SECURITY AGREEMENT
SECURITY AGREEMENT, dated November __, 2003 made by Commtouch Inc., a
California corporation (the "Grantor"), in favor of Smithfield Fiduciary LLC, a
Cayman Islands limited liability company, in its capacity as collateral agent
for the Buyers (as defined below) party to the Securities Purchase Agreement,
dated as of November __, 2003 (such agreement, as amended, restated or otherwise
modified from time to time, being hereinafter referred to as the "Securities
Purchase Agreement") (in such capacity, the "Collateral Agent").
W I T N E S S E T H:
WHEREAS, Commtouch Software Ltd., an Israeli corporation (the "Parent")
and each party listed as a "Buyer" on the Schedule of Buyers attached to the
Securities Purchase Agreement (the "Buyers") are parties to the Securities
Purchase Agreement, pursuant to which the Parent shall be required to sell and
the Buyers shall purchase or have the right to purchase, the Securities;
WHEREAS, the Grantor is a wholly-owned subsidiary of the Parent and
will derive substantial benefits from the execution of the Securities Purchase
Agreement;
WHEREAS, the Grantor and the Parent are mutually dependent on each
other in the conduct of their respective businesses as an integrated operation,
with the credit needed from time to time by one often being provided through
financing obtained by the other and the ability to obtain such financing being
dependent on the successful operations of both the Grantor and the Parent;
WHEREAS, it is a condition precedent to the Buyers entering into the
Securities Purchase Agreement that the Grantor shall have executed and delivered
to the Collateral Agent a guarantee of the obligations of the Parent under the
Securities Purchase Agreement and the Notes (as defined below) (the "Guaranty"),
and this security agreement providing for the grant to the Collateral Agent for
the benefit of the Buyers of a security interest in all personal property of the
Grantor to secure such Guaranty; and
WHEREAS, the Grantor has determined that the execution, delivery and
performance of this Agreement directly benefits, and are in the best interest of
the Grantor.
NOW, THEREFORE, in consideration of the premises and the agreements
herein and in order to induce the Buyers to enter into the Securities Purchase
Agreement, the Grantor agrees with the Collateral Agent, for the benefit of the
Buyers, as follows:
SECTION 1. Definitions.
(a) Reference is hereby made to the Securities Purchase Agreement and
the senior secured convertible notes issued pursuant thereto (the "Notes") for a
statement of the terms thereof. All terms used in this Agreement and the
recitals hereto which are defined in the Securities Purchase Agreement, the
Notes or in Article 9 of the Uniform Commercial Code (the "Code") as in effect
from time to time in the State of New York and which are not otherwise defined
herein shall have the same meanings herein as set forth therein; provided that
terms used
herein which are defined in the Code as in effect in the State of New York on
the date hereof shall continue to have the same meaning notwithstanding any
replacement or amendment of such statute except as the Collateral Agent may
otherwise determine.
(b) The following terms shall have the respective meanings provided for
in the Code: "Accounts", "Cash Proceeds", "Chattel Paper", "Commercial Tort
Claim", "Commodity Account", "Commodity Contracts", "Deposit Account",
"Documents", "Equipment", "Fixtures", "General Intangibles", "Goods",
"Instruments", "Inventory", "Investment Property", "Letter-of-Credit Rights",
"Noncash Proceeds", "Payment Intangibles", "Proceeds", "Promissory Notes",
"Record", "Security Account", "Software", and "Supporting Obligations".
(c) As used in this Agreement, the following terms shall have the
respective meanings indicated below, such meanings to be applicable equally to
both the singular and plural forms of such terms:
"Copyright Licenses" means all licenses, contracts or other agreements,
whether written or oral, naming the Grantor as licensee or licensor and
providing for the grant of any right to use or sell any works covered by any
copyright (including, without limitation, all Copyright Licenses set forth in
Schedule II hereto).
"Copyrights" means all domestic and foreign copyrights, whether
registered or not, including, without limitation, all copyright rights
throughout the universe (whether now or hereafter arising) in any and all media
(whether now or hereafter developed), in and to all original works of authorship
fixed in any tangible medium of expression, acquired or used by the Grantor
(including, without limitation, all copyrights described in Schedule II hereto),
all applications, registrations and recordings thereof (including, without
limitation, applications, registrations and recordings in the United States
Copyright Office or in any similar office or agency of the United States or any
other country or any political subdivision thereof), and all reissues,
divisions, continuations, continuations in part and extensions or renewals
thereof.
"Event of Default" shall have the meaning set forth in the Notes.
"Intellectual Property" means the Copyrights, Trademarks and Patents.
"Licenses" means the Copyright Licenses, the Trademark Licenses and the
Patent Licenses.
"Patent Licenses" means all licenses, contracts or other agreements,
whether written or oral, naming the Grantor as licensee or licensor and
providing for the grant of any right to manufacture, use or sell any invention
covered by any Patent (including, without limitation, all Patent Licenses set
forth in Schedule II hereto).
"Patents" means all domestic and foreign letters patent, design
patents, utility patents, industrial designs, inventions, trade secrets, ideas,
concepts, methods, techniques, processes, proprietary information, technology,
know-how, formulae, rights of publicity and other general intangibles of like
nature, now existing or hereafter acquired (including, without limitation, all
domestic and foreign letters patent, design patents, utility patents, industrial
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designs, inventions, trade secrets, ideas, concepts, methods, techniques,
processes, proprietary information, technology, know-how and formulae described
in Schedule II hereto), all applications, registrations and recordings thereof
(including, without limitation, applications, registrations and recordings in
the United States Patent and Trademark Office, or in any similar office or
agency of the United States or any other country or any political subdivision
thereof), and all reissues, divisions, continuations, continuations in part and
extensions or renewals thereof.
"Trademark Licenses" means all licenses, contracts or other agreements,
whether written or oral, naming the Grantor as licensor or licensee and
providing for the grant of any right concerning any Trademark, together with any
goodwill connected with and symbolized by any such trademark licenses, contracts
or agreements and the right to prepare for sale or lease and sell or lease any
and all Inventory now or hereafter owned by the Grantor and now or hereafter
covered by such licenses (including, without limitation, all Trademark Licenses
described in Schedule II hereto).
"Trademarks" means all domestic and foreign trademarks, service marks,
collective marks, certification marks, trade names, business names, d/b/a's,
Internet domain names, trade styles, designs, logos and other source or business
identifiers and all general intangibles of like nature, now or hereafter owned,
adopted, acquired or used by the Grantor (including, without limitation, all
domestic and foreign trademarks, service marks, collective marks, certification
marks, trade names, business names, d/b/a's, Internet domain names, trade
styles, designs, logos and other source or business identifiers described in
Schedule II hereto), all applications, registrations and recordings thereof
(including, without limitation, applications, registrations and recordings in
the United States Patent and Trademark Office or in any similar office or agency
of the United States, any state thereof or any other country or any political
subdivision thereof), and all reissues, extensions or renewals thereof, together
with all goodwill of the business symbolized by such marks and all customer
lists, formulae and other Records of the Grantor relating to the distribution of
products and services in connection with which any of such marks are used.
SECTION 2. Grant of Security Interest. As collateral security for all
of the Obligations (as defined in Section 3 hereof), the Grantor hereby pledges
and assigns to the Collateral Agent, and grants to the Collateral Agent for the
benefit of the Buyers a continuing security interest in, all personal property
of the Grantor, wherever located and whether now or hereafter existing and
whether now owned or hereafter acquired, of every kind and description, tangible
or intangible (the "Collateral"), including, without limitation, the following:
(a) all Accounts;
(b) all Chattel Paper (whether tangible or electronic);
(c) the Commercial Tort Claims specified on Schedule VI hereto;
(d) all Deposit Accounts, all cash, and all other property from time to
time deposited therein and the monies and property in the possession or under
the control of any Agent or Buyer or any affiliate, representative, agent or
correspondent of such Agent or Buyer;
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(e) all Documents;
(f) all Equipment;
(g) all Fixtures;
(h) all General Intangibles (including, without limitation, all Payment
Intangibles);
(i) all Goods;
(j) all Instruments (including, without limitation, Promissory Notes);
(k) all Inventory;
(l) all Investment Property;
(m) all Copyrights, Patents and Trademarks, and all Licenses;
(n) all Letter-of-Credit Rights;
(o) all Supporting Obligations;
(p) all other tangible and intangible personal property of the Grantor
(whether or not subject to the Code), including, without limitation, all bank
and other accounts and all cash and all investments therein, all proceeds,
products, offspring, accessions, rents, profits, income, benefits, substitutions
and replacements of and to any of the property of the Grantor described in the
preceding clauses of this Section 2 (including, without limitation, any proceeds
of insurance thereon and all causes of action, claims and warranties now or
hereafter held by the Grantor in respect of any of the items listed above), and
all books, correspondence, files and other Records, including, without
limitation, all tapes, desks, cards, Software, data and computer programs in the
possession or under the control of the Grantor or any other Person from time to
time acting for the Grantor that at any time evidence or contain information
relating to any of the property described in the preceding clauses of this
Section 2 or are otherwise necessary or helpful in the collection or realization
thereof; and
(q) all Proceeds, including all Cash Proceeds and Noncash Proceeds, and
products of any and all of the foregoing Collateral;
in each case howsoever the Grantor's interest therein may arise or appear
(whether by ownership, security interest, claim or otherwise).
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SECTION 3. Security for Obligations. The security interest created
hereby in the Collateral constitutes continuing collateral security for the
Guaranteed Obligations (as defined in the Guaranty) and any other obligations of
the Grantor under the Guaranty (the "Obligations").
SECTION 4. Representations and Warranties. The Grantor represents and
warrants as follows:
(a) Schedule I hereto sets forth (i) the exact legal name of the
Grantor and (ii) the organizational identification number of the Grantor or
states that no such organizational identification number exists.
(b) The Grantor (i) is a corporation, limited liability company or
limited partnership duly organized, validly existing and in good standing under
the laws of the state, province, or jurisdiction of its organization as set
forth on Schedule I hereto, (ii) has all requisite power and authority to
execute, deliver and perform this Agreement and each other Transaction Document
to be executed and delivered by it pursuant hereto and to consummate the
transactions contemplated hereby and thereby, and (iii) is duly qualified to do
business and is in good standing in each jurisdiction in which the character of
the properties owned or leased by it or in which the transaction of its business
makes such qualification necessary and where the failure to be so qualified
would reasonably be expected to have a Material Adverse Effect.
(c) The execution, delivery and performance by the Grantor of this
Agreement and each other Transaction Document to which the Grantor is a party or
will be a party (i) have been duly authorized by all necessary action, (ii) do
not and will not contravene its charter or by-laws, its limited liability
company or operating agreement or its certificate of partnership or partnership
agreement, as applicable, or any applicable law or any contractual restriction
binding on or otherwise affecting the Grantor or its properties, (iii) do not
and will not result in or require the creation of any Lien upon or with respect
to any of its properties and (iv) do not and will not result in any default,
noncompliance, suspension, revocation, impairment, forfeiture or nonrenewal of
any permit, license, authorization or approval applicable to it or its
operations or any of its properties, which, in the case of this clause (iv), is
reasonably expected to have a Material Adverse Effect.
(d) This Agreement is, and each other Transaction Document to which the
Grantor is or will be a party, when executed and delivered pursuant hereto, will
be, a legal, valid and binding obligation of the Grantor, enforceable against
the Grantor in accordance with its terms, except as may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, suretyship or other similar
laws and principles of equity.
(e) There is no pending or written notice threatening any action, suit,
proceeding or claim affecting the Grantor before any governmental authority or
any arbitrator, or any order, judgment or award by any governmental authority or
arbitrator, that may adversely affect the grant by the Grantor, or the
perfection, of the security interest purported to be created hereby in the
Collateral, or the exercise by the Collateral Agent of any of its rights or
remedies hereunder.
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(f) All Federal, state and local tax returns and other reports required
by applicable law to be filed by the Grantor have been filed, or extensions have
been obtained, and all taxes, assessments and other governmental charges imposed
upon the Grantor or any property of the Grantor (including, without limitation,
all federal income and social security taxes on employees' wages) and which have
become due and payable on or prior to the date hereof have been paid, except to
the extent contested in good faith by proper proceedings which stay the
imposition of any penalty, fine or Lien resulting from the non-payment thereof
and with respect to which adequate reserves have been set aside for the payment
thereof in accordance with generally accepted accounting principles.
(g) All Equipment, Fixtures, Goods and Inventory now existing are, and
all Equipment, Fixtures, Goods and Inventory hereafter existing will be, located
and/or based at the addresses specified therefor in Schedule III hereto, except
that the Grantor will give the Collateral Agent not less than 30 days' prior
written notice of any change of the location of any such Collateral, other than
to locations set forth on Schedule III and with respect to which the Collateral
Agent has filed financing statements and otherwise fully perfected its Liens
thereon. The Grantor's chief place of business and chief executive office, the
place where the Grantor keeps its Records concerning Accounts and all originals
of all Chattel Paper are located at the addresses specified therefor in Schedule
III hereto. None of the Accounts is evidenced by Promissory Notes or other
Instruments. Set forth in Schedule IV hereto is a complete and accurate list, as
of the date of this Agreement, of each Deposit Account, Securities Account and
Commodities Account of the Grantor, together with the name and address of each
institution at which each such Account is maintained, the account number for
each such Account and a description of the purpose of each such Account. Set
forth in Schedule II hereto is a complete and correct list of each trade name
used by the Grantor and the name of, and each trade name used by, each person
from which the Grantor has acquired any substantial part of the Collateral.
(h) The Grantor has delivered to the Collateral Agent complete and
correct copies of each License described in Schedule II hereto, including all
schedules and exhibits thereto, which represents all of the Licenses existing on
the date of this Agreement. Each such License sets forth the entire agreement
and understanding of the parties thereto relating to the subject matter thereof,
and there are no other agreements, arrangements or understandings, written or
oral, relating to the matters covered thereby or the rights of the Grantor or
any of its affiliates in respect thereof. Each material License now existing is,
and each other material License will be, the legal, valid and binding obligation
of the parties thereto, enforceable against such parties in accordance with its
terms. No default under any material License by any such party has occurred, nor
does any defense, offset, deduction or counterclaim exist thereunder in favor of
any such party.
(i) The Grantor owns and controls, or otherwise possesses adequate
rights to use, all Trademarks, Patents and Copyrights, which are the only
trademarks, patents, copyrights, inventions, trade secrets, proprietary
information and technology, know-how, formulae, rights of publicity necessary to
conduct its business in substantially the same manner as conducted as of the
date hereof. Schedule II hereto sets forth a true and complete list of all
Intellectual Property and Licenses owned or used by the Grantor as of the date
hereof. All such Intellectual Property is subsisting and in full force and
effect, has not been adjudged invalid or unenforceable, is valid and enforceable
and has not been abandoned in whole or in part. Except as set forth in Schedule
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II, no such Intellectual Property is the subject of any licensing or franchising
agreement. The Grantor has no knowledge of any conflict with the rights of
others to any Intellectual Property and, to the best knowledge of the Grantor,
the Grantor is not now infringing or in conflict with any such rights of others
in any material respect, and to the best knowledge of the Grantor, no other
Person is now infringing or in conflict in any material respect with any such
properties, assets and rights owned or used by the Grantor. The Grantor has
received any notice that it is violating or has violated the trademarks,
patents, copyrights, inventions, trade secrets, proprietary information and
technology, know-how, formulae, rights of publicity or other intellectual
property rights of any third party.
(j) The Grantor is and will be at all times the sole and exclusive
owners of, or otherwise have and will have adequate rights in, the Collateral
free and clear of any Lien except for (i) the Lien created by this Agreement and
(ii) purchase money liens up to $250,000 at any time outstanding (the "Permitted
Liens"). No effective financing statement or other instrument similar in effect
covering all or any part of the Collateral is on file in any recording or filing
office except (A) such as may have been filed in favor of the Collateral Agent
relating to this Agreement and (B) such as may have been filed to perfect or
protect any security interests or Liens permitted by the Securities Purchase
Agreement.
(k) The exercise by the Collateral Agent of any of its rights and
remedies hereunder will not contravene any law or any contractual restriction
binding on or otherwise affecting the Grantor or any of its properties and will
not result in or require the creation of any Lien, upon or with respect to any
of its properties.
(l) No authorization or approval or other action by, and no notice to
or filing with, any governmental authority or other regulatory body, or any
other Person, is required for (i) the grant by the Grantor, or the perfection,
of the security interest purported to be created hereby in the Collateral or
(ii) the exercise by the Collateral Agent of any of its rights and remedies
hereunder, except (A) for the filing under the Uniform Commercial Code as in
effect in the applicable jurisdiction of the financing statements, all of which
financing statements, have been duly filed and are in full force and effect, (B)
with respect to the perfection of the security interest created hereby in the
Intellectual Property, for the recording of the appropriate Assignment for
Security, substantially in the form of Exhibit A hereto, as applicable, in the
United States Patent and Trademark Office or the United States Copyright Office,
as applicable, and (C) with respect to the perfection of the security interest
created hereby in foreign Intellectual Property and Licenses, for registrations
and filings in jurisdictions located outside of the United States and covering
rights in such jurisdictions relating to the Intellectual Property and Licenses.
(m) This Agreement creates in favor of the Collateral Agent a legal,
valid and enforceable security interest in the Collateral, as security for the
Obligations. The Collateral Agent's having possession of all Instruments and
cash constituting Collateral from time to time, the recording of the appropriate
Assignment for Security executed pursuant hereto in the United States Patent and
Trademark Office and the United States Copyright Office, as applicable, and the
filing of the financing statements and the other filings and recordings, as
applicable, described in Schedule V hereto and, with respect to the Intellectual
Property hereafter existing and not covered by an appropriate Assignment for
Security, the recording in the United States
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Patent and Trademark Office or the United States Copyright Office, as
applicable, of appropriate instruments of assignment, result in the perfection
of such security interests. Such security interests are, or in the case of
Collateral in which the Grantor obtains rights after the date hereof, will be,
perfected, first priority security interests, subject only to the Permitted
Liens and the recording of such instruments of assignment. Such recordings and
filings and all other action necessary or desirable to perfect and protect such
security interest have been duly taken, except for the Collateral Agent's having
possession of Instruments and cash constituting Collateral after the date hereof
and the other filings and recordations described in Section 4(l) hereof.
(n) As of the date hereof, the Grantor does not hold any Commercial
Tort Claims nor is aware of any such pending claims, except for such claims
described in Schedule VI.
SECTION 5. Covenants as to the Collateral. So long as any of the
Obligations shall remain outstanding, unless the Collateral Agent shall
otherwise consent in writing:
(a) Further Assurances. The Grantor will at its expense, at any time
and from time to time, promptly execute and deliver all further instruments and
documents and take all further action that the Collateral Agent may request in
order to (i) perfect and protect the security interest purported to be created
hereby; (ii) enable the Collateral Agent to exercise and enforce its rights and
remedies hereunder in respect of the Collateral; or (iii) otherwise effect the
purposes of this Agreement, including, without limitation: (A) marking
conspicuously all Chattel Paper and each License and, at the request of the
Collateral Agent, each of its Records pertaining to the Collateral with a
legend, in form and substance satisfactory to the Collateral Agent, indicating
that such Chattel Paper, License or Collateral is subject to the security
interest created hereby, (B) if any Account shall be evidenced by Promissory
Notes or other Instruments or Chattel Paper, delivering and pledging to the
Collateral Agent hereunder such Promissory Notes, Instruments or Chattel Paper,
duly endorsed and accompanied by executed instruments of transfer or assignment,
all in form and substance satisfactory to the Collateral Agent, (C) executing
and filing (to the extent, if any, that the Grantor's signature is required
thereon) or authenticating the filing of, such financing or continuation
statements, or amendments thereto, as may be necessary or desirable or that the
Collateral Agent may request in order to perfect and preserve the security
interest purported to be created hereby, (D) furnishing to the Collateral Agent
from time to time statements and schedules further identifying and describing
the Collateral and such other reports in connection with the Collateral in each
case as the Collateral Agent may reasonably request, all in reasonable detail,
(E) if any Collateral having a net book value in excess of $150,000 in any case
shall be in the possession of a third party, notifying such Person of the
Collateral Agent's security interest created hereby and obtaining a written
acknowledgment from such Person that such Person holds possession of the
Collateral for the benefit of the Collateral Agent, which such written
acknowledgement shall be in form and substance satisfactory to the Collateral
Agent, (F) if at any time after the date hereof, the Grantor acquires or holds
any Commercial Tort Claim, promptly notifying the Collateral Agent in a writing
signed by the Grantor setting forth a brief description of such Commercial Tort
Claim and granting to the Collateral Agent a security interest therein and in
the proceeds thereof, which writing shall incorporate the provisions hereof and
shall be in form and substance satisfactory to the Collateral Agent, and (G)
taking all actions required by any earlier versions of the Uniform
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Commercial Code or by other law, as applicable, in any relevant Uniform
Commercial Code jurisdiction, or by other law as applicable in any foreign
jurisdiction.
(b) Location of Equipment and Inventory. The Grantor will keep the
Equipment and Inventory at the locations specified therefor in Section 4(g)
hereof or, upon not less than thirty (30) days' prior written notice to the
Collateral Agent accompanied by a new Schedule V hereto indicating each new
location of the Equipment and Inventory, at such other locations in the United
States.
(c) Condition of Equipment. The Grantor will maintain or cause the
Equipment (necessary or useful to its business) to be maintained and preserved
in good condition, repair and working order, ordinary wear and tear excepted,
and will forthwith, or in the case of any loss or damage to any Equipment within
a commercially reasonable time after the occurrence thereof, make or cause to be
made all repairs, replacements and other improvements in connection therewith
which are necessary or desirable, consistent with past practice, or which the
Collateral Agent may request to such end. The Grantor will promptly furnish to
the Collateral Agent a statement describing in reasonable detail any loss or
damage in excess of $100,000 to any Equipment.
(d) Taxes, Etc. The Grantor agrees to pay promptly when due all
property and other taxes, assessments and governmental charges or levies imposed
upon, and all claims (including claims for labor, materials and supplies)
against, the Equipment and Inventory, except to the extent the validity thereof
is being contested in good faith by proper proceedings which stay the imposition
of any penalty, fine or Lien resulting from the non-payment thereof and with
respect to which adequate reserves in accordance with generally accepted
accounting principles have been set aside for the payment thereof.
(e) Insurance.
