SECURITY AGREEMENT
Exhibit
4.3
This
SECURITY AGREEMENT, dated as of February 11, 2008 (this “Agreement”),
is
among
Wits
Basin Precious Minerals Inc., a Minnesota corporation (the
“Company”),
certain Subsidiaries of the Company
(such
subsidiaries,
the
“Guarantors”
and
together with the Company,
the
“Debtors”)
and
Platinum Long Term Growth V, LLC, a Delaware limited liability company (the
“Secured
Party”),
the
holder of the Company’s Senior Secured Note, issued on February 11, 2008 in the
original principal amount of $1,020,000 (the “Note”),
and
its endorsees, transferees and assigns.
W
I T N E S S E T H:
WHEREAS,
pursuant to the Note, the Secured Party has agreed to extend the loans to the
Company evidenced by the Note;
WHEREAS,
pursuant to a certain Guarantee, dated as of the date hereof (the “Guarantee”),
the
Guarantors
have
jointly and severally agreed to guarantee and act as surety for payment of
such
Note; and
WHEREAS,
in order to induce the Secured Party to extend the loans evidenced by the Note,
each Debtor has agreed to execute and deliver to the Secured Party this
Agreement and to grant the Secured Party a security interest in certain property
of such Debtor to secure the prompt payment, performance and discharge in full
of all of the Company’s obligations under the Note and the Guarantors’
obligations under the Guarantee.
NOW,
THEREFORE, in consideration of the agreements herein contained and for other
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto hereby agree as follows:
1.
Certain
Definitions.
As used
in this Agreement, the following terms shall have the meanings set forth in
this
Section 1. Terms used but not otherwise defined in this Agreement that are
defined in Article 9 of the UCC (including the terms “account”, “chattel paper”,
“commercial tort claim”, “deposit account”, “document”, “equipment”, “fixtures”,
“general intangibles”, “goods”, “instruments”, “inventory”, “investment
property”, “letter-of-credit rights”, “proceeds”, “securities” and “supporting
obligations”) shall have the respective meanings given such terms in Article 9
of the UCC.
(a)
“Collateral”
means
the collateral in which the Secured Party is granted a security interest by
this
Agreement and which shall include the following personal property of the
Debtors, whether presently owned or existing or hereafter acquired or coming
into existence, wherever situated, and all additions and accessions thereto
and
all substitutions and replacements thereof, and all proceeds, products and
accounts thereof, including, without limitation, all proceeds from the sale
or
transfer of the Collateral and of insurance covering the same and of any tort
claims in connection therewith,
and all
dividends, interest, cash, notes, securities, equity interest or other property
at any time and from time to time acquired, receivable or otherwise distributed
in respect of, or in exchange for, any or all of the Pledged Securities (as
defined below):
(i)
All
goods, including, without limitation, (A) all machinery, equipment, computers,
motor vehicles, trucks, tanks, boats, ships, appliances, furniture, special
and
general tools, fixtures, test and quality control devices and other equipment
of
every kind and nature and wherever situated, together with all documents of
title and documents representing the same, all additions and accessions thereto,
replacements therefor, all parts therefor, and all substitutes for any of the
foregoing and all other items used and useful in connection with any Debtor’s
businesses and all improvements thereto; and (B) all inventory, including all
materials, work in process and finished goods;
(ii)
All
contract rights and other general intangibles, including, without limitation,
all partnership interests, membership interests, stock or other securities,
rights
under any of the Organizational Documents, agreements related to the Pledged
Securities, licenses,
distribution and other agreements, computer software (whether “off-the-shelf”,
licensed from any third party or developed by any Debtor), computer software
development rights, leases, franchises, customer lists, quality control
procedures, grants and rights, goodwill, trademarks, service marks, trade
styles, trade names, patents, patent applications, copyrights, and income tax
refunds;
(iii)
All
accounts, together with all instruments, all documents of title representing
any
of the foregoing, all rights in any merchandising, goods, equipment, motor
vehicles and trucks which any of the same may represent, and all right, title,
security and guaranties with respect to each account, including any right of
stoppage in transit;
(iv)
All
documents, letter-of-credit rights, instruments and chattel paper;
(v) All
commercial tort claims;
(vi) All
deposit accounts and all cash (whether or not deposited in such deposit
accounts);
(vii) All
investment property;
(viii) All
supporting obligations;
(ix) All
files, records, books of account, business papers, and computer programs;
and
(x) the
products and proceeds of all of the foregoing Collateral set forth in clauses
(i)-(ix) above.
Without
limiting the generality of the foregoing, the “Collateral”
shall
include, subject to the exclusions below, all investment property and general
intangibles respecting ownership and/or other equity interests of Debtors in
each wholly-owned, majority-owned or minority owned subsidiary (including Kwagga
Gold (Barbados) Limited), including, without limitation, the shares of capital
stock and the other equity interests listed on Schedule
H
hereto
(as the same may be modified from time to time pursuant to the terms hereof),
and any other shares of capital stock and/or other equity interests of any
other
direct or indirect subsidiary of any Debtor obtained in the future, and, in
each
case, all certificates representing such shares and/or equity interests and,
in
each case, all rights, options, warrants, stock, other securities and/or equity
interests that may hereafter be received, receivable or distributed in respect
of, or exchanged for, any of the foregoing and all rights arising under or
in
connection with the Pledged Securities, including, but not limited to, all
dividends, interest and cash.
Notwithstanding
the foregoing, nothing herein shall be deemed to constitute an assignment of
any
asset which, in the event of an assignment, becomes void by operation of
applicable law or the assignment of which is otherwise prohibited by applicable
law (in each case to the extent that such applicable law is not overridden
by
Sections 9-406, 9-407 and/or 9-408 of the UCC or other similar applicable law);
provided, however, that to the extent permitted by applicable law, this
Agreement shall create a valid security interest in such asset and, to the
extent permitted by applicable law, this Agreement shall create a valid security
interest in the proceeds of such asset.
Notwithstanding
the foregoing, the “Collateral”
shall
not be deemed to include (i) any equity interest of the Debtors in China Global
Mining Resources Ltd., a Hong Kong corporation, China Global Mining Resources
Ltd., a British Virgin Islands corporation, Wits-China Acquisition Corp., or
any
other entity created by the Company or such entities after the date hereof
(each, a “China
Subsidiary”)
to the
extent all or substantially all of such entity’s assets are located in, or
relate to, China and such assets are subject to a lien in favor of China Gold
LLC (“China
Gold”)
pursuant to that certain Security Agreement dated June 19, 2007 by and between
the Company and China Gold, the Amended and Restated Pledge Agreement dated
as
of February 7, 2008, or those certain Subsidiary Security Agreements by and
between China Gold and any China Subsidiary, or any of the respective assets
of
such entities or the proceeds thereof, (ii) the portion of any equity interest
of the Debtors in any Dividend Subsidiary (as defined in that certain Note
and
Warrant Purchase Agreement dated of even date herewith by and between the
Company and Secured Party (the “Purchase
Agreement”))
to
the extent such portion is distributed to the holders of the Company’s Common
Stock pursuant to a Subsidiary Dividend (as defined in the Purchase Agreement)
and (iii) the other assets identified in and defined as “Collateral” under the
Security Agreement, dated as of June 19, 2007, between the Company and China
Gold (without giving effect to any amendment to such Security Agreement), the
Amended and Restated Pledge Agreement dated February 7, 2008 by and between
the
Company and China Gold, or those certain Subsidiary Security Agreements by
and
between China Gold and any China Subsidiary.
(b)
“Intellectual
Property”
means
the collective reference to all rights, priorities and privileges relating
to
intellectual property, whether arising under United States, multinational or
foreign laws or otherwise, including, without limitation, (i) all copyrights
arising under the laws of the United States, any other country or any political
subdivision thereof, whether registered or unregistered and whether published
or
unpublished, all registrations and recordings thereof, and all applications
in
connection therewith, including, without limitation, all registrations,
recordings and applications in the United States Copyright Office, (ii) all
letters patent of the United States, any other country or any political
subdivision thereof, all reissues and extensions thereof, and all applications
for letters patent of the United States or any other country and all divisions,
continuations and continuations-in-part thereof, (iii) all trademarks, trade
names, corporate names, company names, business names, fictitious business
names, trade dress, service marks, logos, domain names and other source or
business identifiers, and all goodwill associated therewith, now existing or
hereafter adopted or acquired, all registrations and recordings thereof, and
all
applications in connection therewith, whether in the United States Patent and
Trademark Office or in any similar office or agency of the United States, any
State thereof or any other country or any political subdivision thereof, or
otherwise, and all common law rights related thereto, (iv) all trade secrets
arising under the laws of the United States, any other country or any political
subdivision thereof, (v) all rights to obtain any reissues, renewals or
extensions of the foregoing, (vi) all licenses for any of the foregoing, and
(vii) all causes of action for infringement of the foregoing.
