Exhibit 10.3
SECURITY AGREEMENT
SECURITY AGREEMENT (as amended, restated, supplemented or otherwise
modified from time to time in accordance herewith and including all attachments,
exhibits and schedules hereto, the "Agreement"), dated as of March 31, 2006,
made by Glowpoint, Inc., a Delaware corporation (the "Grantor"), in favor of the
secured parties listed on Exhibit A to this Agreement and their permitted
successors and assigns (collectively, the "Secured Parties").
WHEREAS, the Grantor has issued or will issue separate senior secured
convertible promissory notes to the Secured Parties (the "Notes") pursuant to a
Note and Warrant Purchase Agreement dated as of March 31, 2006 (the "Purchase
Agreement"), by and among the Grantor and the Secured Parties; and
WHEREAS, the Secured Parties and the Grantor desire that the Grantor
execute and deliver to the Secured Parties a security agreement providing for
the grant to the Secured Parties of a continuing security interest in all
personal property and assets of the Grantor, all in substantially the form
hereof to secure all Obligations (hereinafter defined).
NOW, THEREFORE, the parties agree as follows:
ARTICLE I. DEFINITIONS
Section 1.1. