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SECURITY AGREEMENT
Dated as of April 28, 2000
between
XxxxxxxXxxxxxxxxx.xxx, Inc.
as the Debtor,
and
Ultimate Holdings, Ltd.
as the Secured Party
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SECURITY AGREEMENT
This SECURITY AGREEMENT, dated as of April 28, 2000 (this "Agreement"), is
made between XxxxxxxXxxxxxxxxx.xxx, Inc., a Delaware corporation, (the
"Debtor"), and Ultimate Holdings, Ltd., a Bermuda limited company (the "Secured
Party").
The Note Purchase Agreement dated April 28, 2000 (the "Note Purchase
Agreement"), between the Debtor and the Secured Party provides, among other
things, for the purchase of a Note (the "Note") up to the maximum aggregate
principal amount of Six Million United States Dollars (US$6,000,000.00) (the
"Maximum Loan Commitment Amount") by the Secured Party from the Debtor. The
Secured Party shall lend the Maximum Loan Commitment Amount in several
installments upon receipt of borrowing requests from Debtor all as more fully
set forth in the Note Purchase Agreement. It is a condition to the obligations
of the Secured Party under the Note Purchase Agreement that the Debtor shall
have executed and delivered, and granted the Liens provided for in this
Agreement.
In addition to the good and valuable consideration previously received and
acknowledged as sufficient by the Secured Party, the Debtor has agreed to pledge
and grant a security interest in the Collateral as security for the Secured
Obligations. Accordingly, the Debtor agrees with the Secured Party as follows:
Section 1. Definitions and Interpretation.
1.01 Certain Defined Terms. Unless otherwise defined, all capitalized terms
used in this Agreement that are defined in the Note Purchase Agreement
(including those terms incorporated by reference) shall have the meanings
assigned to them in the Note Purchase Agreement. In addition, the following
terms shall have the following meanings under this Agreement:
"Accounts" shall have the meaning assigned to that term in Section 2.01(b).
"Collateral" shall have the meaning assigned to that term in Section 2.01.
"Copyright Collateral" shall mean all Copyrights, whether now owned or
hereafter acquired by the Debtor, including each Copyright identified in Annex
3.
"Copyrights" shall mean, collectively, (a) all copyrights, copyright
registrations and applications for copyright registrations, (b) all renewals and
extensions of all copyrights, copyright registrations and applications for
copyright registration and (c) all rights, now existing or hereafter coming into
existence, (i) to all income, royalties, damages and other payments (including
in respect of all past, present or future infringements) now or hereafter due or
payable under or with respect to any of the foregoing, (ii) to xxx for all past,
present and future infringements with respect to any of the foregoing and (iii)
otherwise accruing under or pertaining to any of the foregoing throughout the
world.
"Documents" shall have the meaning assigned to that term in Section
2.01(f).
"Equipment" shall have the meaning assigned to that term in Section
2.01(e).
"Instruments" shall have the meaning assigned to that term in Section
2.01(c).
"Intellectual Property" shall mean all Copyright Collateral, all Patent
Collateral and all Trademark Collateral, together with (a) all inventions,
processes, production methods, proprietary information, know-how and trade
secrets; (b) all licenses or user or other agreements granted to the Debtor with
respect to any of the foregoing, in each case whether now or hereafter owned or
used, including the licenses or other agreements with respect to the Copyright
Collateral, the Patent Collateral or the Trademark Collateral listed in Annex 6;
(c) all information, customer lists, identification of suppliers, data, plans,
blueprints, specifications, designs, drawings, recorded knowledge, surveys,
engineering reports, test reports, manuals, materials standards, processing
standards, performance standards, catalogs, computer and automatic machinery
software and programs; (d) all field repair data, sales data and other
information relating to sales or service of products now or hereafter
manufactured; (e) all accounting information and all media in which or on which
any information or knowledge or data or records may be recorded or stored and
all computer programs used for the compilation or printout of such information,
knowledge, records or data; (f) the approvals of any governmental person now
held or hereafter obtained by the Debtor in respect of any of the foregoing; and
(g) all causes of action, claims and warranties now owned or hereafter acquired
by the Debtor in respect of any of the foregoing. It is understood that
Intellectual Property shall include all of the foregoing owned or acquired by
the Debtor on a worldwide basis.
"Inventory" shall have the meaning assigned to that term in Section
2.01(d).
"Issuers" shall mean, collectively, each subsidiary or affiliate, directly
or indirectly, of XxxxxxxXxxxxxxxxx.xxx, Inc. that is the issuer (as defined in
the Uniform Commercial Code) of any shares of capital stock now owned or
hereafter acquired by the Debtor, including the respective corporations
identified in Annex 2 under the caption "Issuer."
"Patent Collateral" shall mean all Patents, whether now owned or hereafter
acquired by the Debtor, including each Patent identified in Annex 4.
"Patents" shall mean, collectively, (a) all patents and patent
applications, (b) all reissues, divisions, continuations, renewals, extensions
and continuations-in-part of all patents or patent applications and (c) all
rights, now existing or hereafter coming into existence, (i) to all income,
royalties, damages, and other payments (including in respect of all past,
present and future infringements) now or hereafter due or payable under or with
respect to any of the foregoing, (ii) to xxx for all past, present and future
infringements with respect to any of the foregoing and (iii) otherwise accruing
under or pertaining to any of the foregoing throughout the world, including all
inventions and improvements described or discussed in all such patents and
patent applications.
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"Pledged Stock" shall have the meaning assigned to that term in Section
2.01(a).
"Secured Obligations" shall mean (a) the payment and performance of the
Note by the Debtor and (b) any and all obligations of the Debtor for the
performance of its agreements, covenants and undertakings under or in respect of
the Basic Documents.
"Stock Collateral" shall have the meaning assigned to that term in Section
2.01(a).
"Trademark Collateral" shall mean all Trademarks, whether now owned or
hereafter acquired by the Debtor, including each Trademark identified in Annex
5. Notwithstanding the foregoing, the Trademark Collateral shall not include any
Trademark, which would be rendered invalid, abandoned, void or unenforceable by
reason of its being included as part of the Trademark Collateral.
"Trademarks" shall mean, collectively, (a) all trade names, trademarks and
service marks, logos, trademark and service xxxx registrations and applications
for trademark and service xxxx registrations, (b) all renewals and extensions of
any of the foregoing and (c) all rights, now existing or hereafter coming into
existence, (i) to all income, royalties, damages and other payments (including
in respect of all past, present and future infringements) now or hereafter due
or payable under or with respect to any of the foregoing, (ii) to xxx for all
past, present and future infringements with respect to any of the foregoing and
(iii) otherwise accruing under or pertaining to any of the foregoing throughout
the world, together, in each case, with the product lines and goodwill of the
business connected with the use of, or otherwise symbolized by, each such trade
name, trademark and service xxxx.
"Uniform Commercial Code" shall mean the Uniform Commercial Code as in
effect in the State of California from time to time or, by reason of mandatory
application, any other applicable jurisdiction.
Section 1.02 Interpretation. In this Agreement, unless otherwise indicated,
the singular includes the plural and plural the singular; words importing either
gender include the other gender; references to statutes or regulations are to be
construed as including all statutory or regulatory provisions consolidating,
amending or replacing the statute or regulation referred to; references to
"writing" include printing, typing, lithography and other means of reproducing
words in a tangible visible form; the words "including," "includes" and
"include" shall be deemed to be followed by the words "without limitation;"
references to articles, sections (or subdivisions of sections), exhibits,
annexes or schedules are to this Agreement; references to agreements and other
contractual instruments shall be deemed to include all subsequent amendments,
extensions and other modifications to such instruments (without, however,
limiting any prohibition on any such amendments, extensions and other
modifications by the terms of any Basic Document); and references to persons
include persons, firms, companies, corporations, agencies and other entities and
their respective permitted successors and assigns and, in the case of
governmental persons, persons succeeding to their respective functions and
capacities.
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Section 2. Collateral.
2.01 Grant. As collateral security for the prompt payment in full when due
(whether at stated maturity, by acceleration or otherwise) and performance of
the Secured Obligations, the Debtor hereby pledges and grants to the Secured
Party, a security interest in all of the Debtor's right, title and interest in
and to the following property, whether now owned or hereafter acquired by the
Debtor and whether now existing or hereafter coming into existence
(collectively, the "Collateral"):
(a) (i) all of the shares of capital stock of the Issuers represented by
the respective certificates identified in Annex 2 and all other shares of
capital stock of whatever class of the Issuers, now owned or hereafter acquired
by the Debtor, together with in each case the certificates representing the same
(collectively, the "Pledged Stock");
(ii) all shares, securities, moneys or property representing a dividend on,
or a distribution or return of capital in respect of, any of the Pledged Stock,
received or receivable by the Debtor for any reason, including those resulting
from a split-up, revision, reclassification or other like change of any of the
Pledged Stock or otherwise received in exchange for any of the Pledged Stock and
all rights issued to the holders of, or otherwise in respect of, any of the
Pledged Stock; and
(iii) without affecting the obligations of the Debtor under any provision
prohibiting such action under any Basic Document, in the event of any
consolidation or merger in which any Issuer is not the surviving corporation,
all shares of each class of the capital stock of the successor corporation
(unless such successor corporation is one of the other parties hereto that
constitute the Debtor itself) formed by or resulting from such consolidation or
merger (collectively, and together with the property described in clauses (i)
and (ii) above, the "Stock Collateral");
(b) all accounts and general intangibles (each as defined in the Uniform
Commercial Code) of the Debtor constituting a right to the payment of money,
whether or not earned by performance, including all moneys due and to become due
to the Debtor in repayment of any loans or advances, in payment for goods
(including Inventory and Equipment) sold or leased or for services rendered, in
payment of tax refunds and in payment of any guarantee of any of the foregoing
(collectively, the "Accounts");
(c) all instruments, chattel paper or letters of credit (each as defined in
the Uniform Commercial Code) of the Debtor evidencing, representing, arising
from or existing in respect of, relating to, securing or otherwise supporting
the payment of, any of the Accounts (collectively, the "Instruments");
(d) all inventory (as defined in the Uniform Commercial Code) and all other
goods of the Debtor that are held by the Debtor for sale, lease or furnishing
under a contract of service (including to its subsidiaries or affiliates), that
are so leased or furnished or that constitute raw materials, work in process or
material used or consumed in its business, including all spare parts and related
supplies, all goods obtained by the Debtor in exchange for any such goods, all
products made or processed from any such goods and all substances, if any,
commingled with or added to any such goods (collectively, the "Inventory");
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(e) all equipment (as defined in the Uniform Commercial Code) and all other
goods of the Debtor that are used or bought for use primarily in its business,
including all spare parts and related supplies, all goods obtained by the Debtor
in exchange for any such goods, all substances, if any, commingled with or added
to such goods and all upgrades and other improvements to such goods, in each
case to the extent not constituting Inventory (collectively, the "Equipment");
(f) all documents of title (as defined in the Uniform Commercial Code) or
other receipts of the Debtor covering, evidencing or representing Inventory or
Equipment (collectively, the "Documents");
(g) all contracts and other agreements of the Debtor including contracts
and agreements relating to (i) the Debtor's business; and (ii) relating to the
licensing, sale or other disposition of all or any part of the Intellectual
Property, Inventory, Equipment or Documents and all rights, warranties, claims
and benefits of the Debtor against any person arising out of, relating to or in
connection with all or any part of the Intellectual Property, Inventory,
Equipment or Documents of the Debtor, including any such rights, warranties,
claims or benefits against any person possessing, storing or transporting any
such Intellectual Property, Inventory or Equipment or issuing any such
Documents;
(h) all other accounts or general intangibles of the Debtor not
constituting Accounts, including, to the extent related to all or any part of
the other Collateral, all books, correspondence, credit files, records,
invoices, tapes, cards, computer runs and other papers and documents in the
possession or under the control of the Debtor or any computer bureau or service
company from time to time acting for the Debtor;
(i) all other tangible and intangible property of the Debtor, including all
Intellectual Property; and
(j) all proceeds and products in whatever form of all or any part of the
other Collateral, including all proceeds of insurance and all condemnation
awards and all other compensation for any casualty with respect to all or any
part of the other Collateral (together with all rights to recover and proceed
with respect to the same), and all accessories to, substitutions for and
replacements of all or any part of the other Collateral.
2.02 Intellectual Property. For the purpose of enabling the Secured Party
to exercise its rights, remedies, powers and privileges under Section 6 at such
time or times as the Secured Party shall be lawfully entitled to exercise such
rights, remedies, powers and privileges, and for no other purpose, the Debtor
hereby grants to the Secured Party, to the extent assignable, an irrevocable,
nonexclusive license (exercisable without payment of royalty or other
compensation to the Debtor) to use, assign, license or sublicense any of the
Intellectual Property of the Debtor, together with reasonable access to all
media in which any of the licensed items may be recorded or stored and to all
computer programs used for the compilation or printout of such items.
2.03 Perfection. Concurrently with the execution and delivery of this
Agreement, the Debtor shall (i) file such financing statements and other
documents in such offices as shall be necessary or as the Secured Party may
request to perfect and establish the priority of the Liens granted by this
Agreement, (ii) deliver and pledge to the Secured Party any and all Instruments,
endorsed or accompanied by such instruments of assignment and transfer in such
form and substance as the Secured Party may request, (iii) deliver to the
Secured Party all certificates identified in Annex 2, accompanied by undated
stock powers duly executed in blank and (iv) take all such other actions as
shall be necessary or as the Secured Party may request to perfect and establish
the priority of the Liens granted by this Agreement; provided, however, in the
case of any Instrument or Stock Collateral in which another secured party has an
existing security interest perfected through possession or control, the Debtor
shall cause such secured party to acknowledge that its possession or control is
on behalf of the Secured Party as subordinated Lien holder or take such other
action as is reasonably necessary to conform the perfection of the Secured
Party's Liens in such Collateral.
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2.04 Preservation and Protection of Security Interests. The Debtor shall:
(a) upon the acquisition after the Initial Closing Date and/or each
Subsequent Closing Date by the Debtor of any Stock Collateral, promptly (x)
transfer and deliver to the Secured Party all such Stock Collateral (together
with the certificates representing such Stock Collateral securities duly
endorsed in blank or accompanied by undated stock powers duly executed in blank)
and (y) take such other action as the Secured Party shall deem necessary or
appropriate to perfect, and establish the priority of, the Liens granted by this
Agreement in such Stock Collateral, including as provided in Section 2.03;
(b) upon the acquisition after the Initial Closing Date and/or each
Subsequent Closing Date by the Debtor of any Instrument, promptly deliver and
pledge to the Secured Party all such Instruments, endorsed or accompanied by
such instruments of assignment and transfer in such form and substance as the
Secured Party may request;
(c) upon the acquisition after the Initial Closing Date and/or each
Subsequent Closing Date by the Debtor of any Equipment covered by a certificate
of title or ownership, promptly cause the Secured Party to be listed as the
lienholder on such certificate of title and within 30 days of the acquisition of
such Equipment deliver evidence of the same to the Secured Party;
(d) upon the Debtor's acquiring, or otherwise becoming entitled to the
benefits of, any Copyright (or copyrightable material), Patent (or patentable
invention), Trademark (or associated goodwill) or other Intellectual Property or
upon or prior to the Debtor's filing, either directly or through any secured
party, licensee or other designee, of any application with any governmental
person for any Copyright, Patent, Trademark, or other Intellectual Property, in
each case after the Initial Closing Date and/or each Subsequent Closing Date,
execute and deliver such contracts, agreements and other instruments as the
Secured Party may request to evidence, validate, perfect and establish the
priority of the Liens granted by this Agreement in such and any related
Intellectual Property and, if requested by the Secured Party, amend Annex 3, 3
or 4 (as the case may be) to reflect the inclusion of any such Intellectual
Property as part of the Collateral (it being understood that the failure to
amend any such Annex shall not affect the Liens granted by this Agreement on any
such Intellectual Property); and
(e) give, execute, deliver, file or record any and all financing
statements, collateral or absolute assignments, notices, contracts, agreements
or other instruments, obtain any and all approvals of governmental persons and
take any and all steps that may be necessary or as the Secured Party may request
to create, perfect, establish the priority of, or to preserve the validity,
perfection or priority of, the Liens granted by this Agreement or to enable the
Secured Party to exercise and enforce its rights, remedies, powers and
privileges under this Agreement with respect to such Liens, provided that
notices to account debtors in respect of any Accounts or Instruments shall be
subject to the provisions of Section 3.01.
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2.05 Attorney-in-Fact.
(a) Subject to the rights of the Debtor under Sections 2.06, 2.07, 2.08 and
2.09, the Secured Party is hereby appointed the attorney-in-fact of the Debtor
for the purpose of carrying out the provisions of this Agreement and taking any
action and executing any instruments which the Secured Party may deem necessary
or advisable to accomplish the purposes of this Agreement, to preserve the
validity, perfection and priority of the Liens granted by this Agreement and,
following any Event of Default, to exercise its rights, remedies, powers and
privileges under this Agreement. This appointment as attorney-in-fact is
irrevocable and coupled with an interest. Without limiting the generality of the
foregoing, the Secured Party shall be entitled under this Agreement upon the
occurrence and continuation of any Event of Default (i) to ask, demand, collect,
xxx for, recover, receive and give receipt and discharge for amounts due and to
become due under and in respect of all or any part of the Collateral; (ii) to
receive, endorse and collect any Instruments or other drafts, instruments,
documents and chattel paper in connection with clause (i) above (including any
draft or check representing the proceeds of insurance or the return of unearned
premiums); (iii) to file any claims or take any action or proceeding that the
Secured Party may deem necessary or advisable for the collection of all or any
part of the Collateral, including the collection of any compensation due and to
become due under any contract or agreement with respect to all or any part of
the Collateral; and (iv) to execute, in connection with any sale or disposition
of the collateral under Section 6, any endorsements, assignments, bills of sale
or other instruments of conveyance or transfer with respect to all or any part
of the Collateral.
(b) Without limiting the rights and powers of the Secured Party under
Section 2.05(a), the Debtor hereby appoints the Secured Party as its
attorney-in-fact, effective the date of the signing of this Agreement and
terminating upon the termination of this Agreement, for the purpose of (i)
filing such applications with such state agencies and (ii) executing such other
documents and instruments on behalf of, and taking such other action in the name
of, the Debtor as the Secured Party may deem necessary or advisable to
accomplish the purposes of this Agreement. This appointment as attorney-in-fact
is irrevocable and coupled with an interest.
2.06 Special Provisions Relating to Stock Collateral.
(a) So long as no Event of Default shall have occurred and be continuing,
the Debtor shall have the right to exercise all voting, consensual and other
powers of ownership pertaining to the Stock Collateral for all purposes not
inconsistent with the terms of any Basic Document, provided that the Debtor
agrees that it will not vote the Stock Collateral in any manner that is
inconsistent with the terms of any Basic Document; and the Secured Party shall,
at the Debtor's expense, execute and deliver to the Debtor or cause to be
executed and delivered to the Debtor all such proxies, powers of attorney, other
orders and other instruments, without recourse, as the Debtor may reasonably
request for the purpose of enabling the Debtor to exercise the rights and powers
which it is entitled to exercise pursuant to this Section 2.06(a).
(b) Regardless of whether if any Event of Default shall have occurred and
be continuing, and whether or not the Secured Party exercises any available
right to declare any Secured Obligation due and payable or seeks or pursues any
other right, remedy, power or privilege available to it under applicable law,
this Agreement or any other Basic Document, all dividends and other
distributions on the Stock Collateral shall be paid directly to the Secured
Party as part of the Stock Collateral, subject to the terms of this Agreement,
and, if the Secured Party shall so request, the Debtor agrees to execute and
deliver to the Secured Party appropriate additional dividend, distribution and
other orders and instruments to that end. Any cash dividend so received by the
Secured Party shall be credited as prepayments of the Secured Obligations.
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2.07 Use of Intellectual Property. Subject to such action not otherwise
constituting a Default and so long as no Event of Default shall have occurred
and be continuing, the Debtor will be permitted to exploit, use, enjoy, protect,
license, sublicense, assign, sell, dispose of or take other actions with respect
to the Intellectual Property in the ordinary course of the business of the
Debtor. In furtherance of the foregoing, so long as no Event of Default shall
have occurred and be continuing, the Secured Party shall from time to time, upon
the request of the Debtor, execute and deliver any instruments, certificates or
other documents, in the form so requested, which the Debtor shall have certified
are appropriate (in its judgment) to allow them to take any action permitted
above (including relinquishment of the license provided pursuant to Section 2.02
as to any specific Intellectual Property). The exercise of rights, remedies,
powers and privileges under Section 6 by the Secured Party shall not terminate
the rights of the holders of any licenses or sublicenses theretofore granted by
the Debtor in accordance with the first sentence of this Section 2.07.
2.08 Instruments. So long as no Event of Default shall have occurred and be
continuing, the Debtor may retain for collection in the ordinary course of
business any Instruments obtained by it in the ordinary course of business, and
the Secured Party shall, promptly upon the request, and at the expense of, the
Debtor, make appropriate arrangements for making any Instruments pledged by the
Debtor available to the Debtor for purposes of presentation, collection or
renewal. Any such arrangement shall be effected, to the extent deemed
appropriate by the Secured Party, against trust receipt or like document.
2.09 Use of Collateral. So long as no Event of Default shall have occurred
and be continuing, the Debtor shall, in addition to its rights under Sections
2.06, 2.07 and 2.08 in respect of the Collateral contemplated in those sections,
be entitled to use and possess the other Collateral and to exercise its rights,
title and interest in all contracts, agreements, licenses and approvals of
governmental persons, subject to the rights, remedies, powers and privileges of
the Secured Party under Sections 3 and 6 and to such use, possession or exercise
not otherwise constituting an Event of Default.
2.10 Rights and Obligations.
(a) The Debtor shall remain liable to perform its duties and obligations
under the contracts and agreements included in the Collateral in accordance with
their respective terms to the same extent as if this Agreement had not been
executed and delivered. The exercise by the Secured Party of any right, remedy,
power or privilege in respect of this Agreement shall not release the Debtor
from any of its duties and obligations under such contracts and agreements. The
Secured Party shall have no duty, obligation or liability under such contracts
and agreements or in respect to any approval of any governmental persons
included in the Collateral by reason of this Agreement or any other Basic
Document, nor shall the Secured Party be obligated to perform any of the duties
or obligations of the Debtor under any such contract or agreement or any such
approval of any governmental persons or to take any action to collect or enforce
any claim (for payment) under any such contract or agreement or approval of any
governmental persons.
(b) No Lien granted by this Agreement in the Debtor's right, title and
interest in any contract, agreement or approval of any governmental person shall
be deemed to be a consent by the Secured Party to any such contract, agreement
or approval of any governmental person.
(c) No reference in this Agreement to proceeds or to the sale or other
disposition of Collateral shall authorize the Debtor to sell or otherwise
dispose of any Collateral except to the extent otherwise expressly permitted by
the terms of any Basic Document.
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(d) The Secured Party shall not be required to take steps necessary to
preserve any rights against prior parties to any part of the Collateral.
2.11 Termination. When all the Secured Obligations shall have been paid in
full, this Agreement shall terminate, and the Secured Party shall forthwith
cause to be assigned, transferred and delivered, against receipt but without any
recourse, warranty or representation whatsoever, any remaining Collateral and
money received in respect of the Collateral, to or on the order of the Debtor
and to be released, canceled and granted back all licenses and rights referred
to in Section 2.02. The Secured Party shall also execute and deliver to the
Debtor upon such termination such Uniform Commercial Code termination
statements, and such other documentation as shall be reasonably requested by the
Debtor to effect the termination and release of the Liens granted by this
Agreement on the Collateral.
Section 3. Certain Proceeds.
3.01 Notice to Account Debtors. If any Event of Default shall have occurred
and be continuing, the Debtor shall, upon request of the Secured Party, promptly
notify (and the Debtor hereby authorizes the Secured Party so to notify) each
account debtor in respect of any Accounts or Instruments that such Collateral
has been assigned to the Secured Party, under this Agreement and that any
payments due or to become due in respect of such Collateral are to be made
directly to the Secured Party.
3.02 Proceeds Held in Trust. If any Event of Default shall have occurred
and be continuing, the Debtor agrees that if the proceeds of any Collateral
(including payments made in respect of Accounts and Instruments) shall be
received by it, all such proceeds shall be held in trust by the Debtor for and
as the property of the Secured Party and shall not be commingled with any other
funds or property of the Debtor.
Section 4. Representations and Warranties. As of the Initial Closing Date
and the date of any subsequent disbursement of funds pursuant to the Note
Purchase Agreement, the Debtor represents and warrants to the Secured Party, as
follows:
4.01 Title. The Debtor is the sole beneficial owner of the Collateral in
which it purports to xxxxx x Xxxx pursuant to this Agreement, and such
Collateral is free and clear of all Liens (and, with respect to the Stock
Collateral, of any right in favor of any other person), except for the Liens set
forth in Annex 8. The Liens granted by this Agreement in favor of the Secured
Party have attached and constitute a perfected security interest in all of such
Collateral (other than Intellectual Property registered or otherwise located
outside of the United States of America) prior to all other Liens, except for
the Liens set forth in Annex 8.
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4.02 Pledged Stock.
(a) The Pledged Stock evidenced by the certificates identified in Annex 2
is duly authorized, validly existing, fully paid and nonassessable, and none of
such Pledged Stock is subject to any contractual restriction, or any restriction
under the charter or by-laws of the respective Issuer of such Pledged Stock,
upon the transfer of such Pledged Stock (except for any such restriction
contained in any Basic Document or in any document pursuant to which a Lien has
been granted).
(b) The Pledged Stock evidenced by the certificates identified in Annex 2
constitutes all of the issued and outstanding shares of capital stock of any
class of the Issuers beneficially owned by the Debtor on the Initial Closing
Date and on all Subsequent Closing Dates (whether or not registered in the name
of the Debtor), and Annex 2 correctly identifies, as at the Initial Closing Date
and at all Subsequent Closing Dates, the respective Issuers of such Pledged
Stock, the respective class and par value of the shares comprising such Pledged
Stock and the respective number (and registered owners) of the shares evidenced
by each such certificate.
4.03 Intellectual Property.
(a) Annexes 2, 3 and 4 set forth completely and correctly all Copyrights,
Patents and Trademarks owned by the Debtor on the Initial Closing Date and on
each Subsequent Closing Dates; except pursuant to licenses and other user
agreements entered into by the Debtor in the ordinary course of business and
listed in Annex 6, the Debtor owns and possesses the right to use, and has done
nothing to authorize or enable any other person to use, any Copyright, Patent or
Trademark listed in Annex 3, 3 or 4; all registrations listed in Annexes 2, 3
and 4 are valid and in full force and effect; and, except as may be set forth in
Annex 6, the Debtor owns and possesses the right to use all Copyrights, Patents
and Trademarks listed in Annexes 2, 3 and 4;
(b) Annex 6 sets forth completely and correctly all licenses and other user
agreements included in the Intellectual Property on the Initial Closing Date and
on each Subsequent Closing Date;
(c) To the Debtor's knowledge, (i) except as set forth in Annex 6, there is
no violation by others of any right of the Debtor with respect to any Copyright,
Patent or Trademark listed in Annex 3, 3 or 4 and (ii) the Debtor is not
infringing in any respect upon any Copyright, Patent or Trademark of any other
person; and no proceedings have been instituted, are pending against the Debtor
or, to the Debtor's knowledge, have been threatened against, and no claim has
been received by, the Debtor, alleging any such violation, except as may be set
forth in Annex 6; and
(d) The Debtor does not own any Trademarks registered in the United States
of America to which the last sentence of the definition of Trademark Collateral
applies.
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Section 5. Covenants.
5.01 Books and Records. The Debtor shall:
(a) keep full and accurate books and records relating to the Collateral and
stamp or otherwise xxxx such books and records in such manner as the Secured
Party may reasonably require in order to reflect the Liens granted by this
Agreement;
(b) furnish to the Secured Party from time to time (but, unless any Event
of Default shall have occurred and be continuing, no more frequently than
monthly) statements and schedules further identifying and describing the
Copyright Collateral, the Patent Collateral and the Trademark Collateral and
such other reports in connection with the Copyright Collateral, the Patent
Collateral and the Trademark Collateral, as the Secured Party may reasonably
request, all in reasonable detail;
(c)prior to filing, either directly or through the Secured Party, licensee
or other designee, any application for any Copyright, Patent or Trademark,
furnish to the Secured Party prompt notice of such proposed filing; and
(d) permit representatives of the Secured Party, upon reasonable notice, at
any time during normal business hours to inspect and make abstracts from its
books and records pertaining to the Collateral, permit representatives of the
Secured Party to be present at the Debtor's place of business to receive copies
of all communications and remittances relating to the Collateral and forward
copies of any notices or communications received by the Debtor with respect to
the Collateral, all in such manner as the Secured Party may request.
5.02 Removals, Etc. Without at least 30 days' prior written notice to the
Secured Party, (i) maintain any of its books and records with respect to the
Collateral at any office or maintain its principal place of business at any
place, or permit any Inventory or Equipment to be located anywhere, other than
at the address initially indicated for notices to it under Section 7 or at one
of the locations identified in Annex 7 or in transit from one of such locations
to another or (ii) change its corporate name, or the name under which it does
business, from the name shown on the signature pages to this Agreement.
5.03 Sales and Other Liens. The Debtor shall not dispose of any Collateral,
create, incur, assume or suffer to exist any Lien upon any Collateral or file or
suffer to be on file or authorize to be filed, in any jurisdiction, any
financing statement or like instrument with respect to all or any part of the
Collateral in which the Secured Party is not named as the sole secured party for
its own benefit, except for such filings with respect to any subordinate liens.
5.04 Stock Collateral. The Debtor will cause the Stock Collateral to
constitute at all times 100% of the total number of shares of each class of
capital stock of each Issuer then outstanding. The Debtor shall cause all such
shares to be duly authorized, validly issued, fully paid and nonassessable and
to be free of any contractual restriction or any restriction under the charter
or bylaws of the respective Issuer of such Stock Collateral, upon the transfer
of such Stock Collateral (except for any such restriction contained in any Basic
Document or in any document pursuant to which a Lien has been granted).
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5.05 Intellectual Property.
(a) The Debtor (either itself or through licensees) will, for each
Trademark, (i) to the extent consistent with past practice and good business
judgment, continue to use such Trademark on each and every trademark class of
goods applicable to its current line as reflected in its current catalogs,
brochures and price lists in order to maintain such Trademark in full force and
effect free from any claim of abandonment for nonuse, (ii) maintain as in the
past the quality of products and services offered under such Trademark, (iii)
employ such Trademark with the appropriate notice of registration and (iv) not
(and not permit any licensee or sublicensee to) do any act or knowingly omit to
do any act whereby any Trademark material to the conduct of its business may
become invalidated.
(b) The Debtor (either itself or through licensees) will not do any act or
knowingly omit to do any act whereby any Patent material to the conduct of its
business may become abandoned or dedicated.
(c) The Debtor will notify the Secured Party immediately if it knows or has
reason to know that any Intellectual Property material to the conduct of its
business may become abandoned or dedicated, or of any adverse determination or
development (including the institution of, or any such determination or
development in, any proceeding before any governmental person) regarding the
Debtor's ownership of any Intellectual Property material to its business, its
right to copyright, patent or register the same (as the case may be), or its
right to keep, use and maintain the same.
(d)The Debtor will take all necessary steps that are consistent with good
business practices in any proceeding before any appropriate governmental person
to maintain and pursue each application relating to any Intellectual Property
(and to obtain the relevant registrations) and to maintain each registration
material to the conduct of its business, including payment of maintenance fees,
filing of applications for renewal, affidavits of use, affidavits of
incontestability and opposition, interference and cancellation proceedings.
(e) If any Intellectual Property material to the conduct of its business is
infringed, misappropriated or diluted by a third party, the Debtor will notify
the Secured Party within (10) days after it learns of such event and will, if
consistent with good business practice, promptly xxx for infringement,
misappropriation or dilution, seek temporary restraints and preliminary
injunctive relief to the extent practicable, seek to recover any and all damages
for such infringement, misappropriation or dilution and take such other actions
as are appropriate under the circumstances to protect such Collateral.
(f) The Debtor will, through counsel acceptable to the Secured Party,
prosecute diligently any application for any Intellectual Property pending as of
the date of this Agreement or thereafter made until the termination of this
Agreement, make application on uncopyrighted but copyrightable material,
unpatented but patentable inventions and unregistered but registerable
Trademarks and preserve and maintain all rights in applications for any
Intellectual Property; provided, however, that the Debtor shall have no
obligation to make any such application if making such application would be
unnecessary or imprudent in the good faith business judgment of the Debtor. Any
expenses incurred in connection with such an application shall be borne by the
Debtor. The Debtor will not abandon any right to file an application for any
Intellectual Property or any pending such application in the United States
without the consent of the Secured Party, which consent shall not be
unreasonably withheld.
(g)The Secured Party, will have the right but not the obligation to bring
suit in its own name to enforce the Copyrights, Patents and Trademarks and any
license under such Intellectual Property, in which event the Debtor will, at the
request of the Secured Party, do any and all lawful acts and execute and deliver
any and all proper documents required by the Secured Party in aid of such
enforcement action.
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5.06 Further Assurances. The Debtor agrees that, from time to time upon the
written request of the Secured Party, the Debtor will execute and deliver such
further documents and do such other acts and things as the Secured Party may
reasonably request in order fully to effect the purposes of this Agreement.
Section 6. Remedies.
6.01 Events of Default, Etc. If any Event of Default shall have occurred
and be continuing:
(a) The Secured Party in its discretion may require the Debtor to, and the
Debtor will, assemble the Collateral owned by it at such place or places,
reasonably convenient to both the Secured Party and the Debtor, designated in
the Secured Party's request;
(b) The Secured Party in its discretion may make any reasonable compromise
or settlement it deems desirable with respect to any of the Collateral and may
extend the time of payment, arrange for payment in installments, or otherwise
modify the terms of, all or any part of the Collateral;
(c) The Secured Party in its discretion may, in its name or in the name of
the Debtor or otherwise, demand, xxx for, collect or receive any money or
property at any time payable or receivable on account of or in exchange for all
or any part of the Collateral, but will be under no obligation to do so;
(d) The Secured Party in its discretion may, upon ten business days' prior
written notice to the Debtor of the time and place, with respect to all or any
part of the Collateral which shall then be or shall thereafter come into the
possession, custody or control of the Secured Party, sell, lease or otherwise
dispose of all or any part of such Collateral, at such place or places as the
Secured Party deems best, for cash, for credit or for future delivery (without
thereby assuming any credit risk) and at public or private sale, without demand
of performance or notice of intention to effect any such disposition or of time
or place of any such sale (except such notice as is required above or by
applicable statute and cannot be waived), and the Secured Party or any other
person may be the purchaser, lessee or recipient of any or all of the Collateral
so disposed of at any public sale (or, to the extent permitted by law, at any
private sale) and thereafter hold the same absolutely, free from any claim or
right of whatsoever kind, including any right or equity of redemption (statutory
or otherwise), of the Debtor, any such demand, notice and right or equity being
hereby expressly waived and released. In the event of any sale, license or other
disposition of any of the Trademark Collateral, the goodwill connected with and
symbolized by the Trademark Collateral subject to such disposition shall be
included, and the Debtor will supply to the Secured Party or its designee, for
inclusion in such sale, assignment or other disposition, all Intellectual
Property relating to such Trademark Collateral. The Secured Party may, without
notice or publication, adjourn any public or private sale or cause the same to
be adjourned from time to time by announcement at the time and place fixed for
the sale, and such sale may be made at any time or place to which the sale may
be so adjourned; and
(e) The Secured Party will have, and in its discretion may exercise, all of
the rights, remedies, powers and privileges with respect to the Collateral of a
secured party under the Uniform Commercial Code (whether or not the Uniform
Commercial Code is in effect in the jurisdiction where such rights, remedies,
powers and privileges are asserted) and such additional rights, remedies, powers
and privileges to which a secured party is entitled under the laws in effect in
any jurisdiction where any rights, remedies, powers and privileges in respect of
this Agreement or the Collateral may be asserted, including the right, to the
maximum extent permitted by law, to exercise all voting, consensual and other
powers of ownership pertaining to the Collateral as if the Secured Party were
the sole and absolute owner of the Collateral (and the Debtor agrees to take all
such action as may be appropriate to give effect to such right).
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The proceeds of, and other realization upon, the Collateral by virtue of
the exercise of remedies under this Section 6.01 and of the exercise of the
license granted to the Secured Party, in Section 2.02 shall be applied in
accordance with Section 6.04.
6.02 Deficiency. If the proceeds of, or other realization upon, the
Collateral by virtue of the exercise of remedies under Section 6.01 and of the
exercise of the license granted by the Secured Party, in Section 2.02 are
insufficient to cover the costs and expenses of such exercise and the payment in
full of the other the Secured Obligations, the Debtor will remain liable for any
deficiency.
6.03 Private Sale.
(a) The Secured Party will incur no liability as a result of the sale,
lease or other disposition of all or any part of the Collateral at any private
sale pursuant to Section 6.01 conducted in a commercially reasonable manner. The
Debtor hereby waives any claims against the Secured Party arising by reason of
the fact that the price at which the Collateral may have been sold at such a
private sale was less than the price which might have been obtained at a public
sale or was less than the aggregate amount of the Secured Obligations, even if
the Secured Party accepts the first offer received and does not offer the
Collateral to more than one offeree.
(b) The Debtor recognizes that, by reason of certain prohibitions contained
in the Securities Act of 1933 and applicable state securities laws, the Secured
Party may be compelled, with respect to any sale of all or any part of the
Collateral, to limit purchasers to those who will agree, among other things, to
acquire the Collateral for their own account, for investment and not with a view
to distribution or resale. The Debtor acknowledges that any such private sales
may be at prices and on terms less favorable to the Secured Party than those
obtainable through a public sale without such restrictions, and, notwithstanding
such circumstances, agree that any such private sale shall be deemed to have
been made in a commercially reasonable manner and that the Secured Party shall
have no obligation to engage in public sales and no obligation to delay the sale
of any Collateral for the period of time necessary to permit the respective
Issuer of such Collateral to register it for public sale.
6.04 Application of Proceeds. Except as otherwise expressly provided in
this Agreement and except as provided below in this Section 6.04, the proceeds
of, or other realization upon, all or any part of the Collateral by virtue of
the exercise of remedies under Section 6.01 or of the exercise of the license
granted in Section 2.02, and any other cash at the time held by the Secured
Party under Section 3 or this Section 6, will be applied by the Secured Party:
14
First, to the payment of the costs and expenses of such exercise of
remedies, including reasonable out-of-pocket costs and expenses of the Secured
Party, the fees and expenses of its counsel, and all other expenses incurred and
advances made by the Secured Party in that connection;
Next, to the payment in full of the remaining Secured Obligations in such
manner as the Secured Party may determine; and
Finally, to the payment to the Debtor, or its respective successors or
assigns, or as a court of competent jurisdiction may direct, of any surplus then
remaining.
As used in this Section 6, "proceeds" of Collateral shall mean cash,
securities and other property realized in respect of, and distributions in kind
of, Collateral, including any property received under any bankruptcy,
reorganization or other similar proceeding as to the Debtor or any issuer of, or
account debtor or other the Debtor on, any of the Collateral.
Section 7. Miscellaneous.
7.01 Waiver. No failure on the part of the Secured Party to exercise and no
delay in exercising, and no course of dealing with respect to, any right,
remedy, power or privilege under this Agreement will operate as a waiver of such
right, remedy, power or privilege, nor will any single or partial exercise of
any right, remedy, power or privilege under this Agreement preclude any other or
further exercise of any such right, remedy, power or privilege or the exercise
of any other right, remedy, power or privilege. The rights, remedies, powers and
privileges provided in this Agreement are cumulative and not exclusive of any
rights, remedies, powers and privileges provided by law.
7.02 Notices. All notices and other communications provided for in this
Agreement will be in writing and delivered by registered or certified mail,
postage prepaid, or delivered by overnight courier (for next Business Day
delivery) or telecopied, addressed as follows, or at such other address as any
of the parties hereto may hereafter designate by notice to the other parties
given in accordance with this Section 7.02:
1) if to the Debtor:
XxxxxxxXxxxxxxxxx.xxx, Inc.
0000 Xxxxxxxxx Xxxx., 0xx Xxxxx
Xxx Xxxx, XX 00000
Attn: Ramy El-Batrawi
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
With a copy of any notice to:
Nida & Xxxxxxx, LLP
000 Xxxxxxx Xxxxxx
Xxxxx Xxxxxxx, Xxxxxxxxxx 00000
Attn: Xxxxxxxx X. Xxxxxxx, Esq.
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
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2) if to the Secured Party:
Ultimate Holdings, Ltd.
00 Xxxxxxxxxx Xx.
Xxxxxxxx, XX 00
Xxxxxxx
Xxxx: Xxxxxx Xxxxxxxx
Telephone: ______________
Telecopier: (000) 00-000-0000
Any such notice or communication shall be deemed to have been duly given on
the fifth day after being so mailed, the next Business Day after delivery by
overnight courier, when received when sent by telecopy or upon receipt when
delivered personally.
7.03 Expenses, Etc. The Debtor agrees to pay or to reimburse the Secured
Party for all costs and expenses (including reasonable attorney's fees and
expenses) that may be incurred by the Secured Party in any effort to enforce any
of the provisions of Section 6 or any of the obligations of the Debtor in
respect of the Collateral or in connection with (a) the preservation of the Lien
of, or the rights of the Secured Party under this Agreement or (b) any actual or
attempted sale, lease, disposition, exchange, collection, compromise, settlement
or other realization in respect of, or care of, the Collateral, including all
such costs and expenses (and reasonable attorney's fees and expenses) incurred
in any bankruptcy, reorganization, workout or other similar proceeding.
7.04 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument. Signatures may be
exchanged by telecopy, with original signatures to follow. Each of the parties
hereto agrees that it will be bound by its own telecopied signature and that it
accepts the telecopied signatures of the other parties to this Agreement. The
original signature pages shall be forwarded to the Debtor or its counsel and the
Debtor or its counsel will provide all of the parties hereto with a copy of the
entire Agreement.
7.05 Amendments. This Agreement may only be amended by a writing duly
executed by the parties hereto.
7.06 Severability. If any term or provision of this Agreement or any other
document executed in connection herewith shall be determined to be illegal or
unenforceable, all other terms and provisions hereof and thereof shall
nevertheless remain effective and shall be enforced to the fullest extent
permitted by applicable law.
7.07 Governing Law. EXCEPT TO THE EXTENT THAT THE LAW OF ANOTHER
JURISDICTION IS EXPRESSLY SELECTED IN A DOCUMENT OR SECURITY, THIS AGREEMENT AND
ALL AMENDMENTS, SUPPLEMENTS, WAIVERS AND CONSENTS RELATING HERETO OR THERETO
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAW OF THE
STATE OF CALIFORNIA WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.
7.08 Entire Agreement. This Agreement contains the entire Agreement of the
parties hereto with respect to the transactions contemplated hereby and
supersedes all previous oral and written, and all previous contemporaneous oral
negotiations, commitments and understandings.
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7.09 Further Assurances. The Debtor agrees promptly to execute and deliver
such documents and to take such other acts as are reasonably necessary to
effectuate the purposes of this Agreement.
7.10 Headings. The headings contained herein are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement.
7.11 Waiver of Jury Trial. THE DEBTOR AND THE SECURED PARTY HEREBY AGREE TO
WAIVE THEIR RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF THIS AGREEMENT OR ANY OTHER AGREEMENTS RELATING HERETO OR ANY
DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS TRANSACTION.
NOTWITHSTANDING ANYTHING TO THE CONTRARY HEREIN, THIS WAIVER IS IRREVOCABLE,
MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THE WAIVER
SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS
TO THIS AGREEMENT OR ANY OTHER DOCUMENTS OR AGREEMENTS RELATING HERETO.
[Signature Page Follows]
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IN WITNESS WHEREOF, the parties hereto execute this Agreement as of the
date first set forth above.
The Secured Party:
ULTIMATE HOLDINGS, LTD.,
a Bermuda limited company
By:____________________________
Name: ___________________
Title: ____________________
The Debtor:
XXXXXXXXXXXXXXXXX.XXX, INC.,
a Delaware corporation
By:____________________________
Name: ___________________
Title: ____________________