(c) “Necessary
Endorsement”
means
undated stock powers endorsed in blank or other proper instruments of assignment
duly executed and such other instruments or documents as the Secured Party
may
reasonably request.
(d)
“Obligations”
means
all of the liabilities
and obligations (primary, secondary, direct, contingent, sole, joint or several)
due or to become due, or that are now or may be hereafter contracted or
acquired, or owing to, of any Debtor to the Secured Party, including, without
limitation, all
obligations under this Agreement, the Purchase Agreement, the Note, the
Guarantee, the Warrant issued by the Company to the Secured Party on the date
hereof (the “Warrant”)
and
any other instruments, agreements or other documents executed and/or delivered
in connection herewith or therewith, in each case, whether now or hereafter
existing, voluntary or involuntary, direct or indirect, absolute or contingent,
liquidated or unliquidated, whether or not jointly owed with others, and whether
or not from time to time decreased or extinguished and later increased, created
or incurred, and all or any portion of such obligations or liabilities that
are
paid, to the extent all or any part of such payment is avoided or recovered
directly or indirectly from any of the Secured Party as a preference, fraudulent
transfer or otherwise as such obligations may be amended, supplemented,
converted, extended or modified from time to time. Without limiting the
generality of the foregoing, the term “Obligations” shall include, without
limitation: (i) principal of, and interest on the Note and the loans extended
pursuant thereto; (ii) any and all other fees, indemnities, costs, obligations
and liabilities of the Debtors from time to time under or in connection with
this Agreement, the Note, the Purchase Agreement, the Guarantee, the Warrant
and
any other instruments, agreements or other documents executed and/or delivered
in connection herewith or therewith; and (iii) all amounts (including but not
limited to post-petition interest) in respect of the foregoing that would be
payable but for the fact that the obligations to pay such amounts are
unenforceable or not allowable due to the existence of a bankruptcy,
reorganization or similar proceeding involving any Debtor.
(e)
“Organizational
Documents”
means
with respect to any Debtor, the documents by which such Debtor was organized
(such as a certificate of incorporation, certificate of limited partnership
or
articles of organization, and including, without limitation, any certificates
of
designation for preferred stock or other forms of preferred equity) and which
relate to the internal governance of such Debtor (such as bylaws, a partnership
agreement or an operating, limited liability or members agreement).
(f)
“Pledged
Securities”
shall
have the meaning ascribed to such term in Section 4(i).
(g) “UCC”
means
the Uniform Commercial Code of the State of New York and or any other applicable
law of any state or states which has jurisdiction with respect to all, or any
portion of, the Collateral or this Agreement, from time to time. It is the
intent of the parties that defined terms in the UCC should be construed in
their
broadest sense so that the term “Collateral” will be construed in its broadest
sense. Accordingly if there are, from time to time, changes to defined terms
in
the UCC that broaden the definitions, they are incorporated herein and if
existing definitions in the UCC are broader than the amended definitions, the
existing ones shall be controlling.
2.
Grant
of Security Interest in Collateral.
As an
inducement for the Secured Party to extend the loans as evidenced by the Note
and to secure the complete and timely payment, performance and discharge in
full, as the case may be, of all of the Obligations, each Debtor hereby
unconditionally and irrevocably pledges, grants and hypothecates to the Secured
Party a security interest in and to, a lien upon and a right of set-off against
all of their respective right, title and interest of whatsoever kind and nature
in and to, the Collateral (a “Security
Interest”
and
collectively, the “Security
Interests”).
3. Delivery
of Certain Collateral.
Within
ten (10) days of the execution of this Agreement, each Debtor shall deliver
or
cause to be delivered to the Secured Party (a) any and all certificates and
other instruments representing or evidencing the Pledged Securities, and (b)
any
and all certificates and other instruments or documents representing any of
the
other Collateral, in each case, together with all Necessary Endorsements. The
Debtors are, contemporaneously with the execution hereof, delivering to the
Secured Party, or have previously delivered to the Secured Party, a true and
correct copy of each Organizational Document governing any of the Pledged
Securities.
4. Representations,
Warranties, Covenants and Agreements of the Debtors.
Except
as set forth under the corresponding section of the disclosure schedules
delivered to the Secured Party concurrently herewith (the “Disclosure
Schedules”),
which
Disclosure Schedules shall be deemed a part hereof, each Debtor represents
and
warrants to, and covenants and agrees with, the Secured Party as
follows:
(a)
Each
Debtor has the requisite corporate, partnership, limited liability company
or
other power and authority to enter into this Agreement and otherwise to carry
out its obligations hereunder. The execution, delivery and performance by each
Debtor of this Agreement and the filings contemplated therein have been duly
authorized by all necessary action on the part of such Debtor and no further
action is required by such Debtor. This Agreement has been duly executed by
each
Debtor. This Agreement constitutes the legal, valid and binding obligation
of
each Debtor, enforceable against each Debtor in accordance with its terms except
as such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization and similar laws of general application relating to or affecting
the rights and remedies of creditors and by general principles of
equity.
(b)
The
Debtors have no place of business or offices where their respective books of
account and records are kept (other than temporarily at the offices of its
attorneys or accountants) or places where Collateral is stored or located,
except as set forth on Schedule
A
attached
hereto. Except as specifically set forth on Schedule
A,
each
Debtor 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 Encumbrances (as defined in the Note). Except as disclosed
on Schedule
A,
none of
such Collateral is in the possession of any consignee, bailee, warehouseman,
agent or processor.
(c)
Except
for Permitted Encumbrances (as defined in the Note) and except as set forth
on
Schedule
B
attached
hereto, the Debtors are the sole owner of the Collateral, free and clear of
any
liens, security interests, encumbrances, rights or claims, and are fully
authorized to grant the Security Interests. Except as set forth on Schedule
B
attached
hereto, there is not on file in any governmental or regulatory authority, agency
or recording office an effective financing statement, security agreement,
license or transfer or any notice of any of the foregoing (other than those
that
will be filed in favor of the Secured Party pursuant to this Agreement) covering
or affecting any of the Collateral. Except as set forth on Schedule B attached
hereto and except pursuant to this Agreement, as long as this Agreement shall
be
in effect, the Debtors shall not execute and shall not knowingly permit to
be on
file in any such office or agency any other financing statement or other
document or instrument (except to the extent filed or recorded in favor of
the
Secured Party pursuant to the terms of this Agreement).
(d)
No
written claim has been received that any Collateral or Debtor's use of any
Collateral violates the rights of any third party. There has been no adverse
decision to any Debtor's claim of ownership rights in or exclusive rights to
use
the Collateral in any jurisdiction or to any Debtor's right to keep and maintain
such Collateral in full force and effect, and there is no proceeding involving
said rights pending or, to the best knowledge of any Debtor, threatened before
any court, judicial body, administrative or regulatory agency, arbitrator or
other governmental authority.
(e)
Each
Debtor shall at all times maintain its books of account and records relating
to
the Collateral at its principal place of business and its Collateral at the
locations set forth on Schedule
A
attached
hereto and may not relocate such books of account and records or tangible
Collateral unless it delivers to the Secured Party at least 30 days prior to
such relocation (i) written notice of such relocation and the new location
thereof (which must be within the United States) and (ii) evidence that
appropriate financing statements under the UCC and other necessary documents
have been filed and recorded and other steps have been taken to perfect the
Security Interests to create in favor of the Secured Party a valid, perfected
and continuing perfected first priority lien in the Collateral.