(i) The Grantor will, at its own expense, maintain insurance
(including, without limitation, commercial general liability and property
insurance) with respect to the Equipment and Inventory in such amounts, against
such risks, in such form and with responsible and reputable insurance companies
or associations as is required by any governmental authority having jurisdiction
with respect thereto or as is carried generally in accordance with sound
business practice by companies in similar businesses similarly situated and in
any event, in amount, adequacy and scope reasonably satisfactory to the
Collateral Agent. Each policy for liability insurance shall provide for all
losses to be paid on behalf of the Collateral Agent and the Grantor as their
respective interests may appear, and each policy for property damage insurance
shall provide for all losses to be adjusted with, and paid directly to, the
Collateral Agent. Each such policy shall in addition (A) name the Collateral
Agent as an additional insured party thereunder (without any representation or
warranty by or obligation upon the Collateral Agent) as their interests may
appear, (B) contain an agreement by the insurer that any loss thereunder shall
be payable to the Collateral Agent on its own account notwithstanding any
action, inaction or breach of representation or warranty by the Grantor, (C)
provide that there shall be no recourse against the Collateral Agent for payment
of premiums or other amounts with respect thereto and (D) provide that at least
30 days' prior written notice of cancellation, lapse, expiration or other
adverse change shall be given to the Collateral Agent by
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the insurer. The Grantor will, if so requested by the Collateral Agent, deliver
to the Collateral Agent original or duplicate policies of such insurance and, as
often as the Collateral Agent may reasonably request, a report of a reputable
insurance broker with respect to such insurance. The Grantor will also, at the
request of the Collateral Agent, execute and deliver instruments of assignment
of such insurance policies and cause the respective insurers to acknowledge
notice of such assignment.
(ii) Reimbursement under any liability insurance maintained by
the Grantor pursuant to this Section 5(e) may be paid directly to the Person who
shall have incurred liability covered by such insurance. In the case of any loss
involving damage to Equipment or Inventory, any proceeds of insurance maintained
by a Grantor pursuant to this Section 5(e) shall be paid to the Collateral Agent
(except as to which paragraph (iii) of this Section 5(e) is not applicable), the
Grantor will make or cause to be made the necessary repairs to or replacements
of such Equipment or Inventory, and any proceeds of insurance maintained by the
Grantor pursuant to this Section 5(e) shall be paid by the Collateral Agent to
the Grantor as reimbursement for the costs of such repairs or replacements.
(iii) All insurance payments in respect of such Equipment or
Inventory shall be paid to the Collateral Agent and applied as specified in
Section 7(b) hereof.
(f) Provisions Concerning the Accounts and the Licenses.
(i) The Grantor will (A) give the Collateral Agent at least 30
days' prior written notice of any change in the Grantor's name, identity or
organizational structure, (B) maintain its jurisdiction of incorporation as set
forth in Section 4(b) hereto, (C) immediately notify the Collateral Agent upon
obtaining an organizational identification number, if on the date hereof the
Grantor did not have such identification number, and (D) keep adequate records
concerning the Accounts and Chattel Paper and permit representatives of the
Collateral Agent to inspect and make abstracts from such Records and Chattel
Paper.
(ii) The Grantor will, except as otherwise provided in this
subsection (f), continue to collect, at its own expense, all amounts due or to
become due under the Accounts. In connection with such collections, the Grantor
may (and, at the Collateral Agent's direction, will) take such action as the
Grantor or the Collateral Agent may deem necessary or advisable to enforce
collection or performance of the Accounts; provided, however, that the
Collateral Agent shall have the right at any time, upon the occurrence and
during the continuance of an Event of Default, to notify the account debtors or
obligors under any Accounts of the assignment of such Accounts to the Collateral
Agent and to direct such account debtors or obligors to make payment of all
amounts due or to become due to the Grantor thereunder directly to the
Collateral Agent or its designated agent and, upon such notification and at the
expense of the Grantor and to the extent permitted by law, to enforce collection
of any such Accounts and to adjust, settle or compromise the amount or payment
thereof, in the same manner and to the same extent as the Grantor might have
done. After receipt by the Grantor of a notice from the Collateral Agent that
the Collateral Agent has notified, intends to notify, or has enforced or intends
to enforce a Grantor's rights against the account debtors or obligors under any
Accounts as referred to in the proviso to the immediately preceding sentence,
(A) all amounts and proceeds (including Instruments) received by the Grantor in
respect of the Accounts shall be received in
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trust for the benefit of the Collateral Agent hereunder, shall be segregated
from other funds of the Grantor and shall be forthwith paid over to the
Collateral Agent in the same form as so received (with any necessary
endorsement) to be held as cash collateral and either (i) credited to the loan
account so long as no Event of Default shall have occurred and be continuing or
(ii) if an Event of Default shall have occurred and be continuing, applied as
specified in Section 7(b) hereof, and (B) the Grantor will not adjust, settle or
compromise the amount or payment of any Account or release wholly or partly any
account debtor or obligor thereof or allow any credit or discount thereon. In
addition, upon the occurrence and during the continuance of an Event of Default,
the Collateral Agent may (in its sole and absolute discretion) direct any or all
of the banks and financial institutions with which the Grantor either maintains
a Deposit Account or a lockbox or deposits the proceeds of any Accounts to send
immediately to the Collateral Agent by wire transfer (to such account as the
Collateral Agent shall specify, or in such other manner as the Collateral Agent
shall direct) all or a portion of such securities, cash, investments and other
items held by such institution. Any such securities, cash, investments and other
items so received by the Collateral Agent shall (in the sole and absolute
discretion of the Collateral Agent) be held as additional Collateral for the
Obligations or distributed in accordance with Section 7 hereof.
(iii) Upon the occurrence and during the continuance of any
breach or default under any material License referred to in Schedule II hereto
by any party thereto other than the Grantor, the Grantor will, promptly after
obtaining knowledge thereof, give the Collateral Agent written notice of the
nature and duration thereof, specifying what action, if any, it has taken and
proposes to take with respect thereto and thereafter will take reasonable steps
to protect and preserve its rights and remedies in respect of such breach or
default, or will obtain or acquire an appropriate substitute License.
(iv) The Grantor will, at its expense, promptly deliver to the
Collateral Agent a copy of each notice or other communication received by it by
which any other party to any material License referred to in Schedule II hereto
purports to exercise any of its rights or affect any of its obligations
thereunder, together with a copy of any reply by the Grantor thereto.
(v) The Grantor will exercise promptly and diligently each and
every right which it may have under each material License (other than any right
of termination) and will duly perform and observe in all respects all of its
obligations under each material License and will take all action reasonably
necessary to maintain such Licenses in full force and effect. The Grantor will
not, without the prior written consent of the Collateral Agent, cancel,
terminate, amend or otherwise modify in any respect, or waive any provision of,
any material License referred to in Schedule II hereto.
(g) Transfers and Other Liens.
(i) The Grantor will not sell, assign (by operation of law or
otherwise), lease, license, exchange or otherwise transfer or dispose of any of
the Collateral, except (A) to the Parent, and (B) for Inventory and Intellectual
Property in the ordinary course of business, and (C) worn-out or obsolete assets
not necessary to the business, and (D) as otherwise permitted by this Agreement.
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(ii) The Grantor will not create, suffer to exist or grant any
Lien upon or with respect to any Collateral other than a Permitted Lien.
(h) Intellectual Property.
(i) If applicable, the Grantor has duly executed and delivered
the applicable Assignm-ent for Security in the form attached hereto as Exhibit
A. The Grantor (either itself or through licensees) will, and will cause each
licensee thereof to, take all action necessary to maintain all of the
Intellectual Property in full force and effect, including, without limitation,
using the proper statutory notices and markings and using the Trademarks on each
applicable trademark class of goods in order to so maintain the Trademarks in
full force free, from any claim of abandonment for non-use, and the Grantor will
not (nor permit any licensee thereof to) do any act or knowingly omit to do any
act whereby any Intellectual Property may become invalidated; provided, however,
that so long as no Event of Default has occurred and is continuing, the Grantor
shall not have an obligation to use or to maintain any Intellectual Property (A)
that relates solely to any product or work, that has been, or is in the process
of being, discontinued, abandoned or terminated, (B) that is being replaced with
Intellectual Property substantially similar to the Intellectual Property that
may be abandoned or otherwise become invalid, so long as the failure to use or
maintain such Intellectual Property does not materially adversely affect the
validity of such replacement Intellectual Property and so long as such
replacement Intellectual Property is subject to the Lien created by this
Agreement or (C) that is substantially the same as another Intellectual Property
that is in full force, so long the failure to use or maintain such Intellectual
Property does not materially adversely affect the validity of such replacement
Intellectual Property and so long as such other Intellectual Property is subject
to the Lien and security interest created by this Agreement. The Grantor will
cause to be taken all necessary steps in any proceeding before the United States
Patent and Trademark Office and the United States Copyright Office or any
similar office or agency in any other country or political subdivision thereof
to maintain each registration of the Intellectual Property (other than the
Intellectual Property described in the proviso to the immediately preceding
sentence), including, without limitation, filing of renewals, affidavits of use,
affidavits of incontestability and opposition, interference and cancellation
proceedings and payment of maintenance fees, filing fees, taxes or other
governmental fees. If any Intellectual Property (other than Intellectual
Property described in the proviso to the first sentence of subsection (i) of
this clause (h)) is infringed, misappropriated, diluted or otherwise violated in
any material respect by a third party, the Grantor shall (x) upon learning of
such infringement, misappropriation, dilution or other violation, promptly
notify the Collateral Agent and (y) to the extent the Grantor shall deem
appropriate under the circumstances, promptly xxx for infringement,
misappropriation, dilution or other violation, seek injunctive relief where
appropriate and recover any and all damages for such infringement,
misappropriation, dilution or other violation, or take such other actions as the
Grantor shall deem appropriate under the circumstances to protect such
Intellectual Property. The Grantor shall furnish to the Collateral Agent from
time to time upon its request statements and schedules further identifying and
describing the Intellectual Property and Licenses and such other reports in
connection with the Intellectual Property and Licenses as the Collateral Agent
may reasonably request, all in reasonable detail and promptly upon request of
the Collateral Agent, following receipt by the Collateral Agent of any such
statements, schedules or reports, the Grantor shall modify this Agreement by
amending Schedule II hereto, as the case may be, to include any Intellectual
Property and License, as the case may be, which becomes part of the Collateral
under this Agreement and shall execute and
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authenticate such documents and do such acts as shall be necessary or, in the
judgment of the Collateral Agent, desirable to subject such Intellectual
Property and Licenses to the Lien and security interest created by this
Agreement. Notwithstanding anything herein to the contrary, upon the occurrence
and during the continuance of an Event of Default, the Grantor may not abandon
or otherwise permit any Intellectual Property to become invalid without the
prior written consent of the Collateral Agent, and if any Intellectual Property
is infringed, misappropriated, diluted or otherwise violated in any material
respect by a third party, the Grantor will take such action as the Collateral
Agent shall deem appropriate under the circumstances to protect such
Intellectual Property.
(ii) In no event shall the Grantor, either itself or through
any agent, employee, licensee or designee, file an application for the
registration of any Trademark or Copyright or the issuance of any Patent with
the United States Patent and Trademark Office or the United States Copyright
Office, as applicable, or in any similar office or agency of the United States
or any country or any political subdivision thereof unless it gives the
Collateral Agent prior written notice thereof. Upon request of the Collateral
Agent, the Grantor shall execute, authenticate and deliver any and all
assignments, agreements, instruments, documents and papers as the Collateral
Agent may reasonably request to evidence the Collateral Agent's security
interest hereunder in such Intellectual Property and the General Intangibles of
the Grantor relating thereto or represented thereby, and the Grantor hereby
appoints the Collateral Agent its attorney-in-fact to execute and/or
authenticate and file all such writings for the foregoing purposes, all acts of
such attorney being hereby ratified and confirmed, and such power (being coupled
with an interest) shall be irrevocable until the indefeasible payment in full in
cash of all of the Obligations in full and the termination of each of the
Transaction Documents.
(i) Deposit, Commodities and Securities Accounts. Prior to the issuance
of any Note, the Grantor shall cause each bank and other financial institution
with an account referred to in Schedule IV hereto to execute and deliver to the
Collateral Agent a control agreement, in form and substance reasonably
satisfactory to the Collateral Agent, duly executed by the Grantor and such bank
or financial institution, or enter into other arrangements in form and substance
satisfactory to the Collateral Agent, pursuant to which such institution shall
irrevocably agree, inter alia, that (i) it will comply at any time with the
instructions originated by the Collateral Agent to such bank or financial
institution directing the disposition of cash, Commodity Contracts, securities,
Investment Property and other items from time to time credited to such account,
without further consent of the Grantor, which instructions the Collateral Agent
will not give to such bank or other financial institution in the absence of a
continuing Event of Default, (ii) all cash, Commodity Contracts, securities,
Investment Property and other items of the Grantor deposited with such
institution shall be subject to a perfected, first priority security interest in
favor of the Collateral Agent, (iii) any right of set off, banker's Lien or
other similar Lien, security interest or encumbrance shall be fully waived as
against the Collateral Agent, and (iv) upon receipt of written notice from the
Collateral Agent during the continuance of an Event of Default, such bank or
financial institution shall immediately send to the Collateral Agent by wire
transfer (to such account as the Collateral Agent shall specify, or in such
other manner as the Collateral Agent shall direct) all such cash, the value of
any Commodity Contracts, securities, Investment Property and other items held by
it. Without the prior written consent of the Collateral Agent, the Grantor shall
not make or maintain any Deposit Account, Commodity Account or Securities
Account except for the accounts set forth in Schedule IV hereto. The
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provisions of this paragraph 5(i) shall not apply to (i) Deposit Accounts for
which the Collateral Agent is the depositary and (ii) Deposit Accounts specially
and exclusively used for payroll, payroll taxes and other employee wage and
benefit payments to or for the benefit of a Grantor's salaried employees.
(j) [Intentionally Left Blank].
(k) Control. The Grantor hereby agrees to take any or all action that
may be necessary or desirable or that the Collateral Agent may request in order
for the Collateral Agent to obtain control in accordance with Sections 9-105 -
9-107 of the Code with respect to the following Collateral: (i) Electronic
Chattel Paper, (ii) Investment Property and (iii) Letter-of-Credit Rights.
(l) Inspection and Reporting. The Grantor shall permit the Collateral
Agent, or any agent or representatives thereof or such professionals or other
Persons as the Collateral Agent may designate, not more than twice a year in the
absence of an Event of Default, (i) to examine and make copies of and abstracts
from the Grantor's records and books of account, (ii) to visit and inspect its
properties, (iii) to verify materials, leases, notes, Accounts, Inventory and
other assets of the Grantor from time to time, (iii) to conduct audits, physical
counts, appraisals and/or valuations, examinations at the locations of the
Grantor. The Grantor shall also permit the Collateral Agent, or any agent or
representatives thereof or such professionals or other Persons as the Collateral
Agent may designate to discuss the Grantor's affairs, finances and accounts with
any of its directors, officers, managerial employees, independent accountants or
any of its other representatives.
SECTION 6. Additional Provisions Concerning the Collateral.
(a) The Grantor hereby (i) authorizes the Collateral Agent to file one
or more financing or continuation statements, and amendments thereto, relating
to the Collateral and (ii) ratifies such authorization to the extent that the
Collateral Agent has filed any such financing or continuation statements, or
amendments thereto, prior to the date hereof. A photocopy or other reproduction
of this Agreement or any financing statement covering the Collateral or any part
thereof shall be sufficient as a financing statement where permitted by law.
(b) The Grantor hereby irrevocably appoints the Collateral Agent as its
attorney-in-fact and proxy, with full authority in the place and stead of the
Grantor and in the name of the Grantor or otherwise, from time to time in the
Collateral Agent's discretion, to take any action and to execute any instrument
which the Collateral Agent may deem necessary or advisable to accomplish the
purposes of this Agreement (subject to the rights of the Grantor under Section 5
hereof), including, without limitation, (i) to obtain and adjust insurance
required to be paid to the Collateral Agent pursuant to Section 5(e) hereof,
(ii) to ask, demand, collect, xxx for, recover, compound, receive and give
acquittance and receipts for moneys due and to become due under or in respect of
any Collateral, (iii) to receive, endorse, and collect any drafts or other
instruments, documents and chattel paper in connection with clause (i) or (ii)
above, (iv) to file any claims or take any action or institute any proceedings
which the Collateral Agent may deem necessary or desirable for the collection of
any Collateral or otherwise to enforce the rights of the Collateral Agent and
the Buyers with respect to any Collateral, and (v) to execute assignments,
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licenses and other documents to enforce the rights of the Collateral Agent and
the Buyers with respect to any Collateral. This power is coupled with an
interest and is irrevocable until all of the Obligations are indefeasibly paid
in full in cash.
(c) For the purpose of enabling the Collateral Agent to exercise rights
and remedies hereunder, at such time as the Collateral Agent shall be lawfully
entitled to exercise such rights and remedies, and for no other purpose, the
Grantor hereby grants to the Collateral Agent, to the extent assignable, an
irrevocable, non-exclusive license (exercisable without payment of royalty or
other compensation to the Grantor) to use, assign, license or sublicense any
Intellectual Property now owned or hereafter acquired by the Grantor, wherever
the same may be located, including in such license 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 thereof. Notwithstanding
anything contained herein to the contrary, but subject to the provisions of the
Securities Purchase Agreement that limit the right of the Grantor to dispose of
its property and Section 5(h) hereof, so long as no Event of Default shall have
occurred and be continuing, the Grantor may 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 its business. In
furtherance of the foregoing, unless an Event of Default shall have occurred and
be continuing, the Collateral Agent shall from time to time, upon the request of
a Grantor, execute and deliver any instruments, certificates or other documents,
in the form so requested, which the Grantor shall have certified are appropriate
(in the Grantor's judgment) to allow it to take any action permitted above
(including relinquishment of the license provided pursuant to this clause (c) as
to any Intellectual Property). Further, upon the indefeasible payment in full in
cash of all of the Obligations, the Collateral Agent (subject to Section 10(e)
hereof) shall release and reassign to the Grantor all of the Collateral Agent's
right, title and interest in and to the Intellectual Property, and the Licenses,
all without recourse, representation or warranty whatsoever. The exercise of
rights and remedies hereunder by the Collateral Agent shall not terminate the
rights of the holders of any licenses or sublicenses theretofore granted by the
Grantor in accordance with the second sentence of this clause (c). The Grantor
hereby releases the Collateral Agent from any claims, causes of action and
demands at any time arising out of or with respect to any actions taken or
omitted to be taken by the Collateral Agent under the powers of attorney granted
herein other than actions taken or omitted to be taken through the Collateral
Agent's gross negligence or willful misconduct, as determined by a final
determination of a court of competent jurisdiction.
(d) If the Grantor fails to perform any agreement contained herein, the
Collateral Agent may itself perform, or cause performance of, such agreement or
obligation, in the name of the Grantor or the Collateral Agent, and the expenses
of the Collateral Agent incurred in connection therewith shall be payable by the
Grantor pursuant to Section 8 hereof and shall be secured by the Collateral.
(e) The powers conferred on the Collateral Agent hereunder are solely
to protect its interest in the Collateral and shall not impose any duty upon it
to exercise any such powers. Except for the safe custody of any Collateral in
its possession and the accounting for moneys actually received by it hereunder,
the Collateral Agent shall have no duty as to any Collateral or as to the taking
of any necessary steps to preserve rights against prior parties or any other
rights pertaining to any Collateral.
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(f) Anything herein to the contrary notwithstanding (i) the Grantor
shall remain liable under the Licenses and otherwise with respect to any of the
Collateral to the extent set forth therein to perform all of its obligations
thereunder to the same extent as if this Agreement had not been executed, (ii)
the exercise by the Collateral Agent of any of its rights hereunder shall not
release the Grantor from any of its obligations under the Licenses or otherwise
in respect of the Collateral, and (iii) the Collateral Agent shall not have any
obligation or liability by reason of this Agreement under the Licenses or with
respect to any of the other Collateral, nor shall the Collateral Agent be
obligated to perform any of the obligations or duties of the Grantor thereunder
or to take any action to collect or enforce any claim for payment assigned
hereunder.
SECTION 7. Remedies Upon Default. If any Event of Default shall have
occurred and be continuing:
(a) The Collateral Agent may exercise in respect of the Collateral, in
addition to any other rights and remedies provided for herein or otherwise
available to it, all of the rights and remedies of a secured party upon default
under the Code (whether or not the Code applies to the affected Collateral), and
also may (i) take absolute control of the Collateral, including, without
limitation, transfer into the Collateral Agent's name or into the name of its
nominee or nominees (to the extent the Collateral Agent has not theretofore done
so) and thereafter receive, for the benefit of the Collateral Agent, all
payments made thereon, give all consents, waivers and ratifications in respect
thereof and otherwise act with respect thereto as though it were the outright
owner thereof, (ii) require the Grantor to, and the Grantor hereby agrees that
it will at its expense and upon request of the Collateral Agent forthwith,
assemble all or part of the Collateral as directed by the Collateral Agent and
make it available to the Collateral Agent at a place or places to be designated
by the Collateral Agent that is reasonably convenient to both parties, and the
Collateral Agent may enter into and occupy any premises owned or leased by the
Grantor where the Collateral or any part thereof is located or assembled for a
reasonable period in order to effectuate the Collateral Agent's rights and
remedies hereunder or under law, without obligation to the Grantor in respect of
such occupation, and (iii) without notice except as specified below and without
any obligation to prepare or process the Collateral for sale, (A) sell the
Collateral or any part thereof in one or more parcels at public or private sale,
at any of the Collateral Agent's offices or elsewhere, for cash, on credit or
for future delivery, and at such price or prices and upon such other terms as
the Collateral Agent may deem commercially reasonable and/or (B) lease, license
or dispose of the Collateral or any part thereof upon such terms as the
Collateral Agent may deem commercially reasonable. The Grantor agrees that, to
the extent notice of sale or any other disposition of the Collateral shall be
required by law, at least ten (10) days' notice to the Grantor of the time and
place of any public sale or the time after which any private sale or other
disposition of the Collateral is to be made shall constitute reasonable
notification. The Collateral Agent shall not be obligated to make any sale or
other disposition of Collateral regardless of notice of sale having been given.
The Collateral Agent may adjourn any public or private sale from time to time by
announcement at the time and place fixed therefor, and such sale may, without
further notice, be made at the time and place to which it was so adjourned. The
Grantor hereby waives any claims against the Collateral Agent and the Buyers
arising by reason of the fact that the price at which the Collateral may have
been sold at 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
Obligations, even if the Collateral Agent accepts the first offer
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received and does not offer the Collateral to more than one offeree, and waives
all rights that the Grantor may have to require that all or any part of the
Collateral be marshalled upon any sale (public or private) thereof. The Grantor
hereby acknowledges that (i) any such sale of the Collateral by the Collateral
Agent shall be made without warranty, (ii) the Collateral Agent may specifically
disclaim any warranties of title, possession, quiet enjoyment or the like, and
(iii) such actions set forth in clauses (i) and (ii) above shall not adversely
effect the commercial reasonableness of any such sale of the Collateral. In
addition to the foregoing, (i) upon written notice to the Grantor from the
Collateral Agent, the Grantor shall cease any use of the Intellectual Property
or any trademark, patent or copyright similar thereto for any purpose described
in such notice; (ii) the Collateral Agent may, at any time and from time to
time, upon 10 days' prior notice to the Grantor, license, whether general,
special or otherwise, and whether on an exclusive or non-exclusive basis, any of
the Intellectual Property, throughout the universe for such term or terms, on
such conditions, and in such manner, as the Collateral Agent shall in its sole
discretion determine; and (iii) the Collateral Agent may, at any time, pursuant
to the authority granted in Section 6 hereof (such authority being effective
upon the occurrence and during the continuance of an Event of Default), execute
and deliver on behalf of the Grantor, one or more instruments of assignment of
the Intellectual Property (or any application or registration thereof), in form
suitable for filing, recording or registration in any country.
(b) Any cash held by the Collateral Agent as Collateral and all Cash
Proceeds received by the Collateral Agent in respect of any sale of or
collection from, or other realization upon, all or any part of the Collateral
may, in the discretion of the Collateral Agent, be held by the Collateral Agent
as collateral for, and/or then or at any time thereafter applied (after payment
of any amounts payable to the Collateral Agent pursuant to Section 8 hereof) in
whole or in part by the Collateral Agent against, all or any part of the
Obligations in such order as the Collateral Agent shall elect, consistent with
the provisions of the Securities Purchase Agreement. Any surplus of such cash or
Cash Proceeds held by the Collateral Agent and remaining after the indefeasible
payment in full in cash of all of the Obligations shall be paid over to
whomsoever shall be lawfully entitled to receive the same or as a court of
competent jurisdiction shall direct.
(c) In the event that the proceeds of any such sale, collection or
realization are insufficient to pay all amounts to which the Collateral Agent
and the Buyers are legally entitled, the Grantor shall be liable for the
deficiency, together with interest thereon at the highest rate specified in any
applicable Transaction Document for interest on overdue principal thereof or
such other rate as shall be fixed by applicable law, together with the costs of
collection and the reasonable fees, costs, expenses and other client charges of
any attorneys employed by the Collateral Agent to collect such deficiency.
(d) The Grantor hereby acknowledges that if the Collateral Agent
complies with any applicable state, provincial, or federal law requirements in
connection with a disposition of the Collateral, such compliance will not
adversely effect the commercial reasonableness of any sale or other disposition
of the Collateral.
(e) The Collateral Agent shall not be required to marshal any present
or future collateral security (including, but not limited to, this Agreement and
the Collateral) for, or other assurances of payment of, the Obligations or any
of them or to resort to such collateral security or other assurances of payment
in any particular order, and all of the Collateral Agent's rights
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hereunder and in respect of such collateral security and other assurances of
payment shall be cumulative and in addition to all other rights, however
existing or arising. To the extent that the Grantor lawfully may, the Grantor
hereby agrees that it will not invoke any law relating to the marshalling of
collateral which might cause delay in or impede the enforcement of the
Collateral Agent's rights under this Agreement or under any other instrument
creating or evidencing any of the Obligations or under which any of the
Obligations is outstanding or by which any of the Obligations is secured or
payment thereof is otherwise assured, and, to the extent that it lawfully may,
the Grantor hereby irrevocably waives the benefits of all such laws.
SECTION 8. Indemnity and Expenses.
(a) The Grantor agrees to defend, protect, indemnify and hold the
Collateral Agent harmless from and against any and all claims, damages, losses,
liabilities, obligations, penalties, fees, costs and expenses (including,
without limitation, legal fees, costs, expenses, and disbursements of Collateral
Agent's counsel) to the extent that they arise out of or otherwise result from
this Agreement (including, without limitation, enforcement of this Agreement),
except claims, losses or liabilities resulting solely and directly from the
Collateral Agent's gross negligence or willful misconduct, as determined by a
final judgment of a court of competent jurisdiction.
(b) The Grantor will upon demand pay to the Collateral Agent the amount
of any and all costs and expenses, including the reasonable fees, costs,
expenses and disbursements of counsel for the Collateral Agent and of any
experts and agents (including, without limitation, any collateral trustee which
may act as agent of the Collateral Agent), which the Collateral Agent may incur
in connection with (i) the preparation, negotiation, execution, delivery,
recordation, administration, amendment, waiver or other modification or
termination of this Agreement, (ii) the custody, preservation, use or operation
of, or the sale of, collection from, or other realization upon, any Collateral,
(iii) the exercise or enforcement of any of the rights of the Collateral Agent
hereunder, or (iv) the failure by the Grantor to perform or observe any of the
provisions hereof.
SECTION 9. Notices, Etc. All notices and other communications provided
for hereunder shall be in writing and shall be mailed (by certified mail,
postage prepaid and return receipt requested), telecopied or delivered, if to
the Grantor at its address specified below and if to the Collateral Agent to it,
at its address specified below; or as to any such Person, at such other address
as shall be designated by such Person in a written notice to such other Person
complying as to delivery with the terms of this Section 9. All such notices and
other communications shall be effective (i) if sent by certified mail, return
receipt requested, when received or three days after deposited in the mails,
whichever occurs first, (ii) if telecopied, when transmitted and confirmation is
received, or (iii) if delivered, upon delivery.
SECTION 10. Miscellaneous.
(a) No amendment of any provision of this Agreement shall be effective
unless it is in writing and signed by the Grantor and the Collateral Agent, and
no waiver of any provision of this Agreement, and no consent to any departure by
the Grantor therefrom, shall be effective unless it is in writing and signed by
the Collateral Agent, and then such waiver or
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consent shall be effective only in the specific instance and for the specific
purpose for which given.
(b) No failure on the part of the Collateral Agent to exercise, and no
delay in exercising, any right hereunder or under any other Transaction Document
shall operate as a waiver thereof; nor shall any single or partial exercise of
any such right preclude any other or further exercise thereof or the exercise of
any other right. The rights and remedies of the Collateral Agent or any Buyer
provided herein and in the other Transaction Documents are cumulative and are in
addition to, and not exclusive of, any rights or remedies provided by law. The
rights of the Collateral Agent or any Buyer under any Transaction Document
against any party thereto are not conditional or contingent on any attempt by
such Person to exercise any of its rights under any other Transaction Document
against such party or against any other Person, including but not limited to,
the Grantor.
(c) Any provision of this Agreement which 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 portions hereof or thereof or affecting the validity or enforceability
of such provision in any other jurisdiction.
(d) This Agreement shall create a continuing security interest in the
Collateral and shall (i) remain in full force and effect until the indefeasible
payment in full in cash of the Obligations , and (ii) be binding on the Grantor
and all other Persons who become bound as debtor to this Agreement in accordance
with Section 9-203(d) of the Code and shall inure, together with all rights and
remedies of the Collateral Agent and the Buyers hereunder, to the benefit of the
Collateral Agent and the Buyers and their respective permitted successors,
transferees and assigns. Without limiting the generality of clause (ii) of the
immediately preceding sentence, without notice to the Grantor, the Collateral
Agent and the Buyers may assign or otherwise transfer their rights and
obligations under this Agreement and any other Transaction Document, to any
other Person and such other Person shall thereupon become vested with all of the
benefits in respect thereof granted to the Collateral Agent and the Buyers
herein or otherwise. Upon any such assignment or transfer, all references in
this Agreement to the Collateral Agent or any such Buyer shall mean the assignee
of the Collateral Agent or such Buyer. None of the rights or obligations of the
Grantor hereunder may be assigned or otherwise transferred without the prior
written consent of the Collateral Agent, and any such assignment or transfer
shall be null and void.
(e) Upon the indefeasible payment in full in cash of the Obligations,
(i) this Agreement and the security interests created hereby shall terminate and
all rights to the Collateral shall revert to the Grantor and (ii) the Collateral
Agent will, upon the Grantor's request and at the Grantor's expense, (A) return
to the Grantor such of the Collateral as shall not have been sold or otherwise
disposed of or applied pursuant to the terms hereof and (B) execute and deliver
to the Grantor such documents as the Grantor shall reasonably request to
evidence such termination, all without any representation, warranty or recourse
whatsoever.
(f) THIS AGREEMENT SHALL BE GOVERNED BY, CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, EXCEPT AS REQUIRED BY
MANDATORY PROVISIONS OF LAW AND EXCEPT TO
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THE EXTENT THAT THE VALIDITY AND PERFECTION OR THE PERFECTION AND THE EFFECT OF
PERFECTION OR NON-PERFECTION OF THE SECURITY INTEREST CREATED HEREBY, OR
REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE
LAW OF A JURISDICTION OTHER THAN THE STATE OF NEW YORK.
(g) ANY LEGAL ACTION, SUIT OR PROCEEDING WITH RESPECT TO THIS AGREEMENT
OR ANY DOCUMENT RELATED THERETO MAY BE BROUGHT IN XXX XXXXXX XX XXX XXXXX XX XXX
XXXX IN THE COUNTY OF NEW YORK OR THE UNITED STATES OF AMERICA FOR THE SOUTHERN
DISTRICT OF NEW YORK, AND APPELLATE COURTS THEREOF, AND, BY EXECUTION AND
DELIVERY OF THIS AGREEMENT, THE GRANTOR HEREBY ACCEPTS FOR ITSELF AND IN RESPECT
OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE
AFORESAID COURTS. THE GRANTOR HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION, INCLUDING, WITHOUT LIMITATION,
ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON
CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY SUCH
ACTION, SUIT OR PROCEEDING IN SUCH RESPECTIVE JURISDICTIONS AND CONSENTS TO THE
GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY THE
COURT.
(h) EACH OF THE GRANTOR AND (BY ITS ACCEPTANCE OF THE BENEFITS OF THIS
AGREEMENT) THE COLLATERAL AGENT WAIVES ANY RIGHT IT MAY HAVE TO TRIAL BY JURY IN
RESPECT OF ANY LITIGATION BASED ON, ARISING OUT OF, UNDER OR IN CONNECTION WITH
THIS AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT, OR ANY COURSE OF CONDUCT,
COURSE OF DEALING, VERBAL OR WRITTEN STATEMENT OR OTHER ACTION OF THE PARTIES
HERETO.
(i) The Grantor irrevocably consents to the service of process of any
of the aforesaid courts in any such action, suit or proceeding by the mailing of
copies thereof by registered or certified mail (or any substantially similar
form of mail), postage prepaid, to the Grantor at its address provided herein,
such service to become effective 10 days after such mailing.
(j) Nothing contained herein shall affect the right of the Collateral
Agent to serve process in any other manner permitted by law or commence legal
proceedings or otherwise proceed against the Grantor or any property of the
Grantor in any other jurisdiction.
(k) The Grantor irrevocably and unconditionally waives any right it may
have to claim or recover in any legal action, suit or proceeding referred to in
this Section any special, exemplary, punitive or consequential damages.
(l) Section headings herein are included for convenience of reference
only and shall not constitute a part of this Agreement for any other purpose.
-20-
(m) This Agreement may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which shall be deemed
to be an original, but all of which taken together constitute one in the same
Agreement.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
-21-
IN WITNESS WHEREOF, the Grantor has caused this Agreement to be
executed and delivered by its officer thereunto duly authorized, as of the date
first above written.
COMMTOUCH INC.
By: ____________________________________
Name:
Title:
Address
ACCEPTED BY:
SMITHFIELD FIDUCIARY LLC
By: ____________________________________
Name:
Title:
Address:
SCHEDULE I
LEGAL NAMES; ORGANIZATIONAL IDENTIFICATION NUMBERS; STATES OR
JURISDICTION OF ORGANIZATION
Sched. I-1
SCHEDULE II
INTELLECTUAL PROPERTY AND LICENSES
Sched. II-1
SCHEDULE III
LOCATIONS OF GRANTOR
LOCATION Description of Location (State if
Location (i) contains Rolling Stock,
other Equipment, Fixtures, Goods or
Inventory, (ii) is chief place of
business and chief executive office,
or (iii) contains Records concerning
Accounts and originals of Chattel
Paper)
Sched. III-1
SCHEDULE IV
DEPOSIT ACCOUNTS, SECURITIES ACCOUNTS AND COMMODITIES ACCOUNTS
Name and Address
of Institution
Maintaining Account Account Number Type of Account
------------------- -------------- ---------------
Sched. IV-1
SCHEDULE V
UCC-1 FINANCING STATEMENTS
Sched. V-1
SCHEDULE VI
COMMERCIAL TORT CLAIMS
Sched. VI-1
EXHIBIT A
ASSIGNMENT FOR SECURITY
[TRADEMARKS] [PATENTS] [COPYRIGHTS]
WHEREAS, ____________________ (the "Assignor") [has adopted, used and
is using, and holds all right, title and interest in and to, the trademarks and
service marks listed on the annexed Schedule 1A, which trademarks and service
marks are registered or applied for in the United States Patent and Trademark
Office (the "Trademarks")] [holds all right, title and interest in the letter
patents, design patents and utility patents listed on the annexed Schedule 1A,
which patents are issued or applied for in the United States Patent and
Trademark Office (the "Patents")] [holds all right, title and interest in the
copyrights listed on the annexed Schedule 1A, which copyrights are registered in
the United States Copyright Office (the "Copyrights")];
WHEREAS, the Assignor has entered into a Security Agreement, dated
November ___2003 (the "Security Agreement"), in favor of Smithfield Fiduciary
LLC, as collateral agent for certain buyers (the "Assignee");
WHEREAS, pursuant to the Security Agreement, the Assignor has assigned
to the Assignee and granted to the Assignee for the benefit of the Buyers a
continuing security interest in all right, title and interest of the Assignor
in, to and under the [Trademarks, together with, among other things, the
good-will of the business symbolized by the Trademarks] [Patents] [Copyrights]
and the applications and registrations thereof, and all proceeds thereof,
including, without limitation, any and all causes of action which may exist by
reason of infringement thereof and any and all damages arising from past,
present and future violations thereof (the "Collateral"), to secure the payment,
performance and observance of the Obligations (as defined in the Security
Agreement);
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Assignor does hereby pledge,
convey, sell, assign, transfer and set over unto the Assignee and grants to the
Assignee for the benefit of the Buyers a continuing security interest in the
Collateral to secure the prompt payment, performance and for the benefit of the
Buyers observance of the Obligations.
The Assignor does hereby further acknowledge and affirm that the rights
and remedies of the Assignee with respect to the Collateral are more fully set
forth in the Security Agreement, the terms and provisions of which are hereby
incorporated herein by reference as if fully set forth herein.
IN WITNESS WHEREOF, the Assignor has caused this Assignment to be duly
executed by its officer thereunto duly authorized as of November __, 2003.
COMMTOUCH INC.
By: ___________________________________
Name:
Title:
Exh. A-1
STATE OF ____________
ss.:
COUNTY OF __________
On this ____ day of _______________, 20__, before me personally came
________________, to me known to be the person who executed the foregoing
instrument, and who, being duly sworn by me, did depose and say that s/he is the
________________ of _______________________________________, a
____________________, and that s/he executed the foregoing instrument in the
firm name of _______________________________________, and that s/he had
authority to sign the same, and s/he acknowledged to me that he executed the
same as the act and deed of said firm for the uses and purposes therein
mentioned.
Exh. A-3
SCHEDULE 1A TO ASSIGNMENT FOR SECURITY
[Trademarks and Trademark Applications]
[Patent and Patent Applications]
[Copyright and Copyright Applications]
Owned by ______________________________
