Execution Copy
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (this "Agreement"), dated as of March 7, 2006,
is made between POWERLINX, INC., a Nevada corporation ("Debtor") and SOFAER
CAPITAL INC, a British Virgin Islands corporation, as collateral agent for the
Purchasers referred to below ("Secured Party").
Debtor and Secured Party hereby agree as follows:
SECTION 1 Definitions; Interpretation.
(a) All capitalized terms used in this Agreement and not otherwise
defined herein shall have -the meanings assigned to them in the Securities
Purchase Agreement and the Debentures.
(b) As used in this Agreement, the following terms shall have the
following meanings:
"Collateral" has the meaning set forth in Section 2.
"Documents" means this Agreement, the Debentures and all other
certificates, documents, agreements and instruments delivered to Secured Party
or Purchasers under this Agreement or the Debentures, or in connection with the
Obligations, including without limitation the Copyright Security Agreement, the
Patent and Trademark Security Agreement, and any other Collateral Documents.
"Event of Default" has the meaning set forth in Section 8.
"Lien" means any mortgage, deed of trust, pledge, security interest,
assignment, deposit arrangement, charge or encumbrance, lien, or other type of
preferential arrangement.
"Obligations" means the indebtedness, liabilities and other obligations
of Debtor to Secured Party, as collateral agent, and Purchasers under or in
connection with this Agreement and the other Documents, including, without
limitation, all unpaid principal of the Debentures, all interest accrued
thereon, all fees and all other amounts payable by Debtor to Secured Party, as
collateral agent, and Purchasers thereunder or in connection therewith, whether
now existing or hereafter arising, and whether due or to become due, absolute or
contingent, liquidated or unliquidated, determined or undetermined, and
including interest that accrues after the commencement by or against Debtor of
any bankruptcy or insolvency proceeding naming such Person as the debtor in such
proceeding.
"Partnership and LLC Collateral" has the meaning set forth in Section 5.
"Permitted Lien" means (i) any Lien in favor of Secured Party or
Purchasers; (ii) any Lien existing as of the date hereof that is subordinate to
the Lien on the Collateral created by this Agreement pursuant to a subordination
agreement in form and substance satisfactory to Secured Party; (iii) any Liens
existing as of the date hereof and disclosed in writing to Secured Party; (iv)
Liens (A) upon or in any property acquired or held by Debtor or any of its
subsidiaries to secure the purchase price of such property or indebtedness
incurred solely for the purpose of financing the acquisition of such property,
or (B) existing on such property at the time of its acquisition, provided that
the Lien is confined solely to the property so acquired and improvements
thereon, and provided further that indebtedness secured by such Lien is
permitted pursuant to the Debentures; (v) Liens on assets of Persons which
become subsidiaries of Debtor after the date hereof, provided that such Liens
existed at the time the respective Persons became subsidiaries of Debtor and
were not created in anticipation thereof; and (vi) other Liens which arise in
the ordinary course of business and do not materially impair Debtor's ownership
or use of the Collateral or the value thereof.
"Person" means an individual, corporation, partnership, joint venture,
trust, unincorporated organization, governmental agency or authority, or any
other entity of whatever nature.
"Pledged Collateral" means Debtor's (i) Investment Property and (ii)
Partnership and LLC Collateral, including any ownership interests in any
subsidiaries of Debtor.
"Pledged Collateral Agreements" means any shareholders agreement,
operating agreement, partnership agreement, voting trust, proxy agreement or
other agreement or understanding with respect to any Pledged Collateral.
"Purchasers" means the several lending institutions named in Annex 1.
"UCC" means the Uniform Commercial Code as the same may, from time to
time, be in effect in the State of New York.
(a) Where applicable and except as otherwise defined herein, terms used
in this Agreement shall have the meanings assigned to them in the UCC.
(b) In this Agreement, (i) the meaning of defined terms shall be equally
applicable to both the singular and plural forms of the terms defined; and (ii)
the captions and headings are for convenience of reference only and shall not
affect the construction of this Agreement.
SECTION 2 Security Interest.
(a) As security for the payment and performance of the Obligations,
Debtor hereby grants to Secured Party as collateral agent, for itself and for
the ratable benefit of Purchasers, a security interest in all of Debtor's right,
title and interest in, to and under all of its personal property, wherever
located and whether now existing or owned or hereafter acquired or arising,
including all accounts, chattel paper, commercial tort claims, deposit accounts,
documents, equipment (including all fixtures), general intangibles, instruments,
inventory, investment property, letter-of-credit rights, money and all products,
proceeds and supporting obligations of any and all of the foregoing
(collectively, the "Collateral"). The interest of any Purchaser in the
Collateral shall be on a parity with the interests of all other Purchasers, and
the interest of each Purchaser in the Collateral shall be ratable in the
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proportion that the aggregate indebtedness then outstanding and unpaid under the
Debenture(s) held by such Purchaser bears to the aggregate indebtedness then
outstanding and unpaid under the Debentures held by all Purchasers (except to
the extent the Purchasers agree to any other ratable interest therein). Any
Purchaser holding any instruments, certificated Pledged Collateral or other
Collateral hereunder shall do so as agent for Secured Party and for the ratable
benefit of all Purchasers.
(b) Anything herein to the contrary notwithstanding, (i) Debtor shall
remain liable under any Pledged Collateral Agreements and any other contracts,
agreements and other documents included in the Collateral, to the extent set
forth therein, to perform all of its duties and obligations thereunder to the
same extent as if this Agreement had not been executed, (ii) the exercise by
Secured Party of any of the rights hereunder shall not release Debtor from any
of its duties or obligations under any Pledged Collateral Agreements or other
such contracts, agreements and other documents, and (iii) Secured Party shall
not have any obligation or liability under any Pledged Collateral Agreements or
other such contracts, agreements and other documents by reason of this
Agreement, nor shall Secured Party be obligated to perform any of the
obligations or duties of Debtor thereunder or to take any action to collect or
enforce any Pledged Collateral Agreements or other such contract, agreement or
other document.
(c) Anything herein to the contrary notwithstanding, in no event shall
the Collateral include, and Debtor shall not be deemed to have granted a
security interest in, any of Debtor's right, title or interest in any of the
outstanding voting capital stock or other ownership interests of a Controlled
Foreign Corporation (as defined below) in excess of 65% of the voting power of
all classes of capital stock or other ownership interests of such Controlled
Foreign Corporation entitled to vote; provided that (i) immediately upon the
amendment of the Internal Revenue Code to allow the pledge of a greater
percentage of the voting power of capital stock or other ownership interests in
a Controlled Foreign Corporation without adverse tax consequences, the
Collateral shall include, and Debtor shall be deemed to have granted a security
interest in, such greater percentage of capital stock or other ownership
interests of each Controlled Foreign Corporation; and (ii) if no adverse tax
consequences to Debtor shall arise or exist in connection with the pledge of any
Controlled Foreign Corporation, the Collateral shall include, and Debtor shall
be deemed to have granted a security interest in, such Controlled Foreign
Corporation. As used herein, "Controlled Foreign Corporation" shall mean a
"controlled foreign corporation" as defined in the Internal Revenue Code.
(d) Secured Party agrees that, notwithstanding the terms of any account
control agreements, while no Event of Default exists Secured Party (i) shall
refrain from exerting control over any deposit or securities accounts subject to
such account control agreements, (ii) shall defer to Debtor's control over the
assets and proceeds in such accounts, including Debtor's ability to withdraw
from, or otherwise direct the disposition of funds from, deposit accounts for
the payment of Debtor's obligations to third parties as they become due and
payable, and including Debtor's ability to withdraw from, designate investments
in, or otherwise direct activities in its securities accounts, and (iii) shall
not send a "Notice of Exclusive Control" (or similar notice pursuant to which
Secured Party purports to exert exclusive control over any deposit or securities
account of Debtor) to the applicable bank, broker or other securities
intermediary party to an account control agreement.
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(e) This Agreement shall create a continuing security interest in the Collateral
which shall remain in effect until terminated in accordance with Section 19
hereof.
SECTION 3 Financing Statements and Other Action.
(a) Debtor hereby authorizes Secured Party to file at any time and from
time to time any financing statements describing the Collateral, and Debtor
shall execute and deliver to Secured Party, and Debtor hereby authorizes Secured
Party to file (with or without Debtor's signature), at any time and from time to
time, all amendments to financing statements, assignments, continuation
financing statements, termination statements, account control agreements, and
other documents and instruments, in form reasonably satisfactory to Secured
Party, as Secured Party may reasonably request, to perfect and continue
perfected, maintain the priority of or provide notice of the security interest
of Secured Party in the Collateral and to accomplish the purposes of this
Agreement. Without limiting the generality of the foregoing, Debtor ratifies and
authorizes the filing by Secured Party of any financing statements filed prior
to the date hereof.
(b) Debtor will cooperate with Secured Party in obtaining control (as
defined in the UCC) of Collateral consisting of deposit accounts, investment
property, letter of credit rights and electronic chattel paper. In the case of
deposit accounts, Debtor shall use commercially reasonable efforts to obtain
such control agreements. Secured Party reserves the right following the
occurrence and during the continuance of an Event of Default to require Debtor
to maintain deposit accounts at a bank or other financial institution which will
execute and deliver a control agreement in form and substance satisfactory to
Secured Party.
(c) Debtor will join with Secured Party in notifying any third party who
has possession of any Collateral of Secured Party's security interest therein
and obtaining an acknowledgment from the third party that it is holding the
Collateral for the benefit of Secured Party.
(d) Upon request of Secured Party, Debtor (i) shall cause certificates
to be issued in respect of any uncertificated Pledged Collateral, (ii) shall
exchange certificated Pledged Collateral for certificates of larger or smaller
denominations, and (iii) shall cause any securities intermediaries to show on
their books that Secured Party is the entitlement holder with respect to any
Pledged Collateral.
(e) Debtor will not create any chattel paper without placing a legend on
the chattel paper acceptable to Secured Party indicating that Secured Party has
a security interest in the chattel paper.
SECTION 4 Representations and Warranties. Debtor represents and warrants
to Secured Party and each Purchaser that:
(a) Debtor is duly organized, validly existing and in good standing
under the law of the jurisdiction of its organization and has all requisite
power and authority to execute, deliver and perform its obligations under the
Documents.
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(b) The execution, delivery and performance by Debtor of the Documents
have been duly authorized by all necessary action of Debtor, and the Documents
constitute the legal, valid and binding obligations of Debtor, enforceable
against Debtor in accordance with its terms.
(c) No authorization, consent, approval, license, exemption of, or
filing or registration with, any governmental authority or agency, or approval
or consent of any other Person, is required for the due execution, delivery or
performance by Debtor of the Documents, except for any filings necessary to
perfect any Liens on any Collateral.
(d) Debtor's chief executive office and principal place of business (as
of the date of this Agreement) is located at the address set forth in Schedule
1; Debtor's jurisdiction of organization is set forth in Schedule 1; Debtor's
exact legal name is as set forth in the first paragraph of this Agreement; and
all other locations where Debtor conducts business or Collateral is kept (as of
the date of this Agreement) are set forth in Schedule 1.
(e) Debtor has rights in or the power to transfer the Collateral, and
Debtor is the sole and complete owner of the Collateral, free from any Lien
other than Permitted Liens.
(f) All of Debtor's U.S. and foreign patents and patent applications,
copyrights (whether or not registered), applications for copyright, trademarks,
service marks and trade names (whether registered or unregistered), and
applications for registration of such trademarks, service marks and trade names,
are set forth in Schedule 2.
(g) Debtor is not and will not become a lessee under any real property
lease or other agreement governing the location of Collateral at the premises of
another Person pursuant to which the lessor or such other Person may obtain any
rights in any of the Collateral, and no such lease or other such agreement now
prohibits, restrains, impairs or will prohibit, restrain or impair such Debtor's
right to remove any Collateral from the premises at which such Collateral is
situated, except for the usual and customary restrictions contained in such
leases of real property.
(h) No control agreements exist with respect to any Collateral other
than control agreements in favor of Secured Party.
(i) Debtor does not have or hold any chattel paper, letter-of-credit
rights or commercial tort claims except as disclosed in Schedule 1.
(j) The names and addresses of all financial institutions and other
Persons at which Debtor maintains its deposit and securities accounts, and the
account numbers and account names of such accounts, are set forth in Schedule 1.
(k) Schedule 3 lists Debtor's ownership interests in each of its
subsidiaries as of the date hereof.
(l) Debtor is and will be the legal record and beneficial owner of all
Pledged Collateral, and has and will have good and marketable title thereto.
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(m) Except as disclosed in writing to Secured Party, there are no
Pledged Collateral Agreements which affect or relate to the voting or giving of
written consents with respect to any of the Pledged Collateral. Each Pledged
Collateral Agreement contains the entire agreement between the parties thereto
with respect to the subject matter thereof, has not been amended or modified,
and is in full force and effect in accordance with its terms. To the best
knowledge of Debtor, there exists no material violation or material default
under any Pledged Collateral Agreement by Debtor or the other parties thereto.
Debtor has not knowingly waived or released any of its material rights under or
otherwise consented to a material departure from the terms and provisions of any
Pledged Collateral Agreement.
SECTION 5 Covenants. So long as any of the Obligations remain
unsatisfied, Debtor agrees that:
(a) Debtor shall appear in and defend any action, suit or proceeding
which may affect to a material extent its title to, or right or interest in, or
Secured Party's right or interest in, the Collateral, and shall do and perform
all reasonable acts that may be necessary and appropriate to maintain, preserve
and protect the Collateral.
(b) Debtor shall comply in all material respects with all laws,
regulations and ordinances, and all policies of insurance, relating in a
material way to the possession, operation, maintenance and control of the
Collateral.
(c) Debtor shall give prompt written notice to Secured Party (and in any
event not later than 30 days following any change described below in this
subsection) of: (i) any change in the location of Debtor's chief executive
office or principal place of business; (ii) any change in the locations set
forth in Schedule 1; (iii) any change in its name; (iv) any changes in its
identity or structure in any manner which might make any financing statement
filed hereunder incorrect or misleading; (v) any change in its registration as
an organization (or any new such registration); or (vi) any change in its
jurisdiction of organization; provided that Debtor shall not locate any
Collateral outside of the United States nor shall Debtor change its jurisdiction
of organization to a jurisdiction outside of the United States.
(d) Debtor shall carry and maintain in full force and effect, at its own
expense and with financially sound and reputable insurance companies, insurance
with respect to the Collateral in such amounts, with such deductibles and
covering such risks as is customarily carried by companies engaged in the same
or similar businesses and owning similar properties in the localities where
Debtor operates. Insurance on the Collateral shall name Secured Party as
additional insured and as loss payee. Upon the request of Secured Party, Debtor
shall furnish Secured Party from time to time with full information as to the
insurance carried by it and, if so requested, copies of all such insurance
policies. Debtor shall also furnish to Secured Party at least once in each
calendar year a certificate of Debtor's insurance broker or other insurance
specialist stating that all premiums then due on the policies relating to
insurance on the Collateral have been paid and that such policies are in full
force and effect. All insurance policies required under this subsection (d)
shall provide that they shall not be terminated or cancelled nor shall any such
policy be materially changed without at least 30 days' prior written notice to
Debtor and Secured Party. Receipt of notice of termination or cancellation of
any such insurance policies or reduction of coverages or amounts thereunder
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shall entitle Secured Party to renew any such policies, cause the coverages and
amounts thereof to be maintained at levels required pursuant to the first
sentence of this subsection (d) or otherwise to obtain similar insurance in
place of such policies, in each case at the expense of Debtor.
(e) All insurance policies shall provide that any losses payable
thereunder be payable directly to Secured Party unless written authority to the
contrary is obtained. In the event that Debtor shall receive any proceeds of any
insurance (other than in respect of third party liability insurance) it shall
immediately cause such proceeds to be paid over to Secured Party. If the
Collateral shall be materially damaged or destroyed, in whole or in part, by
fire or other casualty, Debtor shall give prompt notice thereof to Secured
Party. Additionally, Debtor shall in any event promptly give Secured Party
notice of all reports made to insurance companies in respect of any claim in
excess of $25,000.00. No settlement on account of any loss covered by insurance
shall be made for less than insured value without the consent of Secured Party.
In its sole discretion Secured Party may apply all or any portion of such
insurance proceeds to the payment of Obligations or may release all or any
portion thereof to Debtor.
(f) Debtor shall keep separate, accurate and complete books and records
with respect to the Collateral, disclosing Secured Party's security interest
hereunder.
(g) Debtor shall not surrender or lose possession of (other than to
Secured Party), sell, lease, rent, or otherwise dispose of or transfer any of
the Collateral or any right or interest therein, except in the ordinary course
of business or unless such Collateral is replaced by comparable Collateral of
similar value; provided that no such disposition or transfer of Collateral
consisting of Pledged Collateral or instruments shall be permitted while any
Event of Default exists.
(h) Debtor shall keep the Collateral free of all Liens except Permitted
Liens.
(i) Debtor shall pay and discharge all taxes, fees, assessments and
governmental charges or levies imposed upon it with respect to the Collateral
prior to the date on which penalties attach thereto, except to the extent such
taxes, fees, assessments or governmental charges or levies are being contested
in good faith by appropriate proceedings.
(j) Debtor shall maintain and preserve its legal existence, its rights
to transact business and all other rights, franchises and privileges necessary
or desirable in the normal course of its business and operations and the
ownership of the Collateral, except in connection with any transactions
expressly permitted by the Documents.
(k) Upon the request of Secured Party, Debtor shall (i) immediately
deliver to Secured Party, or an agent designated by it, appropriately endorsed
or accompanied by appropriate instruments of transfer or assignment, all
documents and instruments, all certificated securities with respect to any
Pledged Collateral, all letters of credit and all accounts and other rights to
payment at any time evidenced by promissory notes, trade acceptances or other
instruments, and (ii) provide such notice, obtain such acknowledgments and take
all such other action, with respect to any chattel paper, documents and
letter-of credit rights, as Secured Party shall reasonably specify.
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(l) Debtor shall at any reasonable time and from time to time permit
Secured Party or any of its agents or representatives to visit the premises of
Debtor and inspect the Collateral and to examine and make copies of and
abstracts from the records and books of account of Debtor.
(m) Debtor shall: (i) with such frequency as Secured Party may require,
furnish to Secured Party such lists of customers and other information relating
to the accounts and other rights to payment as Secured Party shall reasonably
request; (ii) give only normal discounts, allowances and credits as to accounts
and other rights to payment, in the ordinary course of business, according to
normal trade practices utilized by Debtor, and enforce all accounts and other
rights to payment strictly in accordance with their terms, except that Debtor
may grant any extension of the time for payment or enter into any agreement to
make a rebate or otherwise to reduce the amount owing on or with respect to, or
compromise or settle for less than the full amount thereof, any account or other
right to payment, in the ordinary course of business, according to normal and
prudent trade practices utilized by Debtor; and (iii) upon the request of
Secured Party (A) at any time, notify all or any designated portion of the
account debtors and other obligors on the accounts and other rights to payment
of the security interest hereunder, and (B) upon the occurrence and during the
continuance of an Event of Default, notify the account debtors and other
obligors on the accounts and other rights to payment or any designated portion
thereof that payment shall be made directly to Secured Party or to such other
Person or location as Secured Party shall specify.
(n) Debtor shall, at such times as Secured Party shall reasonably
request, prepare and deliver to Secured Party a report of all Inventory, in form
and substance satisfactory to Secured Party.
(o) Debtor shall (i) notify Secured Party of any material claim made or
asserted against the Collateral by any Person and of any change in the
composition of the Collateral or other event which could materially adversely
affect the value of the Collateral or Secured Party's Lien thereon; (ii) furnish
to Secured Party such statements and schedules further identifying and
describing the Collateral and such other reports and other information in
connection with the Collateral as Secured Party may reasonably request, all in
reasonable detail; and (iii) upon reasonable request of Secured Party make such
demands and requests for information and reports as Debtor is entitled to make
in respect of the Collateral.
(p) If and when Debtor shall obtain rights to any new patents,
trademarks, service marks, trade names or copyrights, or otherwise acquire or
become entitled to the benefit of, or apply for registration of, any of the
foregoing, Debtor (i) shall promptly notify Secured Party thereof and (ii)
hereby authorizes Secured Party to modify, amend, or supplement Schedule 2 and
from time to time to include any of the foregoing and make all necessary or
appropriate filings with respect thereto.
(q) Without limiting the generality of subsection (p), Debtor shall not
register with the U.S. Copyright Office any unregistered copyrights (whether in
existence on the date hereof or thereafter acquired, arising, or developed)
unless Debtor provides Secured Party with written notice of its intent to
register such copyrights not less than 30 days prior to the date of the proposed
registration.
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(r) At Secured Party's request, Debtor will obtain from each Person from
whom Debtor leases any premises at which any Collateral is at any time present
such collateral access, subordination, waiver, consent and estoppel agreements
as Secured Party may require, in form and substance satisfactory to Secured
Party.
(s) Debtor shall give Secured Party immediate notice of the acquisition
of any instruments or securities, or the establishment of any new deposit
account or any new securities account with respect to any Pledged Collateral.
(t) Debtor shall immediately notify Secured Party if Debtor holds or
acquires (i) any commercial tort claims, (ii) any chattel paper, including any
interest in any electronic chattel paper, or (iii) any letter-of-credit rights.
(u) (i) Debtor shall comply with all of its obligations under any
Pledged Collateral Agreements to which it is a party and shall enforce all of
its rights thereunder. (ii) Debtor will take all actions necessary to cause each
Pledged Collateral Agreement relating to Collateral consisting of any and all
limited, limited liability and general partnership interests and limited
liability company interests of any type or nature ("Partnership and LLC
Collateral") to provide specifically at all times that: (A) the Partnership and
LLC Collateral shall be securities and shall be governed by Article 8 of the
applicable Uniform Commercial Code; (B) each certificate of membership or
partnership representing the Partnership and LLC Collateral shall bear a legend
to the effect that such membership interest or partnership interest is a
security and is governed by Article 8 of the applicable Uniform Commercial Code;
and (C) no consent of any member, manager, partner or other Person shall be a
condition to the admission as a member or partner of any transferee that
acquires ownership of the Partnership and LLC Collateral as a result of the
exercise by Secured Party of any remedy hereunder or under applicable law. (iii)
Debtor shall not vote to enable or take any other action to amend or terminate,
or waive compliance with any of the terms of, any Pledged Collateral Agreement,
certificate or articles of incorporation, bylaws or other organizational
documents, or otherwise cast any vote or grant or give any consent, waiver or
ratification in respect of the Pledged Collateral, in any way that materially
changes the rights of Debtor with respect to any Pledged Collateral in a manner
adverse to the Secured Party or that adversely affects the validity, perfection
or priority of Secured Party's security interest therein.
(v) In the event that Debtor acquires rights in any subsidiary after the
date hereof, it shall deliver to Secured Party a completed supplement to
Schedule 3, reflecting such new subsidiary. Notwithstanding the foregoing, it is
understood and agreed that the security interest of Secured Party shall attach
to any such subsidiary immediately upon Debtor's acquisition of rights therein
and shall not be affected by the failure of Debtor to deliver any such
supplement to Schedule 3.
(w) Without limiting the foregoing provisions of this Xxxxxxx 0, Xxxxxx
shall send to Secured Party, within five calendar days following the beginning
of each calendar quarter, an Update Certificate in the form substantially
attached hereto as Exhibit A.
(x) (i) Promptly after the date Debtor incorporates, creates or acquires
any additional subsidiary and, in any event, within ten days following receipt
by Debtor from Secured Party of a security agreement providing for the grant to
Secured Party a blanket Lien on its personal property substantially similar to
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the grant contained in this Agreement, in form and substance satisfactory to
Secured Party (or a supplement to any existing security agreement entered into
by any Subsidiaries), and a guaranty of the Obligations, in form and substance
satisfactory to Secured Party (or a supplement to any existing guaranty of any
Subsidiaries), Debtor shall cause such subsidiary to execute and deliver such
security agreement (or supplement) and guaranty (or supplement) to Secured
Party. (ii) Without limiting the foregoing provisions of this Section 5, within
ten days after the date of incorporation, creation of acquisition of a
subsidiary, and if Debtor shall hold any certificated securities in respect of
such subsidiary, upon request of Secured Party, Debtor shall deliver the same to
the Secured Party, accompanied by such instruments of transfer or assignment
duly executed in blank as Secured Party may reasonably request. (iii) If at any
time Debtor or any subsidiary shall become the owner of any real property,
promptly, and in any event within thirty 30 days following acquisition of such
real property, Debtor shall (and shall cause any of its Subsidiaries to) execute
and deliver to Secured Party a deed of trust or mortgage in respect of such
property, in form and substance satisfactory to Secured Party, together with
such title insurance polices, evidence of insurance, insurance certificates and
endorsements, surveys, appraisals, consents, estoppels, subordination agreements
and other documents and other instruments related thereto, as Secured Party
shall reasonably request, in form and substance satisfactory to Secured Party.
(iv) Additionally, Debtor and such subsidiary shall execute and deliver to
Secured Party such other items as reasonably requested by Secured Party in
connection with the foregoing, including certificates and powers, financing
statements and other security documents, resolutions, incumbency and officers'
certificates, opinions of counsel, control agreements, search reports and other
certificates and documents, in form and substance satisfactory to Secured Party.
(y) Secured Party may elect in its sole discretion to waive any such
collateral and guaranty delivery requirement set forth in subsection (x) for any
subsidiary that will remain a dormant or shell subsidiary; and Secured Party
agrees to waive any such requirement in the case of a Controlled Foreign
Corporation (or in the case of a stock pledge, to require the pledge of 100% of
the non-voting capital stock or other ownership interests, but not more than 65%
of the voting capital stock or other ownership interests, of any such subsidiary
constituting a direct (i.e., "first tier") Controlled Foreign Corporation), if
any adverse tax consequences under applicable U.S. tax law would result
therefrom.
SECTION 6 Rights of Secured Party.
(a) Until Secured Party exercises its rights hereunder to collect the
accounts and other rights to payment, Debtor shall endeavor in the first
instance diligently to collect all amounts due or to become due on or with
respect to the accounts and other rights to payment. At the request of Secured
Party, upon the occurrence and during the continuance of any Event of Default,
all remittances received by Debtor shall be held in trust for Secured Party and,
in accordance with Secured Party's instructions, remitted to Secured Party or
deposited to an account of Secured Party in the form received (with any
necessary endorsements or instruments of assignment or transfer).
(b) At the request of Secured Party, upon the occurrence and during the
continuance of any Event of Default, Secured Party shall be entitled to receive
all distributions and payments of any nature with respect to any Pledged
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Collateral or instrument Collateral, and all such distributions or payments
received by the Debtor shall be held in trust for Secured Party and, in
accordance with Secured Party's instructions, remitted to Secured Party or
deposited to an account designated by Secured Party in the form received (with
any necessary endorsements or instruments of assignment or transfer). Further,
upon the occurrence and during the continuance of any Event of Default any such
distributions and payments with respect to any Pledged Collateral held in any
securities account shall be held and retained in such securities account, in
each case as part of the Collateral hereunder, and Secured Party shall have the
right, following prior written notice to the Debtor, to vote and to give
consents, ratifications and waivers with respect to any Pledged Collateral and
instruments, and to exercise all rights of conversion, exchange, subscription or
any other rights, privileges or options pertaining thereto, as if Secured Party
were the absolute owner thereof; provided that Secured Party shall have no duty
to exercise any of the foregoing rights afforded to it and shall not be
responsible to the Debtor or any other Person for any failure to do so or delay
in doing so.
SECTION 7 Authorization; Secured Party Appointed Attorney-in-Fact.
Secured Party shall have the right to, in the name of Debtor, or in the
name of Secured Party or otherwise, upon notice to but without the requirement
of assent by Debtor, and Debtor hereby constitutes and appoints Secured Party
(and any of Secured Party's officers, employees or agents designated by Secured
Party) as Debtor's true and lawful attorney-in-fact, with full power and
authority to: (i) sign and file any of the financing statements and other
documents and instruments which must be executed or filed to perfect or continue
perfected, maintain the priority of or provide notice of Secured Party's
security interest in the Collateral (including any notices to or agreements with
any securities intermediary); (ii) assert, adjust, xxx for, compromise or
release any claims under any policies of insurance; (iii) give notices of
control, default or exclusivity (or similar notices) under any account control
agreement or similar agreement with respect to exercising control over deposit
accounts or securities accounts; and (iv) execute any and all such other
documents and instruments, and do any and all acts and things for and on behalf
of Debtor, which Secured Party may deem reasonably necessary or advisable to
maintain, protect, realize upon and preserve the Collateral and Secured Party's
security interest therein and to accomplish the purposes of this Agreement.
Secured Party agrees that, except upon and during the continuance of an Event of
Default, it shall not exercise the power of attorney, or any rights granted to
Secured Party, pursuant to clauses (ii), (iii) and (iv). The foregoing power of
attorney is coupled with an interest and irrevocable so long as the Obligations
have not been paid and performed in full. Debtor hereby ratifies, to the extent
permitted by law, all that Secured Party shall lawfully and in good faith do or
cause to be done by virtue of and in compliance with this Section 7.
SECTION 8 Events of Default. Any of the following events which shall
occur and be continuing shall constitute an "Event of Default":
(a) Any representation or warranty by Debtor under or in connection with
this Agreement shall prove to have been incorrect in any material respect when
made or deemed made.
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(b) Debtor shall fail to perform or observe in any material respect any
other term, covenant or agreement contained in this Agreement on its part to be
performed or observed and any such failure shall remain unremedied for a period
of 15 days from the occurrence thereof; or any "Event of Default" as defined in
the Debentures or any other Document shall have occurred.
(c) Any material impairment in the value of the Collateral or the
priority of Secured Party's Lien hereunder.
(d) Any levy upon, seizure or attachment of any of the Collateral which
shall not have been rescinded or withdrawn.
(e) Any loss, theft or substantial damage to, or destruction of, any
material portion of the Collateral (unless within 15 days after the occurrence
of any such event, Debtor furnishes to Secured Party evidence satisfactory to
Secured Party that the amount of any such loss, theft, damage to or destruction
of the Collateral is fully insured under policies naming Secured Party as an
additional named insured or loss payee).
SECTION 9 Remedies.
(a) Upon the occurrence and during the continuance of any Event of
Default, Secured Party may declare any of the Obligations to be immediately due
and payable and shall have, in addition to all other rights and remedies granted
to it in this Agreement and the other Documents, all rights and remedies of a
secured party under the UCC and other applicable laws. Without limiting the
generality of the foregoing, (i) Secured Party may peaceably and without notice
enter any premises of Debtor, take possession of any the Collateral, remove or
dispose of all or part of the Collateral on any premises of such Debtor or
elsewhere, or, in the case of equipment, render it nonfunctional, and otherwise
collect, receive, appropriate and realize upon all or any part of the
Collateral, and demand, give receipt for, settle, renew, extend, exchange,
compromise, adjust, or xxx for all or any part of the Collateral, as Secured
Party may determine; (ii) Secured Party may require any Debtor to assemble all
or any part of the Collateral and make it available to Secured Party at any
place and time designated by Secured Party; (iii) Secured Party may secure the
appointment of a receiver of the Collateral or any part thereof (to the extent
and in the manner provided by applicable law); (iv) Secured Party may sell,
resell, lease, use, assign, license, sublicense, transfer or otherwise dispose
of any or all of the Collateral in its then condition or following any
commercially reasonable preparation or processing (utilizing in connection
therewith any of Debtor's assets, without charge or liability to Secured Party
therefor) at public or private sale, by one or more contracts, in one or more
parcels, at the same or different times, for cash or credit, or for future
delivery without assumption of any credit risk, all as Secured Party deems
advisable; provided, however, that Debtor shall be credited with the net
proceeds of sale only when such proceeds are finally collected by Secured Party.
Debtor recognizes that Secured Party may be unable to make a public sale of any
or all of the Pledged Collateral, by reason of prohibitions contained in
applicable securities laws or otherwise, and expressly agrees that a private
sale to a restricted group of purchasers for investment and not with a view to
any distribution thereof shall be considered a commercially reasonable sale.
Secured Party and each Purchaser shall have the right upon any such public sale,
and, to the extent permitted by law, upon any such private sale, to purchase the
whole or any part of the Collateral so sold, free of any right or equity of
redemption, which right or equity of redemption Debtor hereby releases, to the
extent permitted by law. Secured Party shall give Debtor such notice of any
private or public sales as may be required by the UCC or other applicable law.
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(b) For the purpose of enabling Secured Party to exercise its rights and
remedies under this Section 9 or otherwise in connection with this Agreement,
Debtor hereby grants to Secured Party an irrevocable, non-exclusive and
assignable license (exercisable without payment or royalty or other compensation
to Debtor) to use, license or sublicense any intellectual property Collateral.
(c) Neither Secured Party nor any Purchaser shall have any obligation to
clean up or otherwise prepare the Collateral for sale. Secured Party has no
obligation to attempt to satisfy the Obligations by collecting them from any
other Person liable for them, and Secured Party and Purchasers may release,
modify or waive any Collateral provided by any other Person to secure any of the
Obligations, all without affecting Secured Party's or any Purchaser's rights
against Debtor. Debtor waives any right it may have to require Secured Party or
any Purchaser to pursue any third Person for any of the Obligations. Secured
Party and Purchasers may comply with any applicable state or federal law
requirements in connection with a disposition of the Collateral and compliance
will not be considered adversely to affect the commercial reasonableness of any
sale of the Collateral. Secured Party may sell the Collateral without giving any
warranties as to the Collateral. Secured Party may specifically disclaim any
warranties of title or the like. This procedure will not be considered adversely
to affect the commercial reasonableness of any sale of the Collateral. If
Secured Party sells any of the Collateral upon credit, Debtor will be credited
only with payments actually made by the purchaser, received by Secured Party and
applied to the indebtedness of the purchaser. In the event the purchaser fails
to pay for the Collateral, Secured Party may resell the Collateral and Debtor
shall be credited with the proceeds of the sale.
(d) To the extent Debtor uses the proceeds of any of the Obligations to
purchase Collateral, Debtor's repayment of the Obligations shall apply on a
"first-in, first-out" basis so that the portion of the Obligations used to
purchase a particular item of Collateral shall be paid in the chronological
order the Debtor purchased the Collateral.
(e) The cash proceeds actually received from the sale or other
disposition or collection of Collateral, and any other amounts received in
respect of the Collateral the application of which is not otherwise provided for
herein, shall be applied first, to the payment of the reasonable costs and
expenses of Secured Party in exercising or enforcing its rights hereunder and in
collecting or attempting to collect any of the Collateral, and to the payment of
all other amounts payable to Secured Party pursuant to Section 13 hereof; and
second, to the payment of the Obligations. Any surplus thereof which exists
after payment and performance in full of the Obligations shall be promptly paid
over to Debtor or otherwise disposed of in accordance with the UCC or other
applicable law. Debtor shall remain liable to Secured Party, as collateral
agent, and each Purchaser, for any deficiency which exists after any sale or
other disposition or collection of Collateral.
(f) In taking any action under this Section 9 or otherwise taking action
as collateral agent on behalf of Purchasers and exercising such powers and
performing such duties under this Agreement as are granted to Secured Party
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hereunder, except to the extent otherwise provided under the Documents, Secured
Party shall act in each case in accordance with the instructions of the Required
Purchasers; provided, however, that, without the consent of all Purchasers,
Secured Party shall not, and may not be directed to, release any of the
Collateral or terminate this Agreement, except in connection with a sale or
other disposition of Pledged Collateral under this Section 9, as otherwise
contemplated or permitted hereunder or under the Documents or as contemplated by
Section 19.
SECTION 10 Certain Waivers. Debtor waives, to the fullest extent
permitted by law, (i) any right of redemption with respect to the Collateral,
whether before or after sale hereunder, and all rights, if any, of marshalling
of the Collateral or other collateral or security for the Obligations; (ii) any
right to require Secured Party (A) to proceed against any Person, (B) to exhaust
any other collateral or security for any of the Obligations, (C) to pursue any
remedy in Secured Party's power, or (D) to make or give any presentments,
demands for performance, notices of nonperformance, protests, notices of
protests or notices of dishonor in connection with any of the Collateral; and
(iii) all claims, damages, and demands against Secured Party or any Purchaser
arising out of the repossession, retention, sale or application of the proceeds
of any sale of the Collateral.
SECTION 11 Notices. All notices or other communications hereunder shall
be in writing (including by facsimile transmission or by email) and mailed, sent
or delivered to the respective parties hereto at or to their respective
addresses, facsimile numbers or email addresses set forth below their names on
the signature pages hereof, or at or to such other address, facsimile number or
email address as shall be designated by any party in a written notice to the
other parties hereto. All such notices and other communications shall be deemed
to be delivered when a record (within the meaning of the UCC) has been (i)
delivered by hand; (ii) sent by mail upon the earlier of the date of receipt or
five business days after deposit in the mail, first class (or air mail as to
communications sent to or from the United States); (iii) sent by facsimile
transmission; or (iv) sent by email. Electronic mail may be used only for
routine communications, such as distribution of informational documents or
documents for execution by the parties thereto, and may not be used for any
other purpose.
SECTION 12 No Waiver; Cumulative Remedies. No failure on the part of
Secured Party or any Purchaser to exercise, and no delay in exercising, any
right, remedy, power or privilege hereunder shall operate as a waiver thereof,
nor shall any single or partial exercise of any such right, remedy, power or
privilege preclude any other or further exercise thereof or the exercise of any
other right, remedy, power or privilege. The rights and remedies under this
Agreement are cumulative and not exclusive of any rights, remedies, powers and
privileges that may otherwise be available to Secured Party and the Purchasers.
SECTION 13 Costs and Expenses; Indemnification.
(a) Debtor agrees to pay on demand:
(i) the reasonable out of pocket costs and expenses of Secured Party,
and the reasonable fees and disbursements of counsel to Secured Party, in
connection with any amendments, modifications or waivers of the terms thereof
requested or initiated by Debtor, and the custody of the Collateral;
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(ii) all title, appraisal, survey, audit, consulting, search, recording,
filing and similar costs, fees and expenses incurred or sustained by Secured
Party in connection with this Agreement or the Collateral incurred after the
date hereof at any time after the occurrence of an Event of Default; and
(iii) all costs and expenses of Secured Party and each Purchaser, and
the fees and disbursements of counsel, in connection with the enforcement or
attempted enforcement of, and preservation of any rights or interests under,
this Agreement and the other Documents, including in any out-of-court workout or
other refinancing or restructuring or in any bankruptcy case, and the
protection, sale or collection of, or other realization upon, any of the
Collateral, including all expenses of taking, collecting, holding, sorting,
handling, preparing for sale, selling, or the like, and other such expenses of
sales and collections of Collateral.
(b) Debtor hereby agrees to indemnify Secured Party, each Purchaser, any
affiliate thereof, and their respective directors, officers, employees, agents,
counsel and other advisors (each an "Indemnified Person") against, and hold each
of them harmless from, any and all liabilities, obligations, losses, claims,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind or nature whatsoever, including the reasonable fees and
disbursements of counsel to an Indemnified Person, which may be imposed on or
incurred by any Indemnified Person, or asserted against any Indemnified Person
by any third party or by Debtor, in any way relating to or arising out of, in
connection with, or as a result of (i) the execution or delivery of this
Agreement or any agreement or instrument contemplated hereby, the performance by
the parties hereto of their respective obligations hereunder or thereunder, the
transactions contemplated hereby or the Collateral, or (ii) any actual or
prospective claim, litigation, investigation or proceeding relating to any of
the foregoing, whether based on contract, tort or any other theory, whether
brought by a third party or by Debtor (the "Indemnified Liabilities"); provided
that Debtor shall not be liable to any Indemnified Person for any portion of
such Indemnified Liabilities to the extent they are found by a final decision of
a court of competent jurisdiction to have resulted from such Indemnified
Person's gross negligence or willful misconduct. If and to the extent that the
foregoing indemnification is for any reason held unenforceable, Debtor agrees to
make the maximum contribution to the payment and satisfaction of each of the
Indemnified Liabilities which is permissible under applicable law.
(c) Any amounts payable to Secured Party and the Purchasers under this
Section 13 or otherwise under this Agreement if not paid upon demand shall bear
interest from the date of such demand until paid in full, at the default rate of
interest set forth in the Debentures.
SECTION 14 Binding Effect. This Agreement shall be binding upon, inure
to the benefit of and be enforceable by Debtor, Secured Party, each Purchaser
and their respective successors and assigns and shall bind any Person who
becomes bound as a debtor to this Agreement. Debtor may not assign, transfer,
hypothecate or otherwise convey its rights, benefits, obligations or duties
hereunder without the prior express written consent of Secured Party, as
collateral agent, and Purchasers. Any such purported assignment, transfer,
hypothecation or other conveyance by Debtor without the prior express written
consent of Secured Party, as collateral agent, and Purchasers shall be void.
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SECTION 15 Governing Law; Submission of Jurisdiction.
(a) This Agreement shall be governed by, and construed in accordance
with, the law of the State of New York, except as required by mandatory
provisions of law and to the extent the validity or perfection of the security
interests hereunder, or the remedies hereunder, in respect of any Collateral are
governed by the law of a jurisdiction other than New York.
(b) Debtor hereby (i) submits to the non-exclusive jurisdiction of the
courts of the State of New York and the Federal courts of the United States
sitting in the Borough of Manhattan for the purpose of any action or proceeding
arising out of or relating to the Documents, (ii) agrees that all claims in
respect of any such action or proceeding may be heard and determined in such
courts, (iii) irrevocably waives (to the extent permitted by applicable law) any
objection which it now or hereafter may have to the laying of venue of any such
action or proceeding brought in any of the foregoing courts, and any objection
on the ground that any such action or proceeding in any such court has been
brought in an inconvenient forum, and (iv) agrees that a final judgment in any
such action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner permitted by law.
(c) Nothing in this Section 15 shall affect the right of Secured Party
to serve legal process in any other manner permitted by law or limit the right
of Secured Party to bring any action or proceeding against Debtor or its
property in the courts of other jurisdictions.
SECTION 16 Entire Agreement; Amendment. This Agreement contains the
entire agreement of the parties with respect to the subject matter hereof. No
amendment or waiver of any provision of this Agreement nor consent to any
departure therefrom by Debtor shall in any event be effective unless the same
shall be in writing and signed by Secured Party (with the consent of the
Required Purchasers), and then such waiver or consent shall be effective only in
the specific instance and for the specific purpose for which given; provided,
however, that without the consent of all Purchasers, no amendment, waiver or
consent shall do any of the following: (i) subject the Purchasers to any
additional obligations; (ii) reduce any amount payable to the Purchasers
hereunder; (iii) postpone any date fixed for any payment in respect of any
amount payable to any Purchaser hereunder; (iv) change the definition of
"Required Purchasers" or any definition or provision of this Agreement requiring
the approval of the Required Purchasers or some other specified amount of
Purchasers; (v) amend the provisions of the proviso in Section 9(f); or (vi)
amend the provisions of this Section 16; and provided, further, that no
amendment, waiver or consent shall, unless in writing and signed by Secured
Party, affect the rights, duties or obligations of Secured Party under or in
respect of this Agreement.
SECTION 17 Severability. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
all applicable laws and regulations. If, however, any provision of this
Agreement shall be prohibited by or invalid under any such law or regulation in
any jurisdiction, it shall, as to such jurisdiction, be deemed modified to
conform to the minimum requirements of such law or regulation, or, if for any
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reason it is not deemed so modified, it shall be ineffective and invalid only to
the extent of such prohibition or invalidity without affecting the remaining
provisions of this Agreement, or the validity or effectiveness of such provision
in any other jurisdiction.
SECTION 18 Counterparts. This Agreement may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute but one and the same agreement.
SECTION 19 Termination. Upon payment and performance in full of all
Obligations, the security interest created under this Agreement shall terminate
and Secured Party shall promptly execute and deliver to Debtor such documents
and instruments reasonably requested by Debtor as shall be necessary to evidence
termination of all security interests given by Debtor to Secured Party
hereunder.
SECTION 20 Conflicts. In the event of any conflict or inconsistency
between this Agreement and the Debentures, the terms of this Agreement shall
control.
SECTION 21 Acknowledgments. Debtor hereby acknowledges and agrees for
that the Inventory Security Agreement dated March 7, 2005 made by Debtor in
favor of Caledonian Bank and Trust as Trustee for Sofaer Capital Global Hedge
Fund, the Inventory Security Agreement dated August 16, 2005 made by Debtor in
favor of Caledonian Bank and Trust as Trustee for Sofaer Capital Global Hedge
Fund and the Inventory Security Agreement dated December 21, 2005 made by Debtor
in favor of Citco Trustees (Cayman) Limited on behalf of Sofaer Capital Global
Hedge Fund (altogether, the "Inventory Security Agreements"), are amended and
restated by this Agreement and the security interests thereunder shall not be
deemed terminated hereby. Debtor hereby restates, reaffirms and continues the
security interest in the existing collateral created pursuant to the Inventory
Security Agreements (as amended and restated by this Agreement) as security for
the "Obligations" referred to therein.
[Signature on following page]
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IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement, as of the date first above written.
POWERLINX, INC.
By ____________________________________________
Name: Xxxxxxx Xxxxxxxxx
Title: Chief Executive Officer
0000 00xx Xx. X, Xxxxx 000
Xx. Xxxxxxxxxx, XX 00000
Attn: Xxxxxxx Xxxxx
Fax: (000) 000-0000
Email: xxxxxx@xxxxx-xxxx.xxx
SOFAER CAPITAL INC.
By ____________________________________________
Name:
Title:
c/o Sofaer Global Research (UK) Limited
0 Xxxxx Xxxxxxxx Xxxxxx
Xxxxxx XX0X 0XX
Xxxxxx Xxxxxxx
Attn: Xxx Xxxxx
Fax: (000) 00 00 0000-0000
Email: xxxxxx@xxxxxx.xxx
