SECURITY AGREEMENT
SECURITY
AGREEMENT (as amended, restated, supplemented or otherwise modified from time
to
time in accordance herewith and including all attachments, exhibits and
schedules hereto, the “Agreement”),
dated
as of June 29, 2007, made by TechnoConcepts Inc., a Colorado corporation (the
“Grantor”),
in
favor of the secured parties listed on Exhibit
A
to this
Agreement and their permitted successors and assigns (collectively, the
“Secured
Parties”).
WHEREAS,
Grantor has issued or will issue secured promissory notes to the Secured Parties
(collectively, the “Note”)
pursuant to a Note and Warrant Purchase Agreement, dated as of June 29, 2007
(the “Purchase
Agreement”),
by
and among Grantor and the Secured Parties; and
WHEREAS,
the Secured Parties and the Grantor agree that the Grantor execute and deliver
to the Secured Parties a security agreement providing for the grant to the
Secured Parties of a continuing security interest in all personal property
and
assets of the Grantor, all in substantially the form hereof to secure all
Obligations (hereinafter defined).
NOW,
THEREFORE, the parties agree as follows:
ARTICLE
I. Definitions
Section
1.1. Definition
of Terms Used Herein.
All
capitalized terms used herein and not defined herein have the respective
meanings provided therefor in the Purchase Agreement or the Note, as applicable.
All terms defined in the Uniform Commercial Code (hereinafter defined) as in
effect from time to time and used herein and not otherwise defined herein
(whether or not such terms are capitalized) have the same definitions herein
as
specified therein.
Section
1.2. Definition
of Certain Terms Used Herein.
As used
herein, the following terms have the following meanings:
“Collateral”
means
all accounts receivable of the Grantor and all personal and fixed property
of
every kind and nature, including, without limitation, all furniture, fixtures,
equipment, raw materials, inventory, as extracted collateral, or other goods,
accounts, contract rights, rights to the payment of money, insurance refund
claims and all other insurance claims and proceeds, tort claims, chattel paper,
documents, instruments, securities and other investment property, deposit
accounts, rights to proceeds of letters of credit and all general intangibles
including, without limitation, all tax refund claims, license fees, patents,
patent licenses, patent applications, trademarks, trademark licenses, trademark
applications, trade names, copyrights, copyright licenses, copyright
applications, rights to xxx and recover for past infringement of patents,
trademarks and copyrights, computer programs, computer software, engineering
drawings, service marks, customer lists, goodwill, and all licenses, permits,
agreements of any kind or nature pursuant to which the Grantor possesses, uses
or has authority to possess or use property (whether tangible or intangible)
of
others or others possess, use or have authority to possess or use property
(whether tangible or intangible) of the Grantor, and all recorded data of any
kind or nature, regardless of the medium of recording including, without
limitation, all books and records, software, writings, plans, specifications
and
schematics, whether now owned or hereinafter acquired by the Grantor together
with all substitutions and replacements thereof and all proceeds and products
of
each of the foregoing; provided,
that
the Collateral shall not include license agreements or other agreements which
require the consent of any person for the assignment thereof unless and until
such consent has been obtained (provided that the proceeds thereof shall
constitute Collateral).
“Default”
means
any event or circumstance which, with the giving of notice, the lapse of time,
or both, would (if not cured, waived, or otherwise remedied during such time)
constitute an Event of Default.
“Event
of Default”
has
the
meaning specified in the Note.
“Indemnitees”
has the
meaning specified in Section 7.5(b).
“Intellectual
Property”
means
the
collective reference to all rights, priorities and privileges relating to
intellectual property, whether arising under United States of America
(“United
States”),
multinational or foreign laws or otherwise, including without limitation, (i)
all copyrights arising under the laws of the United States, any other country
or
any political subdivision thereof, whether registered or unregistered and
whether published or unpublished, all registrations and recordings thereof,
and
all applications in connection therewith, including, without limitation, all
registrations, recordings and applications in the United States Copyright
Office, (ii) all letters patent of the United States, any other country or
any
political subdivision thereof, all reissues and extensions thereof, and all
applications for letters patent of the United States or any other country and
all divisions, continuations and continuations-in-part thereof, (iii) all
trademarks, trade names, corporate names, company names, business names,
fictitious business names, trade dress, service marks, logos, domain names
and
other source or business identifiers, and all goodwill associated therewith,
now
existing or hereafter adopted or acquired, all registrations and recordings
thereof, and all applications in connection therewith, whether in the United
States Patent and Trademark Office or in any similar office or agency of the
United States, any state thereof or any other country or any political
subdivision thereof, or otherwise, and all common law rights related thereto,
(iv) all trade secrets arising under the laws of the United States, any other
country or any political subdivision thereof, (v) all rights to obtain any
reissues, renewals or extensions of the foregoing, (vi) all licenses for any
of
the foregoing, and (vii) all causes of action for infringement of the foregoing.
“Lien”
means:
(i) any interest in property securing an obligation owed to, or a claim by,
a Person other than the owner of the property, whether such interest is based
on
the common law, statute, or contract, and including a security interest, charge,
claim, or lien arising from a mortgage, deed of trust, encumbrance, pledge,
hypothecation, assignment, deposit arrangement, agreement, security agreement,
conditional sale or trust receipt or a lease, consignment or bailment for
security purposes; (ii) to the extent not included under clause (i),
any
reservation, exception, encroachment, easement, right-of-way, covenant,
condition, restriction, lease or other title exception or encumbrance affecting
property; and (iii) any contingent or other agreement to provide any of the
foregoing.
“Note”
has
the
meaning assigned to such term in the first recital of this
Agreement.
“Obligations”
means
all indebtedness, liabilities, obligations, covenants and duties of the Grantor
to the Secured Parties of every kind, nature and description, direct or
indirect, absolute or contingent, joint or several, due or not due, contractual
or tortious, liquidated or unliquidated, arising by operation of law or
otherwise, now existing of hereafter arising under or in connection with the
Note, the Purchase Agreement, this Agreement or the other Transaction Documents,
whether for principal, interest, fees, expenses or otherwise, together with
all
costs of collection or enforcement, including, without limitation, reasonable
attorneys’ fees incurred in any collection efforts or in any action or
proceeding.
2
“Permitted
Liens”
means
(a) liens for taxes not delinquent or that are being contested in good faith
by
appropriate proceedings; (b) inchoate materialmens’, mechanics’, workmens’,
repairmens’, or other like liens arising in the ordinary course of business and,
in each case, not delinquent or that are being contested in good faith by
appropriate proceedings; (c)
pledges
or deposits in connection with workers’ compensation, unemployment insurance and
other social security legislation;(d)
deposits to secure the performance of bids, trade contracts (other than for
the
repayment of borrowed money), leases, statutory obligations, surety and appeal
bonds, performance bonds and other obligations of a like nature incurred in
the
ordinary course of business; (e) any interest or title of a lessor under any
operating lease entered into by the Grantor in the ordinary course of its
business and covering only the assets so leased; and (f) liens in favor of
depository and collection banks and other regulated financial institutions
consisting of statutory or contractual setoff rights with respect to deposit
accounts or securities accounts of the Grantor maintained with such bank or
financial institution to secure payment of customary maintenance fees or other
administrative charges associated with such accounts so long as such Liens
are
incurred in the ordinary course of business for amounts that are not overdue
for
a period of more than 30 days or that are being contested in good faith by
appropriate proceedings.
“Registered
Organization”
means
an
entity formed by filing a registration document with a United States
Governmental Authority, such as a corporation, limited partnership or limited
liability company.
“Security
Interest”
has
the
meaning specified in Section 2.1 of this Agreement.
“Uniform
Commercial Code”
means
the Uniform Commercial Code as in effect in the State of New York as it may
be
amended, supplemented or modified from time to time.
ARTICLE
II. Security Interest
Section
2.1. Security
Interest.
As
security for the payment and performance, in full of the Obligations, and any
extensions, renewals, modifications or refinancings of the Obligations, the
Grantor hereby bargains, sells, conveys, assigns, sets over, mortgages, pledges,
hypothecates and transfers to the Secured Parties, and hereby grants to the
Secured Parties, their successors and assigns, a security interest in, all
of
such Grantor’s right, title and interest in, to and under the Collateral and all
hereinafter acquired Collateral (the “Security
Interest”).
Section
2.2. No
Assumption of Liability.
The
Security Interest is granted as security only and shall not subject the Secured
Parties to, or in any way alter or modify, any obligation or liability of the
Grantor with respect to or arising out of the Collateral.
3
Section
2.3. Continuing
Agreement.
This
Agreement shall create a continuing security interest in the Collateral and
shall remain in full force and effect until payment in full of the
Obligations.
ARTICLE
III. Representations and Warranties
The
Grantor represents and warrants to the Secured Parties that:
Section
3.1. Title
and Authority.
The
Grantor has (or to the extent that this Agreement states that the Collateral
is
to be acquired after the date hereof, will have) good and valid rights in and
title to the Collateral with respect to which it has purported to grant a
security interest hereunder and has (or to the extent that this Agreement states
that the Collateral is to be acquired after the date hereof, will have) full
power and authority to grant to the Secured Parties the Security Interest and
to
execute, deliver and perform its obligations in accordance with the terms of
this Agreement, without the consent or approval of any other Person other than
any consent or approval which has been obtained.
Section
3.2. Filings;
Actions to Achieve Perfection.
Fully
executed Uniform Commercial Code financing statements (including fixture
filings, as applicable) or other appropriate filings, recordings or
registrations containing a description of the Collateral as set forth herein
or
in any generic manner and may describe the Collateral as “all assets” or words
of similar effect, have been delivered to the Secured Parties for filing in
each
United States governmental, municipal or other office specified in Schedule
3.2
to this
Agreement, which are all the filings, recordings and registrations that are
necessary to publish notice of and protect the validity of and to establish
a
legal, valid and perfected security interest in favor of the Secured Parties
in
respect of all Collateral in which the Security Interest may be perfected by
filing, recording or registration in the United States (or any political
subdivision thereof) and its territories and possessions, and no further or
subsequent filing, refiling, recording, rerecording, registration or
reregistration is necessary in any such jurisdiction, except as provided under
applicable law with respect to the filing of continuation statements or with
respect to the filing of amendments or new filings to reflect the change of
the
Grantor’s name, location, identity or corporate structure. The Grantor’s name is
listed in the preamble of this Agreement identically to how it appears on its
certificate of incorporation or other organizational documents and its
organizational identification number is as set forth on Schedule
3.2
to this
Agreement.
Section
3.3. Validity
and Priority of Security Interest.
The
Security Interest constitutes (a) a legal and valid security interest in all
the
Collateral securing the payment and performance of the Obligations, (b) subject
only to the filings described in Section 3.2 above, the Permitted Liens, and
other previously perfected security interests in the Collateral listed on
Schedule
3.3
to this
Agreement (the “Existing
Liens”),
a
perfected security interest in all Collateral in which a security interest
may
be perfected by filing, recording or registration in the United States pursuant
to the Uniform Commercial Code or other applicable law in the United States
(or
any political subdivision thereof) and its territories and possessions or any
other country, state or nation (or any political subdivision thereof). Such
notices, filings and all other action necessary or desirable to perfect and
protect such security interest have been duly taken. Notwithstanding anything
herein to the contrary, the Security Interest granted hereunder is expressly
subordinated to those Liens on the Collateral listed on Schedule
3.3
to this
Agreement.
4
Section
3.4. Absence
of Other Liens.
The
Grantor’s Collateral is owned by the Grantor free and clear of any Lien other
than Permitted Liens and Existing Liens. Without limiting the foregoing and
except as set forth on Schedule
3.3
to this
Agreement, the Grantor has not filed or consented to any filing of any financing
statement or similar filing in favor of any Person other than the Secured
Parties, nor permitted the granting or assignment of a security interest or
permitted perfection of any security interest in the Collateral in favor of
any
Person other than the Secured Parties.
Section
3.5. Valid
and Binding Obligation.
This
Agreement constitutes the legal, valid and binding obligation of the Grantor,
enforceable against the Grantor in accordance with its terms, except (i) as
limited by applicable bankruptcy, insolvency, reorganization, moratorium, and
other laws of general application affecting enforcement of creditors’ rights
generally, (ii) as limited by laws relating to the availability of specific
performance, injunctive relief, or other equitable remedies, and (iii) to the
extent the indemnification provisions contained in this Agreement may be limited
by applicable federal or state securities laws.
Section
3.6. Location
of Collateral.
The
Grantor has no place of business or offices where its respective books of
account and records are kept (other than temporarily at the offices of is
attorneys or accountants) or places where Collateral is stored or located,
except as set forth on Schedule
3.6
to this
Agreement. Except as specifically set forth on Schedule
3.6
to this
Agreement, the Grantor is the record owner of the real property where such
Collateral is located, and there exist no mortgages or other liens on any such
real property except for Permitted Liens. Except as disclosed on Schedule
3.6
to this
Agreement, none of such Collateral is in the possession of any consignee,
bailee, warehousemen, agent or processor.
Section
3.7. Intellectual
Property.
Schedule
3.7
to this
Agreement lists, to the best knowledge of the Grantor, all of the patents,
patent applications, trademarks, trademark applications, registered copyrights,
and domain names owned by the Grantor as of the date hereof. Schedule
3.7
to this
Agreement lists all material licenses in favor of the Grantor for the use of
any
patents, trademarks, copyrights and domain names as of the date hereof. All
material patents and trademarks of the Grantor have been duly recorded at the
United States Patent and Trademark Office and all material copyrights of the
Grantor have been duly recorded at the United States Copyright Office.
Schedule
3.7
to this
Agreement shall be updated to the extent necessary to reflect new or additional
patents, trademarks, copyrights, domain names, and applications or licenses
therefore, in favor of the Secured Parties.
Section
3.8. Deposit
Accounts; Securities Accounts.
The
only Deposit Accounts or Securities Accounts maintained by the Grantor on the
date hereof are those listed on Schedule
3.8
to this
Agreement.
ARTICLE
IV. Covenants
Section
4.1. Change
of Name; Location of Collateral; Place of Business, State of Formation or
Organization.
(a)
The
Grantor shall notify the Secured Parties in writing at least eleven (11) days
prior to any change (i) in its corporate name or in any trade name used to
identify it in the conduct of its business or in the ownership of its
properties, (ii) in the location of its chief executive office, its principal
place of business, any office in which it maintains books or records relating
to
Collateral owned by it (including the establishment of any such new office
or
facility), (iii) in its identity or corporate structure such that a filed filing
made under the Uniform Commercial Code becomes misleading or (iv) in its Federal
Taxpayer Identification Number or organizational identification number.
Furthermore, the Grantor shall not effect or permit any change referred to
in
the preceding sentence unless all filings have been made under the Uniform
Commercial Code or otherwise that are required in order for the Secured Parties
to continue at all times following such change to have a valid, legal and
perfected security interest in all the Collateral.
5
(b)
Without limiting Section 4.1(a), without prior written notice to the Secured
Parties, in each instance, the Grantor shall not change its (i) principal
residence, if it is an individual, (ii) place of business, if it has only one
place of business and is not a Registered Organization, (iii) principal place
of
business, if it has more than one place of business and is not a Registered
Organization, or (iv) state of incorporation, formation or organization, if
it
is a Registered Organization.
Section
4.2. Records.
The
Grantor shall maintain, at its own cost and expense, such complete and accurate
records with respect to the Collateral owned by it as is consistent with its
current practices and in accordance with such prudent and standard practices
used in industries that are the same as or similar to those in which the Grantor
is engaged, but in any event to include complete accounting records indicating
all payments and proceeds received with respect to any part of the Collateral,
and, at such time or times as the Secured Parties may reasonably request,
promptly to prepare and deliver to the Secured Parties a duly certified schedule
or schedules in form and detail reasonably satisfactory to the Secured Parties
showing the identity, amount and location of any and all Collateral.
Section
4.3. Periodic
Certification; Notice of Changes.
In the
event there should at any time be any change in the information represented
and
warranted herein or in the documents and instruments executed and delivered
in
connection herewith, the Grantor shall immediately notify the Secured Parties
in
writing of such change (this notice requirement shall be in extension of and
shall not limit or relieve the Grantor of any other covenants
hereunder).
Section
4.4. Protection
of Security.
The
Grantor shall, at its own cost and expense, take any and all actions necessary
to defend title to the Collateral against all persons and to defend the Security
Interest of the Secured Parties in the Collateral and the priority thereof
against any Lien.
Section
4.5. Inspection
and Verification.
The
Secured Parties and such persons as the Secured Parties may reasonably designate
shall have the right, upon reasonable notice to the Grantor and during normal
business hours, to inspect the Collateral, all records related thereto (and
to
make extracts and copies from such records) and the premises upon which any
of
the Collateral is located, to discuss the Grantor’s affairs with the officers of
the Grantor and its independent accountants and to verify under reasonable
procedures the validity, amount, quality, quantity, value, condition and status
of, or any other matter relating to, the Collateral, including, in the case
of
collateral in the possession of any third Person, by contacting any account
debtor or third Person possessing such Collateral for the purpose of making
such
a verification. Out-of-pocket expenses in connection with any inspections by
representatives of the Secured Parties shall be (a) the obligations of the
Grantor with respect to any inspection after the Secured Parties’ demand payment
of the Note in accordance with the terms thereof or (b) the obligation of the
Secured Parties in any other case.
6
Section
4.6. Taxes;
Encumbrances.
At
their option, the Secured Parties may discharge Liens other than Permitted
Liens
and Existing Liens at any time levied or placed on the Collateral and may pay
for the maintenance and preservation of the Collateral to the extent the Grantor
fails to do so and the Grantor shall reimburse the Secured Parties on demand
for
any payment made or any expense incurred by the Secured Parties pursuant to
the
foregoing authorization; provided,
however,
that
nothing in this Section shall be interpreted as excusing the Grantor from the
performance of, or imposing any obligation on the Secured Parties to cure or
perform, any covenants or other obligation of the Grantor with respect to any
Lien or maintenance or preservation of Collateral as set forth
herein.
Section
4.7. Use
and Disposition of Collateral.
The
Grantor shall not make or permit to be made an assignment, pledge or
hypothecation of any Collateral or shall grant any other Lien (other than
Permitted Liens) in respect of the Collateral without the prior written consent
of the Secured Parties. The Grantor shall not make or permit to be made any
transfer of any Collateral other than in the ordinary course of business or
with
respect to Existing Liens and other liens approved by the Secured Parties and
the Grantor shall remain at all times in possession of the Collateral owned
by
it.
Section
4.8. Insurance/Notice
of Loss.
Within
a reasonable period of time following the date of this Agreement, Grantor,
at
its own expense, shall maintain or cause to be maintained insurance covering
physical loss or damage to the Collateral as described on Schedule
4.8
to this
Agreement. In extension of the foregoing and without limitation, such insurance
shall be payable to the Secured Parties as loss payee under a “standard” loss
payee clause, and the Secured Parties shall be listed as an “additional insured”
on Grantor’s general liability insurance. Such insurance shall not be
terminated, cancelled or not renewed for any reason, including non-payment
of
insurance premiums, unless the insurer shall have provided the Secured Parties
at least 30 days prior written notice. Grantor irrevocably makes, constitutes
and appoints the Secured Parties (and all officers, employees or agents
designated by the Secured Parties) as its true and lawful agent and
attorney-in-fact for the purpose, at any time after the occurrence and during
the continuance of an Event of Default, of making, settling and adjusting claims
in respect of Collateral under policies of insurance, endorsing the name of
Grantor on any check, draft, instrument or other item of payment for the
proceeds of such policies of insurance and for making all determinations and
decisions with respect thereto. In the event that Grantor at any time or times
shall fail to obtain or maintain any of the policies of insurance required
hereby or to pay any premium in whole or part relating thereto, the Secured
Parties may, without waiving or releasing any obligation or liability of Grantor
hereunder, in their sole discretion, obtain and maintain such policies of
insurance and pay such premium and take any other actions with respect thereto
as the Secured Parties deem advisable. All sums disbursed by the Secured Parties
in connection and in accordance with this Section, including reasonable
attorneys’ fees, court costs, expenses and other charges relating thereto, shall
be payable upon demand, by Grantor to the Secured Parties and shall be
additional Obligations secured hereby. Grantor shall promptly notify the Secured
Parties if any material portion of the Collateral owned or held by Grantor
is
damaged or destroyed. The proceeds of any casualty insurance in respect of
any
casualty loss of any of the Collateral shall (i) so long as no Event of Default
has occurred and is continuing, be disbursed to Grantor for direct application
by Grantor solely to the repair or replacement of Grantor’s property so damaged
or destroyed, and (ii) in all other circumstances, be held by the Secured
Parties and promptly applied to the Obligations. The Secured Parties may apply
any of such proceeds directly to the repair or replacement of Grantor’s property
so damaged or destroyed, or Grantor may apply all or any part of such proceeds
to the Obligations.
7
Section
4.9. Legend.
Grantor
shall legend, in form and manner satisfactory to the Secured Parties, its
accounts and its books, records and documents evidencing or pertaining thereto
with an appropriate reference to the fact that such accounts have been assigned
to the Secured Parties and that the Secured Parties have a security interest
therein.
Section
4.10. Further
Assurances.
Grantor
shall, at its own expense, execute, acknowledge, deliver and cause to be duly
filed all such further instruments and documents and take all such actions
as
the Secured Parties may from time to time reasonably request to better assure,
preserve, protect and perfect the Security Interest and the rights and remedies
created hereby, including the payment of any fees and taxes required in
connection with the execution and delivery of this Agreement, the granting
of
the Security Interest, the filing of any financing statements (including fixture
filings), the delivery of a separate security agreement with respect to the
Grantor’s Intellectual Property or any other documents in connection herewith or
therewith. If any amount payable under or in connection with any of the
Collateral shall be or become evidenced by any promissory note or other
instrument, such note or instrument shall be immediately pledged and delivered
to the Secured Parties, duly endorsed in a manner satisfactory to the Secured
Parties.
ARTICLE
V. Power of Attorney
Section
5.1. Power
of Attorney.
(a)
Grantor hereby irrevocably (as a power coupled with an interest) constitutes
and
appoints Vision Opportunity Master Fund, Ltd. (“Vision”)
and
all officers, employees or agents designated by Vision, its attorney-in-fact
with full power of substitution, for the benefit of the Secured Parties,
(i)
to
take all appropriate action and to execute all documents and instruments that
may be necessary or desirable to accomplish the purposes of this Agreement,
and
without limiting the generality of the foregoing, Grantor hereby grants the
power to file one or more financing statements (including fixture filings),
continuation statements, filings with the United States Patent and Trademark
Office or United States Copyright Office (or any successor office or any similar
office in any other country) or other documents for the purpose of perfecting,
confirming, continuing, enforcing or protecting the Security Interest granted
by
Grantor, without the signature of Grantor, and naming Grantor as debtor and
the
Secured Parties as secured party; and
(ii)
at
any time after the occurrence and during the continuance of an Event of Default,
(i) to receive, endorse, assign and/or deliver any and all notes, acceptances,
checks, drafts, money orders or other evidences of payment relating to the
Collateral or any part thereof; (ii) to demand, collect, receive payment of,
give receipt for and give discharges and releases of all or any of the
Collateral; (iii) to sign the name of Grantor on any invoice or xxxx of lading
relating to any of the Collateral; (iv) to send verifications of accounts to
any
account debtor or any other Person liable for an account; (v) to commence and
prosecute any and all suits, actions or proceedings at law or in equity in
any
court of competent jurisdiction to collect or otherwise realize on all or any
of
the Collateral or to enforce any rights in respect of any Collateral; (vi)
to
settle, compromise, compound, adjust or defend any actions, suits or proceedings
relating to all or any of the Collateral; and (vii) to use, sell, assign,
transfer, pledge, make any agreement with respect to or otherwise deal with
all
or any of the Collateral, and to do all other acts and things necessary to
carry
out the purposes of this Agreement, as fully and completely as though the
Secured Parties were the absolute owner of the Collateral for all purposes;
provided, however,
that
nothing herein contained shall be construed as requiring or obligating the
Secured Parties to make any commitment or to make any inquiry as to the nature
or sufficiency of any payment received by the Secured Parties, or to present
or
file any claim or notice, or to take any action with respect to the Collateral
or any part thereof or the moneys due or to become due in respect thereof or
any
property covered thereby, and no action taken or omitted to be taken by the
Secured Parties with respect to the Collateral or any part thereof shall give
rise to any defense, counterclaim or offset in favor of Grantor or to any claim
or action against the Secured Parties.
8
(b)
The
provisions of this Article shall in no event relieve Grantor of any of its
obligations hereunder with respect to the Collateral or any part thereof or
impose any obligation on the Secured Parties to proceed in any particular manner
with respect to the Collateral or any part thereof, or in any way limit the
exercise by the Secured Parties of any other or further right which it may
have
on the date of this Agreement or hereafter, whether hereunder, by law or
otherwise.
ARTICLE
VI. Remedies
Section
6.1. Remedies
upon Default.
(a)
Upon
the occurrence and during the continuance of an Event of Default, Grantor agrees
to deliver each item of its Collateral to the Secured Parties on demand, and
it
is agreed that the Secured Parties shall have the right to take any of or all
the following actions at the same or different times (but at all times subject
to any Permitted Lien and Existing Liens): to the extent permitted by applicable
law, with or without legal process and with or without prior notice or demand
for performance, to take possession of the Collateral and without liability
for
trespass to enter any premises where the Collateral may be located for the
purpose of taking possession of or removing the Collateral; exercise Grantor’s
right to xxxx and receive payment for completed work; and, generally, to
exercise any and all rights afforded to a secured party under the Uniform
Commercial Code or other applicable law. Without limiting the generality of
the
foregoing, Grantor agrees that the Secured Parties shall have the right, subject
to the mandatory requirements of applicable law, to sell or otherwise dispose
of
all or any part of the Collateral, at public or private sale or at any broker’s
board or on any securities exchange, for cash, upon credit or for future
delivery as the Secured Parties shall deem appropriate. The Secured Parties
shall be authorized at any such sale (if it deems it advisable to do so) to
restrict the prospective bidders or purchasers to persons who will represent
and
agree that they are purchasing the Collateral for their own account for
investment and not with a view to the distribution or sale thereof, and upon
consummation of any such sale the Secured Parties shall have the right to
assign, transfer and deliver to the purchaser or purchasers thereof the
Collateral so sold. Each such purchaser at any such sale shall hold the property
sold absolutely, free from any claim or right on the part of Grantor, and
Grantor hereby waives (to the extent permitted by law) all rights of redemption,
stay and appraisal which Grantor now has or may at any time in the future have
under any rule of law or statute now existing or hereafter enacted.
9
(b)
The
Secured Parties shall give Grantor ten (10) days’ written notice (which Grantor
agrees is reasonable notice within the meaning of Section 9-611 of the Uniform
Commercial Code) of the Secured Parties’ intention to make any sale of
Collateral. Such notice, in the case of a public sale, shall state the time
and
place for such sale and, in the case of a sale at a broker’s board or on a
securities exchange, shall state the board or exchange at which such sale is
to
be made and the day on which the Collateral, or portion thereof, will first
be
offered for sale at such board or exchange. Any such public sale shall be held
at such time or times within ordinary business hours and at such place or places
as the Secured Parties may fix and state in the notice (if any) of such sale.
At
any such sale, the Collateral, or portion thereof, to be sold may be sold in
one
lot as an entirety or in separate parcels, as the Secured Parties may (in their
sole and absolute discretion) determine. The Secured Parties shall not be
obligated to make any sale of any Collateral if it shall determine not to do
so,
regardless of the fact that notice of sale of such Collateral shall have been
given. The Secured Parties 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 sale, and such sale may, without
further notice, be made at the time and place to which the same was so
adjourned. In case any sale of all or any part of the Collateral is made on
credit or for future delivery, the Collateral so sold may be retained by the
Secured Parties until the sale price is paid by the purchaser or purchasers
thereof, but the Secured Parties shall not incur any liability in case any
such
purchaser or purchasers shall fail to take up and pay for the Collateral so
sold
and, in case of any such failure, such Collateral may be sold again upon like
notice. At any public (or, to the extent permitted by law, private) sale made
pursuant to this Section, the Secured Parties may bid for or purchase, free
(to
the extent permitted by law) from any right of redemption, stay, valuation
or
appraisal on the part of Grantor (all said rights being also hereby waived
and
released to the extent permitted by law), the Collateral or any part thereof
offered for sale and may make payment on account thereof by using any claim
then
due and payable to the Secured Parties from Grantor as a credit against the
purchase price, and the Secured Parties may, upon compliance with the terms
of
sale, hold, retain and dispose of such property without further accountability
to Grantor therefor. For purposes hereof, a written agreement to purchase the
Collateral or any portion thereof shall be treated as a sale thereof; the
Secured Parties shall be free to carry out such sale pursuant to such agreement
and Grantor shall not be entitled to the return of the Collateral or any portion
thereof subject thereto, notwithstanding the fact that after the Secured Parties
shall have entered into such an agreement all Obligations have been paid in
full. As an alternative to exercising the power of sale herein conferred upon
it, the Secured Parties may proceed by a suit or suits at law or in equity
to
foreclose this Agreement and to sell the Collateral or any portion thereof
pursuant to a judgment or decree of a court or courts having competent
jurisdiction or pursuant to a proceeding by a court-appointed
receiver.
10
Section
6.2. Application
of Proceeds.
The
Secured Parties shall apply the proceeds of any collection or sale of the
Collateral, as well as any Collateral consisting of cash, as follows:
(a)
FIRST, to the payment of all costs and expenses incurred by the Secured Parties
in connection with such collection or sale or otherwise in connection with
this
Agreement or any of the Obligations, including all court costs and the
reasonable fees and expenses of its agents and legal counsel, and any other
costs or expenses incurred in connection with the exercise of any right or
remedy hereunder, under the Purchase Agreement, the Note and the other
Transaction Documents;
(b)
SECOND, to the payment in full of the Obligations; and
(c)
THIRD, to Grantor, its successors or assigns, or to whomsoever may be lawfully
entitled to receive the same, or as a court of competent jurisdiction may
otherwise direct.
Subject
to the foregoing, the Secured Parties shall have absolute discretion as to
the
time of application of such proceeds, moneys or balances in accordance with
this
Agreement. Upon any sale of the Collateral by the Secured Parties (including
pursuant to a power of sale granted by statute or under a judicial proceeding),
the receipt of any such proceeds, moneys or balances by the Secured Parties
or
of the officer making the sale shall be a sufficient discharge to the purchaser
or purchasers of the Collateral so sold and such purchaser or purchasers shall
not be obligated to see to the application of any part of the purchase money
paid over to the Secured Parties or such officer or be answerable in any way
for
the misapplication thereof.
ARTICLE
VII. Miscellaneous
Section
7.1. Notices.
All
communications and notices hereunder to the Grantor and to the Secured Parties
shall (except as otherwise expressly permitted herein) be in writing and
delivered to the Grantor or the Secured Parties, as the case may be, as provided
in the Purchase Agreement.
Section
7.2. Security
Interest Absolute.
All
rights of the Secured Parties hereunder, the Security Interest and all
obligations of Grantor hereunder shall be absolute and unconditional
irrespective of (a) any lack of validity or enforceability of this Agreement,
the Purchase Agreement, the Note, any Transaction Document or any agreement
with
respect to any of the Obligations or any other agreement or instrument relating
to any of the foregoing, (b) any change in the time, manner or place of payment
of, or in any other term of, all or any of the Obligations, or any other
amendment or waiver of or any consent to any departure from the Purchase
Agreement, the Note, any Transaction Document or any other agreement or
instrument, (c) any exchange, release or non-perfection of any Lien on other
collateral, or any release or amendment or waiver of or consent under or
departure from any guarantee, securing or guaranteeing all or any of the
Obligations, or (d) any other circumstance that might otherwise constitute
a
defense available to, or a discharge of, Grantor in respect of the Obligations
or this Agreement.
11
Section
7.3. Survival
of Agreement.
All
covenants, agreements, representations and warranties made by Grantor herein
and
in the certificates or other instruments prepared or delivered in connection
with or pursuant to this Agreement shall be considered to have been relied
upon
by the Secured Parties and shall survive the making of the loan and the
execution and delivery to the Secured Parties of the Note, regardless of any
investigation made by the Secured Parties or on their behalf; and shall continue
in full force and effect until this Agreement shall terminate.
Section
7.4. Binding
Effect; Several Agreement; Successors and Assigns.
This
Agreement shall become effective as to Grantor when a counterpart hereof
executed on behalf of Grantor shall have been delivered to the Secured Parties
and a counterpart hereof shall have been executed on behalf of the Secured
Parties, and thereafter shall be binding upon Grantor and the Secured Parties
and their respective successors and assigns, and shall inure to the benefit
of
Grantor, the Secured Parties and their respective successors and assigns, except
that Grantor shall not have the right to assign or transfer its rights or
obligations hereunder or any interest herein or in the Collateral (and any
such
assignment or transfer shall be void) except as expressly contemplated by this
Agreement, the Purchase Agreement, the Note or the other Transaction Documents.
Section
7.5. Secured
Parties’ Fees and Expense; Indemnification.
(a)
Grantor agrees to pay upon demand to the Secured Parties the amount of any
and
all reasonable expenses, including all reasonable fees, disbursements and other
charges of its counsel and of any experts or agents, which the Secured Parties
may incur in connection with (i) (including all filings and recordings made
hereunder), the administration of this Agreement, (ii) the custody or
preservation of, or the sale of, collection from or other realization upon
any
of the Collateral, (iii) the exercise, enforcement or protection of any of
the
rights of the Secured Parties hereunder or (iv) the failure of Grantor to
perform or observe any of the provisions hereof.
(b)
Grantor agrees to indemnify the Secured Parties and the agent, contractors
and
employees of the Secured Parties (collectively, the “Indemnitees”)
against, and hold each of them harmless from, any and all losses, claims,
damages, liabilities and related expenses, including reasonable fees,
disbursements and other charges of counsel, incurred by or asserted against
any
of them arising out of, in any way connected with, or as a result of, the
execution, delivery, or performance of this Agreement or any agreement or
instrument contemplated hereby or any claim, litigation, investigation or
proceeding relating hereto or to the Collateral, whether or not any Indemnitee
is a party thereto; provided,
that
such indemnity shall not, as to any Indemnitee, be available to the extent
that
such losses, claims, damages, liabilities or related expenses are determined
by
a court of competent jurisdiction by final and nonappealable judgment to have
resulted from the gross negligence or willful misconduct of such
Indemnitee.
(c)
Any
such amounts payable as provided hereunder shall be additional Obligations
secured hereby. The provisions of this Section shall remain operative and in
full force and effect regardless of the termination of this Agreement, the
Purchase Agreement, the Note or the other Transaction Documents, the
consummation of the transactions contemplated hereby, the repayment of any
of
the Obligations, the invalidity or unenforceability of any term or provision
of
this Agreement, the Purchase Agreement, the Note or the other Transaction
Documents, or any investigation made by or on behalf of the Secured Parties.
All
amounts due under this Section shall be payable on written demand therefor.
12
Section
7.6. GOVERNING
LAW.
THIS
AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL
LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO ANY OF THE CONFLICTS
OF
LAW PRINCIPLES WHICH WOULD RESULT IN THE APPLICATION OF THE SUBSTANTIVE LAW
OF
ANOTHER JURISDICTION. THIS AGREEMENT SHALL NOT BE INTERPRETED OR CONSTRUED
WITH
ANY PRESUMPTION AGAINST THE PARTY CAUSING THIS AGREEMENT TO BE
DRAFTED.
Section
7.7. Waivers;
Amendment.
(a)
No
failure or delay of the Secured Parties in exercising any power or right
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise of any such right or power, or any abandonment or discontinuance of
steps to enforce such a right or power, preclude any other or further exercise
thereof or the exercise of any other right or power. The rights and remedies
of
the Secured Parties hereunder and under the Purchase Agreement are cumulative
and are not exclusive of any rights or remedies that they would otherwise have.
No waiver of any provisions of this Agreement, the Purchase Agreement, the
Note
or the other Transaction Documents or consent to any departure by Grantor
therefrom shall in any event be effective unless the same shall be permitted
by
paragraph (b) below, and then such waiver or consent shall be effective only
in
the specific instance and for the purpose for which given. No notice to or
demand on Grantor in any case shall entitle Grantor to any other or further
notice or demand in similar or other circumstances.
(b)
Neither this Agreement nor any provision hereof may be waived, amended or
modified except pursuant to an agreement or agreements, in writing entered
into
by the Secured Parties and Grantor.
Section
7.8. WAIVER
OF JURY TRIAL.
EACH
PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW,
ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY
OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT, THE
PURCHASE AGREEMENT OR THE NOTE. EACH PARTY HERETO (A) CERTIFIES THAT NO
REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY
OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION,
SEEK
TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER
PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT, THE PURCHASE
AGREEMENT AND THE NOTE, AS APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL
WAIVERS AND CERTIFICATIONS IN THIS SECTION.
Section
7.9. Severability.
In the
event any one or more of the provisions contained in this Agreement should
be
held invalid, illegal or unenforceable in any respect, the validity, legality
and enforceability of the remaining provisions contained herein shall not in
any
way be affected or impaired thereby (it being understood that the invalidity
of
a particular provision in a particular jurisdiction shall not in and of itself
affect the validity of such provision in any other jurisdiction). The parties
shall endeavor in good-faith negotiations to replace the invalid, illegal or
unenforceable provisions with valid provisions the economic effect of which
comes as close as possible to that of the invalid, illegal or unenforceable
provisions.
13
Section
7.10. Counterparts.
This
Agreement may be executed in two or more counterparts, each of which shall
constitute an original but all of which when taken together shall constitute
but
one contract. Each party shall be entitled to rely on a facsimile signature
of
any other party hereunder as if it were an original.
Section
7.11. Jurisdiction;
Consent to Service of Process.
(a)
Grantor hereby irrevocably and unconditionally submits, for itself and its
property, to the nonexclusive jurisdiction of any New York State court or
Federal court of the United States of America sitting in New York City, and
any
appellate court from any thereof, in any action or proceeding arising out of
or
relating to this Agreement, the Purchase Agreement or the Note, or for
recognition or enforcement of any judgment, and each of the parties hereto
hereby irrevocably and unconditionally agrees that all claims in respect of
any
such action or proceeding may be heard and determined in such New York State
or,
to the extent permitted by law, in such Federal court. Each of the parties
hereto agrees that a final judgment in any such action or proceeding shall
be
conclusive and may be enforced in other jurisdictions by suit on the judgment
or
in any other manner provided by law. Nothing in this Agreement shall affect
any
right that the Secured Parties may otherwise have to bring any action or
proceeding relating to this Agreement, the Purchase Agreement, the Note or
the
other Transaction Documents against Grantor or its properties in the courts
of
any jurisdiction.
(b)
Grantor hereby irrevocably and unconditionally waives, to the fullest extent
it
may legally and effectively do so, any objection which it may now or hereafter
have to the laying of venue of any suit, action or proceeding arising out of
or
relating to this Agreement, the Purchase Agreement, the Note or the other
Transaction Documents in any New York State or Federal court. Each of the
parties hereto hereby irrevocably waives, to the fullest extent permitted by
law, the defense of an inconvenient forum to the maintenance of such action
or
proceeding in any such court.
(c)
Each
party to this Agreement irrevocably consents to service of process in the manner
provided for notices in Section 7.1. Nothing in this Agreement will affect
the
right of any party to this Agreement to serve process in any other manner
permitted by law.
Section
7.12. Termination.
This
Agreement and the Security Interest shall terminate when all the Obligations
(other than indemnification obligations in respect of unasserted claims) have
been paid in full, at which time the Secured Parties shall execute and deliver
to Grantor, at Grantor’s expense, all Uniform Commercial Code termination
statements and similar documents which Grantor shall reasonably request to
evidence such termination. Any execution and delivery of termination statements
or documents pursuant to this Section shall be without recourse to or warranty
by the Secured Parties.
14
Section
7.13. Prejudgment
Remedy Waiver.
Grantor
acknowledges that this Agreement, the Purchase Agreement, the Note and the
other
Transaction Documents evidence a commercial transaction and that it could,
under
certain circumstances have the right, to notice of and hearing on the right
of
the Secured Parties to obtain a prejudgment remedy, such as attachment,
garnishment and/or replevin, upon commencing any litigation against Grantor.
Notwithstanding, Grantor hereby waives, to the extent permitted by applicable
law, all rights to notice, judicial hearing or prior court order to which it
might otherwise have the right under any state or federal statute or
constitution in connection with the obtaining by the Secured Parties of any
prejudgment remedy by reason of this Agreement, the Purchase Agreement, the
Note, the other Transaction Documents or by reason of the Obligations or any
renewals or extensions of the same. Grantor also waives, to the extent permitted
by applicable law, any and all objection which it might otherwise assert, now
or
in the future, to the exercise or use by the Secured Parties of any right of
setoff, repossession or self help as may presently exist under statute or common
law.
Section
7.14. Limitation
on Secured Parties’ Duty in Respect of Collateral.
Secured
Party shall not have any duty as to any Collateral in its possession or control
or in the possession or control of any agent or nominee of it or any income
thereon or as to the preservation of rights against prior parties or any other
rights pertaining thereto, except that Secured Party shall use reasonable care
with respect to the Collateral in its possession or under its control.
[SIGNATURE
PAGES FOLLOW]
15
IN
WITNESS WHEREOF, the parties have duly executed this Security Agreement as
of
the day and year first written above.
|
TECHNOCONCEPTS
INC.
|
||
| |
|
|
| By: | ||
|
Name:
Title:
|
||
|
VISION
OPPORTUNITY MASTER FUND, LTD.
|
||
| |
|
|
| By: | ||
|
Name:
Title:
|
||
|
DYNAMIC
DECISIONS GROWTH PREMIUM
|
||
| |
|
|
| By: | ||
|
Name:
Title:
|
||
EXHIBIT
A
Secured
Parties
Vision
Opportunity Master Fund, Ltd.
00
X.
00xx Xxxxxx, 0xx xxxxx
Xxx
Xxxx,
XX 00000
Dynamic
Decisions Growth Premium
c/o
Morgan Xxxxxxx
00
Xxxxx
Xxxxxx
Xxxxxx
X00 0XX XX
SCHEDULE
3.2
State
of Incorporation; Chief Executive Office; Filing Locations; Organizational
Identification Number
SCHEDULE
3.3
Existing
Liens
SCHEDULE
3.6
Location
of Collateral
SCHEDULE
3.7
Intellectual
Property
SCHEDULE
3.8
Deposit
Accounts; Securities Accounts
SCHEDULE
4.8
Insurance
