Exhibit 99.2
SECURITY AGREEMENT
This SECURITY AGREEMENT, dated as of June 18, 2007 (this "AGREEMENT"),
is among Environmental Service Professionals, Inc., a Nevada corporation (the
"COMPANY"), all of the Subsidiaries of the Company (such subsidiaries, the
"GUARANTORS" and together with the Company, the "DEBTORS") and BOCA FUNDING, LLC
(the "SECURED PARTY"), the holder of the Company's 12% Senior Secured
Convertible Note, issued on June 18, 2007 in the original principal amount of
$615,000 (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):
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(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 all investment property and general
intangibles respecting ownership and/or other equity interests
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in each Guarantor, including, without limitation, the shares
of capital stock and the other equity interests listed on
SCHEDULE H hereto (as the same may be modified from time to
time pursuant to the terms hereof), and any other shares of
capital stock and/or other equity interests of any other
direct or indirect subsidiary of any Debtor obtained in the
future, and, in each case, all certificates representing such
shares and/or equity interests and, in each case, all rights,
options, warrants, stock, other securities and/or equity
interests that may hereafter be received, receivable or
distributed in respect of, or exchanged for, any of the
foregoing 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.
(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.
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(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 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 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.
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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. Contemporaneously or prior to 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 disclosed on SCHEDULE A, none of such
Collateral is in the possession of any consignee, bailee, warehouseman,
agent or processor.
(c) Except for Permitted Liens (as defined in the 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
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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
Liens (as defined in the Note) securing the payment and performance of
the Obligations. Upon making the filings described in the immediately
following paragraph, all security interests created hereunder in any
Collateral which may be perfected by filing Uniform Commercial Code
financing statements shall have been duly perfected. Except for the
filing of the Uniform Commercial Code financing statements referred to
in the immediately following paragraph, the recordation of the
Intellectual Property Security Agreement (as defined below) (if any)
with respect to copyrights and copyright applications in the United
States Copyright Office referred to in paragraph (p), 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, the
recordation of said Intellectual Property Security Agreement, 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
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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) 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 in and to the Guarantors, and
represent all capital stock and other equity interests owned, directly
or indirectly, by the Company. All of the Pledged Securities are
validly issued, fully paid and nonassessable, and the Company is the
legal and beneficial owner of the Pledged Securities, free and clear of
any lien, security interest or other encumbrance except for the
security interests created by this Agreement and other Permitted Liens
(as defined in the Note). Each Debtor shall cause the pledge and
security interest of the Secured Party to be duly noted in its
corporate books and records.
(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 Liens (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
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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 Liens (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
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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.
(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
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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 Liens (as defined in the Note), no Debtor may consign any of
its Inventory or sell any of its Inventory on ▇▇▇▇ 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).
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(dd) [Reserved].
(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
11
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.
(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 (i) cause to be
registered at the United States Copyright Office all of its material
copyrights, (ii) cause the security interest contemplated hereby with
respect to all Intellectual Property registered at the United States
Copyright Office or United States Patent and Trademark Office to be
duly recorded at the applicable office, and (iii) give the 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
12
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
13
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, pro-rata in proportion to
their respective then-currently outstanding principal amount of Note
for application to the satisfaction of the Obligations (and if any
Debenture is not outstanding, pro-rata in proportion to the initial
purchases of the remaining Note).
(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
14
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.
15
(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
16
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 this Agreement,
the Note or any agreement entered into in connection with the foregoing, or any
portion hereof or thereof; (b) any change in the time, manner or place of
payment or performance of, or in any other term of, all or any of the
17
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. 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 (including, without limitation, Annex B hereto) shall survive and
remain operative and in full force and effect regardless of the termination of
this Agreement.
15. POWER OF ATTORNEY; FURTHER ASSURANCES.
(a) Each Debtor authorizes the 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 ▇▇▇▇, ▇▇▇▇ 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
18
threatened against the Collateral; (iv) to demand, collect, receipt
for, compromise, settle and ▇▇▇ 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
instead 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
19
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:
Boca Funding, LLC
Carnegie Hall Tower
▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Debtors:
c/o Environmental Service Professionals, Inc
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
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
20
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 each
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
21
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
22
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]
23
IN WITNESS WHEREOF, the parties hereto have caused this Security
Agreement to be duly executed on the day and year first above written.
ENVIRONMENTAL SERVICE PROFESSIONALS, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: CEO
NATIONAL PROFESSIONAL SERVICES INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: CEO
PACIFIC ENVIRONMENTAL SAMPLING, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: CEO
ALLSTATE HOME INSPECTION & ENVIRONMENTAL TESTING, LTD.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: CEO
BOCA FUNDING, LLC
By: /s/ Gil Kaulter
---------------
Name:
Title:
24
SCHEDULE A
Principal Place of Business of Debtors:
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Locations Where Collateral is Located or Stored:
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
SCHEDULE B
None.
SCHEDULE C
Nevada
California
Delaware
SCHEDULE D
Legal Names and Organizational Identification Numbers
------ --------------------------------------- --------------------------- ----------------------- ---
NAME STAE OF ORGANIZATION TAX ID #
------ --------------------------------------- --------------------------- ----------------------- ---
------ --------------------------------------- --------------------------- ----------------------- ---
Environmental Service Professionals, Nevada ▇▇-▇▇▇▇▇▇▇
Inc.
------ --------------------------------------- --------------------------- ----------------------- ---
National Professional Services Inc. Delaware ▇▇-▇▇▇▇▇▇▇
------ --------------------------------------- --------------------------- ----------------------- ---
Pacific Environmental Sampling, Inc. California ▇▇-▇▇▇▇▇▇▇
------ --------------------------------------- --------------------------- ----------------------- ---
Allstate Home Inspection & Delaware ▇▇-▇▇▇▇▇▇▇
Environmental Testing, Ltd.
------ --------------------------------------- --------------------------- ----------------------- ---
SCHEDULE E
Names; Mergers and Acquisitions
Glass-Aire Industries Group Ltd.
SCHEDULE F
Intellectual Property
All Intellectual Property as disclosed in the Company's Annual Report on Form
10-KSB for the fiscal year ended December 31, 2006.
SCHEDULE G
Account Debtors
None.
SCHEDULE H
Pledged Securities
--------------------------------------- ------------------------ --------------------- --------------- ---------------
NAME OF ISSUER/GUARANTOR TYPE OF SECURITIES NO. OF SHARES PERCENTAGE OF STOCK
OWNED ISSUER OWNED CERTIFICATE
NO.
--------------------------------------- ------------------------ --------------------- --------------- ---------------
--------------------------------------- ------------------------ --------------------- --------------- ---------------
National Professional Services Inc. Common 1,000 100% 7
--------------------------------------- ------------------------ --------------------- --------------- ---------------
Pacific Environmental Sampling, Inc. Common 1,000 100% 21
--------------------------------------- ------------------------ --------------------- --------------- ---------------
Allstate Home Inspection & Common 1,000 100% 2
Environmental Testing, Ltd.
--------------------------------------- ------------------------ --------------------- --------------- ---------------
ANNEX A
TO
SECURITY
AGREEMENT
FORM OF ADDITIONAL DEBTOR JOINDER
Security Agreement dated as of June ___, 2007 made by ENVIRONMENTAL
SERVICE PROFESSIONALS, 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.
[Name of Additional Debtor]
By:
Name:
Title:
Address:
Dated: