[EXECUTION COPY]
EXHIBIT 10.8
SECURITY AGREEMENT
SECURITY AGREEMENT, dated as of April 28, 2004 (this "Agreement"), among
MediaBay, Inc., a Florida corporation (the "Company"), the other Persons listed
on the signature pages hereof (such Persons, together with the Company,
collectively, the "Grantors") and ZOHAR CDO 2003-1, LIMITED, a Cayman Islands
exempted company, as agent (in such capacity, the "Agent") for the Lenders (as
defined in the Credit Agreement referred to below).
W I T N E S S E T H:
WHEREAS, the Grantors have entered into that certain Credit Agreement,
dated as of the date hereof, among MediaBay, Inc., Xxxxx Xxxxxxx, Inc. and Audio
Book Club, Inc., as borrowers thereunder, the Guarantors signatory thereto,
Zohar CDO 2003-1, Limited, as Agent and lender thereunder (as amended, amended
and restated, supplemented or otherwise modified from time to time, the "Credit
Agreement"; capitalized terms used but not defined herein shall have the
meanings ascribed to them in the Credit Agreement);
WHEREAS, it is a condition precedent to the Credit Agreement that the
Grantors shall have entered into this Agreement in order to grant to the Agent
for the benefit of the Agent and the Lenders (collectively, the "Secured
Parties") a security interest in the Collateral (as defined herein);
WHEREAS, each Grantor will derive substantial direct and indirect benefit
from the transactions contemplated by the Credit Documents;
NOW, THEREFORE, in consideration of the mutual agreements contained herein
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, each Grantor hereby agrees with the Agent for the
benefit of the Secured Parties as follows:
Section 1. Grant of Security Interest. To secure the due and prompt
payment and performance by the Grantors of the Obligations (as defined below),
each Grantor hereby pledges, assigns and grants to the Agent, for itself and for
the benefit of the other Secured Parties, a continuing security interest in and
lien on all properties, assets and rights of such Grantor of every kind and
nature, wherever located, whether now owned or hereafter acquired or arising,
and all proceeds and products thereof, including, without limitation, all goods,
accounts (including all accounts receivable), contract rights, rights to the
payment of money (including tax refund claims, insurance proceeds and tort
claims), chattel paper, documents, instruments, general intangibles, securities
(together with all income therefrom, increases thereunder and proceeds thereof),
investment property (together with all income therefrom, increases thereunder
and proceeds thereof), patents, trademarks, tradenames, copyrights, engineering
drawings, service marks, customer lists, goodwill, and all licenses, permits,
agreements of any kind or nature pursuant to which such Grantor possesses, uses
or has authority to possess or use property (whether tangible or intangible) of
others or pursuant to which others possess, use or have authority to possess or
use property (whether tangible or intangible) of such Grantor, books and
records, equipment, furniture, fixtures, and all inventory and all other capital
assets, raw materials, work in progress and all substitutions and replacements
thereof (all such properties, assets and rights hereinafter called,
collectively, the "Collateral").
Section 2. Obligations Secured. The Collateral hereunder constitutes and
will constitute continuing security for all of the indebtedness, obligations and
liabilities of the Grantors to the Agent and/or the Lenders and their permitted
successors and assigns under the Credit Agreement and the other Credit
Documents, in each case as such instrument is originally executed on the date
hereof or as modified, amended, restated, supplemented or extended hereafter,
whether such obligations are now existing or hereafter arising, direct or
indirect, absolute or contingent, due or to become due, matured or unmatured,
liquidated or unliquidated, arising by contract, operation of law or otherwise,
whether for principal, interest (including interest which, but for the filing of
a petition in bankruptcy with respect to a Grantor, would have accrued on any
obligation, whether or not a claim is allowed against such a Grantor for such
interest in the related bankruptcy proceeding), fees, expenses, indemnification
or otherwise and all obligations of the Grantors to the Agent and/or the Lenders
arising out of any extension, refinancing or refunding of any of the foregoing
obligations (collectively, the "Obligations").
Section 3. Grantors Remain Liable. Anything herein to the contrary
notwithstanding, (a) each Grantor shall remain liable under the contracts and
agreements included in such Grantor's 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, (b) the exercise by the Agent of any of
the rights hereunder shall not release any Grantor from any of its duties or
obligations under the contracts and agreements included in the Collateral and
(c) neither the Agent or any Lender shall have any obligation or liability under
the contracts and agreements included in the Collateral by reason of this
Agreement or any other Credit Document, nor shall the Agent or any Lender be
obligated to perform any of the obligations or duties of any Grantor thereunder
or to take any action to collect or enforce any claim for payment assigned
hereunder.
Section 4. Pro Rata Security; Application of Proceeds of Collateral. All
amounts owing with respect to the Obligations shall be secured pro rata by the
Collateral without distinction as to whether some Obligations are then due and
payable and other Obligations are not then due and payable. Upon any realization
upon the Collateral by the Agent and/or the Lenders, whether by receipt of
insurance proceeds pursuant to Section 5(d) hereof or upon foreclosure and sale
of all or part of the Collateral pursuant to Section 9 hereof or otherwise, the
Grantors, the Agent and the Lenders agree that the proceeds thereof shall be
applied (i) first, to the payment of expenses incurred with respect to
maintenance and protection of the Collateral and of expenses incurred pursuant
to Section 13 hereof with respect to the sale of or realization upon any of the
Collateral or the perfection, enforcement or protection of the rights of the
Agent and/or the Lenders (including reasonable attorneys' fees and expenses of
every kind), (ii) second, to all amounts of interest, expenses and fees
outstanding which constitute the Obligations; (iii) third, to all amounts of
principal outstanding under the Obligations; and (iv) fourth, any proceeds
remaining after the repayment of all of the Obligations to be paid over to the
Grantors or such other person or persons as may be entitled thereto. The
Grantors shall remain liable for any deficiency remaining unpaid after the
application of proceeds in accordance with the foregoing provisions. The
Grantors agree that all amounts received with respect to any of the Obligations,
whether by realization on the Collateral or otherwise, shall be applied to the
payment of the Obligations in accordance with the provisions of this Section 4.
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Section 5. Representations and Covenants of the Grantors.
(a) Location of Chief Executive Offices; Domicile; Organizational
Identification Number. Each Grantor represents that set forth on Schedule 1 are
(i) the location of its chief executive office and the location where its books
and records are kept, (ii) the jurisdiction of its organization or formation,
(iii) its organizational identification number (if any), (iv) a true and correct
list of all localities where the property of such Grantor comprising the
Collateral is located. Each Grantor agrees that it will not change its name,
organizational identification number (if any), the jurisdiction of its
organization or the location of its chief executive office or the location where
its books and records are kept without providing at least thirty (30) days'
prior written notice to Agent.
(b) Ownership of Collateral.
(i) Each Grantor represents that it is the owner of the Collateral
of such Grantor free from any adverse lien, security interest or
encumbrance, except as expressly permitted by the Credit Agreement.
(ii) Except for the security interests herein granted and except as
expressly permitted by Section 6.1(b) of the Credit Agreement, each
Grantor shall be the owner of the Collateral of such Grantor free of any
liens or other encumbrances, and such Grantor shall defend the same
against all claims and demands of all persons at any time claiming the
same or any interest therein adverse to the Agent and/or the Lenders.
Except as otherwise expressly permitted by the Credit Agreement, such
Grantor shall not pledge, mortgage or create or suffer to exist a security
interest in the Collateral of such Grantor in favor of any person other
than the Agent and the Lenders.
(c) Sale or Disposition of Collateral. Each Grantor shall not sell or
offer to sell or otherwise transfer the Collateral of such Grantor, any portion
thereof, or any interest therein except for sales of inventory in the ordinary
course of business and except as expressly permitted by the Credit Agreement.
(d) Insurance. Each Grantor shall have and maintain at all times with
respect to the Collateral of such Grantor such insurance as is required by the
Credit Agreement, such insurance to be payable to the Agent, subject to the
provisions of Section 2.8(b) of the Credit Agreement, and to such Grantor as
their interests may appear. All policies of insurance shall provide for a
minimum of thirty (30) days' prior written cancellation notice to the Agent. In
the event of failure by any Grantor to provide and maintain insurance as herein
provided, the Agent may, at its option, provide such insurance, and such Grantor
hereby promises to pay to the Agent on demand the amount of any reasonable
disbursements made by the Agent for such purpose. Each Grantor shall furnish to
the Agent certificates or other evidence satisfactory to the Agent of compliance
with the foregoing insurance provisions. The Agent may act as attorney for such
Grantor in endorsing any drafts and, after the occurrence and during the
continuance of an Event of Default (as defined herein), in obtaining, adjusting,
settling and canceling such insurance; and, subject to the provisions of Section
2.8(b) of the Credit Agreement, any amounts collected or received under any such
policies shall be applied by the Agent to the Obligations in accordance with the
provisions of Section 4 hereof, or at the option of the Agent and the Required
Lenders, the same may be released to such Grantor, but such application or
release shall not cure or waive any default hereunder and no amount so released
shall be deemed a payment on any Obligation secured hereby.
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(e) Maintenance of Collateral. Each Grantor shall keep the Collateral in
good order and repair, ordinary and reasonable wear and tear excepted, and will
not use the same in violation of law or any policy of insurance thereon. The
Agent and any Lender may inspect the Collateral at any reasonable time, wherever
located. Except as otherwise provided in the Credit Agreement, each Grantor
shall pay promptly when due all taxes and assessments upon the Collateral or for
its use or operation or upon this Agreement. In its discretion, the Agent may
discharge taxes and other encumbrances at any time levied or placed on the
Collateral, which remain unpaid in violation of the Credit Agreement, make
repairs thereof and pay any necessary filing fees incurred in connection with
the perfection, protection or enforcement of Agent's rights hereunder. Each
Grantor agrees to reimburse the Agent on demand for any and all expenditures so
made, and until paid, the amount thereof shall be a debt secured by the
Collateral of such Grantor. The Agent shall have no obligation to any Grantor to
make any such expenditures, nor shall the making thereof relieve such Grantor of
any default.
(f) Creation and Perfection of Lien. Each Grantor represents and warrants
to the Agent and the Lenders and covenants with the Agent and the Lenders that
this Agreement creates a valid security interest in the Collateral of such
Grantor as security for the payment and performance of the Obligations. Upon the
filing of a UCC-l financing statement in the form attached hereto as Exhibit A
(the "Financing Statement") in the jurisdiction of organization of such Grantor
under the Uniform Commercial Code against each Grantor as the same may be in
effect from time to time in the jurisdiction of organization of such Grantor
(the "UCC"), naming such Grantor as debtor and the Agent, for itself and for the
benefit of the Lenders, as secured party, all filings, assignments, pledges and
deposits of documents or instruments will have been made and all other actions
will have been taken that are necessary or advisable, under applicable law, to
establish and perfect the Agent's and the Lenders' security interest in such of
the Collateral as to which a security interest may be perfected by filing under
the UCC, and such security interest shall remain prior to all other liens,
except as contemplated by the Credit Agreement. No further filings, recordings
or other actions are or will be necessary to maintain the priority of such
security interest with respect to such Collateral other than the filing of UCC
continuation statements within six months prior to the expiration of a period of
five years after the original filing and any amendments that may be required
from time to time to maintain the validity and/or sufficiency of such filing
under the UCC. The Collateral and the Agent's and Lenders' rights with respect
to the Collateral are not subject to any setoff, claims, withholdings or other
defenses (except for setoffs, claims, withholdings or other defenses arising
with respect to Grantor's accounts receivable in the ordinary course of
business).
(g) No Further Actions. Except for the filings referred to in paragraph
(f) above, no authorization, approval or other action by, and no notice of
filing with, any governmental authority or regulatory body or other Person that
has not been received, taken or made is required (i) for the grant by the
Grantors of the security interest granted hereby or for the execution, delivery
or performance of this Agreement by the Grantors, (ii) for the perfection and
maintenance of the security interest hereunder (including the first priority
nature of such security interest) to the extent such security interest may be
perfected by such filings referred to in paragraph (f) above, or (iii) for the
exercise by the Agent and/or the Lenders of the rights or the remedies in
respect of the Collateral pursuant to this Agreement.
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(h) Accounts Receivable. Each Grantor shall keep or cause to be kept
separate records of accounts which are complete and accurate in all material
respects, and from time to time upon the request of the Agent, at reasonable
intervals and upon reasonable notice, shall deliver to the Agent and the Lenders
a list of the names, addresses, face value, and dates of invoices for each
debtor obligated on an account receivable (which records may be provided in an
electronic format reasonably acceptable to Agent).
(i) Government Contracts. Each Grantor agrees that, at the request of the
Agent, it shall execute all such documents, and take all such actions, as such
Person shall reasonably determine to be necessary or appropriate from time to
time under the Federal Assignment of Claims Act of 1940, as amended, in order to
confirm and assure to Agent its rights under this Agreement with respect to any
and all Collateral of such Grantor consisting of the such Grantor's rights to
monies due or to become due under any contracts or agreements with or orders
from the United States government or any agency or department thereof, the
assignment of which is not prohibited by such contract or agreement.
(j) Securities. Each Grantor agrees that it shall forthwith deliver and
pledge to the Agent, for itself and for the benefit of the Lenders, all
certificates representing securities which it shall acquire, whether by
purchase, stock dividend, distribution of capital or otherwise, along with stock
powers or other appropriate instruments of assignment with respect thereto, duly
executed in blank.
(k) Cooperation. Each Grantor agrees, after the occurrence of an Event of
Default, to take any actions that the Agent and/or the Required Lenders may
reasonably request in order to enable the Agent and the Lenders to obtain and
enjoy the full rights and benefits granted to them by the Credit Agreement and
the other Credit Documents. Each Grantor further consents, after the occurrence
of an Event of Default, to the transfer of control or assignment of all or any
portion of the Collateral of such Grantor to a receiver, trustee, transferee, or
similar official or to any purchaser of the Collateral of such Grantor pursuant
to any public or private sale, judicial sale, foreclosure or exercise of other
remedies available to the Agent and/or the Lenders as permitted by the Credit
Documents, applicable law or otherwise.
(l) Access to Books and Records and the Collateral. Each Grantor shall
permit the Agent's representatives to have access to its books and records and
the Collateral from time to time (which shall be during regular business hours
provided that there is not then a Default or Event of Default and at any time if
a Default or Event of Default has occurred and is continuing), as requested by
such Person, for purposes of examination, verification, inspection, and
appraisal thereof and/or any other purpose permitted by the Credit Documents.
Except after the occurrence of a Default or an Event of Default, the Agent shall
give such Grantor at least one Business Day's telephonic notice before
exercising the rights granted in the preceding sentence.
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(m) Further Assurances By the Grantors. Each Grantor agrees to execute and
deliver to the Agent from time to time at its request all documents and
instruments, including financing statements, supplemental security agreements,
notices of assignments under the United States Assignment of Claims Act and
under similar or local statutes and regulations, and to take all action as the
Agent may reasonably deem necessary, desirable or proper to perfect or otherwise
protect the security interest and lien created hereby.
Section 6. Power of Attorney.
(a) Each Grantor acknowledges the Agent's right, to the extent permitted
by applicable law, singly to execute and/or file financing or continuation
statements and similar notices required by applicable law, and amendments
thereto, concerning the Collateral of such Grantor without execution by such
Grantor. A copy 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) Each Grantor hereby irrevocably appoints the Agent as the such
Grantor's attorney-in-fact, effective at all times subsequent to the occurrence
of an Event of Default, and during the continuance thereof, with full authority
in the place and stead of such Grantor and in the name of such Grantor or
otherwise, to take any action and to execute any instrument which the Agent may
deem necessary or advisable to accomplish the purpose of this Agreement,
including, without limitation, the power and right (i) to endorse such Grantor's
name on any checks, notes, acceptances, money orders, drafts, filings or other
forms of payment or security of such Grantor that may come into the Agent's
possession, and (ii) to do all other things which the Agent then determines to
be necessary to carry out the terms of this Agreement. Each Grantor ratifies and
approves all acts of such attorney-in-fact. The power conferred on the Agent
hereunder is solely to protect the Agent's and the Lenders' interests in the
Collateral and shall not impose any duty upon the Agent to exercise such power.
This power of attorney is coupled with an interest and may not be revoked by any
Grantor while any Obligations are owing to the Agent or the Lenders.
Section 7. [Reserved]
Section 8. Accounts Receivable. Until the Agent elects (which election may
be made after the occurrence of an Event of Default and during the continuation
thereof) that debtors on accounts receivable of any Grantor or obligors on
accounts, chattel paper or general intangibles of such Grantor or obligors on
instruments for which such Grantor is an obligee or lessees or conditional
vendees under agreements governing the leasing or selling by conditional sale of
Collateral of such Grantor by such Grantor, be notified of the Agent's and
Lenders' security interest, such Grantor shall continue to collect payment
thereof. Upon the making of such an election by the Agent, such Grantor shall
hold the proceeds received from collection as trustee for the Agent and shall
turn the same over to the Agent, or to such other bank or Person as may be
approved by the Agent, immediately upon receipt in the identical form received.
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At the election of the Agent, after the occurrence of an Event of Default
and during the continuance thereof, such Grantor shall so notify such account
debtors and obligors that payment thereof is to be made directly to the Agent,
and the Agent may itself, at any time after the occurrence of an Event of
Default and during the continuance thereof, without notice to or demand upon
such Grantor, so notify such account debtors and obligors. The making of such an
election or the giving of any such notification shall not affect the duties of
such Grantor described above with respect to proceeds of collection of accounts
receivable received by such Grantor. The Agent shall apply the proceeds of such
collection received by the Agent to the Obligations in accordance with Section 4
of this Agreement. The application of the proceeds of such collection shall be
conditional upon final payment in cash or solvent credits of the items giving
rise to them. If any item is not so paid, the Agent in its discretion, whether
or not the item is returned, may either reverse any credit given for the item or
charge it to any deposit account maintained by such Grantor with the Agent.
Section 9. Events of Default; Remedies.
(a) Upon the occurrence of an Event of Default and during the continuation
thereof, whether or not the Obligations are due, the Agent may (on behalf of
itself and the Lenders) demand, xxx for, collect, or make any settlement or
compromise it deems desirable with respect to the Collateral.
(b) An "Event of Default" hereunder shall mean (i) that a representation,
warranty or certification made by any Grantor in this Agreement or in any
document executed or delivered from time to time relating to this Agreement is
materially untrue, misleading or incomplete in its recital of any facts at the
time as of which such representation, warranty or certification, as the case may
be, is made, or (ii) any Event of Default, as that term is defined in any of the
Credit Documents, whether or not any acceleration of the maturity of the amounts
due in respect of any of the Obligations shall have occurred, or (iii) any
Grantor's failure to perform or observe any term, covenant, or agreement
contained in this Agreement on its part to be performed or observed, or (iv) any
judicial process, condemnation or forfeiture proceedings is brought against any
material item or portion of the Collateral or any rights therein shall be
subject to such judicial process, condemnation or forfeiture proceedings.
(c) Upon the occurrence and during the continuance of an Event of Default,
to the fullest extent permitted by applicable law, in addition to the remedies
set forth elsewhere in this Agreement:
(i) The Agent shall have (on behalf of itself and the Lenders), in
addition to all other rights and remedies given it by any instrument or
other agreement evidencing, or executed and delivered in connection with,
any of the Obligations and otherwise allowed by law, the rights and
remedies of a secured party under the Uniform Commercial Code as enacted
in any jurisdiction in which the Collateral may be located and without
limiting the generality of the foregoing, the Agent may immediately,
without (to the fullest extent permitted by law) demand of performance or
advertisement or notice of intention to sell or of time or place of sale
or of redemption or other notice or demand whatsoever (except that the
Agent shall give to the applicable Grantor at least ten days' notice of
the time and place of any proposed sale or other disposition), all of
which are hereby expressly waived to the fullest extent permitted by law,
sell at public or private sale or otherwise realize upon, the whole or
from time to time any part of the Collateral of such Grantor in or upon
which the Agent and/or the Lenders shall have a security interest or lien
hereunder, or any interest which such Grantor may have therein, and after
deducting from the proceeds of sale or other disposition of the Collateral
of such Grantor all expenses (including all reasonable expenses for legal
services) as provided in Section 13 hereof, shall apply the residue of
such proceeds toward the payment of the Obligations in accordance with
Section 4 of this Security Agreement, such Grantor remaining liable for
any deficiency remaining unpaid after such application. If notice of any
sale or other disposition is required by law to be given to any Grantor,
then such Grantor, the Agent and the Lenders hereby agree that a notice
given as hereinbefore provided shall be reasonable notice of such sale or
other disposition. Each Grantor also agrees to assemble the Collateral of
such Grantor at such place or places as the Agent reasonably designates by
written notice. At any such sale or other disposition the Agent and/or any
Lender may itself, and any other person or entity owed any Obligation may
itself, to the extent permitted by applicable law, purchase the whole or
any part of the Collateral sold, free from any right of redemption on the
part of the Grantors, which right is hereby waived and released to the
fullest extent permitted by law.
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(ii) Furthermore, without limiting the generality of any of the
rights and remedies conferred upon the Agent and/or any Lender under
Section 9(c)(i) hereof, the Agent to the fullest extent permitted by law,
may enter upon the premises of any Grantor, exclude such Grantor or any
guarantor therefrom and take immediate possession of the Collateral of
such Grantor, either personally or by means of a receiver appointed by a
court therefor, and may, at its option, use, operate, manage and control
the Collateral of such Grantor in any lawful manner and may collect and
receive all rents, income, revenue, earnings, issues and profits
therefrom, and may maintain, repair, renovate, alter or remove the
Collateral of such Grantor as the Agent and/or such Lender may determine
in its discretion, and any such monies so collected or received by such
Person shall be remitted to the Agent and shall be applied to, or may be
accumulated for application upon, the Obligations in accordance with
Section 4 of this Agreement.
(iii) Each of the Agent and the Lenders agrees that such Person will
give notice to such Grantor of any enforcement action taken by it pursuant
to this Section 9 promptly after commencing such action.
(iv) Each Grantor recognizes that the Agent and/or the Lenders may
be unable to effect a public sale of securities constituting Collateral of
such Grantor by reason of certain prohibitions contained in the Securities
Act and may be compelled to resort to one or more private sales thereof to
a restricted group of purchasers consistent with all applicable laws. Each
Grantor agrees that any such private sales may be at prices and other
terms less favorable to such Grantor than if sold at public sales and that
such private sales shall not solely by reason thereof be deemed not to
have been made in a commercially reasonable manner. Neither the Agent nor
the Lenders shall be under any obligation to delay a sale of any of the
securities for the period of time necessary to permit the issuer of such
securities to register such securities for public sale under the
Securities Act of 1933, as amended, even if the issuer would agree to do
so.
Section 10. Marshalling. Neither the Agent nor any Lender shall be
required to marshal any present or future security for (including but not
limited to this Agreement and the Collateral subject to the security interest
created hereby), or guarantees of, the Obligations or any of them, or to resort
to such security or guarantees in any particular order; and all of its rights
hereunder and in respect of such securities and guaranties shall be cumulative
and in addition to all other rights, however existing or arising. To the extent
that it lawfully may, each Grantor hereby agrees that it will not invoke any law
relating to the marshalling of Collateral of such Grantor which might cause
delay in or impede the enforcement of the Agent's and/or any Lender's rights
under this Agreement or under any other instrument evidencing any of the
Obligations or under which any of the Obligations is outstanding or by which any
of the Obligations is secured or guaranteed, and to the extent that it lawfully
may do so such Grantor hereby irrevocably waives the benefits of all such laws.
Except as otherwise provided by applicable law, neither the Agent nor the
Lenders shall have any duty as to the collection or protection of the Collateral
or any income thereon, nor as to the preservation of rights against prior
parties, nor as to the preservation of any rights pertaining thereto beyond the
sole custody thereof.
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Section 11. Grantors' Obligations Not Affected. To the extent permitted by
law, the obligations of the Grantors under this Security Agreement shall remain
in full force and effect without regard to, and shall not be impaired by (a) any
bankruptcy, insolvency, reorganization, arrangement, readjustment, composition,
liquidation or the like of any Grantor, to the extent permitted by law; (b) any
exercise or nonexercise, or any waiver, by the Agent and/or any Lender of any
right, remedy, power or privilege under or in respect of any of the Obligations
or any security therefor (including this Agreement); (c) any amendment to or
modification of any instrument evidencing any of the Obligations or pursuant to
which any of them were issued; (d) any amendment to or modification of any
instrument or agreement (other than this Agreement) securing any of the
Obligations; or (e) the taking of additional security for or any guaranty of any
of the Obligations or the release or discharge or termination of any security or
guaranty for any of the Obligations; and whether or not such Grantor shall have
notice or knowledge of any of the foregoing.
Section 12. No Waiver. No failure on the part of the Agent and/or any
Lender to exercise, and no delay in exercising, any right, remedy or power
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise by such Person of any right, remedy or power hereunder preclude any
other or future exercise of any other right, remedy or power. Each and every
right, remedy and power hereby granted to the Agent and/or any Lender or the
future holders of any of the Obligations or allowed to any of them by law or
other agreement, including, without limitation, each of the Credit Documents,
shall be cumulative and not exclusive of any other, and, subject to the
provisions of this Agreement, may be exercised by the Agent and/or any Lender or
the future holders of any of the Obligations from time to time.
Section 13. Expenses. Each Grantor agrees to pay, on demand, all
reasonable costs and expenses (including reasonable attorneys' fees and expenses
for legal services of every kind) of the Agent and/or any Lender incidental to
the sale of, or realization upon, any of the Collateral of such Grantor or in
any way relating to the perfection, enforcement or protection of the rights of
such Person hereunder; and the Agent and/or such Lenders may at any time apply
to the payment of all such costs and expenses all monies of such Grantor or
other proceeds arising from its possession or disposition of all or any portion
of the Collateral of such Grantor.
Section 14. Consents, Amendments and Waivers. Any term of this Agreement
may be amended, and the performance or observance by the Grantors of any term of
this Agreement may be waived (either generally or in a particular instance and
either retroactively or prospectively) only in accordance with the terms of
Section 11.1 of the Credit Agreement all of which are incorporated herein by
reference.
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Section 15. Agent's Duties. The powers conferred on the Agent hereunder
are solely to protect the Agent's and Lenders' 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 Agent shall have no duty as to any
Collateral, as to ascertaining or taking action with respect to calls,
conversions, exchanges, maturities, tenders or other matters relative to any
Collateral, whether or not Agent or any Lender has or is deemed to have
knowledge of such matters, or as to the taking of any necessary steps to
preserve rights against any parties or any other rights pertaining to any
Collateral. The Agent shall be deemed to have exercised reasonable care in the
custody and preservation of any Collateral in its possession if such Collateral
is accorded treatment substantially equal to that which it accords its own
property.
Section 16. Indemnity. Each Grantor agrees to indemnify, defend and save
and hold harmless each of the Agent and the Lenders and each of their Affiliates
and their respective officers, directors, employees, agents, attorneys and
advisors (each, an "Indemnified Party") from and against, and shall pay on
demand, any and all claims, damages, losses, liabilities and expenses that may
be incurred by or asserted or awarded against any Indemnified Party, in each
case arising out of or in connection with or resulting from this Agreement
and/or any other Credit Document (including, without limitation, enforcement of
this Agreement and/or any other Credit Document), except to the extent such
claim, damage, loss, liability or expense is found in a final, non-appealable
judgment by a court of competent jurisdiction to have resulted from such
Indemnified Party's gross negligence or willful misconduct.
Section 17. Governing Law. This Agreement and all claims, disputes and
matters arising hereunder or related hereto shall be governed by and construed
under the laws of the State of New York (without reference to conflicts of laws
provisions). The parties acknowledge the exclusive jurisdiction of the state and
federal courts located within the County of New York, State of New York over
controversies arising from or relating to this Agreement.
Section 18. Parties in Interest. All terms of this Agreement shall be
binding upon and inure to the benefit of and be enforceable by the respective
successors and assigns of the parties hereto; provided that no Grantor may
assign or transfer its rights hereunder without the prior written consent of the
Agent and the Required Lenders. Any assignment or transfer by any Grantor of its
rights hereunder in violation of this Agreement shall be void.
Section 19. Counterparts. This Agreement and any amendment hereof may be
executed in any number of counterparts and by each party on a separate
counterpart, which when so executed and delivered shall be an original, but all
of which together shall constitute one instrument. Delivery of an executed
counterpart of a signature page to this Agreement by facsimile shall be
effective as delivery of an original executed counterpart of this Agreement.
Section 20. Termination. Upon payment in full of the Obligations in
accordance with their terms, this Agreement and the liens and security interests
created hereunder shall automatically terminate and the Agent (on behalf of
itself and the Lenders) shall return to the Grantors, at the expense of the
Grantors, such Collateral in the possession or control of the Agent as has not
theretofore been disposed of pursuant to the provisions hereof and shall deliver
to the Grantors documents in recordable form (which documents shall be prepared
by, and the expense thereof to be borne by, Grantors) sufficient to discharge
the liens and security interests granted hereunder.
10
Section 21. Notices. Except as otherwise expressly provided herein, all
notices and other communications made or required to be given pursuant to this
Agreement shall be made in accordance with the provisions of Section 11.2 of the
Credit Agreement.
Section 22. Additional Grantors. The initial Grantors hereunder shall be
the Borrowers and such Subsidiaries of the Borrowers as are signatories hereto
on the date hereof. From time to time subsequent to the date hereof, additional
Subsidiaries of any Borrower may become parties hereto, as additional Grantors
(each an "Additional Grantor"), by executing a joinder in the form of Exhibit B
attached hereto. Upon delivery of any such joinder to Agent, notice of which is
hereby waived by Grantors, each such Additional Grantor shall be a Grantor and
shall be as fully a party hereto as if such Additional Grantor were an original
signatory hereof. Each Grantor expressly agrees that its obligations arising
hereunder shall not be affected or diminished by the addition or release of any
other Grantor hereunder, nor by any election of Agent not to cause any
Subsidiary of any Borrower to become an Additional Grantor hereunder. This
Agreement shall be fully effective as to any Grantor that is or becomes a party
hereto regardless of whether any other Person becomes or fails to become or
ceases to be a Grantor hereunder.
