ANNEX VIII
TO
SECURITIES PURCHASE AGREEMENT
SECURITY INTEREST AGREEMENT
SECURITY INTEREST AGREEMENT ("Security Interest Agreement"), dated as of
January 31, 2005, by and among the persons set forth on Schedule 1 (each a
"Secured Party" and collectively, the "Secured Parties"), CONSPIRACY
ENTERTAINMENT CORPORATION, a Utah corporation having its principal executive
offices at 000 Xxxxx Xxxxxx Xxxxxxxxx, Xxxxx Xxxxxx, XX 00000 (the "Company" or
the "Debtor"), and XXXXXXX & PRAGER, LLP, as agent for the Secured. Parties (the
"Agent").
RECITALS
A. Reference is made to (i) that certain Securities Purchase Agreement of
even date herewith (the "Securities Purchase Agreement") to which the Debtor and
the Secured Parties are parties, and (ii) the Transaction Agreements, including,
without limitation, the Debentures and the Registration Rights Agreement.
Capitalized terms not otherwise defined herein shall have the meanings ascribed
to them in the relevant Transaction Agreements.
B. Pursuant to the Transaction Agreements, the Debtor has certain
obligations to the Secured Parties (all such obligations, the "Obligations"),
including, but not limited to, obligations pursuant to the Securities Purchase
Agreement, the Debentures and the Registration Rights Agreement.
C. In order to induce the Secured Parties to execute and deliver the
Transaction Agreements and to make the advances to the Debtor contemplated
thereby, and as contemplated by the Securities Purchase Agreement and the
Debenture, the Debtor has agreed to grant to the Secured Parties a security
interest in the Collateral (as defined below) to secure the due and punctual
fulfillment of the Obligations. The Secured Parties are willing to enter into
the Securities Purchase Agreement and the other Transaction Agreements only upon
receiving the Debtor's execution of this Security Interest Agreement.
NOW, THEREFORE, in consideration of the premises, the mutual covenants and
conditions contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
Section 1. Grant of Security Interest.
(a) In order to secure the due and punctual fulfillment of the
Obligations, the Debtor hereby grants, conveys, transfers and assigns to the
Secured Parties (and to each of them based on the Lender's Allocable Share of
such Secured Party) a continuing security interest in the following described
properties, assets and rights of Debtor, wherever located, whether now owned or
hereafter acquired or arising, and all cash and non-cash proceeds and products
thereof (all of the same hereinafter collectively called the "Collateral"):
All assets of the Debtor, including, but not limited to: all personal and
fixture property of every kind and nature, including without limitation
all goods (including inventory, equipment and any accessions thereto),
instruments (including promissory notes), documents, accounts (including
accounts receivable), chattel paper (whether tangible or electronic),
deposit accounts, letter-of-credit rights (whether or not the letter of
credit is evidenced by a writing), commercial tort claims (including those
referenced in Annex V to the Securities Purchase Agreement), securities
and all other investment property, supporting obligations, any other
contract rights or rights to the payment of money, insurance claims and
proceeds, and all general intangibles (including all payment intangibles);
all Copyrights (as defined below) and any and all royalties, payments and
other amounts payable to Debtor in connection with the Copyrights,
together with all renewals and extensions of the Copyrights, the right to
recover for all past and future infringements of the Copyrights, and all
manuscripts, documents, writings, tapes, disks, storage media, computer
programs, computer databases, computer program flow diagrams, source
codes, object codes and all tangible property embodying or incorporating
the Copyrights, and all other rights of every kind whatsoever accruing
thereunder or pertaining thereto; all of Debtor's right, title and
interest in and to any and all present and future license rights or
agreements, with respect to the Copyrights or otherwise; and all present
and future accounts and other rights to payment arising from, in
connection with or relating to the Copyrights or otherwise.
"Copyrights" means any or all of the following: all present and future
United States registered copyrights and copyright registrations, including
Debtor's United States registrations and copyright registrations listed in
Exhibit C to this Security Interest Agreement, all of Debtor's present and
future United States applications for copyright registrations listed in
Exhibit D to this Security Interest Agreement, and all of Debtor's present
and future copyrights that are not registered in the United States
Copyright Office ("Copyright Office"), including without limitation
derivative works.
(b) The security interests granted pursuant to this Section 1 (the
"Security Interests") are granted as security only and shall not subject the
Secured Party to, or transfer or in any way affect or modify, any obligation or
liability of the Debtor under any of the Collateral or any transaction which
gave rise thereto.
Section 2. Filing; Further Assurances.
(a) The Debtor will, at its expense, cause to be searched the public
records with respect to the Collateral and will execute, deliver, file and
record (in such manner and form as the Secured Party may require), or permit the
Secured Party to file and record, as its attorney in fact, any financing
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statements, any carbon, photographic or other reproduction of a financing
statement or this Security Agreement (which shall be sufficient as a financing
statement hereunder), any specific assignments or other paper that may be
reasonably necessary or desirable, or that the Secured Party may request, in
order to create, preserve, perfect or validate any Security Interest or to
enable the Secured Party to exercise and enforce its rights hereunder with
respect to any of the Collateral. The Debtor hereby appoints Secured Party as
Debtor's attorney-in-fact to execute in the name and behalf of Debtor such
additional financing statements as Secured Party may request.
(b) Each Secured Party has designated an Agent as provided in Section 13
hereof. Among other things, such Agent shall be agent of the Secured Party for
execution of and identification on any financing statement or similar instrument
referring to or describing the Collateral.
(c) The Agent is authorized to execute and file any and all financing
statements desired to be filed by the Secured Parties to reflect the security
interest in the Collateral in any and all jurisdictions. For such purposes, the
Debtor irrevocably appoints the Agent (acting by Xxxxxx X. Xxxxxxx or Xxxxxx
Xxxxxxxx, or either one of them), with full power of substitution to execute and
file such financing statements naming the Debtor as debtor thereon.
Section 3. Representations and Warranties of Debtor. The Debtor hereby
represents and warrants to the Secured Party (a) that, except as set forth in
Exhibit A attached hereto, the Debtor is, or to the extent that certain of the
Collateral is to be acquired after the date hereof, will be, the owner of the
Collateral free from any adverse lien, security interest or encumbrance; (b)
that except for such financing statements as may be described on Exhibit A
attached hereto and made a part hereof, no financing statement covering the
Collateral is on file in any public office, other than the financing statements
filed pursuant to this Security Agreement; and (c) that all additional
information, representations and warranties contained in Exhibit B attached
hereto and made a part hereof are true, accurate and complete on the date
hereof.
Section 4. Covenants of Debtor. The Debtor hereby covenants and agrees
with the Secured Party that the Debtor (a) will, at the Debtor's sole cost and
expense, defend the Collateral against all claims and demands of all persons at
any time claiming any interest therein junior to the Secured Party's interest;
(b) will provide the Secured Party with prompt written notice of (i) any change
in the chief executive officer of the Debtor or the office where the Debtor
maintains its books and records pertaining to the Collateral; (ii) the movement
or location of all or a material part of the Collateral to or at any address
other than as set forth in said Exhibit B; and (iii) any facts which constitute
a Debtor Event of Default (as such term is defined below), or which, with the
giving of notice and/or the passage of time, could or would constitute a Debtor
Event of Default, pursuant to Section 7 below; (c) will promptly pay any and all
taxes, assessments and governmental charges upon the Collateral prior to the
date penalties are attached thereto, except to the extent that such taxes,
assessments and charges shall be contested in good faith by the Debtor; (d) will
immediately notify the Secured Party of any event causing a substantial loss or
diminution in the value of all or any material part of the Collateral and the
amount or an estimate of the amount of such loss or diminution; (e) will have
and maintain adequate insurance at all times with respect to the Collateral, for
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such other risks as are customary in the Debtor's industry for the respective
items included in the Collateral, such insurance to be payable to the Secured
Party and the Debtor as their respective interests may appear, and shall provide
for a minimum of ten (10) days prior written notice of cancellation to the
Secured Party, and Debtor shall furnish the Secured Party with certificates or
other evidence satisfactory to the Secured Party of compliance with the
foregoing insurance provisions; (f) will not sell or offer to sell or otherwise
assign, transfer or dispose of the Collateral or any interest therein, without
the prior written consent of the Secured Party, except in the ordinary course of
business; (g) will keep the Collateral free from any adverse lien, security
interest or encumbrance (except for encumbrances specified in Exhibit A attached
hereto) and in good order and repair, reasonable wear and tear excepted, and
will not waste or destroy the Collateral or any part thereof; and (h) will not
use the Collateral in material violation of any statute or ordinance the
violation of which could materially and adversely affect the Debtor's business.
Section 5. Records Relating To Collateral. The Debtor will keep its
records concerning the Collateral at its offices designated in the caption of
this Security Interest Agreement or at such other place or places of business of
which the Secured Party shall have been notified in writing no less than ten
(10) days prior thereto. The Debtor will hold and preserve such records and
chattel paper and will permit representatives of the Secured Party at any time
during normal business hours upon reasonable notice to examine and inspect the
Collateral and to make abstracts from such records and chattel paper, and will
furnish to the Secured Party such information and reports regarding the
Collateral as the Secured Party may from time to time reasonably request.
Section 6. General Authority. From and during the term of any Debtor Event
of Default, the Debtor hereby appoints the Secured Party the Debtor's lawful
attorney, with full power of substitution, in the name of the Debtor, for the
sole use and benefit of the Secured Party, but at the Debtor's expense, to
exercise, all or any of the following powers with respect to all or any of the
Collateral:
(a) to demand, xxx for, collect, receive and give acquittance for any and
all monies due or to become due;
(b) to receive, take, endorse, assign and deliver all checks, notes,
drafts, documents and other negotiable and non- negotiable instruments and
chattel paper taken or received by the Secured Party;
(c) to settle, compromise, prosecute or defend any action or proceeding
with respect thereto;
(d) to sell, transfer, assign or otherwise deal in or with the same or the
proceeds thereof or the related goods securing the Collateral, as fully and
effectually as if the Secured Party were the sole and absolute owner thereof;
(e) to extend the time of payment of any or all thereof and to make any
allowance and other adjustments with reference thereto; and
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(f) to discharge any taxes, liens, security interests or other
encumbrances at any time placed thereon;
provided that the Secured Party shall give the Debtor not less than ten (10)
business days prior written notice of the time and place of any sale or other
intended disposition of any of the Collateral.
The exercise by Secured Party of or failure to so exercise any authority
granted herein shall in no manner affect Debtor's liability to Secured Party,
and provided, further, that Secured Party shall be under no obligation or duty
to exercise any of the powers hereby conferred upon them and they shall be
without liability for any act or failure to act in connection with the
collection of, or the preservation of, any rights under any of the Collateral.
Section 7. Debtor Events of Default. The Debtor shall be in default under
this Security Agreement upon the occurrence of any of the following events (a
"Debtor Event of Default"):
(i) if any representation or warranty made by the Debtor in this
Security Interest Agreement, in the Securities Purchase Agreement or
in any of the other Transaction Agreements shall be false or
misleading in any material respect; or
(ii) the occurrence of an Event of Default (as defined in the Debenture)
by the Debtor.
Section 8. Remedies Upon Debtor Event of Default. If any Debtor Event of
Default shall have occurred, the Secured Party may exercise all the rights and
remedies of a Secured Party under the Uniform Commercial Code. The Secured Party
may require the Debtor to assemble all or any part of the Collateral and make it
available to the Secured Party at a place to be designated by the Secured Party
which is reasonably convenient. The Secured Party shall give the Debtor ten (10)
business days prior written notice of the Secured Party's intention to make any
public or private sale or sale at a broker's board or on a securities exchange
of the Collateral. At any such sale the Collateral may be sold in one lot as an
entirety or in separate parcels, as the Secured Party, in its sole discretion,
may determine. The Secured Party shall not be obligated to make any such sale
pursuant to any such notice. The Secured Party 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 same may be
adjourned. The Secured Party, instead of exercising the power of sale herein
conferred upon it, may proceed by a suit or suits at law or in equity to
foreclose the Security Interests and sell the Collateral, or any portion
thereof, under a judgment or decree of a court or courts of competent
jurisdiction.
