SECURITY AGREEMENT
Exhibit
10.10
This
SECURITY AGREEMENT (this “Agreement”), dated as of April 21, 2009, is made by
and between Xxxxxx Asset Partners, LLC, a Delaware limited liability company, in
its capacity as collateral agent (the “Collateral Agent”), and Amber Ready,
Inc., a Nevada corporation (“Amber” or the “Grantor”) for the benefit of the
holders (the “Holders”) of those certain three year convertible secured
promissory notes described below in the minimum principal amount of $3,000,000
(the “Minimum Amount”) and a maximum amount of up to $11,000,000 (or up to
$12,000,000, if an over-allotment (the “Over-allotment”) is exercised in full),
to be issued by Amber from time to time on and after the date hereof, all upon
terms described in that certain Confidential Private Placement Memorandum, dated
March 19, 2009 (the “Memorandum”).
W I T N E S S E T
H:
WHEREAS,
from time to time on and after the date hereof and subject to reaching the
Minimum Amount, Xxxxx xxx issue up to $11,000,000 (or up to $12,000,000, upon
exercise of the Over-allotment in full) of its 18% secured convertible three
year promissory notes (as each may be at any time amended, extended, restated,
renewed or modified, each a “Convertible Note,” and collectively, the
“Convertible Notes”), which are convertible into units (“Units”) upon the terms
set forth in the Memorandum (such transaction referred to herein as the
“Financing”);
WHEREAS,
pursuant to the execution of a Subscription Agreement in the form attached to
the Memorandum as Appendix A (the
“Subscription Agreement”), each subscriber has become a Holder and has appointed
and authorized the Collateral Agent to act as collateral agent under this
Agreement;
WHEREAS,
it is a condition precedent to the obligation of each of the subscribers to
purchase a Convertible Note that Amber shall have granted to the Collateral
Agent a security interest for the benefit of the Holders in the Collateral (as
hereinafter defined) as contemplated by this Agreement; and
WHEREAS,
Amber expects to realize direct and indirect benefits as a result of the sale of
the Convertible Notes to the subscribers and desires to grant the Collateral
Agent a security interest for the benefit of the Holders in the Collateral as
contemplated by this Agreement.
NOW,
THEREFORE, for good and valuable consideration, the receipt and adequacy of
which are hereby acknowledged, the parties agree as follows:
1
ARTICLE I
– DEFINITIONS
1.1 This
Agreement is the Security Agreement referred to in the Subscription Agreement,
the Memorandum and the Convertible Notes. As used in this Agreement,
the following terms shall have the meanings respectively set forth
below:
“Agreement”
means this Security Agreement, and any extensions, modifications, renewals,
restatements, supplements or amendments hereof.
“Bankruptcy
Code” means Chapter 11 of Title 11 of the United States Code, as amended from
time to time, and any successor statute and all rules and regulations
promulgated thereunder.
“Collateral”
means all of Amber’s now owned or hereafter acquired right, title and interest
in and to the General Assets, the Trademarks, the Patents and the
Licenses.
“General
Assets” shall have the meaning set forth in Section 2.1 hereof.
“Investment
Collateral” shall have the meaning set forth in Section 7.1 hereof.
“Licenses”
shall have the meaning set forth in Section 2.4 hereof.
“Patents”
shall have the meaning set forth in Section 2.3 hereof.
“Secured Obligations” means any and all
present and future obligations of Amber arising under or relating to the
Convertible Notes, the Subscription Agreement or this Agreement, whether due or
to become due, matured or unmatured, or liquidated or unliquidated, including
interest that accrues after the commencement of any bankruptcy or insolvency
proceeding by or against the Grantor. For the avoidance of doubt, the
Secured Obligations shall include the obligations of the Grantor to pay the fees
and expenses of the Collateral Agent and to provide indemnity to the Collateral
Agent pursuant to Article XIII
hereof.
“Trademarks” shall have the meaning set
forth in Section 2.2 hereof.
ARTICLE
II –SECURITY INTERESTS
2.1 Grant of Security Interest
in General Assets. To secure the complete and timely payment,
performance and satisfaction of all of the Secured Obligations, the Grantor
hereby grants to the Collateral Agent, for the pro rata benefit of the Holders,
a security interest as and by way of a security interest having priority over
all other security interests (except as expressly set forth in this Agreement),
with power of sale to the fullest extent permitted by applicable law, in all of
the Grantor’s right, title and interest in and to the Grantor’s now owned or
otherwise existing and hereafter acquired or arising:
2
(a) accounts
(as that term is defined from time to time in the Uniform Commercial Code as in
effect in the State of New York), contract rights and all other forms of
obligations owing to the Grantor arising out of the sale or lease of goods or
the rendition of services by the Grantor, irrespective of whether earned by
performance, and any and all credit insurance, guarantees or security
therefor;
(b) books
and records, including ledgers; records indicating, summarizing or evidencing
the Grantor’s properties or assets or liabilities; all information relating to
the Grantor’s business operations or financial condition; and all other computer
programs, disk or tape files, printouts, runs or other computer prepared
information;
(c) deposit
accounts (as that term is defined from time to time in the Uniform Commercial
Code as in effect in the State of New York);
(d) all
of the Grantor’s general intangibles (as that term is defined from time to time
in the Uniform Commercial Code as in effect in the State of New York) and other
personal property (including contract rights, rights arising under common law,
statutes or regulations, choses or things in action, commercial tort claims,
blueprints, drawings, purchase orders, customer lists, monies due or recoverable
from pension funds, route lists, computer programs, information contained in
computer disks or tapes, literature, reports, catalogs, insurance premium
rebates, tax refunds and tax refund claims);
(e) goods
(as that term is defined from time to time in the Uniform Commercial Code as in
effect in the State of New York), including (i) all inventory, including
equipment held for lease, whether raw materials, in process or finished, all
material or equipment usable in processing the same and all documents of title
covering any inventory, (ii) all equipment employed in connection with the
Grantor’s business, together with all present and future additions, attachments
and accessions thereto and all substitutions therefor and replacements thereof
and (iii) all vehicles;
(f) instruments
and other investment property (as such terms are defined from time to time in
the Uniform Commercial Code as in effect in the State of New York);
(g) negotiable
collateral, including all of the Grantor’s right, title and interest with
respect to any letters of credit, letter of credit rights, instruments, drafts,
documents and chattel paper (as each term is defined from time to time in the
Uniform Commercial Code as in effect in the State of New York), and any and all
supporting obligations in respect thereof;
(h) money
or other assets of the Grantor that now or hereafter come into the possession,
custody or control of the Grantor;
(i) the
proceeds and products, whether tangible or intangible, of any of the foregoing,
including proceeds of insurance covering any or all of the foregoing, and any
and all other tangible or intangible property resulting from the sale, exchange,
collection or other disposition of any of the foregoing, or any portion thereof
or interest therein, and the proceeds thereof; and
(j) all
of the Grantor’s right, title and market in and to any shares of capital stock
of any of its subsidiaries and the certificates representing any such
shares.
3
All of
the items described in clauses (a)-(j) in this Section 2.1 are hereinafter
individually and/or collectively referred to as the “General
Assets.”
On or
prior to the date of execution of this Agreement, Grantor shall deliver to the
Collateral Agent, for the benefit of the Holders, a certificate of insurance
naming the Collateral Agent as loss payee and additional insured, as its
interest may appear, under the Grantor’s policies of liability and property
insurance for the benefit of the Holders, which shall remain in effect for the
term of this Agreement.
2.2 Grant of Security Interest
in Trademarks. To secure the complete and timely payment, performance and
satisfaction of all of the Secured Obligations, the Grantor hereby grants to the
Collateral Agent, for the pro rata benefit of the Holders, a security interest
as and by way of a first mortgage and security interest having priority over all
other security interests, including with power of sale to the fullest extent
permitted by applicable law, in all of the Grantor’s right, title and interest
in and to the Grantor’s now owned or otherwise existing and hereafter acquired
or arising: (a) trademarks, trade names, registered trademarks, trademark
applications, service marks, registered service marks and service xxxx
applications and (b) all renewals thereof, all income, royalties, damages and
payments now and hereafter due and/or payable under and with respect thereto,
including, without limitation, payments under all licenses entered into in
connection therewith and damages and payments for past or future infringements
or dilutions thereof, the right to xxx for past, present and future
infringements and dilutions thereof, the goodwill of the Grantor’s business
symbolized by the foregoing and connected therewith and all of the Grantor’s
rights corresponding thereto throughout the world (all of the foregoing items
described in the foregoing clauses (a) and (b) in this Section 2.2, are
hereinafter individually and/or collectively referred to as the “Trademarks”);
and (c) all proceeds of any and all of the foregoing, including, without
limitation, license royalties and proceeds of the infringement
suits.
2.3 Grant of Security Interest
in Patents. To secure the complete and timely payment,
performance and satisfaction of all of the Secured Obligations, the Grantor
hereby grants to the Collateral Agent, for the benefit of the Holders, a
security interest as and by way of a first mortgage and security interest having
priority over all other security interests, including with power of sale to the
fullest extent permitted by applicable law, in all of the Grantor’s right, title
and interest in and to the Grantor’s now owned or otherwise existing and
hereafter acquired or arising: (a) patents and patent applications and (b) all
renewals thereof, all income, royalties, damages and payments now and hereafter
due and/or payable under and with respect to thereto, including, without
limitation, payments under all licenses entered into in connection therewith and
damages and payments for past or future infringements or dilutions thereof, the
right to xxx for past, present and future infringements and dilutions thereof,
the goodwill of the Grantor’s business symbolized by the foregoing and connected
therewith and all of the Grantor’s rights corresponding thereto throughout the
world (all of the foregoing items described in the foregoing clauses (a) and (b)
in this Section 2.3, are hereinafter individually and/or collectively referred
to as the “Patents”); and (c) all proceeds of any and all of the foregoing,
including license royalties and proceeds of the infringement
suits. Notwithstanding the foregoing provisions of this Section 2.3,
the Patents shall not include any agreement to purchase a patent in effect as of
the date hereof that by its terms expressly prohibits the grant of the security
contemplated by this Agreement; provided, however, that upon
the termination of such prohibitions for any reason whatsoever, the provisions
of this Section 2.3 shall be deemed to apply thereto automatically.
4
2.4 Grant of Security Interest
in Licenses. To secure the complete and timely payment,
performance and satisfaction of all of the Secured Obligations, the Grantor
hereby grants to the Collateral Agent, for the benefit of the Holders, a
security interest, as and by way of a first mortgage and security interest
having priority over all other security interests, including with power of sale
to the fullest extent permitted by applicable law, in all of the Grantor’s
right, title and interest in and to the Grantor’s now owned or otherwise
existing and hereafter acquired in any license agreements with any other party,
whether the Grantor is a licensee or licensor under any such license agreement,
and the right to use the foregoing in connection with the enforcement of the
Holders’ rights under the Convertible Notes, including the right to prepare for
sale and sell any and all inventory now or hereafter owned by the Grantor and
now or hereafter covered by such licenses (all of the foregoing are hereinafter
referred to collectively as the “Licenses”). Notwithstanding the
foregoing provisions of this Section 2.4, the Licenses shall not include any
license agreement in effect as of the date hereof that by its terms expressly
prohibits the grant of the security contemplated by this Agreement; provided, however, that upon
the termination of such prohibitions for any reason whatsoever, the provisions
of this Section 2.4 shall be deemed to apply thereto automatically.
2.5 Control Account Agreement;
Cash Collateral Account.
(a) On
or prior to the initial closing of the Financing, the Grantor shall establish a
cash collateral account (the “Cash Collateral Account”) for the benefit of the
holders of the Convertible Notes pursuant to a Control Account Agreement, in
form and substance satisfactory to the Collateral Agent, to be entered into
among the Grantor, the Collateral Agent and Signature Bank or another banking
institution (the “Depositary”) satisfactory to the Grantor and the Collateral
Agent (the “Control Account Agreement”), pursuant to which the Grantor shall
grant to the Collateral Agent a first priority security interest in, and
exclusive dominion and control over, the Cash Collateral Account, the funds
therein and the proceeds thereof as additional security for the Secured
Obligations. Such Control Account Agreement shall remain in effect
until the Convertible Notes are either converted or paid in full.
(b) At
each closing of the Financing, 18% of its gross proceeds (the “Gross Proceeds”)
shall be deposited into the Cash Collateral Account provided however, that the
total amount of the Gross Proceeds deposited into the Cash Collateral Account
shall not exceed $1,600,000.
(c) In
addition, from and after the initial closing of the Financing, the Grantor shall
deposit five percent (5%) of its gross revenues from all sources before
deduction of expenses (“Gross Revenues”) into the Cash Collateral
Account. Such deposit(s) shall be made no later than the
twentieth business day of each calendar quarter with respect to the immediately
preceding calendar quarter, with the first deposit, if any, being due and
payable no later than the twentieth business day following the first
calendar quarter ended after the initial closing of the Financing.
5
(d) Contemporaneously
with each such deposit of Gross Revenues, Grantor shall deliver to the
Collateral Agent and to Xxxx Xxxxxx Financial, Inc., the Grantor’s placement
agent for the Convertible Notes (the ”Placement Agent”), a written joint
certification from Grantor’s Chief Executive Officer and Chief Financial
Officer, certifying to the means of determination of the related deposit of
Gross Revenues and the accuracy thereof, in form and substance reasonably
satisfactory to the Collateral Agent and the Placement Agent.
(e) To
the extent the Convertible Notes are repaid or converted in their entirety
without recourse to the Cash Collateral Account, the Cash Collateral Account
shall be dissolved and the proceeds thereof delivered to the
Grantor.
(f) In
connection with the establishment of the Cash Collateral Account, the Depositary
has represented and warranted to the Collateral Agent, for the benefit of the
Holders, that the Depositary is, on the date hereof, and shall continue to be
through December 31, 2009, a participant in the Temporary Liquidity Guarantee
Program (the “Program”), which guarantees the full amount of all of all funds
currently held in, and that may in the future be deposited in, the Cash
Collateral Account. In the event that the Program expires on December 31, 2009
and is not renewed, or in the event that the Program is terminated prior to the
repayment or conversion of all Convertible Notes, the Grantor shall cooperate
with the Collateral Agent to ensure that all cash collateral is transferred to
one or more insured accounts at one or more other FDIC-insured financial
institutions, at the sole cost and expense of the Grantor, and on terms similar
to the Control Account Agreement and otherwise satisfactory to the Collateral
Agent, subject to the requirements of the institutions in which such accounts
are established. Pending such transfer, the cash collateral shall be delivered
to the Collateral Agent to secure the obligations of the Grantor in accordance
with this Agreement.
2.6 Title; Other
Liens. Except for the security interest granted to the
Collateral Agent pursuant to this Agreement, the Grantor owns each of the
General Assets, Trademarks, Patents and Licenses free and clear of any and all
liens, claims or security or adverse interests to all or any of the Trademarks,
Patents and Licenses on file or of record in any public office, except as such
as have been filed in favor of the Collateral Agent pursuant to this
Agreement.
ARTICLE
III – FURTHER ASSURANCES
3.1 At
any time and from time to time at the request of the Collateral Agent, the
Grantor shall execute and deliver to the Collateral Agent all such financing
statements and other instruments and documents in form and substance reasonably
satisfactory to the Collateral Agent as shall be necessary or desirable to fully
perfect, when filed and/or recorded, the security interest granted to the
Collateral Agent for the benefit of the Holders pursuant to Article II of this
Agreement. The Grantor hereby authorizes the Collateral Agent,
without notice to the Grantor, to file any financing statement and amendments
thereof or continuations thereof, naming the Grantor as debtor and the
Collateral Agent as the secured party. At any time and from time to
time, the Collateral Agent shall be entitled to file and/or record any or all
such financing statements, instruments and documents held by it, and any or all
such further financing statements, documents and instruments, and to take all
such other actions, as the Collateral Agent may deem appropriate to perfect and
to maintain perfected the security interest granted to it for the benefit of the
Holders in Article
II of this Agreement. Before and after the occurrence of any
default under the Convertible Notes, at the Collateral Agent’s request, the
Grantor shall execute all such further financing statements, instruments and
documents, and shall do all such further acts and things, as may be deemed
necessary or desirable by the Collateral Agent to create and perfect, and to
continue and preserve, an indefeasible security interest in the Collateral in
favor of the Collateral Agent for the benefit of the Holders or the priority
thereof, including causing any such financing statements to be filed and/or
recorded in the applicable jurisdiction.
6
ARTICLE
IV – SECURITY AGREEMENT
4.1 This
Agreement secures the payment of all of the Secured Obligations of the Grantor
now or hereafter existing under the Convertible Notes, whether for principal,
interest, fees, expenses or otherwise, and all of the Secured Obligations of the
Grantor now or hereafter existing under this Agreement and provides for the
application of proceeds from the Collateral, upon the occurrence of an Event of
Default, to satisfy the Secured Obligations, including the irrevocable right of
the Collateral Agent to apply proceeds from Collateral to the payment of any and
all amounts owing to the Collateral Agent pursuant to any of the provisions of
Article X or
Article XIII of
this Agreement prior to making any payment to any or all of the
Holders.
ARTICLE V
– EVENTS OF DEFAULT
5.1 There
shall be an Event of Default (as defined in the Convertible Notes) hereunder
upon the occurrence and during the continuance of an Event of Default under any
of the Convertible Notes. The Grantor shall promptly notify the
Collateral Agent in writing of any occurrence of an Event of
Default.
ARTICLE
VI – RIGHTS UPON EVENT OF DEFAULT
6.1 Upon
the occurrence and during the continuance of an Event of Default, the Collateral
Agent shall have, in any jurisdiction where enforcement hereof is sought, in
addition to all other rights and remedies that the Collateral Agent may have
under applicable law or in equity or under this Agreement, all rights and
remedies of a secured party under the Uniform Commercial Code as enacted in any
jurisdiction.
ARTICLE
VII – VOTING RIGHTS; DIVIDENDS; ETC.
7.1 With
respect to Grantor’s right, title and interest to any Collateral consisting of
securities, partnership interests, joint venture interests, investments or the
like (referred to collectively and individually in this Article VII and in
Article VIII
hereof as the “Investment Collateral”), so long as no Event of Default occurs
and remains continuing:
(a) the
Grantor shall be entitled to exercise any and all voting and other consensual
rights pertaining to the Investment Collateral, or any part thereof, for any
purpose not inconsistent with the terms of this Agreement or the Convertible
Notes; and
(b) the
Grantor shall be entitled to receive and to retain and use any and all dividends
or distributions paid in respect of the Investment Collateral.
7
ARTICLE
VIII – RIGHTS DURING EVENT OF DEFAULT
8.1 With
respect to any Investment Collateral, so long as an Event of Default has
occurred and is continuing:
|
(a)
|
at
the option of the Collateral Agent, subject to the direction of the
Requisite Holders (as defined below), all rights of the Grantor to
exercise the voting and other consensual rights which it would otherwise
be entitled to exercise pursuant to Section 7.1(a) of Article VII
hereof, and to receive the dividends and distributions which it would
otherwise be authorized to receive and retain pursuant to Section 7.1(b)
of Article
VIII hereof, shall cease, and all such rights thereupon shall
become vested in the Collateral Agent for the benefit of the Holders which
thereupon shall have the sole right to exercise such voting and other
consensual rights and to receive and to hold as pledged Investment
Collateral such dividends and distributions;
and
|
|
(b)
|
all
dividends and other distributions that are received by the Grantor
contrary to the provisions of this Agreement shall be held in trust for
the benefit of the Collateral Agent on behalf of the Holders, shall be
segregated from other funds of the Grantor and forthwith shall be paid
over to Collateral Agent for the benefit of the Holders as pledged
Collateral in the same form as so received (with any necessary
endorsements).
|
ARTICLE
IX – GENERAL REPRESENTATIONS, WARRANTIES AND COVENANTS
9.1 The
Grantor represents, warrants and covenants, which representations, warranties
and covenants shall survive execution and delivery of this Agreement, as
follows:
(a) Except
as set forth on Schedule 9.1(b) and
except for the security interest granted to the Collateral Agent for the benefit
of the Holders herein, the Grantor is, and as to Collateral acquired from time
to time after the date hereof, the Grantor will be, the owner of all the
Collateral free from any lien, security interest, encumbrance or other right,
title or interest of any person, and the Grantor shall defend the Collateral
against all claims and demands of all persons at any time claiming the same or
any interest therein adverse to the Collateral Agent for the benefit of the
Holders;
(b) Except
as set forth on Schedule 9.1(b) there
is no financing statement (or similar statement or instrument of registration
under the law of any jurisdiction) now on file or registered in any public
office covering any interest of any kind in the Collateral, or intended to cover
any such interest that has not been terminated or released by the secured party
named therein, and so long as any Convertible Notes remain outstanding or any of
the Secured Obligations of the Grantor remain unpaid, the Grantor will not
execute and there will not be on file in any public office any financing
statement (or similar statement or instrument of registration under the law of
any jurisdiction) or statements relating to the Collateral, except financing
statements filed or to be filed in respect of and covering the security interest
hereby granted to the Collateral Agent for the benefit of the
Holders;
8
(c) at
the Grantor’s own expense, the Grantor will keep the Collateral (i) in good
condition at all times (normal wear and tear excepted) and maintain same in
accordance with all manufacturer’s specifications and requirements, and (ii)
free and clear of all liens and encumbrances, except for the liens granted
hereby; and without the consent of the Collateral Agent, the Grantor will not
sell, transfer, change the registration, if any, dispose of, attempt to dispose
of, substantially modify or abandon the Collateral or any part thereof other
than sales of inventory in the ordinary course of business and the disposition
of obsolete or worn-out equipment in the ordinary course of
business;
(d) the
chief executive office and chief place of business of Amber is located at 000
Xxxxxxxxx Xxxxx, 0xx
Xxxxx, Xxxxxxxx, XX 00000. The Grantor will not move its chief
executive office and chief place of business until (i) it shall have given to
the Collateral Agent not less than 30 days’ prior written notice of its
intention to do so, clearly describing such new location and providing such
other information in connection therewith as the Collateral Agent may reasonably
request, and (ii) with respect to such new location, it shall have taken such
action, satisfactory to the Collateral Agent, to maintain the security interest
of the Collateral Agent, in favor of the Holders, in the Collateral;
and
(e) the
Grantor will not amend its certificate of incorporation or other governing
documents to change its name or state of incorporation.
ARTICLE X
– FEES, COSTS AND EXPENSES
10.1 In
addition to Grantor’s obligation to the Collateral Agent under a Collateral
Agent Agreement among the Grantor, the Collateral Agent and
the Placement Agent, the Grantor shall pay the Collateral Agent all
of the Collateral Agent’s fees for services performed by it hereunder, and all
costs and expenses (including reasonable attorneys’ fees and disbursements)
incurred by it in the making or the enforcement or attempted enforcement of this
Agreement, whether or not an action is filed in connection therewith, and in
connection with any waiver or amendment of any term or provision
hereof. All such fees and all advances, charges, costs and expenses,
including reasonable attorneys’ fees and disbursements, incurred or paid by the
Collateral Agent in exercising any right, privilege, power or remedy conferred
hereunder, or in the enforcement or attempted enforcement thereof, shall be
secured hereby and shall become a part of the Secured Obligations and shall be
paid to the Collateral Agent by the Grantor, immediately upon demand, together
with interest thereon from the date of demand at a rate of 12% per
annum.
9
ARTICLE
XI – CONTINUING EFFECT
11.1 This
Agreement shall remain in full force and effect and continue to be effective
should any petition be filed by or against the Grantor for liquidation or
reorganization, should the Grantor become insolvent or make an assignment for
the benefit of creditors or should a receiver or trustee be appointed for all or
any significant part of the Grantor’s assets, and shall continue to be effective
or be reinstated, as the case may be, if at any time payment and performance of
the Secured Obligations, or any part thereof, is, pursuant to applicable law,
rescinded or reduced in amount, or must otherwise be restored or returned by the
Collateral Agent, whether as a “voidable preference,” “fraudulent conveyance” or
otherwise, all as though such payment or performance had not been
made. In the event that any payment or any part thereof is rescinded,
reduced, restored or returned, the Secured Obligations shall be reinstated and
deemed reduced only by such amount paid and not so rescinded, reduced, restored
or returned.
ARTICLE
XII – TERMINATION; RELEASE OF THE GRANTOR
12.1 This
Agreement shall be terminated and all Secured Obligations of the Grantor
hereunder shall be released when all Secured Obligations of the Grantor have
been paid in full or upon such release of the Secured Obligations hereunder or,
with respect to any Convertible Note, when such Convertible Note shall no longer
be outstanding. Upon such termination, and upon receipt by the Collateral Agent
of evidence of such termination reasonably satisfactory to the Collateral Agent,
the Collateral Agent shall return any pledged Collateral to the Grantor, or to
the person or persons legally entitled thereto, and shall endorse, execute,
deliver, record and file all instruments and documents, and do all other acts
and things reasonably required for the return of the Collateral to the Grantor,
or to the person or persons legally entitled thereto, and to evidence or
document the release of the Collateral Agent's interests arising for the benefit
of the Holders under this Agreement, all as reasonably requested by, and at the
sole expense of, the Grantor.
ARTICLE
XIII – THE COLLATERAL AGENT
13.1 By
their execution of Subscription Agreements in the form attached to the
Memorandum as Annex
A, the Holders have authorized the Collateral Agent to exercise for the
pro rata benefit of the Holders all rights, powers and remedies provided to the
Collateral Agent under or pursuant to this Agreement, including all rights,
powers and remedies upon an Event of Default, subject always to the terms,
conditions, limitations and restrictions provided in this
Agreement. In furtherance and not in limitation of the foregoing, by
its execution of such Subscription Agreement, each Holder acknowledges and
agrees that: (i) the Collateral Agent shall not be responsible for the
execution, effectiveness, genuineness, validity, perfection, enforceability,
collectability, value or sufficiency of the Collateral, or for any
representations, warranties or statements made in any document executed in
connection with this Security Agreement, other than representations expressly
made herein by the Collateral Agent; (ii) the Collateral Agent shall not be
required to ascertain or inquire as to the performance or observance
by the Grantor or any other party of any of the terms or provisions of the
Secured Obligations; (iii) the Collateral Agent shall not be liable for or by
any reason of (1) the failure or defect in the registration, filing, or
recording of any instruments or financing statements in connection with the
transactions contemplated by this Agreement or (2) any failure to do any act
necessary to constitute, perfect and/or maintain the priority of the security
interests created by this Agreement, and (iv) the Collateral Agent shall not be
deemed to have any knowledge of any Event of Default unless and until it shall
have received written notice thereof from the Grantor or the Requisite Holders
describing such Event of Default in reasonable detail. Except with respect to
those matters as to which the Collateral Agent is expressly required to act
under the terms of this Article XIII, the Collateral Agent may act or refrain
from acting with the written consent of holders of a majority of the aggregate
principal amount of outstanding Convertible Notes as of the date of such consent
(the “Requisite Holders”), which Requisite Holders shall have the right to
direct the time, method and place of conducting any proceeding for any remedy
available to the Collateral Agent; provided, however, that such
direction shall not be in conflict with any rule of law or expose the Collateral
Agent to personal liability, such direction shall not be unduly prejudicial to
the rights of any non-consenting Holder, and the Collateral Agent may take any
action deemed proper by the Collateral Agent, in its discretion, which is not
inconsistent with such direction or the terms of this Agreement. It
is agreed that the duties of the Collateral Agent are only such as are herein
specifically provided, and the Collateral Agent shall have no other duties,
implied or otherwise.
10
13.2 Anything
herein to the contrary notwithstanding, none of the provisions of this Agreement
shall be construed to require the Collateral Agent to expend or risk its own
funds or otherwise incur any liability (financial or otherwise) in the
performance of any of its duties hereunder, or in the exercise of any of its
rights or powers, unless it shall be satisfied that one or more of the Grantor,
the Holders, and/or the placement agent for the Convertible Notes are at the
time obligated and in a financial position to pay the Collateral Agent’s
reasonably anticipated fees for its services and its out-of-pocket expenses
(including fees of its counsel) in the performance of such duties or the
exercise of any of such rights or powers and to indemnify it against any such
risk or liability. In no event shall the Collateral Agent be liable
(i) for any consequential, punitive or special damages or (ii) for the
acts or omissions of its nominees, correspondents, designees, subagents or
subcustodians. The Collateral Agent shall not incur any liability for
not performing any act or fulfilling any duty, obligation or responsibility
hereunder by reason of any occurrence beyond the control of the Collateral Agent
(including any act or provision of any present or future law or regulation or
governmental authority, any act of God or war, or the unavailability of the
Federal Reserve Bank wire or telex or other wire or communication
facility).
13.3 The
Collateral Agent shall not be required or bound to make any investigation into
the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, consent, entitlement order,
approval or other paper or document. The Collateral Agent may execute
any of the powers under the Security Agreement or perform any duties hereunder
either directly or by or through agents, attorneys, custodians or nominees
appointed with due care, and shall not be responsible or liable for the acts or
omissions, including any willful misconduct or gross negligence, on the part of
any agent, attorney, custodian or nominee so appointed.
13.4 The
Grantor shall indemnify and hold the Collateral Agent and its managers, members,
directors, employees, officers, agents, representatives, successors and assigns
harmless from and against any and all losses, claims, damages, liabilities and
expenses, including reasonable costs of investigation and reasonable counsel
fees and expenses that may be imposed on the Collateral Agent or incurred by it
in connection with its acceptance of its appointment as the Collateral Agent
hereunder or the performance of its duties hereunder, except as a result of the
Collateral Agent’s gross negligence or willful misconduct. Such
indemnity includes all losses, damages, liabilities and expenses (including
reasonable counsel fees and expenses) incurred in connection with any litigation
(whether at the trial or appellate levels) arising from this Agreement or the
Subscription Agreements or involving the subject matter hereof or thereof or the
transactions contemplated hereby or thereby. The indemnification
provisions contained in this Section 13.4 are in addition to any other rights
any of the indemnified parties may have by law or otherwise and shall survive
the termination of this Agreement or the resignation or removal of the
Collateral Agent.
11
13.5 (Intentionally
omitted.)
13.6 The
Collateral Agent shall transmit by mail to the Holders, or their successors or
permitted assigns, as the names and addresses appear in a register of Holders
maintained by the Grantor, notice of an Event of Default. The Grantor shall
provide the Collateral Agent with a complete and accurate list of such names and
addresses, as amended from time to time. The Collateral Agent shall not be
deemed to have notice of any Event of Default unless the Collateral Agent shall
have received written notice thereof from the Grantor or the Requisite Holders,
describing such Event of Default in reasonable detail.
13.7 The
Collateral Agent may at any time resign by giving written notice thereof to the
Grantor at least 20 business days prior to the date of such proposed
resignation. Upon receiving such notice of resignation, the Grantor
shall promptly appoint a successor collateral agent by written instrument
executed by authority of its board of directors, a copy of which shall be
delivered to the resigning Collateral Agent and a copy to the successor
collateral agent. If an instrument of acceptance by a successor
collateral agent shall not have been delivered to the Collateral Agent within 20
business days after giving such notice of resignation, the resigning Collateral
Agent may, but shall not be required to, petition any court of competent
jurisdiction for the appointment of a successor collateral agent, but the
Collateral Agent’s election not to petition the court, or any delay by the court
in appointing a successor collateral agent, shall not affect the Collateral
Agent’s resignation. Such court may thereupon, after such notice, if
any, as it may deem proper, appoint a successor collateral agent. The
Collateral Agent may be removed at any time by written action by the Requisite
Holders delivered to the Collateral Agent and to the Grantor. If the
Collateral Agent shall be so removed, the Grantor shall promptly appoint a
successor collateral agent in accordance with the procedures in this Article
XIII.
ARTICLE
XIV – GOVERNING LAW
14.1 THIS
AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH AND GOVERNED BY THE
LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS TO BE PERFORMED WHOLLY
WITHIN SUCH JURISDICTION.
12
ARTICLE
XV – ASSIGNMENT
15.1 This
Agreement shall create a continuing security interest in the Collateral and
shall be binding upon the Grantor and the Grantor’s successors and permitted
assigns; inure, together with the rights and remedies of the Collateral Agent
hereunder, in favor of the Holders and their successors, transferees and
assigns; and be severable in the event that one or more of the provisions herein
is determined to be illegal or unenforceable. Without limiting the
generality of the foregoing, the Holders may assign or otherwise transfer any
portion of the Secured Obligations to any other person or entity, and such other
person or entity shall thereupon become vested with all the benefits and
obligations in respect thereof granted to the Holders (including the beneficial
interest in the rights and benefits granted to the Collateral Agent for the
benefit of the Holders) herein or otherwise.
ARTICLE
XVI - NOTICE
16.1 Unless
otherwise provided herein, all demands, notices, consents, service of process,
requests and other communications hereunder shall be in writing and shall be
delivered in person or by overnight courier service, or mailed by certified
mail, return receipt requested, addressed:
If to the
Grantor:
000
Xxxxxxxxx Xxxxx, 0xx
Xxxxx
Xxxxxxxx,
XX 00000
Attn: Xxx
Xxxxxxxxx, Chief Executive Officer
Fax: (000)
000-0000
With a
copy to:
Sichenzia
Xxxx Xxxxxxxx Xxxxxxx LLP
00
Xxxxxxxx, Xxx Xxxx, XX 00000
Attn: Xxxx
X. Xxxx, Esq.
Fax: (000)
000-0000
13
If to the
Collateral Agent:
Xxxxxx
Asset Partners, LLC
00000
Xxxxxxxx Xxxx Xxxx
Xxxxxxxxxxxx,
XX 00000
Attn: Xxxxxx
X. Xxxxx, Secretary
Fax: (000)
000 0000
With a
copy to:
Xxxxx
Xxxxxx Xxxxxxxx & Xxxxxx, P.C.
000
Xxxxxxxxx Xxx., Xxxxx 0000
Xxx Xxxx,
XX 00000
Attn: Xxxx
Xxxxx, Esq.
Fax: (000)
000-0000
Any such
notice shall be effective (a) when delivered, if delivered by hand delivery
or overnight courier service, or (b) five (5) days after deposit in the
United States mail, as applicable.
[Remainder
of page intentionally left blank]
14
IN
WITNESS WHEREOF, the undersigned have executed this Security Agreement by its
duly authorized officer as of the date first written above.
By: /s/ XXX X.
XXXXXXXXX
Name: Xxx
X. Xxxxxxxxx
Title:
Chief Executive Officer
XXXXXX
ASSET PARTNERS, LLC, as Collateral Agent
By: /s/ XXXXXX
X. XXXXX
Name:
Xxxxxx X. Xxxxx
Title: Secretary
15
Schedule
9.1(b)
UCC-1
filed against the assets of Grantor by Xxxx Xxxxxx Bridge & Opportunity
Fund, L.P. (the “Fund”) with filing number 2507850-3.
UCC-1
filed against the assets of Grantor by the Fund with filing number
0000000000-7.
The full
amount of the underlying debt due to the Fund evidenced by the UCC financing
statements set forth on this Schedule 9.1(b) (the “Financing Statements”) shall
be satisfied at the closing of the Minimum Amount, upon confirmation of which
appropriate form UCC-3s shall be filed terminating the Financing
Statements.