(f)
This
Agreement creates in favor of the Secured Party a valid, security interest
in
the Collateral, subject only to Permitted Encumbrances (as defined in the Note)
securing the payment and performance of the Obligations. Upon Secured Party
making the filings described in the immediately following paragraph, all
security interests created hereunder in any Collateral which may be perfected
by
filing Uniform Commercial Code financing statements shall have been duly
perfected. Except for the filing of the Uniform Commercial Code financing
statements referred to in the immediately following paragraph, and
the
delivery of the certificates and other instruments provided in Section
3,
no
action is necessary to create, perfect or protect the security interests created
hereunder. Without limiting the generality of the foregoing, except for the
filing of said financing statements, no consent of any third parties and no
authorization, approval or other action by, and no notice to or filing with,
any
governmental authority or regulatory body is required for (i) the execution,
delivery and performance of this Agreement, (ii) the creation or perfection
of
the Security Interests created hereunder in the Collateral or (iii) the
enforcement of the rights of the Secured Party hereunder.
(g)
Each
Debtor hereby authorizes the Secured Party to file one or more financing
statements under the UCC, with respect to the Security Interests with the proper
filing and recording agencies in any jurisdiction deemed proper by it, which
UCC
financing statement may describe the collateral as “All assets”.
(h)
The
execution, delivery and performance of this Agreement by the Debtors does not
(i) violate any of the provisions of any Organizational Documents of any Debtor
or any judgment, decree, order or award of any court, governmental body or
arbitrator or any applicable law, rule or regulation applicable to any Debtor
or
(ii) conflict with, or constitute a default (or an event that with notice or
lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation (with or without
notice, lapse of time or both) of, any agreement, credit facility, debt or
other
instrument (evidencing any Debtor's debt or otherwise) or other understanding
to
which any Debtor is a party or by which any property or asset of any Debtor
is
bound or affected. If any, all required consents (including, without limitation,
from stockholders or creditors of any Debtor) necessary for any Debtor to enter
into and perform its obligations hereunder have been obtained.
(i)
Except
as
excluded in Section 1(a) hereof, the capital stock and other equity interests
listed on Schedule
H
hereto
(the “Pledged
Securities”)
represent all of the capital stock and other equity interests of the Guarantors,
and represent all capital stock and other equity interests owned, directly
or
indirectly, by the Company, other than the Dormant Subsidiaries (as defined
below). All of the Pledged Securities are validly issued, fully paid and
nonassessable, and the Company is the legal and beneficial owner of the Pledged
Securities, free and clear of any lien, security interest or other encumbrance
except for the security interests created by this Agreement and other Permitted
Encumbrances (as defined in the Note).
To the
extent the Company owns capital stock or other equity interests in any
Subsidiary that is not set forth on Schedule H hereto (such Subsidiaries, the
“Dormant Subsidiaries”), such entity or entities shall be dissolved within 45
days of the date hereof.
(j)
The
ownership and other equity interests in partnerships and limited liability
companies (if any)
included
in the Collateral
(the
“Pledged
Interests”)
by
their express terms do not provide that they are securities governed by Article
8 of the UCC and are not held in a securities account or by any financial
intermediary.
(k)
Except
for Permitted Encumbrances (as defined in the Note), each Debtor shall at all
times maintain the liens and Security Interests provided for hereunder as valid
and perfected first priority liens and security interests in the Collateral
in
favor of the Secured Party until this Agreement and the Security Interest
hereunder shall be terminated pursuant to Section 11 hereof. Each Debtor hereby
agrees to defend the same against the claims of any and all persons and
entities. Each Debtor shall safeguard and protect all Collateral for the account
of the Secured Party. At the request of the Secured Party, each Debtor will
sign
and deliver to the Secured Party at any time or from time to time one or more
financing statements pursuant to the UCC in form reasonably satisfactory to
the
Secured Party and will pay the cost of filing the same in all public offices
wherever filing is, or is deemed by the Secured Party to be, necessary or
desirable to effect the rights and obligations provided for herein. Without
limiting the generality of the foregoing, each Debtor shall pay all fees, taxes
and other amounts necessary to maintain the Collateral and the Security
Interests hereunder, and each Debtor shall obtain and furnish to the Secured
Party from time to time, upon demand, such releases and/or subordinations of
claims and liens which may be required to maintain the priority of the Security
Interests hereunder.
(l)
Except
for Permitted Encumbrances (as defined in the Note), no Debtor will transfer,
pledge, hypothecate, encumber, license, sell or otherwise dispose of any of
the
Collateral (except for non-exclusive licenses granted by a Debtor in its
ordinary course of business and sales of inventory by a Debtor in its ordinary
course of business) without the prior written consent of the
Secured Party.
(m) Each
Debtor shall keep and preserve its equipment, inventory and other tangible
Collateral in good condition, repair and order and shall not operate or locate
any such Collateral (or cause to be operated or located) in any area excluded
from insurance coverage.
(n) Each
Debtor shall maintain with financially sound and reputable insurers, insurance
with respect to the Collateral, including Collateral hereafter acquired, against
loss or damage of the kinds and in the amounts customarily insured against
by
entities of established reputation having similar properties similarly situated
and in such amounts as are customarily carried under similar circumstances
by
other such entities and otherwise as is prudent for entities engaged in similar
businesses but in any event sufficient to cover the full replacement cost
thereof. Each Debtor shall cause each insurance policy issued in connection
herewith to provide, and the insurer issuing such policy to certify to the
Secured
Party
that (a)
the Secured
Party
will be
named as lender loss payee and additional insured under each such insurance
policy; (b) if such insurance be proposed to be cancelled or materially changed
for any reason whatsoever, such insurer will promptly notify the Secured
Party
and such
cancellation or change shall not be effective as to the Secured
Party
for at
least thirty (30) days after receipt by the Secured
Party
of such
notice, unless the effect of such change is to extend or increase coverage
under
the policy; and (c) the Secured
Party
will
have the right (but no obligation) at its election to remedy any default in
the
payment of premiums within thirty (30) days of notice from the insurer of such
default. If no Event of Default (as defined in the Note) exists and if the
proceeds arising out of any claim or series of related claims do not exceed
$100,000, loss payments in each instance will be applied by the applicable
Debtor to the repair and/or replacement of property with respect to which the
loss was incurred to the extent reasonably feasible, and any loss payments
or
the balance thereof remaining, to the extent not so applied, shall be payable
to
the applicable Debtor, provided, however, that payments received by any Debtor
after an Event of Default occurs and is continuing or in excess of $100,000
for
any occurrence or series of related occurrences shall be paid to the
Secured
Party
and, if
received by such Debtor, shall be held in trust for the Secured Party and
immediately paid over to the Secured
Party
unless
otherwise directed in writing by the Secured
Party.
Copies
of such policies or the related certificates, in each case, naming the
Secured
Party
as
lender loss payee and additional insured shall be delivered to the Secured
Party
at least
annually and at the time any new policy of insurance is issued.
(o)
Each
Debtor shall, within ten (10) days of obtaining knowledge thereof, advise the
Secured Party promptly, in sufficient detail, of any material adverse change
in
the Collateral, and of the occurrence of any event which would have a material
adverse effect on the value of the Collateral or on the Secured Party’s security
interest therein.
(p)
Each
Debtor shall promptly execute and deliver to the Secured Party such further
deeds, mortgages, assignments, security agreements, financing statements or
other instruments, documents, certificates and assurances and take such further
action as the Secured Party may from time to time request and may in its sole
discretion deem necessary to perfect, protect or enforce the Secured Party’s
security interest in the Collateral including, without limitation, if applicable
and requested in writing by the Secured Party, the execution and delivery of
a
separate security agreement with respect to each Debtor’s Intellectual Property
(“Intellectual
Property Security Agreement”)
in
which the Secured Party have been granted a security interest hereunder,
substantially in a form reasonably acceptable to the Secured Party, which
Intellectual Property Security Agreement, other than as stated therein, shall
be
subject to all of the terms and conditions hereof. Without limiting the
generality of the foregoing, Debtors shall cooperate with Secured Party to
perfect the Secured Party’s security interests in (i) the Company’s rights in
and to the Hunter Gold Mining Corporation assets in Colorado, (ii) the Company’s
rights in the Xxxxxx Mine Concession in the State of Xxxxxxxx, Mexico, and
(iii)
any other mining or mining related asset disclosed in the Company’s filings with
the Securities and Exchange Commission and held by the Company on the date
hereof, subject to the exclusions set forth in Section 1(a) hereof (each of
(i)
and (ii) above as described in the Company’s filings with the Securities and
Exchange Commission).
(q)
Each
Debtor shall permit the Secured Party and its representatives and agents to
inspect the Collateral during normal business hours and upon reasonable prior
notice, and to make copies of records pertaining to the Collateral as may be
reasonably requested by the Secured Party from time to time.
(r)
Each
Debtor shall take all steps reasonably necessary to diligently pursue and seek
to preserve, enforce and collect any rights, claims, causes of action and
accounts receivable in respect of the Collateral.
(s)
Each
Debtor shall promptly notify the Secured Party in sufficient detail upon
becoming aware of any attachment, garnishment, execution or other legal process
levied against any Collateral and of any other information received by such
Debtor that may materially affect the value of the Collateral, the Security
Interest or the rights and remedies of the Secured Party hereunder.
(t)
All
information heretofore, herein or hereafter supplied to the Secured Party by
or
on behalf of any Debtor with respect to the Collateral is accurate and complete
in all material respects as of the date furnished.
(u)
The
Debtors shall at all times preserve and keep in full force and effect their
respective valid existence and good standing and any rights and franchises
material to its business.
(v)
No
Debtor
will change its name, type of organization, jurisdiction of organization,
organizational identification number (if it has one), legal or corporate
structure, or identity, or add any new fictitious name unless it provides at
least 30 days prior written notice to the Secured Party of such change and,
at
the time of such written notification, such Debtor provides any financing
statements or fixture filings necessary to perfect and continue the perfection
of the Security Interests granted and evidenced by this Agreement.
(w) Except
in
the ordinary course of business and except for Permitted Encumbrances (as
defined in the Note), no Debtor may consign any of its Inventory or sell any
of
its Inventory on xxxx and hold, sale or return, sale on approval, or other
conditional terms of sale without the consent of the
Secured Party, which shall not be unreasonably withheld.
(x)
No
Debtor
may relocate its chief executive office to a new location without providing
30
days prior written notification thereof to the Secured Party and so long as,
at
the time of such written notification, such Debtor provides any financing
statements or fixture filings necessary to perfect and continue the perfection
of the Security Interests granted and evidenced by this Agreement.
(y) Each
Debtor was organized and remains organized solely under the laws of the state
set forth next to such Debtor’s name in Schedule
D
attached
hereto, which Schedule
D
sets
forth each Debtor’s organizational identification number or, if any Debtor does
not have one, states that one does not exist.
(z)
(i) The
actual name of each Debtor is the name set forth in Schedule
D
attached
hereto; (ii) no Debtor has any trade names except as set forth on Schedule
E
attached
hereto; (iii) no Debtor has used any name other than that stated in the preamble
hereto or as set forth on Schedule
E
for the
preceding five years; and (iv) no entity has merged into any Debtor or been
acquired by any Debtor within the past five years except as set forth on
Schedule
E.
(aa) At
any
time and from time to time that any Collateral consists of instruments,
certificated securities or other items that require or permit possession by
the
secured party to perfect the security interest created hereby, the applicable
Debtor shall deliver such Collateral to the Secured Party.
(bb)
Each
Debtor, in its capacity as issuer, hereby agrees to comply with any and all
orders and instructions of Secured
Party
regarding the Pledged Interests consistent with the terms of this Agreement
without the further consent of any Debtor as contemplated by Section 8-106
(or
any successor section) of the UCC. Further, each Debtor agrees that it shall
not
enter into a similar agreement (or one that would confer “control” within the
meaning of Article 8 of the UCC) with any other person or entity.
(cc) Each
Debtor shall cause all tangible chattel paper constituting Collateral to be
delivered to the Secured Party, or, if such delivery is not possible, then
to
cause such tangible chattel paper to contain a legend noting that it is subject
to the security interest created by this Agreement. To the extent that any
Collateral consists of electronic chattel paper, the applicable Debtor shall
cause the underlying chattel paper to be “marked” within the meaning of Section
9-105 of the UCC (or successor section thereto).
(dd) If
there
is any investment property or deposit account included as Collateral that can
be
perfected by “control” through an account control agreement, the applicable
Debtor shall cause such an account control agreement, in form and substance
in
each case satisfactory to the Secured Party, to be entered into and delivered
to
the Secured Party.
(ee)
To
the
extent that any Collateral consists of letter-of-credit rights, the applicable
Debtor shall cause the issuer of each underlying letter of credit to consent
to
an assignment of the proceeds thereof to the Secured Party.
(ff)
To
the
extent that any Collateral is in the possession of any third party, the
applicable Debtor shall join with the Secured Party in notifying such third
party of the Secured Party’s security interest in such Collateral and shall
obtain an acknowledgement and agreement from such third party with respect
to
the Collateral, in form and substance reasonably satisfactory to the Secured
Party.
(gg) If
any
Debtor shall at any time hold or acquire a commercial tort claim, such Debtor
shall promptly notify the Secured Party in a writing signed by such Debtor
of
the particulars thereof and grant to the Secured Party in such writing a
security interest therein and in the proceeds thereof, all upon the terms of
this Agreement, with such writing to be in form and substance satisfactory
to
the Secured Party.
(hh) Each
Debtor shall immediately provide written notice to the Secured Party of any
and
all accounts which arise out of contracts with any governmental authority and,
to the extent necessary to perfect or continue the perfected status of the
Security Interests in such accounts and proceeds thereof, shall execute and
deliver to the Secured Party an assignment of claims for such accounts and
cooperate with the Secured Party in taking any other steps required, in its
judgment, under the Federal Assignment of Claims Act or any similar federal,
state or local statute or rule to perfect or continue the perfected status
of
the Security Interests in such accounts and proceeds thereof.
(ii) Each
Debtor shall cause each subsidiary
of such
Debtor with operations or material operations (which, if in doubt, shall be
in
the sole determination of the Secured Party) to immediately become a party
hereto (an “Additional
Debtor”),
by
executing and delivering an Additional Debtor Joinder in substantially the
form
of Annex
A
attached
hereto and comply with the provisions hereof applicable to the Debtors. As
of
the date hereof, the Company represents and warrants that none of its
subsidiaries have any operations or material assets. Concurrent therewith,
the
Additional Debtor shall deliver replacement schedules for, or supplements to
all
other Schedules to (or referred to in) this Agreement, as applicable, which
replacement schedules shall supersede, or supplements shall modify, the
Schedules then in effect. The Additional Debtor shall also deliver such opinions
of counsel, authorizing resolutions, good standing certificates, incumbency
certificates, organizational documents, financing statements and other
information and documentation as the Secured Party may reasonably request.
Upon
delivery of the foregoing to the Secured Party, the Additional Debtor shall
be
and become a party to this Agreement with the same rights and obligations as
the
Debtors, for all purposes hereof as fully and to the same extent as if it were
an original signatory hereto and shall be deemed to have made the
representations, warranties and covenants set forth herein as of the date of
execution and delivery of such Additional Debtor Joinder, and all references
herein to the “Debtors” shall be deemed to include each Additional
Debtor.
(jj)
Each
Debtor shall vote the Pledged Securities to comply with the covenants and
agreements set forth herein and in the Note.
(kk) Each
Debtor shall register the pledge of the applicable Pledged Securities on the
books of such Debtor. Each Debtor shall notify each issuer of Pledged Securities
to register the pledge of the applicable Pledged Securities in the name of
the
Secured Party on the books of such issuer. Further, except with respect to
certificated securities delivered to the Secured
Party,
the
applicable Debtor shall deliver to Secured
Party
an
acknowledgement of pledge (which, where appropriate, shall comply with the
requirements of the relevant UCC with respect to perfection by registration)
signed by the issuer of the applicable Pledged Securities, which acknowledgement
shall confirm that: (a) it has registered the pledge on its books and records;
and (b) at any time directed by Secured
Party
during
the continuation of an Event of Default, such issuer will transfer the record
ownership of such Pledged Securities into the name of any designee of
Secured
Party,
will
take such steps as may be necessary to effect the transfer, and will comply
with
all other instructions of Secured
Party
regarding such Pledged Securities without the further consent of the applicable
Debtor.
The
Debtor shall vote the Pledged Securities so as to comply with the covenants
and
agreements of the Debtor set forth in the Note and the Transaction Documents
(as
defined in the Purchase Agreement).
(ll)
In
the
event that, upon an occurrence of an Event of Default, Secured
Party
shall
sell all or any of the Pledged Securities to another party or parties (herein
called the “Transferee”)
or
shall purchase or retain all or any of the Pledged Securities, each Debtor
shall, to the extent applicable: (i) deliver to Secured
Party
or the
Transferee, as the case may be, the articles of incorporation, bylaws, minute
books, stock certificate books, corporate seals, deeds, leases, indentures,
agreements, evidences of indebtedness, books of account, financial records
and
all other Organizational Documents and records of the Debtors and their direct
and indirect subsidiaries; (ii) use its best efforts to obtain resignations
of
the persons then serving as officers and directors of the Debtors and their
direct and indirect subsidiaries, if so requested; and (iii) use its best
efforts to obtain any approvals that are required by any governmental or
regulatory body in order to permit the sale of the Pledged Securities to the
Transferee or the purchase or retention of the Pledged Securities by
Secured
Party
and
allow the Transferee or Secured
Party
to
continue the business of the Debtors and their direct and indirect
subsidiaries.
(mm) Without
limiting the generality of the other obligations of the Debtors hereunder,
each
Debtor shall promptly give the Secured Party notice whenever it acquires
(whether absolutely or by license) or creates any additional material
Intellectual Property.
(nn) Each
Debtor will from time to time, at the joint and several expense of the Debtors,
promptly execute and deliver all such further instruments and documents, and
take all such further action as may be necessary or desirable, or as the Secured
Party may reasonably request, in order to perfect and protect any security
interest granted or purported to be granted hereby or to enable the Secured
Party to exercise and enforce their rights and remedies hereunder and with
respect to any Collateral or to otherwise carry out the purposes of this
Agreement.
(oo) Schedule
F
attached
hereto lists all of the patents, patent applications, trademarks, trademark
applications, registered copyrights, and domain names owned by any of the
Debtors as of the date hereof. Schedule
F
lists
all material licenses in favor of any Debtor for the use of any patents,
trademarks, copyrights and domain names as of the date hereof. All material
patents and trademarks of the Debtors have been duly recorded at the United
States Patent and Trademark Office and all material copyrights of the Debtors
have been duly recorded at the United States Copyright Office.
(pp) Except
as
set forth on Schedule
G
attached
hereto, none of the account debtors or other persons or entities obligated
on
any of the Collateral is a governmental authority covered by the Federal
Assignment of Claims Act or any similar federal, state or local statute or
rule
in respect of such Collateral.
5. Effect
of Pledge on Certain Rights. If
any of
the Collateral subject to this Agreement consists of nonvoting equity or
ownership interests (regardless of class, designation, preference or rights)
that may be converted into voting equity or ownership interests upon the
occurrence of certain events (including, without limitation, upon the transfer
of all or any of the other stock or assets of the issuer), it is agreed that
the
pledge of such equity or ownership interests pursuant to this Agreement or
the
enforcement of any of Secured
Party’s
rights
hereunder shall not be deemed to be the type of event which would trigger such
conversion rights notwithstanding any provisions in the Organizational Documents
or agreements to which any Debtor is subject or to which any Debtor is
party.
6.
Defaults.
The
following events shall be “Events
of Default”:
(a)
The
occurrence of an Event of Default (as defined in the Note) under the
Note;
(b)
Any
representation or warranty of any Debtor in this Agreement shall prove to have
been incorrect in any material respect when made;
(c)
The
failure by any Debtor to observe or perform any of its obligations hereunder
for
three (3) days after delivery to such Debtor of notice of such failure by or
on
behalf of a Secured Party unless such default is capable of cure but cannot
be
cured within such time frame and such Debtor is using best efforts to cure
same
in a timely fashion; or
(d)
If
any provision of this Agreement shall at any time for any reason be declared
to
be null and void, or the validity or enforceability thereof shall be contested
by any Debtor, or a proceeding shall be commenced by any Debtor, or by any
governmental authority having jurisdiction over any Debtor, seeking to establish
the invalidity or unenforceability thereof, or any Debtor shall deny that any
Debtor has any liability or obligation purported to be created under this
Agreement.
7. Duty
To Hold In Trust.
(a) Upon
the
occurrence of any Event of Default and at any time thereafter, each Debtor
shall, upon receipt of any revenue, income,
dividend, interest
or other
sums subject to the Security Interests, whether payable pursuant to the Note
or
otherwise, or of any check, draft, note, trade acceptance or other instrument
evidencing an obligation to pay any such sum, hold the same in trust for the
Secured Party and shall forthwith endorse and transfer any such sums or
instruments, or both, to the Secured Party.
(b) If
any
Debtor shall become entitled to receive or shall receive any securities or
other
property (including, without limitation, shares of Pledged Securities or
instruments representing Pledged Securities acquired after the date hereof,
or
any options, warrants, rights or other similar property or certificates
representing a dividend, or any distribution in connection with any
recapitalization, reclassification or increase or reduction of capital, or
issued in connection with any reorganization of such Debtor or any of its direct
or indirect subsidiaries) in respect of the Pledged Securities (whether as
an
addition to, in substitution of, or in exchange for, such Pledged Securities
or
otherwise), such Debtor agrees to (i) accept the same as the agent of the
Secured Party; (ii) hold the same in trust on behalf of and for the benefit
of
the Secured Party; and (iii) to deliver any and all certificates or instruments
evidencing the same to Secured
Party
on or
before the close of business on the fifth business day following the receipt
thereof by such Debtor, in the exact form received together with the Necessary
Endorsements, to be held by Secured
Party
subject
to the terms of this Agreement as Collateral.
8. Rights
and Remedies Upon Default.
(a) Upon
the
occurrence of any Event of Default and at any time thereafter, the Secured
Party
shall have the right to exercise all of the remedies conferred hereunder and
under the Note, and the Secured Party shall have all the rights and remedies
of
a secured party under the UCC. Without limitation, the Secured Party shall
have
the following rights and powers:
(i)
The
Secured Party shall have the right to take possession of the Collateral and,
for
that purpose, enter, with the aid and assistance of any person, any premises
where the Collateral, or any part thereof, is or may be placed and remove the
same, and each Debtor shall assemble the Collateral and make it available to
the
Secured Party at places which the Secured Party shall reasonably select, whether
at such Debtor's premises or elsewhere, and make available to the Secured Party,
without rent, all of such Debtor’s respective premises and facilities for the
purpose of the Secured Party taking possession of, removing or putting the
Collateral in saleable or disposable form.
(ii) Upon
notice to the Debtors by Secured
Party,
all
rights of each Debtor to exercise the voting and other consensual rights which
it would otherwise be entitled to exercise and all rights of each Debtor to
receive the dividends and interest which it would otherwise be authorized to
receive and retain, shall cease. Upon such notice, Secured
Party
shall
have the right to receive any interest, cash dividends or other payments on
the
Collateral and, at the option of Secured
Party,
to
exercise in the Secured
Party’s
discretion all voting rights pertaining thereto. Without limiting the generality
of the foregoing, Secured
Party
shall
have the right (but not the obligation) to exercise all rights with respect
to
the Collateral as it were the sole and absolute owner thereof, including,
without limitation, to vote and/or to exchange, at its sole discretion, any
or
all of the Collateral in connection with a merger, reorganization,
consolidation, recapitalization or other readjustment concerning or involving
the Collateral or any Debtor or any of its direct or indirect
subsidiaries.
(iii)
The
Secured Party shall have the right to operate the business of each Debtor using
the Collateral and shall have the right to assign, sell, lease or otherwise
dispose of and deliver all or any part of the Collateral, at public or private
sale or otherwise, either with or without special conditions or stipulations,
for cash or on credit or for future delivery, in such parcel or parcels and
at
such time or times and at such place or places, and upon such terms and
conditions as the Secured Party may deem commercially reasonable, all without
(except as shall be required by applicable statute and cannot be waived)
advertisement or demand upon or notice to any Debtor or right of redemption
of a
Debtor, which are hereby expressly waived. Upon each such sale, lease,
assignment or other transfer of Collateral, the Secured Party, may, unless
prohibited by applicable law which cannot be waived, purchase all or any part
of
the Collateral being sold, free from and discharged of all trusts, claims,
right
of redemption and equities of any Debtor, which are hereby waived and
released.
(iv) The
Secured Party shall have the right (but not the obligation) to notify any
account debtors and any obligors under instruments or accounts to make payments
directly to the Secured Party, and to enforce the Debtors’ rights against such
account debtors and obligors.
(v) The
Secured Party, may (but is not obligated to) direct any financial intermediary
or any other person or entity holding any investment property to transfer the
same to the Secured Party, or its designee.
(vi) The
Secured Party may (but is not obligated to) transfer any or all Intellectual
Property registered in the name of any Debtor at the United States Patent and
Trademark Office and/or Copyright Office into the name of the Secured Party
or
any designee or any purchaser of any Collateral.
(b) The
Secured Party shall comply with any applicable law in connection with a
disposition of Collateral and such compliance will not be considered adversely
to affect the commercial reasonableness of any sale of the Collateral. The
Secured Party may sell the Collateral without giving any warranties and may
specifically disclaim such warranties. If the Secured Party sells any of the
Collateral on credit, the Debtors will only be credited with payments actually
made by the purchaser. In addition, each Debtor waives any and all rights that
it may have to a judicial hearing in advance of the enforcement of any of the
Secured Party’s rights and remedies hereunder, including, without limitation,
its right following an Event of Default to take immediate possession of the
Collateral and to exercise its rights and remedies with respect
thereto.
(c) For
the
purpose of enabling the Secured Party to further exercise rights and remedies
under this Section 8 or elsewhere provided by agreement or applicable law,
each
Debtor hereby grants to the Secured Party, an irrevocable, nonexclusive license
(exercisable without payment of royalty or other compensation to such Debtor)
to
use, license or sublicense following an Event of Default, any Intellectual
Property now owned or hereafter acquired by such Debtor, and wherever the same
may be located, and including in such license access to all media in which
any
of the licensed items may be recorded or stored and to all computer software
and
programs used for the compilation or printout thereof.
9. Applications
of Proceeds.
The
proceeds of any such sale, lease or other disposition of the Collateral
hereunder or from payments made on account of any insurance policy insuring
any
portion of the Collateral shall be applied first, to the expenses of retaking,
holding, storing, processing and preparing for sale, selling, and the like
(including, without limitation, any taxes, fees and other costs incurred in
connection therewith) of the Collateral, to the reasonable attorneys’ fees and
expenses incurred by the Secured Party in enforcing the Secured Party’s rights
hereunder and in connection with collecting, storing and disposing of the
Collateral, and then to satisfaction of the Obligations, and to the payment
of
any other amounts required by applicable law, after which the Secured Party
shall pay to the applicable Debtor any surplus proceeds. If, upon the sale,
license or other disposition of the Collateral, the proceeds thereof are
insufficient to pay all amounts to which the Secured Party is legally entitled,
the Debtors will be liable for the deficiency, together with interest thereon,
at the rate of 20% per annum or the lesser amount permitted by applicable law
(the “Default
Rate”),
and
the reasonable fees of any attorneys employed by the Secured Party to collect
such deficiency. To the extent permitted by applicable law, each Debtor waives
all claims, damages and demands against the Secured Party arising out of the
repossession, removal, retention or sale of the Collateral, unless due solely
to
the gross negligence or willful misconduct of the Secured Party as determined
by
a final judgment (not subject to further appeal) of a court of competent
jurisdiction.
10. Securities
Law Provision.
Each
Debtor recognizes that Secured Party may be limited in its ability to effect
a
sale to the public of all or part of the Pledged Securities by reason of certain
prohibitions in the Securities Act of 1933, as amended, or other federal or
state securities laws (collectively, the “Securities
Laws”),
and
may be compelled to resort to one or more sales to a restricted group of
purchasers who may be required to agree to acquire the Pledged Securities for
their own account, for investment and not with a view to the distribution or
resale thereof. Each Debtor agrees that sales so made may be at prices and
on
terms less favorable than if the Pledged Securities were sold to the public,
and
that Secured Party has no obligation to delay the sale of any Pledged Securities
for the period of time necessary to register the Pledged Securities for sale
to
the public under the Securities Laws. Each Debtor shall cooperate with Secured
Party in its attempt to satisfy any requirements under the Securities Laws
(including, without limitation, registration thereunder if requested by Secured
Party) applicable to the sale of the Pledged Securities by Secured
Party.
11. Costs
and Expenses.
Each
Debtor agrees to pay all reasonable out-of-pocket fees, costs and expenses
incurred in connection with any filing required hereunder, including without
limitation, any financing statements pursuant to the UCC, continuation
statements, partial releases and/or termination statements related thereto
or
any expenses of any searches reasonably required by the Secured Party. The
Debtors shall also pay all other claims and charges which in the reasonable
opinion of the Secured Party is reasonably likely to prejudice, imperil or
otherwise affect the Collateral or the Security Interests therein. The Debtors
will also, upon demand, pay to the Secured Party the amount of any and all
reasonable expenses, including the reasonable fees and expenses of its counsel
and of any experts and agents, which the Secured Party, may incur in connection
with (i) the enforcement of this Agreement, (ii) the custody or preservation
of,
or the sale of, collection from, or other realization upon, any of the
Collateral, or (iii) the exercise or enforcement of any of the rights of the
Secured Party under the Note. Until so paid, any fees payable hereunder shall
be
added to the principal amount of the Note and shall bear interest at the Default
Rate.
12. Responsibility
for Collateral.
The
Debtors assume all liabilities and responsibility in connection with all
Collateral, and the Obligations shall in no way be affected or diminished by
reason of the loss, destruction, damage or theft of any of the Collateral or
its
unavailability for any reason. Without limiting the generality of the foregoing,
(a) in no event shall the Secured Party (i) have any duty (either before or
after an Event of Default) to collect any amounts in respect of the Collateral
or to preserve any rights relating to the Collateral, or (ii) have any
obligation to clean-up or otherwise prepare the Collateral for sale, and (b)
each Debtor shall remain obligated and liable under each contract or agreement
included in the Collateral to be observed or performed by such Debtor
thereunder. The Secured Party shall not have any obligation or liability under
any such contract or agreement by reason of or arising out of this Agreement
or
the receipt by the Secured Party of any payment relating to any of the
Collateral, nor shall the Secured Party be obligated in any manner to perform
any of the obligations of any Debtor under or pursuant to any such contract
or
agreement, to make inquiry as to the nature or sufficiency of any payment
received by the Secured Party in respect of the Collateral or as to the
sufficiency of any performance by any party under any such contract or
agreement, to present or file any claim, to take any action to enforce any
performance or to collect the payment of any amounts which may have been
assigned to the Secured Party or to which the Secured Party may be entitled
at
any time or times.
13. Security
Interests Absolute.
All
rights of the Secured Party and all obligations of the Debtors hereunder, shall
be absolute and unconditional, irrespective of: (a) any lack of validity or
enforceability of the Note or any agreement entered into in connection with
the
Note, or any portion hereof or thereof; (b) any change in the time, manner
or
place of payment or performance of, or in any other term of, all or any of
the
Obligations, or any other amendment or waiver of or any consent to any departure
from the Note or any other agreement entered into in connection with the
foregoing; (c) any exchange, release or nonperfection of any of the Collateral,
or any release or amendment or waiver of or consent to departure from any other
collateral for, or any guarantee, or any other security, for all or any of
the
Obligations; (d) any action by the Secured Party to obtain, adjust, settle
and
cancel in its sole discretion any insurance claims or matters made or arising
in
connection with the Collateral; or (e) any other circumstance which might
otherwise constitute any legal or equitable defense available to a Debtor,
or a
discharge of all or any part of the Security Interests granted hereby. Until
the
Obligations shall have been paid and performed in full, the rights of the
Secured Party shall continue even if the Obligations are barred for any reason,
including, without limitation, the running of the statute of limitations or
bankruptcy. Each Debtor expressly waives presentment, protest, notice of
protest, demand, notice of nonpayment and demand for performance. In the event
that at any time any transfer of any Collateral or any payment received by
the
Secured Party hereunder shall be deemed by final order of a court of competent
jurisdiction to have been a voidable preference or fraudulent conveyance under
the bankruptcy or insolvency laws of the United States, or shall be deemed
to be
otherwise due to any party other than the Secured Party, then, in any such
event, each Debtor’s obligations hereunder shall survive cancellation of this
Agreement, and shall not be discharged or satisfied by any prior payment thereof
and/or cancellation of this Agreement, but shall remain a valid and binding
obligation enforceable in accordance with the terms and provisions hereof.
Each
Debtor waives all right to require the Secured Party to proceed against any
other person or entity
or
to
apply
any Collateral which the Secured Party may hold at any time, or to marshal
assets, or to pursue any other remedy. Each Debtor waives any defense arising
by
reason of the application of the statute of limitations to any obligation
secured hereby.
14.
Term
of Agreement; Release of Security.
This
Agreement and the Security Interests shall terminate on the date on which all
payments under the Note have been indefeasibly paid in full and all other
Obligations have been paid or discharged; provided, however, that all
indemnities of the Debtors contained in this Agreement shall survive and remain
operative and in full force and effect regardless of the termination of this
Agreement. With respect to any Subsidiary Dividend, so long as the Note has
not
matured and remain unpaid or so long as the Secured Party has not accelerated
the obligations of the Company under the Note, the Secured Party’s security
interest in the assets of any Subsidiary or Dividend Subsidiary and the security
interest in the portion of the equity interest in such Subsidiary or Dividend
Subsidiary so distributed shall be released and discharged. With respect to
any
other dividend to the Company’s common stock holders of any equity interest in
any Subsidiary, so long as the Note has not matured and remain unpaid or so
long
as the Secured Party has not accelerated the obligations of the Company under
the Note, and upon the prior written consent of the Secured Party (not to be
unreasonably withheld or delayed), the Secured Party’s security interest in the
assets of such Subsidiary and the security interest in the portion of the equity
interest in such Subsidiary so distributed shall be released and
discharged.
15.
Power
of Attorney; Further Assurances.
(a)
Each
Debtor authorizes the Secured Party, and does hereby make, constitute and
appoint the Secured Party and its officers, agents, successors or assigns with
full power of substitution, as such Debtor’s true and lawful attorney-in-fact,
with power, in the name of the Secured Party or such Debtor, to, after the
occurrence and during the continuance of an Event of Default, (i) endorse any
note, checks, drafts, money orders or other instruments of payment (including
payments payable under or in respect of any policy of insurance) in respect
of
the Collateral that may come into possession of the Secured Party; (ii) to
sign
and endorse any financing statement pursuant to the UCC or any invoice, freight
or express xxxx, xxxx of lading, storage or warehouse receipts, drafts against
debtors, assignments, verifications and notices in connection with accounts,
and
other documents relating to the Collateral; (iii) to pay or discharge taxes,
liens, security interests or other encumbrances at any time levied or placed
on
or threatened against the Collateral; (iv) to demand, collect, receipt for,
compromise, settle and xxx for monies due in respect of the Collateral; (v)
to
transfer any Intellectual Property or provide licenses respecting any
Intellectual Property; and (vi) generally, at the option of the Secured Party,
and at the expense of the Debtors, at any time, or from time to time, to execute
and deliver any and all documents and instruments and to do all acts and things
which the Secured Party deems necessary to protect, preserve and realize upon
the Collateral and the Security Interests granted therein in order to effect
the
intent of this Agreement and the Note all as fully and effectually as the
Debtors might or could do; and each Debtor hereby ratifies all that said
attorney shall lawfully do or cause to be done by virtue hereof. This power
of
attorney is coupled with an interest and shall be irrevocable for the term
of
this Agreement and thereafter as long as any of the Obligations shall be
outstanding. The
designation set forth herein shall be deemed to amend and supersede any
inconsistent provision in the Organizational Documents or other documents or
agreements to which any Debtor is subject or to which any Debtor is a party.
Without
limiting the generality of the foregoing, after the occurrence and during the
continuance of an Event of Default, each Secured Party is specifically
authorized to execute and file any applications for or instruments of transfer
and assignment of any patents, trademarks, copyrights or other Intellectual
Property with the United States Patent and Trademark Office and the United
States Copyright Office.
(b)
On
a
continuing basis, each Debtor will make, execute, acknowledge, deliver, file
and
record, as the case may be, with the proper filing and recording agencies in
any
jurisdiction, including, without limitation, the jurisdictions indicated on
Schedule
C
attached
hereto, all such instruments, and take all such action as may reasonably be
deemed necessary or advisable, or as reasonably requested by the Secured Party,
to perfect the Security Interests granted hereunder and otherwise to carry
out
the intent and purposes of this Agreement, or for assuring and confirming to
the
Secured Party the grant or perfection of a perfected security interest in all
the Collateral under the UCC.
(c)
Each
Debtor hereby irrevocably appoints the Secured Party as such Debtor’s
attorney-in-fact, with full authority in the place and stead of such Debtor
and
in the name of such Debtor, from time to time in the Secured Party’s discretion,
to take any action and to execute any instrument which the Secured Party may
deem necessary or advisable to accomplish the purposes of this Agreement,
including the filing, in its sole discretion, of one or more financing or
continuation statements and amendments thereto, relative to any of the
Collateral without the signature of such Debtor where permitted by law, which
financing statements may (but need not), describe the Collateral as “all assets”
or “all personal property” or words of like import, and ratifies all such
actions taken by the Secured Party. This power of attorney is coupled with
an
interest and shall be irrevocable for the term of this Agreement and thereafter
as long as any of the Obligations shall be outstanding.
16. Notices.
Any
demand upon or notice to the Debtors hereunder shall be effective when delivered
by hand or when properly deposited in the mails postage prepaid, or sent by
telex, answerback received, or electronic facsimile transmission, receipt
acknowledged, or delivered to a telegraph company or overnight courier, in
each
case addressed to the Debtor at the address shown below. Any notice by the
Debtors to the Secured Party shall be given as aforesaid, addressed to the
Secured Party at the address shown below or such other address as the Secured
Party may advise the Debtors in writing.
Secured
Party:
Platinum
Long Term Growth V, LLC
Carnegie
Hall Tower
000
X.
00xx Xxxxxx
00xx
Xxxxx
Xxx
Xxxx,
XX 00000
Fax:
_____________________
Debtors:
c/o
Wits
Basin Precious Minerals Inc.
00
Xxxxx
Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxxxx,
XX 00000
Fax:
(000) 000-0000
17. Other
Security.
To the
extent that the Obligations are now or hereafter secured by property other
than
the Collateral or by the guarantee, endorsement or property of any other person,
firm, corporation or other entity, then the Secured Party shall have the right,
in its sole discretion, to pursue, relinquish, subordinate, modify or take
any
other action with respect thereto, without in any way modifying or affecting
any
of the Secured Party’s rights and remedies hereunder.
18. Miscellaneous.
(a)
No
course
of dealing between the Debtors and the Secured Party, nor any failure to
exercise, nor any delay in exercising, on the part of the Secured Party, any
right, power or privilege hereunder or under the Note shall operate as a waiver
thereof; nor shall any single or partial exercise of any right, power or
privilege hereunder or thereunder preclude any other or further exercise thereof
or the exercise of any other right, power or privilege.
(b)
All
of
the rights and remedies of the Secured Party with respect to the Collateral,
whether established hereby or by the Note or by any other agreements,
instruments or documents or by law shall be cumulative and may be exercised
singly or concurrently.
(c)
This
Agreement,
together with the exhibits and schedules hereto, contain the entire
understanding of the parties with respect to the subject matter hereof and
supersede all prior agreements and understandings, oral or written, with respect
to such matters, which the parties acknowledge have been merged into this
Agreement and the exhibits and schedules hereto.
No
provision of this Agreement may be waived, modified, supplemented or amended
except in a written instrument signed, in the case of an amendment, by the
Debtors and the Secured Party or, in the case of a waiver, by the party against
whom enforcement of any such waived provision is sought.
(d)
If
any
term, provision, covenant or restriction of this Agreement is held by a court
of
competent jurisdiction to be invalid, illegal, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions set forth herein
shall remain in full force and effect and shall in no way be affected, impaired
or invalidated, and the parties hereto shall use their commercially reasonable
efforts to find and employ an alternative means to achieve the same or
substantially the same result as that contemplated by such term, provision,
covenant or restriction. It is hereby stipulated and declared to be the
intention of the parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of such that may
be
hereafter declared invalid, illegal, void or unenforceable.
(e)
No
waiver
of any default with respect to any provision, condition or requirement of this
Agreement shall be deemed to be a continuing waiver in the future or a waiver
of
any subsequent default or a waiver of any other provision, condition or
requirement hereof, nor shall any delay or omission of any party to exercise
any
right hereunder in any manner impair the exercise of any such
right.
(f)
This
Agreement shall be binding upon and inure to the benefit of the parties and
their successors and permitted assigns. The Company and the Guarantors may
not
assign this Agreement or any rights or obligations hereunder without the prior
written consent of the Secured Party (other than by merger). The Secured Party
may assign any or all of its rights under this Agreement to any Person to whom
such Secured Party assigns or transfers any Securities, provided such transferee
agrees in writing to be bound, with respect to the transferred Securities,
by
the provisions of this Agreement that apply to the “Secured Party.”
(g)
Each
party shall take such further action and execute and deliver such further
documents as may be necessary or appropriate in order to carry out the
provisions and purposes of this Agreement.
(h)
All
questions concerning the construction, validity, enforcement and interpretation
of this Agreement shall be governed by and construed and enforced in accordance
with the internal laws of the State of New York, without regard to the
principles of conflicts of law thereof. Each Debtor agrees that all proceedings
concerning the interpretations, enforcement and defense of the transactions
contemplated by this Agreement and the Note (whether brought against a party
hereto or its respective affiliates, directors, officers, shareholders,
partners, members, employees or agents) shall be commenced exclusively in the
state and federal courts sitting in the City of New York, Borough of Manhattan.
Each Debtor hereby irrevocably submits to the exclusive jurisdiction of the
state and federal courts sitting in the City of New York, Borough of Manhattan
for the adjudication of any dispute hereunder or in connection herewith or
with
any transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any proceeding, any claim that it is not
personally subject to the jurisdiction of any such court, that such proceeding
is improper. Each party hereto hereby irrevocably waives personal service of
process and consents to process being served in any such proceeding by mailing
a
copy thereof via registered or certified mail or overnight delivery (with
evidence of delivery) to such party at the address in effect for notices to
it
under this Agreement and agrees that such service shall constitute good and
sufficient service of process and notice thereof. Nothing contained herein
shall
be deemed to limit in any way any right to serve process in any manner permitted
by law. Each party hereto hereby irrevocably waives, to the fullest extent
permitted by applicable law, any and all right to trial by jury in any legal
proceeding arising out of or relating to this Agreement or the transactions
contemplated hereby. If any party shall commence a proceeding to enforce any
provisions of this Agreement, then the prevailing party in such proceeding
shall
be reimbursed by the other party for its reasonable attorney’s fees and other
costs and expenses incurred with the investigation, preparation and prosecution
of such proceeding.
(i)
This
Agreement may be executed in any number of counterparts, each of which when
so
executed shall be deemed to be an original and, all of which taken together
shall constitute one and the same Agreement. In the event that any signature
is
delivered by facsimile transmission, such signature shall create a valid binding
obligation of the party executing (or on whose behalf such signature is
executed) the same with the same force and effect as if such facsimile signature
were the original thereof.
(j) All
Debtors shall jointly and severally be liable for the obligations of each Debtor
to the Secured Party hereunder.
(k) Each
Debtor shall indemnify, reimburse and hold harmless the Secured Party and its
partners, members, shareholders, officers, directors, employees and agents
(and
any other persons with other titles that have similar functions) (collectively,
“Indemnitees”)
from
and against any and all losses, claims, liabilities, damages, penalties, suits,
costs and expenses, of any kind or nature, (including fees relating to the
cost
of investigating and defending any of the foregoing) imposed on, incurred by
or
asserted against such Indemnitee in any way related to or arising from or
alleged to arise from this Agreement or the Collateral, except any such losses,
claims, liabilities, damages, penalties, suits, costs and expenses which result
from the gross negligence or willful misconduct of the Indemnitee as determined
by a final, nonappealable decision of a court of competent jurisdiction. This
indemnification provision is in addition to, and not in limitation of, any
other
indemnification provision in the Note, the Purchase Agreement (as such term
is
defined in the Note) or any other agreement, instrument or other document
executed or delivered in connection herewith or therewith.
(l) Nothing
in this Agreement shall be construed to subject the Secured Party to liability
as a partner in any Debtor or any if its direct or indirect subsidiaries that
is
a partnership or as a member in any Debtor or any of its direct or indirect
subsidiaries that is a limited liability company, nor shall the Secured Party
be
deemed to have assumed any obligations under any partnership agreement or
limited liability company agreement, as applicable, of any such Debtor or any
if
its direct or indirect subsidiaries or otherwise, unless and until the Secured
Party exercises its right to be substituted for such Debtor as a partner or
member, as applicable, pursuant hereto.
(m)
To
the
extent that the grant of the security interest in the Collateral and the
enforcement of the terms hereof require the consent, approval or action of
any
partner or member, as applicable, of any Debtor or any direct or indirect
subsidiary of any Debtor or compliance with any provisions of any of the
Organizational Documents, the Debtors hereby grant such consent and approval
and
waive any such noncompliance with the terms of said documents.
[SIGNATURE
PAGES FOLLOW]
IN
WITNESS WHEREOF, the parties hereto have caused this Security
Agreement to be duly executed on the day and year first above
written.
|
WITS
BASIN PRECIOUS MINERALS INC.
|
|
|
By:
|
/s/
Xxxx X. Xxxxx
|
|
Name:
Xxxx X. Xxxxx
|
|
|
Title:
Chief Financial Officer
|
|
|
XXXXXXX
GOLD PRODUCERS, INCORPORATED
|
|
|
By:
|
/s/
Xxxx X. Xxxxx
|
|
Name:
Xxxx X. Xxxxx
|
|
|
Title:
Chief Financial Officer
|
|
|
PLATINUM
LONG TERM GROWTH V, LLC
|
|
|
By:
|
/s/
Xxxx Xxxxxxxxx
|
|
Name:
Xxxx Xxxxxxxxx
|
|
|
Title:
General Manager
|
|
Signature
Page
to
Security Agreement
ANNEX
A
to
SECURITY
AGREEMENT
FORM
OF ADDITIONAL DEBTOR JOINDER
Security
Agreement dated as of February 11, 2008 made by
Wits
Basin Precious Minerals Inc.
and
its
subsidiaries party thereto from time to time, as Debtors
to
and in
favor of
the
Secured Party identified therein (the “Security
Agreement”)
Reference
is made to the Security Agreement as defined above; capitalized terms used
herein and not otherwise defined herein shall have the meanings given to such
terms in, or by reference in, the Security Agreement.
The
undersigned hereby agrees that upon delivery of this Additional Debtor Joinder
to the Secured Party referred to above, the undersigned shall (a) be an
Additional Debtor under the Security Agreement, (b) have all the rights and
obligations of the Debtors under the Security Agreement as fully and to the
same
extent as if the undersigned was an original signatory thereto and (c) be deemed
to have made the representations and warranties set forth therein as of the
date
of execution and delivery of this Additional Debtor Joinder. WITHOUT LIMITING
THE GENERALITY OF THE FOREGOING, THE UNDERSIGNED SPECIFICALLY GRANTS TO THE
SECURED PARTY A SECURITY INTEREST IN THE COLLATERAL AS MORE FULLY SET FORTH
IN
THE SECURITY AGREEMENT AND ACKNOWLEDGES AND AGREES TO THE WAIVER OF JURY TRIAL
PROVISIONS SET FORTH THEREIN.
Attached
hereto are supplemental and/or replacement Schedules to the Security Agreement,
as applicable.
An
executed copy of this Joinder shall be delivered to the Secured Party, and
the
Secured Party may rely on the matters set forth herein on or after the date
hereof. This Joinder shall not be modified, amended or terminated without the
prior written consent of the Secured Party.
IN
WITNESS WHEREOF, the undersigned has caused this Joinder to be executed in
the
name and on behalf of the undersigned.
|
By:
|
|
Name:
|
|
Title:
|
Dated:
