORDS. Borrower shall:
(a) keep full and accurate books and records relating to the Collateral
and stamp or otherwise ▇▇▇▇ such books and records in such manner as Lenders may
reasonably require in order to reflect the Liens granted by this Agreement;
(b) furnish to Lenders' Agent from time to time (but, unless a Default
shall have occurred and be continuing, no more frequently than quarterly),
statements and schedules further identifying and describing the Copyright
Collateral, the Patent Collateral and the Trademark Collateral and such other
reports in connection with the Copyright Collateral, the Patent Collateral and
the Trademark Collateral, as Lenders may reasonably request, all in reasonable
detail;
(c) prior to filing, either directly or through an agent, licensee or
other designee, any application for any Copyright, Patent or Trademark, furnish
to Lenders' Agent prompt notice of such proposed filing; and
(d) permit representatives of Lenders, upon reasonable notice, at any
time during normal business hours to inspect and make abstracts from its books
and records pertaining to the Collateral, permit representatives of Lenders to
be present at Borrower's place of business to receive copies of all
communications and remittances relating to the Collateral and forward copies of
any notices or communications received by Borrower with respect to the
Collateral, all in such manner as the Lenders may request.
4.02 REMOVALS, ETC. Without at least 30 days' prior written notice to
Lenders' Agent, Borrower shall not (i) maintain any of its books and records
with respect to the Collateral at any office or maintain its principal place of
business at any place, or permit any Inventory or Equipment to be located
anywhere, other than at the address initially indicated for notices to it under
Section 6, or (ii) change its corporate name, or the name under which it does
business, from the name shown on the signature pages to this Agreement.
4.03 SALES AND OTHER LIENS. Without the prior written consent of
Lenders, Borrower shall not dispose of any Collateral, create, incur, assume or
suffer to exist any Lien upon any Collateral or file or suffer to be on file or
authorize to be filed, in any jurisdiction, any financing statement or like
instrument with respect to all or any part of the Collateral in which Lenders
are not named as the secured parties for Lenders' benefit alone.
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4.04 STOCK COLLATERAL. Borrower will cause the Stock Collateral to
constitute at all times 100% of the total number of shares of each class of
capital stock of each Issuer then outstanding. Borrower shall cause all such
shares to be duly authorized, validly issued, fully paid and nonassessable and
to be free of any contractual restriction or any restriction under the charter
or bylaws of the respective Issuer of such Stock Collateral, upon the transfer
of such Stock Collateral.
4.05 INTELLECTUAL PROPERTY.
(a) Borrower (either itself or through licensees) will, for each
Trademark, (i) to the extent consistent with past practice and good business
judgment, continue to use such Trademark on each and every trademark class of
goods applicable to its current line as reflected in its current catalogs,
brochures and price lists in order to maintain such Trademark in full force and
effect free from any claim of abandonment for nonuse, (ii) maintain as in the
past the quality of products and services offered under such Trademark, (iii)
employ such Trademark with the appropriate notice of registration and (iv) not
(and not permit any licensee or sublicensee to) do any act or knowingly omit to
do any act whereby any Trademark material to the conduct of its business may
become invalidated.
(b) Borrower (either itself or through licensees) will not do any act
or knowingly omit to do any act whereby any Patent material to the conduct of
its business may become abandoned or dedicated.
(c) Borrower shall notify Lenders' Agent immediately if it knows or has
reason to know that any Intellectual Property material to the conduct of its
business may become abandoned or dedicated, or of any adverse determination or
development (including the institution of, or any such determination or
development in, any proceeding before any Governmental Person) regarding
Borrower's ownership of any Intellectual Property material to its business, its
right to copyright, patent or register the same (as the case may be), or its
right to keep, use and maintain the same.
(d) Borrower will take all necessary steps that are consistent with
good business practices in any proceeding before any appropriate Governmental
Person to maintain and pursue each application relating to any Intellectual
Property (and to obtain the relevant registrations) and to maintain each
registration material to the conduct of its business, including payment of
maintenance fees, filing of applications for renewal, affidavits of use,
affidavits of incontestability and opposition, interference and cancellation
proceedings.
(e) In the event that any Intellectual Property material to the conduct
of its business is infringed, misappropriated or diluted by a third party,
Borrower shall notify Lenders' Agent within (10) days after it learns of such
event and shall, if consistent with good business practice, promptly ▇▇▇ for
infringement, misappropriation or dilution; seek temporary restraints and
preliminary injunctive relief to the extent practicable; seek to recover any and
all damages for such infringement, misappropriation or dilution; and take such
other notions as are appropriate under the circumstances to protect such
Collateral.
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(f) Borrower shall, through counsel acceptable to Lenders, prosecute
diligently any application for any Intellectual Property pending as of the date
of this Agreement or thereafter made until the termination of this Agreement;
make application on uncopyrighted but copyrightable material, unpatented but
patentable inventions and unregistered but registerable Trademarks, and preserve
and maintain all rights in applications for any Intellectual Property; PROVIDED,
HOWEVER, that Borrower shall have no obligation to make any such application if
making such application would be unnecessary or imprudent in the good faith
business judgment of Borrower. Any expenses incurred in connection with such an
application shall be borne by Borrower. Borrower shall not abandon any right to
file a application for any Intellectual Property or any such pending application
in the United States without the consent of Lenders, which consent shall not be
unreasonably withheld.
(g) Lenders shall have the right, but shall in no way be obligated, to
bring suit in Lenders own name(s) or the name(s) of its designee(s) to enforce
the Copyrights, Patents and Trademarks and any license under such Intellectual
Property, in which event Borrower shall, at the request of Lenders, do any and
all lawful acts and execute and deliver any and all proper documents required by
Lenders in aid of such enforcement action.
4.06 FURTHER ASSURANCES. Borrower agrees that, from time to time upon
the written request of Lenders' Agent, Borrower will execute and deliver such
further documents and do such other acts and things as Lenders may reasonably
request in order to fully effect the purposes of this Agreement.
Section 5. REMEDIES.
5.01 EVENTS OF DEFAULT, ETC. If any Event of Default shall have
occurred and be continuing:
(a) Lenders in their discretion may require Borrower to, and Borrower
shall, assemble the Collateral owned by it at such place or places, reasonably
convenient to both the Lenders and Borrower, and designated in Lenders' request;
(b) Lenders in their discretion may make any reasonable compromise or
settlement it deems desirable with respect to any of the Collateral and may
extend the time of payment, arrange for payment in installments, or otherwise
modify the terms of, all or any part of the Collateral;
(c) Lenders in their discretion may, in their name(s) or in the name of
Borrower or otherwise, demand, ▇▇▇ for, collect or receive any money or property
at any time payable or receivable on account of or in exchange for all or any
part of the Collateral, but shall be under no obligation to do so;
(d) Lenders in their discretion may, upon ten (10) business days' prior
written notice to Borrower of the time and place, with respect to all or any
part of the Collateral which shall then be or shall thereafter come into the
possession, custody or control of Lenders or any of their agents, pursuant to
any right hereunder, sell, lease or otherwise dispose of all or any part of such
Collateral, at such place or places as Lenders reasonably deem best, for cash,
for credit or for future delivery (without thereby assuming any credit risk) and
at public or private sale, without
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demand of performance or notice of intention to effect any such disposition or
of time or place of any such sale (except such notice as is required above or by
applicable statute and cannot be waived), and Lenders or any other Person may be
the purchaser, lessee or recipient of any or all of the Collateral so disposed
of at any public sale (or, to the extent permitted by law, at any private sale)
and thereafter hold the same absolutely, free from any claim or right of
whatsoever kind, including any right or equity of redemption (statutory or
otherwise), of Borrower, any such demand, notice and right or equity being
hereby expressly waived and released. In the event of any sale, license or other
disposition of any of the Trademark Collateral, the goodwill connected with and
symbolized by the Trademark Collateral subject to such disposition shall be
included, and Borrower shall supply to Lenders or their designee, for inclusion
in such sale, assignment or other disposition, all Intellectual property
relating to such Trademark Collateral. Lenders or their designee(s) may, without
notice or publication, adjourn any public or private sale or cause the same to
be adjourned from time to time by announcement at the time and place fixed for
the sale, and such sale may be made at any time or place to which the sale may
be so adjourned; and
(e) Lenders shall have, and in their discretion may exercise, all of
the rights, remedies, powers and privileges with respect to the Collateral of a
secured party under the Uniform Commercial Code (whether or not the Uniform
Commercial Code is in effect in the jurisdiction where such rights, remedies,
powers and privilege are asserted) and such additional rights, remedies, powers
and privilege to which a secured party is entitled under the laws in effect in
any jurisdiction where any rights, remedies, powers and privileges in respect of
this Agreement or the Collateral may be asserted, including the right, to the
maximum extent permitted by law, to exercise all voting, consensual and other
powers of ownership pertaining to the Collateral as if Lenders or their agents
were the sole and absolute owner or the Collateral (and Borrower agrees to take
all such action as may be appropriate to give effect to such right).
The proceeds of, and other realization upon, the Collateral by virtue of the
exercise of remedies under this Section 5.01 and of the exercise of the license
granted to Lenders in Section 2.02 shall be applied in accordance with Section
5.04.
5.02 DEFICIENCY. If the proceeds of, or other realization upon, the
Collateral by virtue of the exercise of remedies under Section 5.01 and of the
exercise of the license granted by Lenders in Section 2.02 are insufficient to
cover the costs and expenses of such exercise and the payment in full of the
other Secured Obligations, Borrower shall remain liable for any deficiency.
5.03 PRIVATE SALE.
(a) Lenders shall incur no liability as a result of the sale, lease or
other disposition of all or any part of the Collateral at any private sale
pursuant to Section 5.01 conducted in a commercially reasonable manner. Borrower
hereby waives any claims against Lenders arising by reason of the fact that the
price at which the Collateral may have been sold at such a private sale was less
than the price which might have been obtained at a public sale or was less than
the aggregate amount of the Secured Obligations, even if Lenders accept the
first offer received and does not offer the Collateral to more than one offeree.
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(b) Borrower recognizes that, by reason of certain prohibitions
contained in the Securities Act of 1933 and applicable state securities laws,
Lenders and Lenders' Agent may be compelled, with respect to any sale of all or
any part of the Collateral, to limit purchasers to those who will agree, among
other things, to acquire the Collateral for their own account, for investment
and not with a view to distribution or resale. Borrower acknowledges that any
such private sales may be at prices and on terms less favorable to Lenders than
those obtainable through a public sale without such restrictions, and,
notwithstanding such circumstances, agrees that any such private sale shall be
deemed to have been made in a commercially reasonable manner and that Lenders
and Lenders' Agent shall have no obligation to engage in public sales and no
obligation to delay the sale of any Collateral for the period of time necessary
to permit the respective issuer of such Collateral to register it for public
sale.
5.04 APPLICATION OF PROCEEDS. Except as otherwise expressly provided in
this Agreement and except as provided below in this Section 5.04, the proceeds
of, or other realization upon, all or any part of the Collateral by virtue of
the exercise of remedies under Section 5.01 or of the exercise of the license
granted in Section 2.02, and any other cash at the time held by the Lenders or
Lenders' Agent under this Section 5, shall be applied by the Lenders;
FIRST, to the payment of the costs and expenses of such exercise of
remedies, including reasonable out-of-pocket costs and expenses of the Lenders
and Lenders' Agent, the fees and expenses of its agents and counsel and all
other expenses incurred and advances made by Lenders and Lenders' Agent in that
connection;
NEXT, to the payment in full of the remaining Secured Obligations in
such manner as Lenders may determine; and
FINALLY, to the payment to Borrower, or its respective successors or
assigns, or as a court of competent jurisdiction may direct, of any surplus then
remaining.
As used in this Section 5, "PROCEEDS" of Collateral shall mean cash,
securities and other property realized in respect of, and distributions in kind
of, Collateral, including any property received under any bankruptcy,
reorganization or other similar proceeding as to Borrower or any issuer of, or
account debtor or other Borrower on, any of the Collateral.
Section 6. MISCELLANEOUS.
6.01 WAIVER. No failure on the part of Lenders or Lenders' Agent to
exercise and no delay in exercising, and no course of dealing with respect to,
any right, remedy, power or privilege under this Agreement shall operate as a
waiver of such right, remedy, power or privilege, nor shall any single or
partial exercise of any right, power or privilege under this Agreement preclude
any other or further exercise of any such right, remedy, power or privilege or
the exercise of any other right, remedy, power or privilege. The rights,
remedies, powers and privileges provided in this Agreement are cumulative and
not exclusive of any rights, remedies, powers and privileges provided by law.
6.02 NOTICES. All notices and communications to be given under this
Agreement shall be given or made in writing to the intended recipient at the
address specified below or, as to any party, at such other address as shall be
designated by such party in a notice to each other party.
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Except as otherwise provided in this Agreement, all such communications
shall be deemed to have been duly given when transmitted by telex or telecopier,
delivered to the telegraph or cable office or personally delivered or, in the
case of a mailed notice, upon receipt, in each case, given or addressed as
provided in this Section 6.02:
to Borrower: SONICPORT, INC.
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
To Lenders Agent: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Green Lawns
Copse Lane
Chilworth
Southampton
Hampshire
5016 7JY
w/ copy to: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇ & ▇▇▇▇▇▇
1900 Avenue of the Stars, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
To Lenders: To each and every Lender individually at
its respective address as it appears in
Exhibit A hereto.
w/ copy to: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
1900 Avenue of the Stars, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
6.03 EXPENSES, ETC. Borrower agrees to pay or to reimburse Lenders and
Lenders' Agent for all costs and expenses (including reasonable attorney's fees
and expenses) that may be incurred by Lenders and Lenders' Agent in any effort
to enforce any of the provisions of this Agreement or any of the obligations of
Borrower in respect of the Collateral or in connection with the preservation of
the Lien of, or the rights of Lenders and Lenders' Agent, under this Agreement
or with any actual or attempted sale, lease, disposition, exchange, collection,
compromise, settlement or other realization in respect of, or care of the
Collateral, including all such costs and expenses (and reasonable attorney's
fees and expenses) incurred in any bankruptcy, reorganization, workout or other
similar proceeding.
6.04 AMENDMENTS, ETC. Any provision of this Agreement may be modified,
supplemented or waived only by an instrument in writing duly executed by
Borrower and all of the Lenders. Any such modification, supplement or waiver
shall be for such period and subject to such conditions as shall be specified in
the instrument effecting the same and shall be binding
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upon the Lenders, each holder of any of the Secured Obligations and Borrower,
and any such waiver shall be effective only in the specific instance and for the
purposes for which given.
6.05 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of Borrower, Lenders, Lenders' Agent, and each holder of
any of the Secured Obligations and their respective successors and permitted
assigns. Borrower shall not assign or transfer its rights under this Agreement
without the prior written consent of Lenders. Any purported assignment not
complying with this paragraph shall be void.
6.06 SURVIVAL. All representations and warranties made in this
Agreement or in any certificate or other document delivered pursuant to or in
connection with this Agreement shall survive the execution and delivery of this
Agreement or such certificate or other document (as the case may be) or any
deemed repetition of any such representation or warranty.
6.07 AGREEMENTS SUPERSEDED. This Agreement supersedes all prior
agreements and understandings, written or oral, among the parties with respect
to the subject matter of this Agreement.
6.08 SEVERABILITY. Any provision of this Agreement that is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions of this Agreement, and any such
prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
6.09 CAPTIONS. The table of contents and captions and section headings
appearing in this Agreement are included solely for convenience of reference and
are not intended to affect the interpretation of any provision of this
Agreement.
6.10 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument and any of the parties to this Agreement may execute this Agreement
by signing any such counterpart.
6.11 GOVERNING LAWS SUBMISSION TO JURISDICTION. THIS AGREEMENT SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
CALIFORNIA. BORROWER HEREBY SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF ANY
CALIFORNIA STATE COURT SITTING IN LOS ANGELES, CALIFORNIA FOR THE PURPOSES OF
ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. BORROWER IRREVOCABLY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY OBJECTION WHICH IT MAY NOW OR
HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN SUCH
A COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN
BROUGHT IN AN INCONVENIENT FORUM.
6.12 WAIVER OF JURY TRIAL. BORROWER AND LENDERS HEREBY IRREVOCABLY
WAIVE, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO
TRIAL BY JURY IN ANY LEGAL PROCEEDING
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ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY
THIS AGREEMENT.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered as of the day and year first above written.
BORROWER:
SONICPORT, INC.
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
LENDERS:
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▇▇▇▇ ▇▇▇▇▇▇▇
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▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
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▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
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