Section 23. Conflict. In the event that there is a conflict between any
provision of this Agreement and the Credit Agreement, then the provisions of the
Credit Agreement shall control.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
11
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be duly
executed by its authorized representatives as of the date first written above.
GRANTORS:
MEDIABAY, INC.
By: /s/ Xxxx X. Xxxx
------------------------------------
Name: Xxxx X. Xxxx
Title: Executive Vice President
XXXXX XXXXXXX, INC.
By: /s/ Xxxx X. Xxxx
------------------------------------
Name: Xxxx X. Xxxx
Title: Executive Vice President
AUDIO BOOK CLUB, INC.
By: /s/ Xxxx X. Xxxx
------------------------------------
Name: Xxxx X. Xxxx
Title: Executive Vice President
ABC INVESTMENT CORP.
By: /s/ Xxxx X. Xxxx
------------------------------------
Name: Xxxx X. Xxxx
Title: Executive Vice President
XXXXXXXX.XXX, INC.
By: /s/ Xxxx X. Xxxx
------------------------------------
Name: Xxxx X. Xxxx
Title: Executive Vice President
[Signatures continue on next page]
S-1
VIDEO YESTERYEAR, INC.
By: /s/ Xxxx X. Xxxx
------------------------------------
Name: Xxxx X. Xxxx
Title: Executive Vice President
AGENT:
ZOHAR CDO 2003-1, LIMITED
By: Patriarch Partners VIII, LLC,
its Collateral Manager
By: /s/ Xxxx Xxxxxx
------------------------------------
Name: Xxxx Xxxxxx
Title: Manager
S-2
EXHIBIT A
[UCC-1 FORM]
EXHIBIT A
Debtor: Secured Party:
------- --------------
[DEBTOR] Zohar CDO 2003-1, Limited
[DEBTOR'S ADDRESS] c/o Patriarch Partners VIII, LLC
000 Xxxxx Xxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxx, Xxxxx Xxxxxxxx 00000
All properties, assets and rights of the Debtor of every kind and nature,
wherever located, whether now owned or hereafter acquired or arising, and all
proceeds and products thereof, including, without limitation, all goods,
accounts (including all accounts receivable), contract rights, rights to the
payment of money (including tax refund claims, insurance proceeds and tort
claims), chattel paper, documents, instruments, general intangibles, securities
(together with all income therefrom, increases thereunder and proceeds thereof),
investment property (together with all income therefrom, increases thereunder
and proceeds thereof), patents, trademarks, tradenames, copyrights, engineering
drawings, service marks, customer lists, goodwill, and all licenses, permits,
agreements of any kind or nature pursuant to which the Debtor possesses, uses or
has authority to possess or use property (whether tangible or intangible) of
others or pursuant to which others possess, use or have authority to possess or
use property (whether tangible or intangible) of the Debtor, books and records,
equipment, furniture, fixtures, and all inventory and all other capital assets,
raw materials, work in progress and all substitutions and replacements thereof
(all such properties, assets and rights hereinafter sometimes called,
collectively, the "Collateral").
SCHEDULE 1
TO THE
SECURITY AGREEMENT DATED AS OF APRIL ___, 2004 BY AND AMONG
MEDIABAY, INC., XXXXX XXXXXXX, INC. AND AUDIO BOOK CLUB, AND CERTAIN OF
THEIR SUBSIDIARIES, AS GRANTORS, AND ZOHAR CDO 2003-1, LIMITED, AS
AGENT.
