EXHIBIT 99.2
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SECURITY AGREEMENT
SECURITY AGREEMENT, dated as of December 28, 2005 (this "Agreement"),
among XXXXxx.xxx, Inc., a Delaware corporation (the "Company") and all of the
Subsidiaries of the Company (such subsidiaries, the "Guarantors") (the Company
and Guarantors are collectively referred to as the "Debtors") and the holder or
holders of the Company's 6% Secured Debentures due December ____, 2008 in the
original aggregate principal amount of $3,500,000 (the "Debentures"), signatory
hereto, their endorsees, transferees and assigns (collectively referred to as,
the "Secured Parties").
W I T N E S S E T H:
WHEREAS, pursuant to the Purchase Agreement (as defined in the
Debentures), the Secured Parties have severally agreed to extend the loans to
the Company evidenced by the Debentures;
WHEREAS, pursuant to a certain Subsidiary Guarantee dated as of the
date hereof (the "Guaranty"), the Guarantors have jointly and severally agreed
to guaranty and act as surety for payment of such loans; and
WHEREAS, in order to induce the Secured Parties to extend the loans
evidenced by the Debentures, each Debtor has agreed to execute and deliver to
the Secured Parties this Agreement and to grant the Secured Parties, PARI PASSU
with each other Secured Party, a perfected security interest in certain property
of such Debtor to secure the prompt payment, performance and discharge in full
of all of the Company's obligations under the Debenture and the other Debtor's
obligations under the Guaranty.
NOW, THEREFORE, in consideration of the agreements herein contained and
for other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, the parties hereto hereby agree as follows:
1. CERTAIN DEFINITIONS. As used in this Agreement, the following terms
shall have the meanings set forth in this Section 1. Terms used but not
otherwise defined in this Agreement that are defined in Article 9 of the UCC
(such as "account", "chattel paper", "commercial tort claim", "deposit account",
"document", "equipment", "fixtures", "general intangibles", "goods",
"instruments", "inventory", "investment property", "letter-of-credit rights",
"proceeds" and "supporting obligations") shall have the respective meanings
given such terms in Article 9 of the UCC.
(a) "Collateral" means the collateral in which the Secured
Parties are granted a security interest by this Agreement and which
shall include the following personal property of the Debtors, whether
presently owned or existing or hereafter acquired or coming into
existence, wherever situated, and all additions and accessions thereto
and all substitutions and replacements thereof, and all proceeds,
products and accounts thereof,
including, without limitation, all proceeds from the sale or transfer
of the Collateral and of insurance covering the same and of any tort
claims in connection therewith, and all dividends, interest, cash,
notes, securities, equity interest or other property at any time and
from time to time acquired, receivable or otherwise distributed in
respect of, or in exchange for, any or all of the Pledged Securities
(as defined below):
(i) All goods, including, without limitations, (A)
all machinery, equipment, computers, motor vehicles, trucks,
tanks, boats, ships, appliances, furniture, special and
general tools, fixtures, test and quality control devices and
other equipment of every kind and nature and wherever
situated, together with all documents of title and documents
representing the same, all additions and accessions thereto,
replacements therefor, all parts therefor, and all substitutes
for any of the foregoing and all other items used and useful
in connection with any Debtor's businesses and all
improvements thereto; and (B) all inventory;
(ii) All contract rights and other general
intangibles, including, without limitation, all partnership
interests, membership interests, stock or other securities,
rights under any of the Organizational Documents, agreements
related to the Pledged Securities, licenses, distribution and
other agreements, computer software (whether "off-the-shelf",
licensed from any third party or developed by any Debtor),
computer software development rights, leases, franchises,
customer lists, quality control procedures, grants and rights,
goodwill, trademarks, service marks, trade styles, trade
names, patents, patent applications, copyrights, and income
tax refunds;
(iii) All accounts, together with all instruments,
all documents of title representing any of the foregoing, all
rights in any merchandising, goods, equipment, motor vehicles
and trucks which any of the same may represent, and all right,
title, security and guaranties with respect to each account,
including any right of stoppage in transit;
(iv) All documents, letter-of-credit rights,
instruments and chattel paper;
(v) All commercial tort claims;
(vi) All deposit accounts and all cash (whether or
not deposited in such deposit accounts);
(vii) All investment property;
(viii) All supporting obligations; and
(ix) All files, records, books of account, business
papers, and computer programs; and
(x) the products and proceeds of all of the foregoing
Collateral set forth in clauses (i)-(ix) above.
Without limiting the generality of the foregoing, the
"Collateral" shall include all investment property and general
intangibles respecting ownership and/or other equity interests
in each Guarantor, including, without limitation, the shares
of capital stock and the other equity interests listed on
Schedule H hereto (as the same may be modified from time to
time pursuant to the terms hereof), and any other shares of
capital stock and/or other equity interests of any other
direct or indirect subsidiary of any Debtor obtained in the
future, and, in each case, all certificates representing such
shares and/or equity interests and, in each case, all rights,
options, warrants, stock, other securities and/or equity
interests that may hereafter be received, receivable or
distributed in respect of, or exchanged for, any of the
foregoing (all of the foregoing being referred to herein as
the "Pledged Securities") and all rights arising under or in
connection with the Pledged Securities, including, but not
limited to, all dividends, interest and cash received on
account of the Pledged Securities.
Notwithstanding the foregoing, nothing herein shall
be deemed to constitute an assignment of any asset which, in
the event of an assignment, becomes void by operation of
applicable law or the assignment of which is otherwise
prohibited by applicable law (in each case to the extent that
such applicable law is not overridden by Sections 9-406, 9-407
and/or 9-408 of the UCC or other similar applicable law);
provided, however, that to the extent permitted by applicable
law, this Agreement shall create a valid security interest in
such asset and, to the extent permitted by applicable law,
this Agreement shall create a valid security interest in the
proceeds of such asset.
(b) "Intellectual Property" means the collective reference to
all rights, priorities and privileges relating to intellectual
property, whether arising under United States, multinational or foreign
laws or otherwise, including, without limitation, (i) all copyrights
arising under the laws of the United States, any other country or any
political subdivision thereof, whether registered or unregistered and
whether published or unpublished, all registrations and recordings
thereof, and all applications in connection therewith, including,
without limitation, all registrations, recordings and applications in
the United States Copyright Office, (ii) all letters patent of the
United States, any other country or any political subdivision thereof,
all reissues and extensions thereof, and all applications for letters
patent of the United States or any other country and all divisions,
continuations and continuations-in-part thereof, (iii) all trademarks,
trade names, corporate names, company names, business names, fictitious
business names, trade dress, service marks, logos, domain names and
other source or business identifiers, and all goodwill associated
therewith, now existing or hereafter adopted or acquired, all
registrations and recordings thereof, and all applications in
connection therewith, whether 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, or otherwise, and all common law rights related thereto, (iv)
all trade secrets arising
under the laws of the United States, any other country or any political
subdivision thereof, (v) all rights to obtain any reissues, renewals or
extensions of the foregoing, (vi) all licenses for any of the
foregoing, and (vii) all causes of action for infringement of the
foregoing.
(c) "Majority in Interest" shall mean, at any time of
determination, the majority in interest (based on then-outstanding
principal amounts of Debentures at the time of such determination) of
the Secured Parties.
(d) "Necessary Endorsement" shall mean undated stock powers
endorsed in blank or other proper instruments of assignment duly
executed and such other instruments or documents as the Agent (as that
term is defined below) may reasonably request.
(e) "Obligations" means all of the liabilities and obligations
(primary, secondary, direct, contingent, sole, joint or several) due or
to become due, or that are now or may be hereafter contracted or
acquired, or owing to, of any Debtor to the Secured Parties, arising
from the Transaction Documents (defined in the Securities Purchase
Agreement between the Company and Secured Parties, dated December __,
2005) including, without limitation, all obligations under this
Agreement, the Debentures, the Guaranty and any other instruments,
agreements or other documents executed and/or delivered in connection
herewith or therewith, in each case, whether now or hereafter existing,
voluntary or involuntary, direct or indirect, absolute or contingent,
liquidated or unliquidated, whether or not jointly owed with others,
and whether or not from time to time decreased or extinguished and
later increased, created or incurred, and all or any portion of such
obligations or liabilities that are paid, to the extent all or any part
of such payment is avoided or recovered directly or indirectly from any
of the Secured Parties as a preference, fraudulent transfer or
otherwise as such obligations may be amended, supplemented, converted,
extended or modified from time to time. Without limiting the generality
of the foregoing, the term "Obligations" shall include, without
limitation: (i) principal of, and interest on the Debentures and the
loans extended pursuant thereto; (ii) any and all other fees,
indemnities, costs, obligations and liabilities of the Debtors from
time to time under or in connection with this Agreement, the
Debentures, the Guaranty and any other instruments, agreements or other
documents executed and/or delivered in connection herewith or
therewith; and (iii) all amounts (including but not limited to
post-petition interest) in respect of the foregoing that would be
payable but for the fact that the obligations to pay such amounts are
unenforceable or not allowable due to the existence of a bankruptcy,
reorganization or similar proceeding involving any Debtor.
(f) "Organizational Documents" means with respect to any
Debtor, the documents by which such Debtor was organized (such as a
certificate of incorporation, certificate of limited partnership or
articles of organization, and including, without limitation, any
certificates of designation for preferred stock or other forms of
preferred equity) and which relate to the internal governance of such
Debtor (such as bylaws, a partnership agreement or an operating,
limited liability or members agreement).
(g) "UCC" means the Uniform Commercial Code of the State of
New York and or any other applicable law of any state or states which
has jurisdiction with respect to all, or any portion of, the Collateral
or this Agreement, from time to time. It is the intent of the parties
that defined terms in the UCC should be construed in their broadest
sense so that the term "Collateral" will be construed in its broadest
sense. Accordingly if there are, from time to time, changes to defined
terms in the UCC that broaden the definitions, they are incorporated
herein and if existing definitions in the UCC are broader than the
amended definitions, the existing ones shall be controlling.
2. GRANT OF PERFECTED FIRST PRIORITY SECURITY INTEREST. As an
inducement for the Secured Parties to extend the loans as evidenced by the
Debentures and to secure the complete and timely payment, performance and
discharge in full, as the case may be, of all of the Obligations, each Debtor
hereby unconditionally and irrevocably pledges, grants and hypothecates to the
Secured Parties a continuing security interest in and to, a lien upon and a
right of set-off against all of their respective right, title and interest of
whatsoever kind and nature in and to, the Collateral (the "Security Interest").
3. DELIVERY OF CERTAIN COLLATERAL. Contemporaneously or prior to the
execution of this Agreement, each Debtor shall deliver or cause to be delivered
to the Agent (a) any and all certificates and other instruments representing or
evidencing the Pledged Securities, and (b) any and all certificates and other
instruments or documents representing any of the other Collateral, in each case,
together with all Necessary Endorsements. The Debtors are, contemporaneously
with the execution hereof, delivering to Agent, or have previously delivered to
Agent, a true and correct copy of each Organizational Document governing any of
the Pledged Securities.
4. REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS OF THE
DEBTORS. Each Debtor represents and warrants to, and covenants and agrees with,
the Secured Parties as follows:
(a) Each Debtor has the requisite corporate, partnership,
limited liability company or other power and authority to enter into
this Agreement and otherwise to carry out its obligations hereunder.
The execution, delivery and performance by each Debtor of this
Agreement and the filings contemplated therein have been duly
authorized by all necessary action on the part of such Debtor and no
further action is required by such Debtor. This Agreement has been duly
executed by each Debtor. This Agreement constitutes the legal, valid
and binding obligation of each Debtor, enforceable against each Debtor
in accordance with its terms except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization and
similar laws of general application relating to or affecting the rights
and remedies of creditors and by general principles of equity.
(b) The Debtors have no place of business or offices where
their respective books of account and records are kept (other than
temporarily at the offices of its attorneys or accountants) or places
where Collateral is stored or located, except as set
forth on Schedule A attached hereto. The Debtors own no real property.
Except as disclosed on Schedule A, none of such Collateral is in the
possession of any consignee, bailee, warehouseman, agent or processor.
(c) Except for Permitted Liens (as defined in the Debentures)
and where the Collateral is a license or similar rights, and except as
set forth on Schedule B attached hereto, the Debtors are the sole owner
of the Collateral (except for non-exclusive licenses granted by any
Debtor in the ordinary course of business), free and clear of any
liens, security interests, encumbrances, rights or claims, and are
fully authorized to grant the Security Interest. There is not on file
in any governmental or regulatory authority, agency or recording office
an effective financing statement, security agreement, license or
transfer or any notice of any of the foregoing (other than those that
will be filed in favor of the Secured Parties pursuant to this
Agreement) covering or affecting any of the Collateral. So long as this
Agreement shall be in effect, the Debtors shall not execute and shall
not knowingly permit to be on file in any such office or agency any
such financing statement or other document or instrument (except to the
extent filed or recorded in favor of the Secured Parties pursuant to
the terms of this Agreement or except in connection with Permitted
Liens).
(d) No written claim has been received that any Collateral or
Debtor's use of any Collateral violates the rights of any third party.
There has been no adverse decision to any Debtor's claim of ownership
rights in or exclusive rights to use the Collateral in any jurisdiction
or to any Debtor's right to keep and maintain such Collateral in full
force and effect, and there is no proceeding involving said rights
pending or, to the best knowledge of any Debtor, threatened before any
court, judicial body, administrative or regulatory agency, arbitrator
or other governmental authority.
(e) Each Debtor shall at all times maintain its books of
account and records relating to the Collateral at its principal place
of business and its Collateral at the locations set forth on Schedule A
attached hereto and may not relocate such books of account and records
or tangible Collateral unless it delivers to the Secured Parties at
least 10 days prior to such relocation (i) written notice of such
relocation and the new location thereof (which must be within the
United States) and (ii) evidence that appropriate financing statements
under the UCC and other necessary documents have been filed and
recorded and other steps have been taken to perfect the Security
Interest to create in favor of the Secured Parties a valid, perfected
and continuing perfected first priority lien in the Collateral.
(f) This Agreement creates in favor of the Secured Parties a
valid security interest in the Collateral, subject only to Permitted
Liens (as defined in the Debentures) securing the payment and
performance of the Obligations. Upon making the filings described in
the immediately following paragraph, all security interests created
hereunder in any Collateral which may be perfected by filing Uniform
Commercial Code financing statements shall have been duly perfected.
Except for the filing of the Uniform Commercial Code financing
statements referred to in the immediately following
paragraph, the recordation of the Intellectual Property Security
Agreement (as defined below) with respect to copyrights and copyright
applications in the United States Copyright Office referred to in
paragraph (p), the execution and delivery of deposit account control
agreements satisfying the requirements of Section 9-104(a)(2) of the
UCC with respect to each deposit account of the Debtors, and the
delivery of the certificates and other instruments provided in Section
3, no action is necessary to create, or perfect the security interests
created hereunder. Without limiting the generality of the foregoing,
except for the filing of said financing statements, the recordation of
said Intellectual Property Security Agreement, and the execution and
delivery of said deposit account control agreements, no consent of any
third parties and no authorization, approval or other action by, and no
notice to or filing with, any governmental authority or regulatory body
is required for (i) the execution, delivery and performance of this
Agreement, (ii) the creation or perfection of the Security Interests
created hereunder in the Collateral or (iii) the enforcement of the
rights of the Secured Parties hereunder.
(g) Each Debtor hereby authorizes the Secured Parties, or any
of them, to file one or more financing statements under the UCC, with
respect to the Security Interest with the proper filing and recording
agencies in any jurisdiction deemed proper by them.
(h) The execution, delivery and performance of this Agreement
by the Debtors does not (i) violate any of the provisions of any
Organizational Documents of any Debtor or any judgment, decree, order
or award of any court, governmental body or arbitrator or any
applicable law, rule or regulation applicable to any Debtor or (ii)
conflict with, or constitute a default (or an event that with notice or
lapse of time or both would become a default) under, or give to others
any rights of termination, amendment, acceleration or cancellation
(with or without notice, lapse of time or both) of, any agreement,
credit facility, debt or other instrument (evidencing any Debtor's debt
or otherwise) or other understanding to which any Debtor is a party or
by which any property or asset of any Debtor is bound or affected,
except where such conflict would not have a material adverse effect on
the Collateral. No consent (including, without limitation, from
stockholders or creditors of any Debtor) is required for any Debtor to
enter into and perform its obligations hereunder.
(i) The capital stock and other equity interests listed on
Schedule H hereto represent all of the capital stock and other equity
interests of the Guarantors, and represent all capital stock and other
equity interests owned, directly or indirectly, by the Company. All of
the Pledged Securities are validly issued, fully paid and
nonassessable, and the Company is the legal and beneficial owner of the
Pledged Securities, free and clear of any lien, security interest or
other encumbrance except for the security interests created by this
Agreement and other Permitted Liens (as defined in the Debenture).
(j) The ownership and other equity interests in partnerships
and limited liability companies (if any) included in the Collateral
(the "Pledged Interests") by their express terms do not provide that
they are securities governed by Article 8 of the UCC and are not held
in a securities account or by any financial intermediary.
(k) Each Debtor shall at all times maintain the liens and
Security Interest provided for hereunder as valid and perfected first
(except for Permitted Liens) priority liens and security interests in
the Collateral in favor of the Secured Parties until this Agreement and
the Security Interest hereunder shall be terminated pursuant to Section
14 hereof. Each Debtor hereby agrees to defend the same against the
claims of any and all persons and entities. Each Debtor shall safeguard
and protect all Collateral for the account of the Secured Parties. At
the request of the Secured Parties, each Debtor will sign and deliver
to the Secured Parties at any time or from time to time one or more
financing statements pursuant to the UCC in form reasonably
satisfactory to the Secured Parties and will pay the cost of filing the
same in all public offices wherever filing is, or is deemed by the
Secured Parties to be, necessary or desirable to effect the rights and
obligations provided for herein. Without limiting the generality of the
foregoing, each Debtor shall pay all fees, taxes and other amounts
necessary to maintain the Collateral and the Security Interest
hereunder, and each Debtor shall obtain and furnish to the Secured
Parties from time to time, upon demand, such releases and/or
subordinations of claims and liens which may be required to maintain
the priority of the Security Interest hereunder.
(l) No Debtor will transfer, pledge, hypothecate, encumber,
license, sell or otherwise dispose of any of the Collateral (except for
non-exclusive licenses granted by a Debtor in its ordinary course of
business and sales of Inventory by a Debtor in its ordinary course of
business) without the prior written consent of a Majority in Interest.
(m) Each Debtor shall keep and preserve its equipment,
inventory and other tangible Collateral in good condition, repair and
order (ordinary wear and tear excepted) and shall not operate or locate
any such Collateral (or cause to be operated or located) in any area
excluded from insurance coverage.
(n) Each Debtor shall maintain with financially sound and
reputable insurers, insurance with respect to the Collateral against
loss or damage of the kinds and in the amounts customarily insured
against by entities of established reputation having similar properties
similarly situated and in such amounts as are customarily carried under
similar circumstances by other such entities and otherwise as is
prudent for entities engaged in similar businesses but in any event
sufficient to cover the full replacement cost thereof. Each Debtor
shall cause each insurance policy issued in connection herewith to
provide, and the insurer issuing such policy to certify to the Agent
that (a) the Agent will be named as lender loss payee and additional
insured under each such insurance policy; (b) if such insurance be
proposed to be cancelled or materially changed for any reason
whatsoever, such insurer will promptly notify the Agent and such
cancellation or change shall not be effective as to the Agent for at
least thirty (30) days after receipt by the Agent of such notice,
unless the effect of such change is to extend or increase coverage
under the policy; and (c) the Agent will have the right (but no
obligation) at its election to remedy any default in the payment of
premiums within thirty (30) days of notice from the insurer of such
default. If no Event of Default (as defined in the Debenture) exists
and if
the proceeds arising out of any claim or series of related claims do
not exceed $100,000, loss payments in each instance will be applied by
the applicable Debtor to the repair and/or replacement of property with
respect to which the loss was incurred to the extent reasonably
feasible, and any loss payments or the balance thereof remaining, to
the extent not so applied, shall be payable to the applicable Debtor,
provided, however, that payments received by any Debtor after an Event
of Default occurs and is continuing or in excess of $100,000 for any
occurrence or series of related occurrences shall be paid to the Agent
and, if received by such Debtor, shall be held in trust for and
immediately paid over to the Agent unless otherwise directed in writing
by the Agent. Copies of such policies or the related certificates, in
each case, naming the Agent as lender loss payee and additional insured
shall be delivered to the Agent at least annually and at the time any
new policy of insurance is issued.
(o) Each Debtor shall, within ten (10) days of obtaining
knowledge thereof, advise the Secured Parties promptly, in sufficient
detail, of any substantial change in the Collateral, and of the
occurrence of any event which would have a material adverse effect on
the value of the Collateral or on the Secured Parties' security
interest therein.
(p) Each Debtor shall promptly execute and deliver to the
Secured Parties such further deeds, mortgages, assignments, security
agreements, financing statements or other instruments, documents,
certificates and assurances and take such further action as the Secured
Parties may from time to time reasonably request to perfect or protect
its security interest in the Collateral including, without limitation,
if applicable, the execution and delivery of a separate security
agreement with respect to each Debtor's Intellectual Property
("Intellectual Property Security Agreement") in which the Secured
Parties have been granted a security interest hereunder, substantially
in a form acceptable to the Secured Parties, which Intellectual
Property Security Agreement, other than as stated therein, shall be
subject to all of the terms and conditions hereof.
(q) Each Debtor shall permit the Secured Parties and their
representatives and agents to inspect the Collateral at any time, and
to make copies of records pertaining to the Collateral as may be
requested by a Secured Party from time to time on reasonable notice.
(r) Each Debtor shall take all steps reasonably necessary to
pursue and seek to preserve, enforce and collect any rights, claims,
causes of action and accounts receivable in respect of the Collateral.
(s) Each Debtor shall promptly notify the Secured Parties in
sufficient detail upon becoming aware of any attachment, garnishment,
execution or other legal process levied against any material portion of
the Collateral and of any other such information received by such
Debtor that may materially affect the value of the Collateral, the
Security Interest or the rights and remedies of the Secured Parties
hereunder.
(t) All information heretofore, herein or hereafter supplied
to the Secured Parties by or on behalf of any Debtor with respect to
the Collateral is accurate and complete in all material respects as of
the date furnished.
(u) The Debtors shall at all times preserve and keep in full
force and effect their respective valid existence and good standing and
any rights and franchises material to their businesses.
(v) No Debtor will change its name, type of organization,
jurisdiction of organization, organizational identification number (if
it has one), legal or corporate structure, or identity, or add any new
fictitious name unless it provides at least 10 days prior written
notice to the Secured Parties of such change and, at the time of such
written notification, such Debtor provides any financing statements or
fixture filings necessary to perfect and continue perfected the
perfected Security Interest granted and evidenced by this Agreement.
(w) No Debtor may consign any of its Inventory or sell any of
its Inventory on xxxx and hold, sale or return, sale on approval, or
other conditional terms of sale without the consent of a Majority in
Interest which shall not be unreasonably withheld, except to the extent
such consignment or sale does not exceed 15% of the total value of all
of the Company's finished goods in Inventory.
(x) No Debtor may relocate its chief executive office to a new
location without providing 10 days prior written notification thereof
to the Secured Parties and so long as, at the time of such written
notification, such Debtor provides any financing statements or fixture
filings necessary to perfect and continue perfected the perfected
Security Interest granted and evidenced by this Agreement.
(y) Each Debtor was organized and remains organized solely
under the laws of the state set forth next to such Debtor's name on
Schedule D attached hereto. Schedule D attached hereto sets forth each
Debtor's organizational identification number or, if any Debtor does
not have one, states that one does not exist.
(z) (i) The actual name of each Debtor is the name set forth
on the signature pages hereto; (ii) no Debtor has any trade names
except as set forth on Schedule E attached hereto; (iii) no Debtor has
used any name other than that stated on the signature pages hereto or
as set forth on Schedule E for the preceding five years; and (iv) no
entity has merged into any Debtor or been acquired by any Debtor within
the past five years except as set forth on Schedule E.
(aa) At any time and from time to time that any Collateral
consists of instruments, certificated securities or other items that
require or permit possession by the Secured Party to perfect the
security interest created hereby, the applicable Debtor shall deliver
such Collateral to the Agent.
(bb) Each Debtor, in its capacity as issuer, hereby agrees to
comply with any and all reasonable orders and instructions of Agent
regarding the Pledged Interests consistent with the terms of this
Agreement without the further consent of any Debtor as contemplated by
Section 8-106 (or any successor section) of the UCC. Further, each
Debtor agrees that it shall not enter into a similar agreement (or one
that would confer "control" within the meaning of Article 8 of the UCC)
with any other person or entity.
(cc) Each Debtor shall cause all tangible chattel paper
constituting Collateral to be delivered to the Agent, or, if such
delivery is not practicable, then to cause such tangible chattel paper
to contain a legend noting that it is subject to the security interest
created by this Agreement. To the extent that any Collateral consists
of electronic chattel paper, the applicable Debtor shall cause the
underlying chattel paper to be "marked" within the meaning of Section
9-105 of the UCC (or successor section thereto).
(dd) If there is any investment property or deposit account
included as Collateral that can be perfected by "control" through an
account control agreement, the applicable Debtor shall cause such an
account control agreement, in form and substance in each case
reasonably satisfactory to the Secured Parties, to be entered into and
delivered to the Secured Parties.
(ee) To the extent that any Collateral consists of
letter-of-credit rights, the applicable Debtor shall, after an Event of
Default, cause the issuer of each underlying letter of credit to
consent to a collateral assignment of the proceeds thereof to the
Secured Parties.
(ff) To the extent that any Collateral is in the possession of
any third party, the applicable Debtor shall join with the Secured
Parties in notifying such third party of the Secured Parties' security
interest in such Collateral and shall use its commercially reasonable
efforts to obtain an acknowledgement and agreement from such third
party with respect to the Collateral, in form and substance reasonably
satisfactory to the Secured Parties.
(gg) If any Debtor shall at any time hold or acquire a
commercial tort claim, such Debtor shall promptly notify the Secured
Parties in a writing signed by such Debtor of the particulars thereof
and grant to the Secured Parties in such writing a security interest
therein and in the proceeds thereof, all upon the terms of this
Agreement, with such writing to be in form and substance reasonably
satisfactory to the Secured Parties.
(hh) Each Debtor shall promptly provide written notice to the
Secured Parties of any and all accounts which arise out of contracts
with any governmental authority and, to the extent necessary to perfect
or continue the perfected status of the Security Interest in such
accounts and proceeds thereof, shall execute and deliver to the Secured
Parties a collateral assignment of claims for such accounts and
cooperate with the Secured Parties in taking any other steps required,
in their reasonable judgment, under the Federal Assignment of Claims
Act or any similar federal, state or local statute or rule
to perfect or continue the perfected status of the Security Interest in
such accounts and proceeds thereof.
(ii) Each Debtor shall cause each subsidiary of such Debtor
(unless such subsidiary shall have an immaterial amount of assets) to
immediately become a party hereto (an "Additional Debtor"), by
executing and delivering an Additional Debtor Joinder in substantially
the form of Annex A attached hereto and comply with the provisions
hereof applicable to the Debtors. Concurrent therewith, the Additional
Debtor shall deliver replacement schedules for, or supplements to all
other Schedules to (or referred to in) this Agreement, as applicable,
which replacement schedules shall supersede, or supplements shall
modify, the Schedules then in effect. The Additional Debtor shall also
deliver such opinions of counsel, authorizing resolutions, good
standing certificates, incumbency certificates, organizational
documents, financing statements and other information and documentation
as the Secured Parties may reasonably request. Upon delivery of the
foregoing to the Secured Parties, the Additional Debtor shall be and
become a party to this Agreement with the same rights and obligations
as the Debtors, for all purposes hereof as fully and to the same extent
as if it were an original signatory hereto and shall be deemed to have
made the applicable representations, warranties and covenants set forth
herein as of the date of execution and delivery of such Additional
Debtor Joinder, and all references herein to the "Debtors" shall be
deemed to include each Additional Debtor.
(jj) Each Debtor shall vote the Pledged Securities to comply
with the covenants and agreements set forth herein and in the
Debentures.
(kk) Each Debtor shall register the pledge of the applicable
Pledged Securities on the books of such Debtor. Each Debtor shall
notify each issuer of Pledged Securities to register the pledge of the
applicable Pledged Securities in the name of the Secured Parties on the
books of such issuer. Further, except with respect to certificated
securities delivered to the Agent, the applicable Debtor shall deliver
to Agent an acknowledgement of pledge (which, where appropriate, shall
comply with the requirements of the relevant UCC with respect to
perfection by registration) signed by the issuer of the applicable
Pledged Securities, which acknowledgement shall confirm that: (a) it
has registered the pledge on its books and records; and (b) at any time
directed by Agent during the continuation of an Event of Default, such
issuer will transfer the record ownership of such Pledged Securities
into the name of any designee of Agent, will take such steps as may be
necessary to effect the transfer, and will comply with all other
instructions of Agent regarding such Pledged Securities without the
further consent of the applicable Debtor.
(ll) In the event that, upon an occurrence of an Event of
Default, Agent shall sell all or any of the Pledged Securities to
another party or parties (herein called the "Transferee") or shall
purchase all or any of the Pledged Securities, each Debtor shall, to
the extent applicable: (i) deliver to Agent or the Transferee, as the
case may be, the articles of incorporation, bylaws, minute books, stock
certificate books, corporate seals,
deeds, leases, indentures, agreements, evidences of indebtedness, books
of account, financial records and all other Organizational Documents
and records of the Debtors and their direct and indirect subsidiaries;
(ii) use its best efforts to obtain resignations of the persons then
serving as officers and directors of the Debtors and their direct and
indirect subsidiaries, if so requested; and (iii) use its best efforts
to obtain any approvals that are required by any governmental or
regulatory body in order to permit the sale of the Pledged Securities
to the Transferee or the purchase or retention of the Pledged
Securities by Agent and allow the Transferee or Agent to continue the
business of the Debtors and their direct and indirect subsidiaries.
(mm) Without limiting the generality of the other obligations
of the Debtors hereunder, each Debtor shall promptly (i) cause to be
registered at the United States Copyright Office all of its material
copyrights, (ii) cause the Security Interest contemplated hereby with
respect to all Intellectual Property registered at the United States
Copyright Office or United States Patent and Trademark Office to be
duly recorded at the applicable office, and (iii) give the Agent notice
whenever it acquires (whether absolutely or by license) or creates any
additional material Intellectual Property.
(nn) Each Debtor will from time to time, at the joint and
several expense of the Debtors, promptly execute and deliver all such
further instruments and documents, and take all such further action as
may be necessary, or as the Secured Parties may reasonably request, in
order to perfect and protect any security interest granted or purported
to be granted hereby or to enable the Secured Parties to exercise and
enforce their rights and remedies hereunder and with respect to any
Collateral or to otherwise carry out the purposes of this Agreement.
(oo) Schedule F attached hereto lists all of the patents,
patent applications, trademarks, trademark applications, registered
copyrights, and domain names owned by any of the Debtors as of the date
hereof. Schedule F lists all material licenses in favor of any Debtor
for the use of any patents, trademarks, copyrights and domain names as
of the date hereof. All material patents and trademarks of the Debtors
have been duly recorded at the United States Patent and Trademark
Office and all material copyrights of the Debtors have been duly
recorded at the United States Copyright Office.
(pp) Except as set forth on Schedule G attached hereto, none
of the account debtors or other persons or entities obligated on any of
the Collateral is a governmental authority covered by the Federal
Assignment of Claims Act or any similar federal, state or local statute
or rule in respect of such Collateral.
5. EFFECT OF PLEDGE ON CERTAIN RIGHTS. If any of the Collateral subject
to this Agreement consists of nonvoting equity or ownership interests
(regardless of class, designation, preference or rights) that may be converted
into voting equity or ownership interests upon the occurrence of certain events
(including, without limitation, upon the transfer of all or any of the other
stock or assets of the issuer), it is agreed that the pledge of such equity or
ownership interests pursuant to this Agreement or the enforcement of any of
Agent's rights hereunder shall not be deemed to be the type of event which would
trigger such conversion rights
notwithstanding any provisions in the Organizational Documents or agreements to
which any Debtor is subject or to which any Debtor is party.
6. DEFAULTS. The following events shall be "Events of Default":
(a) The occurrence of an Event of Default (as defined in the
Debenture) under the Debenture;
(b) Any representation or warranty of any Debtor in this
Agreement shall prove to have been incorrect in any material respect
when made;
(c) The failure by any Debtor to observe or perform any of its
obligations hereunder for twenty (20) days after delivery to such
Debtor of notice of such failure by or on behalf of a Secured Party
unless such default is capable of cure but cannot be cured within such
time frame and such Debtor is using commercially reasonable efforts to
cure same in a timely fashion; or
(d) If any provision of this Agreement shall at any time for
any reason be declared to be null and void, or the validity or
enforceability thereof shall be contested by any Debtor, or a
proceeding shall be commenced by any Debtor, or by any governmental
authority having jurisdiction over any Debtor, seeking to establish the
invalidity or unenforceability thereof, or any Debtor shall deny that
any Debtor has any liability or obligation purported to be created
under this Agreement.
7. DUTY TO HOLD IN TRUST.
(a) Upon the occurrence of any Event of Default and at any
time thereafter until such Event of Default is cured provided that such
Event of Default is cured prior to the date that the Agent has taken
any action in respect of such Event of Default, each Debtor shall, upon
receipt of any revenue, income, dividend, interest or other sums
subject to the Security Interest, whether payable pursuant to the
Debenture or otherwise, or of any check, draft, note, trade acceptance
or other instrument evidencing an obligation to pay any such sum, hold
the same in trust for the Secured Parties and shall forthwith endorse
and transfer any such sums or instruments, or both, to the Secured
Parties, pro-rata in proportion to their initial purchases of
Debentures for application to the satisfaction of the Obligations (and
if any Debenture is not outstanding, pro-rata in proportion to the
initial purchases of the remaining Debentures).
(b) If any Debtor shall become entitled to receive or shall
receive any securities or other property (including, without
limitation, shares of Pledged Securities or instruments representing
Pledged Securities acquired after the date hereof, or any options,
warrants, rights or other similar property or certificates representing
a dividend, or any distribution in connection with any
recapitalization, reclassification or increase or reduction of capital,
or issued in connection with any reorganization of such Debtor or any
of its direct or indirect subsidiaries) in respect of the Pledged
Securities (whether as
an addition to, in substitution of, or in exchange for, such Pledged
Securities or otherwise), such Debtor agrees to (i) accept the same as
the agent of the Secured Parties; (ii) hold the same in trust on behalf
of and for the benefit of the Secured Parties; and (iii) to deliver any
and all certificates or instruments evidencing the same to Agent on or
before the close of business on the fifth business day following the
receipt thereof by such Debtor, in the exact form received together
with the Necessary Endorsements, to be held by Agent subject to the
terms of this Agreement as Collateral.
8. RIGHTS AND REMEDIES UPON DEFAULT.
(a) Upon the occurrence of any Event of Default and at any
time thereafter until such Event of Default is cured provided that such
Event of Default is cured prior to the date that the Agent has taken
any action in respect of such Event of Default, the Secured Parties,
acting through any agent appointed by them for such purpose, shall have
the right to exercise all of the remedies conferred hereunder and under
the Debentures, and the Secured Parties shall have all the rights and
remedies of a secured party under the UCC, including, without
limitation, the following rights and powers:
(i) The Secured Parties shall have the right to take
possession of the Collateral and, for that purpose, enter,
with the aid and assistance of any person, any premises where
the Collateral, or any part thereof, is or may be placed and
remove the same, and each Debtor shall assemble the Collateral
and make it available to the Secured Parties at places which
the Secured Parties shall reasonably select, whether at such
Debtor's premises or elsewhere, and make available to the
Secured Parties, without rent, all of such Debtor's respective
premises and facilities for the purpose of the Secured Parties
taking possession of, removing or putting the Collateral in
saleable or disposable form.
(ii) Upon notice to the Debtors by Agent, all rights
of each Debtor to exercise the voting and other consensual
rights which it would otherwise be entitled to exercise and
all rights of each Debtor to receive the dividends and
interest which it would otherwise be authorized to receive and
retain, shall cease. Upon such notice, Agent shall have the
right to receive any interest, cash dividends or other
payments on the Collateral and, at the option of Agent, to
exercise in such Agent's discretion all voting rights
pertaining thereto. Without limiting the generality of the
foregoing, Agent shall have the right (but not the obligation)
to exercise all rights with respect to the Collateral as if it
were the sole and absolute owner thereof, including, without
limitation, to vote and/or to exchange, at its sole
discretion, any or all of the Collateral in connection with a
merger, reorganization, consolidation, recapitalization or
other readjustment concerning or involving the Collateral or
any Debtor or any of its direct or indirect subsidiaries.
(iii) The Secured Parties shall have the right to
operate the business of each Debtor using the Collateral and
shall have the right to assign, sell, lease or
otherwise dispose of and deliver all or any part of the
Collateral, at public or private sale or otherwise, either
with or without special conditions or stipulations, for cash
or on credit or for future delivery, in such parcel or
parcels and at such time or times and at such place or
places, and upon such terms and conditions as the Secured
Parties shall be commercially reasonable, all without
(except as shall be required by applicable statute)
advertisement or demand upon or notice to any Debtor or
right of redemption of a Debtor. Upon each such sale, lease,
assignment or other transfer of Collateral, the Secured
Parties may, unless prohibited by applicable law, purchase
all or any part of the Collateral being sold, free from and
discharged of all trusts, claims, right of redemption and
equities of any Debtor.
(iv) The Secured Parties shall have the right (but
not the obligation) to notify any account debtors and any
obligors under instruments or accounts to make payments
directly to the Secured Parties and to enforce the Debtors'
rights against such account debtors and obligors.
(v) The Secured Parties may (but are not obligated
to) direct any financial intermediary or any other person or
entity holding any investment property to transfer the same to
the Secured Parties or their designee.
(vi) The Secured Parties may (but are not obligated
to) transfer any or all Intellectual Property registered in
the name of any Debtor at the United States Patent and
Trademark Office and/or Copyright Office into the name of the
Secured Parties or any designee or any purchaser of any
Collateral.
(b) The Agent may comply with any applicable law in connection
with a disposition of Collateral and such compliance will not be
considered adversely to affect the commercial reasonableness of any
sale of the Collateral. The Agent may sell the Collateral without
giving any warranties and may specifically disclaim such warranties. If
the Agent sells any of the Collateral on credit, the Debtors will only
be credited with payments actually made by the purchaser. In addition,
each Debtor waives any and all rights that it may have to a judicial
hearing in advance of the enforcement of any of the Agent's rights and
remedies hereunder, including, without limitation, its right following
an Event of Default to take immediate possession of the Collateral and
to exercise its rights and remedies with respect thereto.
(c) For the purpose of enabling the Agent to further exercise
rights and remedies under this Section 8 or elsewhere provided by
agreement or applicable law, each Debtor hereby grants to the Agent,
for the benefit of the Agent and the Secured Parties, an irrevocable,
nonexclusive license (exercisable without payment of royalty or other
compensation to such Debtor) to use, license or sublicense following an
Event of Default, any Intellectual Property now owned or hereafter
acquired by such Debtor, and wherever the same may be located, and
including in such license access to all media in which any of the
licensed items may be recorded or stored and to all computer software
and programs used for the compilation or printout thereof.
9. APPLICATIONS OF PROCEEDS. The proceeds of any such sale, lease or
other disposition of the Collateral hereunder shall be applied first, to the
expenses of retaking, holding, storing, processing and preparing for sale,
selling, and the like (including, without limitation, any taxes, fees and other
costs incurred in connection therewith) of the Collateral, to the reasonable
attorneys' fees and expenses incurred by the Secured Parties in enforcing their
rights hereunder and in connection with collecting, storing and disposing of the
Collateral, and then to satisfaction of the Obligations pro rata among the
Secured Parties (based on then-outstanding principal amounts of Debentures at
the time of any such determination), and to the payment of any other amounts
required by applicable law, after which the Secured Parties shall pay to the
applicable Debtor any surplus proceeds. If, upon the sale, license or other
disposition of the Collateral, the proceeds thereof are insufficient to pay all
amounts to which the Secured Parties are legally entitled, the Debtors will be
liable for the deficiency, together with interest thereon, at the rate of 10%
per annum or the lesser amount permitted by applicable law (the "Default Rate"),
and the reasonable fees of any attorneys employed by the Secured Parties to
collect such deficiency. To the extent permitted by applicable law, each Debtor
waives all claims, damages and demands against the Secured Parties arising out
of the repossession, removal, retention or sale of the Collateral, unless due
solely to the gross negligence or willful misconduct of the Secured Parties as
determined by a final judgment (not subject to further appeal) of a court of
competent jurisdiction.
10. SECURITIES LAW PROVISION. Each Debtor recognizes that Agent may be
limited in its ability to effect a sale to the public of all or part of the
Pledged Securities by reason of certain prohibitions in the Securities Act of
1933, as amended, or other federal or state securities laws (collectively, the
"Securities Laws"), and may be compelled to resort to one or more sales to a
restricted group of purchasers who may be required to agree to acquire the
Pledged Securities for their own account, for investment and not with a view to
the distribution or resale thereof. Each Debtor agrees that sales so made may be
at prices and on terms less favorable than if the Pledged Securities were sold
to the public, and that Agent has no obligation to delay the sale of any Pledged
Securities for the period of time necessary to register the Pledged Securities
for sale to the public under the Securities Laws. Each Debtor shall cooperate
with Agent in its attempt to satisfy any requirements under the Securities Laws
(including, without limitation, registration thereunder if requested by Agent)
applicable to the sale of the Pledged Securities by Agent.
11. COSTS AND EXPENSES. Each Debtor agrees to pay all reasonable
out-of-pocket fees, costs and expenses incurred in connection with any filing
required hereunder, including without limitation, any financing statements
pursuant to the UCC, continuation statements, partial releases and/or
termination statements related thereto or any expenses of any searches
reasonably required by the Secured Parties. The Debtors shall also pay all other
claims and charges which in the reasonable opinion of the Secured Parties might
materially prejudice, imperil or otherwise affect the Collateral or the Security
Interest therein. The Debtors will also, upon demand, pay to the Secured Parties
the amount of any and all reasonable expenses, including the reasonable fees and
expenses of its counsel and of any experts and agents, which the Secured Parties
may incur in connection with (i) the enforcement of this Agreement, (ii) the
custody or preservation of, or the sale of, collection from, or other
realization upon, any of the Collateral, or (iii) the exercise or enforcement of
any of the rights of the Secured Parties under
the Debentures. Until so paid, any fees payable hereunder shall be added to the
principal amount of the Debentures and shall bear interest at the Default Rate.
12. RESPONSIBILITY FOR COLLATERAL. The Debtors assume all
liabilities and responsibility in connection with all Collateral, and the
Obligations shall in no way be affected or diminished by reason of the loss,
destruction, damage or theft of any of the Collateral or its unavailability for
any reason. Without limiting the generality of the foregoing, (a) neither the
Agent nor any Secured Party, other than as required by applicable law, (i) has
any duty (either before or after an Event of Default) to collect any amounts in
respect of the Collateral or to preserve any rights relating to the Collateral,
or (ii) has any obligation to clean-up or otherwise prepare the Collateral for
sale, and (b) each Debtor shall remain obligated and liable under each contract
or agreement included in the Collateral to be observed or performed by such
Debtor thereunder. Neither the Agent nor any Secured Party, other than as
required by applicable law, shall have any obligation or liability under any
such contract or agreement by reason of or arising out of this Agreement or the
receipt by the Agent or any Secured Party of any payment relating to any of the
Collateral, nor shall the Agent or any Secured Party be obligated in any manner
to perform any of the obligations of any Debtor under or pursuant to any such
contract or agreement, to make inquiry as to the nature or sufficiency of any
payment received by the Agent or any Secured Party in respect of the Collateral
or as to the sufficiency of any performance by any party under any such contract
or agreement, to present or file any claim, to take any action to enforce any
performance or to collect the payment of any amounts which may have been
assigned to the Agent or to which the Agent or any Secured Party may be entitled
at any time or times.
13. SECURITY INTEREST ABSOLUTE. All rights of the Secured Parties and
all obligations of the Debtors hereunder, shall be absolute and unconditional,
irrespective of: (a) any lack of validity or enforceability of this Agreement,
the Debentures or any agreement entered into in connection with the foregoing,
or any portion hereof or thereof; (b) any change in the time, manner or place of
payment or performance of, or in any other term of, all or any of the
Obligations, or any other amendment or waiver of or any consent to any departure
from the Debentures or any other agreement entered into in connection with the
foregoing; (c) any exchange, release or nonperfection of any of the Collateral,
or any release or amendment or waiver of or consent to departure from any other
collateral for, or any guaranty, or any other security, for all or any of the
Obligations; (d) any action by the Secured Parties to obtain, adjust, settle and
cancel in its sole discretion any insurance claims or matters made or arising in
connection with the Collateral; or (e) any other circumstance (except if
attributable to the Secured Parties' gross negligence or willful misconduct)
which might otherwise constitute any legal or equitable defense available to a
Debtor, or a discharge of all or any part of the Security Interest granted
hereby. Until the Obligations shall have been paid and performed in full, the
rights of the Secured Parties shall continue even if the Obligations are barred
for any reason, including, without limitation, the running of the statute of
limitations or bankruptcy. Each Debtor expressly waives presentment, protest,
notice of protest, demand, notice of nonpayment and demand for performance,
except as provided herein or in the Debentures. In the event that at any time
any transfer of any Collateral or any payment received by the Secured Parties
hereunder shall be deemed by final order of a court of competent jurisdiction to
have been a voidable
preference or fraudulent conveyance under the bankruptcy or insolvency laws of
the United States, or shall be deemed to be otherwise due to any party other
than the Secured Parties, then, in any such event, each Debtor's obligations
hereunder shall survive cancellation of this Agreement, and shall not be
discharged or satisfied by any prior payment thereof and/or cancellation of this
Agreement, but shall remain a valid and binding obligation enforceable in
accordance with the terms and provisions hereof. Each Debtor waives all right to
require the Secured Parties to proceed against any other person or entity or to
apply any Collateral which the Secured Parties may hold at any time, or to
marshal assets, or to pursue any other remedy. Each Debtor waives any defense
arising by reason of the application of the statute of limitations to any
obligation secured hereby.
14. TERM OF AGREEMENT. This Agreement and the Security Interest
shall terminate on the date on which all payments under the Debentures have been
indefeasibly paid in full and all other Obligations have been paid or
discharged; provided, however, that all indemnities of the Debtors contained in
this Agreement (including, without limitation, Annex B hereto) shall survive and
remain operative and in full force and effect regardless of the termination of
this Agreement.
15. POWER OF ATTORNEY; FURTHER ASSURANCES.
(a) Each Debtor authorizes the Agent on behalf of Secured
Parties, and does hereby make, constitute and appoint the Agent on
behalf of Secured Parties and its respective officers, agents,
successors or assigns with full power of substitution, as such Debtor's
true and lawful attorney-in-fact, with power, in the name of the
various Secured Parties or such Debtor, to, after the occurrence and
during the continuance of an Event of Default, (i) endorse any note,
checks, drafts, money orders or other instruments of payment (including
payments payable under or in respect of any policy of insurance) in
respect of the Collateral that may come into possession of the Secured
Parties; (ii) to sign and endorse any financing statement pursuant to
the UCC or any invoice, freight or express xxxx, xxxx of lading,
storage or warehouse receipts, drafts against debtors, assignments,
verifications and notices in connection with accounts, and other
documents relating to the Collateral; (iii) to pay or discharge taxes,
liens, security interests or other encumbrances at any time levied or
placed on or threatened against the Collateral; (iv) to demand,
collect, receipt for, compromise, settle and xxx for monies due in
respect of the Collateral; (v) to transfer any Intellectual Property or
provide licenses respecting any Intellectual Property; and (vi)
generally, at the option of the Secured Parties, and at the expense of
the Debtors, at any time, or from time to time, to execute and deliver
any and all documents and instruments and to do all acts and things
which the Secured Parties deem reasonably necessary to protect,
preserve and realize upon the Collateral and the Security Interest
granted therein in order to effect the intent of this Agreement and the
Debentures all as fully and effectually as the Debtors might or could
do. This power of attorney is coupled with an interest and shall be
irrevocable for the term of this Agreement and thereafter as long as
any of the Obligations shall be outstanding. The designation set forth
herein shall be deemed to amend and supersede any inconsistent
provision in the Organizational Documents or other documents or
agreements to which any Debtor is subject or to which
any Debtor is a party. Without limiting the generality of the
foregoing, after the occurrence and during the continuance of an Event
of Default, the Agent on behalf of each Secured Party is specifically
authorized to execute and file any applications for or instruments of
transfer and assignment of any patents, trademarks, copyrights or
other Intellectual Property with the United States Patent and
Trademark Office and the United States Copyright Office.
(b) On a continuing basis, each Debtor will make, execute,
acknowledge, deliver, file and record, as the case may be, with the
proper filing and recording agencies in any jurisdiction, including,
without limitation, the jurisdictions indicated on Schedule C attached
hereto, all such instruments, and take all such action as may
reasonably be deemed necessary or advisable, or as reasonably requested
by the Secured Parties, to perfect the Security Interest granted
hereunder and otherwise to carry out the intent and purposes of this
Agreement, or for assuring and confirming to the Secured Parties the
grant or perfection of a perfected security interest in all the
Collateral under the UCC.
(c) Each Debtor hereby irrevocably appoints the Secured
Parties as such Debtor's attorney-in-fact, with full authority in the
place and instead of such Debtor and in the name of such Debtor, from
time to time in the Secured Parties' discretion, to execute and file
any instrument which the Secured Parties may deem necessary or
advisable to perfect the Security Interest, including the filing, in
its sole discretion, of one or more financing or continuation
statements and amendments thereto, relative to any of the Collateral
without the signature of such Debtor where permitted by law, which
financing statements may (but need not) describe the Collateral as "all
assets" or "all personal property" or words of like import. This power
of attorney is coupled with an interest and shall be irrevocable for
the term of this Agreement and thereafter as long as any of the
Obligations shall be outstanding.
16. NOTICES. All notices, requests, demands and other communications
hereunder shall be subject to the notice provision of the Purchase Agreement (as
such term is defined in the Debentures).
17. OTHER SECURITY. To the extent that the Obligations are now or
hereafter secured by property other than the Collateral or by the guarantee,
endorsement or property of any other person, firm, corporation or other entity,
then the Secured Parties shall have the right, in their sole discretion, to
pursue, relinquish, subordinate, modify or take any other action with respect
thereto, without in any way modifying or affecting any of the Secured Parties'
rights and remedies hereunder.
18. APPOINTMENT OF AGENT. The Secured Parties hereby appoint ____ to
act as their agent ("[_____" or "Agent") for purposes of exercising any and all
rights and remedies of the Secured Parties hereunder. Such appointment shall
continue until revoked in writing by a Majority in Interest, at which time a
Majority in Interest shall appoint a new Agent; provided, that [_____ may not be
removed as Agent unless __________________ shall then hold less than
$____________ principal amount of Debentures; provided further that such removal
may occur
only if each of the other Secured Parties shall then hold not less than
$______________ principal amount of Debentures. The Agent shall have the rights,
responsibilities and immunities set forth in Annex B hereto.
19. MISCELLANEOUS.
(a) No course of dealing between the Debtors and the Secured
Parties, nor any failure to exercise, nor any delay in exercising, on
the part of the Secured Parties, any right, power or privilege
hereunder or under the Debentures shall operate as a waiver thereof;
nor shall any single or partial exercise of any right, power or
privilege hereunder or thereunder preclude any other or further
exercise thereof or the exercise of any other right, power or
privilege.
(b) All of the rights and remedies of the Secured Parties with
respect to the Collateral, whether established hereby or by the
Debentures or by any other agreements, instruments or documents or by
law shall be cumulative and may be exercised singly or concurrently.
(c) This Agreement constitutes the entire agreement of the
parties with respect to the subject matter hereof and is intended to
supersede all prior negotiations, understandings and agreements with
respect thereto. Except as specifically set forth in this Agreement, no
provision of this Agreement may be modified or amended except by a
written agreement specifically referring to this Agreement and signed
by the Debtors and 75% of the holders of the then outstanding principal
amount of Debentures.
(d) In the event any provision of this Agreement is held to be
invalid, prohibited or unenforceable in any jurisdiction for any
reason, unless such provision is narrowed by judicial construction,
this Agreement shall, as to such jurisdiction, be construed as if such
invalid, prohibited or unenforceable provision had been more narrowly
drawn so as not to be invalid, prohibited or unenforceable. If,
notwithstanding the foregoing, any provision of this Agreement is held
to be invalid, prohibited or unenforceable in any jurisdiction, such
provision, as to such jurisdiction, shall be ineffective to the extent
of such invalidity, prohibition or unenforceability without
invalidating the remaining portion of such provision or the other
provisions of this Agreement and without affecting the validity or
enforceability of such provision or the other provisions of this
Agreement in any other jurisdiction.
(e) No waiver of any breach or default or any right under this
Agreement shall be considered valid unless in writing and signed by the
party giving such waiver, and no such waiver shall be deemed a waiver
of any subsequent breach or default or right, whether of the same or
similar nature or otherwise.
(f) This Agreement shall be binding upon and inure to the
benefit of each party hereto and its successors and assigns.
(g) Each party shall take such further action and execute and
deliver such further documents as may be necessary or appropriate in
order to carry out the provisions and purposes of this Agreement.
(h) All questions concerning the construction, validity,
enforcement and interpretation of this Agreement shall be governed by
and construed and enforced in accordance with the internal laws of the
State of New York, without regard to the principles of conflicts of law
thereof. Each Debtor agrees that all proceedings concerning the
interpretations, enforcement and defense of the transactions
contemplated by this Agreement and the Debenture (whether brought
against a party hereto or its respective affiliates, directors,
officers, shareholders, partners, members, employees or agents) shall
be commenced exclusively in the state and federal courts sitting in the
City of New York, Borough of Manhattan. Each Debtor hereby irrevocably
submits to the exclusive jurisdiction of the state and federal courts
sitting in the City of New York, Borough of Manhattan for the
adjudication of any dispute hereunder or in connection herewith or with
any transaction contemplated hereby or discussed herein, and hereby
irrevocably waives, and agrees not to assert in any proceeding, any
claim that it is not personally subject to the jurisdiction of any such
court, that such proceeding is improper. Each party hereto hereby
irrevocably waives personal service of process and consents to process
being served in any such proceeding by mailing a copy thereof via
registered or certified mail or overnight delivery (with evidence of
delivery) to such party at the address in effect for notices to it
under this Agreement and agrees that such service shall constitute good
and sufficient service of process and notice thereof. Nothing contained
herein shall be deemed to limit in any way any right to serve process
in any manner permitted by law. Each party hereto hereby irrevocably
waives, to the fullest extent permitted by applicable law, any and all
right to trial by jury in any legal proceeding arising out of or
relating to this Agreement or the transactions contemplated hereby. If
any party shall commence a proceeding to enforce any provisions of this
Agreement, then the prevailing party in such proceeding shall be
reimbursed by the other party for its reasonable attorney's fees and
other costs and expenses incurred with the investigation, preparation
and prosecution of such proceeding.
(i) This Agreement may be executed in any number of
counterparts, each of which when so executed shall be deemed to be an
original and, all of which taken together shall constitute one and the
same Agreement. In the event that any signature is delivered by
facsimile transmission, such signature shall create a valid binding
obligation of the party executing (or on whose behalf such signature is
executed) the same with the same force and effect as if such facsimile
signature were the original thereof.
(j) All Debtors shall jointly and severally be liable for the
obligations of each Debtor to the Secured Parties hereunder.
(k) Each Debtor shall indemnify, reimburse and hold harmless
the Secured Parties and their respective partners, members,
shareholders, officers, directors, employees and agents (collectively,
"Indemnitees") from and against any and all losses,
claims, liabilities, damages, penalties, suits, costs and expenses, of
any kind or nature, (including reasonable fees relating to the cost of
investigating and defending any of the foregoing) imposed on, incurred
by or asserted against such Indemnitee in any way related to or
arising from or alleged to arise from a breach by the Debtor of this
Agreement, except any such losses, claims, liabilities, damages,
penalties, suits, costs and expenses which result from the gross
negligence or willful misconduct of the Indemnitee as determined by a
final, nonappealable decision of a court of competent jurisdiction.
This indemnification provision is in addition to, and not in
limitation of, any other indemnification provision in the Debentures,
the Purchase Agreement (as such term is defined in the Debentures) or
any other agreement, instrument or other document executed or
delivered in connection herewith or therewith.
(l) Nothing in this Agreement shall be construed to subject
Agent or any Secured Party to liability as a partner in any Debtor or
any if its direct or indirect subsidiaries that is a partnership or as
a member in any Debtor or any of its direct or indirect subsidiaries
that is a limited liability company, nor shall Agent or any Secured
Party be deemed to have assumed any obligations under any partnership
agreement or limited liability company agreement, as applicable, of any
such Debtor or any if its direct or indirect subsidiaries or otherwise,
unless and until any such Secured Party exercises its right to be
substituted for such Debtor as a partner or member, as applicable,
pursuant hereto.
(m) To the extent that the grant of the security interest in
the Collateral and the enforcement of the terms hereof require the
consent, approval or action of any partner or member, as applicable, of
any Debtor or any direct or indirect subsidiary of any Debtor or
compliance with any provisions of any of the Organizational Documents,
the Debtors hereby grant such consent and approval and waive any such
noncompliance with the terms of said documents.
[SIGNATURE PAGES FOLLOW]
IN WITNESS WHEREOF, the parties hereto have caused this Security
Agreement to be duly executed on the day and year first above written.
XXXXXX.XXX, INC.
By: /s/ Xxxx Xxxxxxxx
-----------------------
Name: Xxxx Xxxxxxxx
Title: President & CEO
ARKADOS, INC.
By: /s/ Xxxx Xxxxxxxx
-----------------------
Name: Xxxx Xxxxxxxx
Title: President & CEO
[SIGNATURE PAGE OF HOLDERS FOLLOWS]
[SIGNATURE PAGE OF HOLDERS TO CDKN SA]
Name of Investing Entity: Bushido Capital Master Fund, LP
SIGNATURE OF AUTHORIZED SIGNATORY
OF INVESTING ENTITY: /s/ Xxxxxxxxxxx Xxxxxxx
------------------------------
Name of Authorized Signatory: Xxxxxxxxxxx Xxxxxxx
Title of Authorized Signatory: Managing Director, Bushido Capital
Partners, Ltd.
[SIGNATURE PAGE OF HOLDERS FOLLOWS]
[SIGNATURE PAGE OF HOLDERS TO CDKN SA]
Name of Investing Entity: Gamma Opportunity Capital Partners, LP Class A
SIGNATURE OF AUTHORIZED
SIGNATORY OF INVESTING ENTITY: /s/ Xxxxxxxx X. Xxxxxx
------------------------------
Name of Authorized Signatory: Xxxxxxxx X. Xxxxxx
Title of Authorized Signatory: President / Director
[SIGNATURE PAGE OF HOLDERS FOLLOWS]
[SIGNATURE PAGE OF HOLDERS TO CDKN SA]
Name of Investing Entity: Gamma Opportunity Capital Partners, LP Class C
SIGNATURE OF AUTHORIZED
SIGNATORY OF INVESTING ENTITY: /s/ Xxxxxxxx X. Xxxxxx
------------------------------
Name of Authorized Signatory: Xxxxxxxx X. Xxxxxx
Title of Authorized Signatory: President / Director
[SIGNATURE PAGE OF HOLDERS FOLLOWS]