Section 9. Application of Collateral and Proceeds. The proceeds of any
sale of, or other realization upon, all or any part of the Collateral shall be
applied in the following order of priorities: (a) first, to pay the reasonable
expenses of such sale or other realization, including, without limitation,
reasonable attorneys' fees, and all expenses, liabilities and advances
reasonably incurred or made by the Secured Party in connection therewith, and
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any other unreimbursed expenses for which the Secured Party is to be reimbursed
pursuant to Section 10; (b) second, to the payment of the Obligations in such
order of priority as the Secured Party, in its sole discretion, shall determine;
and (c) finally, to pay to the Debtor, or its successors or assigns, or as a
court of competent jurisdiction may direct, any surplus then remaining from such
proceeds.
Section 10. Expenses; Secured Party's Lien. The Debtor will forthwith upon
demand pay to the Secured Party: (a) the amount of any taxes which the Secured
Party may have been required to pay by reason of the Security Interests
(including, without limitation, any applicable transfer taxes) or to free any of
the Collateral from any lien thereon; and (b) the amount of any and all
reasonable out-of-pocket expenses, including, without limitation, the reasonable
fees and disbursements of its counsel, and of any agents not regularly in its
employ, which the Secured Party may incur in connection with (i) the preparation
of any amendments or modifications of this Security Agreement, (ii) the
collection, sale or other disposition of any of the Collateral; (iii) the
exercise by the Secured Party of any of the powers conferred upon it hereunder,
or (iv) any default by the Debtor hereunder.
Section 11. Termination of Security Interests; Release of Collateral. Upon
the payment and performance in full of all the Obligations, the Security
Interests shall terminate and all rights to the Collateral shall revert to the
Debtor. Upon any such termination of the Security Interests or release of
Collateral, the Secured Party will, at the Debtor's expense, to the extent
permitted by law, execute and deliver to the Debtor such documents as the Debtor
shall reasonably request to evidence the termination of the Security Interests
or the release of such Collateral, as the case may be. The Debtor further
covenants and agrees that it will not grant any other security interest or other
lien or rights in the Collateral (however denominated) as long as any of the
Obligations remains outstanding.
Section 12. Notices. All notices, demands, requests, consents, approvals,
and other communications required or permitted hereunder shall be in writing
and, unless otherwise specified herein, shall be (a) personally served, (b)
deposited in the mail, registered or certified, return receipt requested,
postage prepaid, (c) delivered by reputable air courier service with charges
prepaid, or (d) transmitted by hand delivery, telegram, or facsimile, addressed
as set forth below or to such other address as such party shall have specified
most recently by written notice given in accordance herewith. Any notice or
other communication required or permitted to be given hereunder shall be deemed
effective (i) upon hand delivery or delivery by facsimile, with accurate
confirmation generated by the transmitting facsimile machine, at the address or
number designated below (if delivered on a business day during normal business
hours where such notice is to be received), or the first business day following
such delivery (if delivered other than on a business day during normal business
hours where such notice is to be received) or (ii) on the second business day
following the date of mailing by express courier service or on the fifth
business day after deposited in the mail, in each case, fully prepaid, addressed
to such address, or upon actual receipt of such mailing, whichever shall first
occur. The addresses for such communications shall be for (i) the Debtor as
provided in the Securities Purchase Agreement for notices to the Company, (ii)
for each Secured Party as provided in the Securities Purchase Agreement for
notices to the relevant Lender and (iii) for the Agent as provided in the
Securities Purchase Agreement for notices to the Escrow Agent. Any party hereto
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may from time to time change its address or facsimile number for notices under
this Section 12 in the manner contemplated by the Securities Purchase Agreement.
Section 13. Agent.
(a) Anything in the other provisions of this Security Interest Agreement
to the contrary notwithstanding, the Secured Party may designate another entity
to act as agent (the "Agent") for the Secured Party with respect to any one or
more of the rights of Secured Party hereunder, including, but not necessarily
limited to, the right to hold the security interest and/or be named as secured
party (as agent for the Secured Party) in any filed financing statement and to
take action in the name and stead of the Secured Party hereunder. Such
designation may be made with or without power of substitution, Such designation
shall remain in effect until canceled by the Secured Party, as provided herein;
provided, however, that such cancellation shall not affect the validity of any
action theretofore taken by such agent pursuant to this Security Interest
Agreement. The Debtor acknowledges and agrees to honor such designation and
acknowledges that the Agent is acting as the agent of the Secured Party and not
as a principal.
(b) Each Secured Party hereby confirms that the Secured Party has
designated Xxxxxxx & Xxxxxx, LLP (acting by Xxxxxx X. Xxxxxxx or Xxxxxx
Xxxxxxxx, or either one of them), as its initial Agent, with full right of
substitution.
(c) If there is more than one Secured Party, the Agent shall act as agent
for all Secured Parties. Any revocation or designation of an alternate Agent
shall be done only by Secured Parties who represent a Majority in Interest of
the Holders at that time.
(d) Reference is made to the provisions of Sections 2 through 15,
inclusive of the Joint Escrow Instructions. All such provisions are incorporated
herein by reference as if set forth herein in full, except that, for such
purposes, the references therein to (i) the "Escrow Agent" shall be deemed to be
references to the "Agent" under this Security Interest Agreement, (ii) the
"Company" shall be deemed to be references to the Debtor under this Security
Interest Agreement, and (iii) each "Lender" shall be deemed to be references to
each Secured Party under this Security Interest Agreement.
Section 14. Miscellaneous.
(a) No failure on the part of the Secured Party to exercise, and no delay
in exercising, and no course of dealing with respect to, any right, power or
remedy under this Security Interest Agreement shall operate as a waiver thereof;
nor shall any single or partial exercise by the Secured Party of any right,
power or remedy under this Security Interest Agreement preclude the exercise, in
whole or in part, of any other right, power or remedy. The remedies in this
Security Interest Agreement are cumulative and are not exclusive of any other
remedies provided by law. Neither this Security Interest Agreement nor any
provision hereof may be changed, waived, discharged or terminated orally but
only by a statement in writing signed by the party against which enforcement of
the change, waiver, discharge or termination is sought.
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(b) Unless otherwise defined herein, or unless the context otherwise
requires, all terms used herein which are defined in the New York Uniform
Commercial Code have the meanings therein stated.
(c) The execution and delivery by Debtor of this Security Interest
Agreement and all documents delivered in connection herewith have been duly and
validly authorized by all necessary corporate action of Debtor and this
Agreement and all documents delivered in connection herewith have been duly and
validly executed and delivered by Debtor. The execution and delivery by Debtor
of this Security Interest Agreement and all documents delivered in connection
herewith will not result in a breach or default of or under the Certificate of
Incorporation, By-laws or any agreement, contract or indenture of Debtor. This
Security Interest Agreement and all documents delivered in connection therewith
are legal, valid and binding obligations of Debtor enforceable against Debtor in
accordance with their terms.
(e) In the event that any action is taken by Debtor or Secured Party in
connection with the this Security Interest Agreement, or any related document or
matter, the losing party in such legal action, in addition to such other damages
as he or it may be required to pay, shall pay reasonable attorneys' fees to the
prevailing party.
Section 15. Separability. If any provision hereof shall prove invalid or
unenforceable in any jurisdiction whose laws shall be deemed applicable, the
other provisions hereof shall remain in full force and effect in such
jurisdiction and shall be liberally construed in favor of the Secured Party.
Section 16. Governing Law.
(a) This Security Interest Agreement shall be governed by and construed in
accordance with the laws of the State of New York for contracts to be wholly
performed in such state and without giving effect to the principles thereof
regarding the conflict of laws. Each of the parties consents to the exclusive
jurisdiction of the federal courts whose districts encompass any part of the
County of New York or the state courts of the State of New York sitting in the
County of New York in connection with any dispute arising under this Security
Interest Agreement and hereby waives, to the maximum extent permitted by law,
any objection, including any objection based on forum non coveniens, to the
bringing of any such proceeding in such jurisdictions or to any claim that such
venue of the suit, action or proceeding is improper. To the extent determined by
such court, the Debtor shall reimburse the Secured Party for any reasonable
legal fees and disbursements incurred by the Secured Party in enforcement of or
protection of any of its rights under this Security Interest Agreement. Nothing
in this Section shall affect or limit any right to serve process in any other
manner permitted by law.
(b) The Debtor and the Secured Party acknowledge and agree that
irreparable damage would occur in the event that any of the provisions of this
Security Interest Agreement were not performed in accordance with their specific
terms or were otherwise breached. It is accordingly agreed that the parties
shall be entitled to an injunction or injunctions to prevent or cure breaches of
the provisions of this Security Interest Agreement and to enforce specifically
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the terms and provisions hereof, this being in addition to any other remedy to
which any of them may be entitled by law or equity.
Section 16. Jury Trial Waiver. The Debtor and the Secured Party hereby
waive a trial by jury in any action, proceeding or counterclaim brought by
either of the parties hereto against the other in respect of any matter arising
out of or in connection with the Debenture or this Security Interest Agreement.
Section 17. Assignment. Only in connection with the transfer of the rights
under the Transaction Agreements in accordance with their terms, a Secured Party
may assign or transfer the whole or any part of its security interest granted
hereunder, and may transfer as collateral security the whole or any part of
Secured Party's security interest in the Collateral. Any transferee of the
Collateral shall be vested with all of the rights and powers of the assigning
Secured Party hereunder with respect to the Collateral.
[Balance of page intentionally left blank]
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Section 18. Waiver. The Debtor waives any right that it may have to
require Secured Party to proceed against any other person, or proceed against or
exhaust any other security, or pursue any other remedy Secured Party may have.
IN WITNESS WHEREOF, the Parties have executed this Security Interest
Agreement as of the day, month and year first above written.
SECURED PARTIES (named in Schedule 1):
By: Xxxxxxx & Xxxxxx LLP, as their agent
By:
--------------------------------------------
DEBTOR:
CONSPIRACY ENTERTAINMENT CORPORATION
By:
--------------------------------------------
President
AGENT:
XXXXXXX & PRAGER, LLP
By:
--------------------------------------------
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SCHEDULE 1
The Secured Parties are:
Name Address
------------------------------------- -----------------------------------------
Whalehaven Capital Fund Limited 0xx Xxxxx
00 Xxx-Xx-Xxxxx Xxxx
Xxxxxxxx XX00 Xxxxxxx
------------------------------------- -----------------------------------------
Xxxxxxxxxxx Limited Partnership 000 Xxxx Xxxxxx Xxxx, Xxx 000
Xxxxxxx, Xxxxxxx X0X 0X0 Xxxxxx
------------------------------------- -----------------------------------------
Alpha Capital AG Attn: Xxxxxx Xxxxxxxx
Xxxxxxxxx 0
Xxxxxxxxxxx 0000
Xxxxx, Xxxxxxxxxxxxx
------------------------------------- -----------------------------------------
The "Lender's Allocable Share" of each Secured Party is determined as provided
in the Securities Purchase Agreement.
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EXHIBIT A
EXCEPTIONS TO REPRESENTATIONS
1. Pursuant to a Security Interest Agreement, dated as of August 31, 2004,
and Supplement No. 1 thereto, dated as of September 28, 2004, the Company
granted a security interest (the "Prior Security Interest") in the
Collateral to the Secured Parties named therein (the "Prior Secured
Parties").(1)
2. UCC-1 Financing Statements (and amendments thereto), naming the Company,
as Debtor, and Xxxxxxx & Prager LLP, as Agent for the Prior Secured
Parties, as Secured Party, reflecting the Prior Security Interest were
filed with the Secretary of States of California and Utah.
3. The Prior Security Interest has priority over the security interest
granted to the Secured Parties named in the current Security Agreement to
which this Exhibit A is attached.
-----------------
1 Xxxxxxx & Xxxxxx LLP acted as agent for such Secured Parties.
EXHIBIT B
ADDITIONAL INFORMATION RE COLLATERAL, ETC.
CONSPIRACY ENTERTAINMENT HOLDINGS, INC.
000 XXXXX XXXXXX XXXXXXXXX
XXXXX XXXXXX, XX 00000
EXHIBIT C
COPYRIGHTS
CONSPIRACY ENTERTAINMENT CORPORATION
EXHIBIT D
COPYRIGHT APPLICATIONS
NONE