GRANTOR CHIEF EXECUTIVE LOCATION(S) OF BOOKS JURISDICTION OF COLLATERAL
OFFICE AND RECORDS INCORPORATION AND LOCATIONS
CORPORATE
ORGANIZATIONAL
IDENTIFICATION NUMBER
----------------------- -------------------- --------------------- ---------------------- ---------------------
MediaBay, Inc. 0 Xxxxxxxxx Xxxxxx 0 Xxxxxxxxx Xxxxxx Xxxxxxx 0 Xxxxxxxxx Xxxxxx
Xxxxx 000 Suite 300 Suite 300
Cedar Knolls Cedar Knolls P93000057810 Xxxxx Xxxxxx
Xxx Xxxxxx 00000 New Jersey 07929 Xxx Xxxxxx 00000
See Below for
Additional Locations
Xxxxx Xxxxxxx, Inc. 0 Xxxxxxxxx Xxxxxx 0 Xxxxxxxxx Xxxxxx Xxxxxxxx 0 Xxxxxxxxx Xxxxxx
Xxxxx 000 Suite 300 Suite 300
Cedar Knolls Cedar Knolls 2951073 Xxxxx Xxxxxx
Xxx Xxxxxx 00000 New Jersey 07929 Xxx Xxxxxx 00000
See Below for
Additional Locations
Audio Book Club, Inc. 0 Xxxxxxxxx Xxxxxx 0 Xxxxxxxxx Xxxxxx Xxxxxxxx 0 Xxxxxxxxx Xxxxxx
Xxxxx 000 Suite 300 Suite 300
Cedar Knolls Cedar Knolls 2986712 Xxxxx Xxxxxx
Xxx Xxxxxx 00000 New Jersey 07929 Xxx Xxxxxx 00000
See Below for
Additional Locations
ABC Investment Corp. 0 Xxxxxxxxx Xxxxxx 0 Xxxxxxxxx Xxxxxx Xxxxxxxx 0 Xxxxxxxxx Xxxxxx
Xxxxx 000 Suite 300 Suite 300
Cedar Knolls Cedar Knolls 2974056 Xxxxx Xxxxxx
Xxx Xxxxxx 00000 New Jersey 07929 Xxx Xxxxxx 00000
See Below for
Additional Locations
XxxxxXxx.xxx, Inc. 0 Xxxxxxxxx Xxxxxx 0 Xxxxxxxxx Xxxxxx Xxxxxxxx 0 Xxxxxxxxx Xxxxxx
Xxxxx 000 Suite 300 Suite 300
Cedar Knolls Cedar Knolls 3067221 Xxxxx Xxxxxx
Xxx Xxxxxx 00000 New Jersey 07929 Xxx Xxxxxx 00000
See Below for
Additional Locations
Video Yesteryear, Inc. 0 Xxxxxxxxx Xxxxxx 0 Xxxxxxxxx Xxxxxx Xxxxxxxx 0 Xxxxxxxxx Xxxxxx
Xxxxx 000 Suite 300 Suite 300
Cedar Knolls Cedar Knolls 2951021 Xxxxx Xxxxxx
Xxx Xxxxxx 00000 New Jersey 07929 Xxx Xxxxxx 00000
See Below for
Additional Locations
ADDITIONAL INVENTORY LOCATIONS:
-------------------------------
(Note: Grantors do not maintain any inventory (other than de minimus amounts)
at any business location owned or leased by Grantors.)
1. Fulfillment Centers:
--------------------
(Note: Fulfillment Centers are locations owned/leased and operated by
third parties. Inventory of Grantors is delivered to the Fulfillment
Centers, stored by Fulfillment Centers and then shipped by the Fulfillment
Centers according to the instructions of the Grantors.)
Bookspan
000 Xxxxxxxx Xxx
Xxxxxx Xxxx, XX 00000
MBS
000 Xxxxx Xxxxxxxx Xxxxx
Xxxxxxx Xxxxx, XX 00000
Xxxxxxx Fulfillment
00 Xxxxxx Xxxxxxxxxx Xxxx X
Xxxxxxxxxxx, XX 00000
2. Manufacturers:
--------------
(Note: Manufacturers produce finished goods inventory for Grantors. In
certain cases, Grantors will cause certain raw material and/or component
inventory owned by Grantors to be delivered to Manufacturers for use by
the Manufacturers in the production of the finished goods inventory. The
finished goods inventory is then shipped by the Manufacturers according to
the instructions of the Grantors.)
Xxxxxxx Audio
Xxxxx Xxxxxx Xxxxxx
Xxxxxxx, XX 00000
RSB Disc
0000 Xxxx-xx-xxxxxx
Xxxxxxxx, Xxxxxx, Xxxxxx
Cinram
0000 Xxxx Xxxx
Xxxxxxxx, XX 00000
Cinram- Warner Media Svc.
Warehouse 7
0000 Xxxxxxxxx Xx
Xxxxxxxx, XX 00000
Media Evolved, LLC
0000 Xxxxxxx Xxxxx, Xxx 00
Xxxxxxxxx, XX 00000
Creative Vinyl
0000 Xxxxx Xxx.
Xxx Xxxxx Xxxxxxx, XX 00000
Cinram-Warner Media Svc.
C/O- Sonopress, Inc.
000 Xxxxxxxxxx Xx.
Xxxxxxxxxxx, XX 00000-0000
Xxxxx Vinylweld
000 X. Xxxxxxxx Xx
Xxxxx Xxxx, XX 00000
EXHIBIT B
Form of Joinder to Security Agreement
The undersigned, _____________, a ___________________, hereby joins in the
execution of that certain Security Agreement dated as of April 28, 2004 (the
"Security Agreement") issued and executed by each Person that is or becomes a
Grantor thereunder on and/or after the date and pursuant to the terms thereof to
and in favor of Secured Parties thereunder. By executing this Joinder, the
undersigned hereby agrees that it is a Grantor thereunder with the same force
and effect as if originally named therein as a Grantor. The undersigned agrees
to be bound by all of the terms and provisions of the Security Agreement and
represents and warrants that the representations and warranties set forth in
Section 5 of the Security Agreement are, with respect to the undersigned, true,
complete and correct as of the date hereof. Each reference to a Grantor in the
Security Agreement shall be deemed to include the undersigned. Capitalized terms
used but not defined herein shall have the meanings set forth in the Security
Agreement.
IN WITNESS WHEREOF, the undersigned has executed this Joinder this ___ day
of _________, 200_.
[Name of Grantor]
By:_________________________________
Name:
Title:
Address:
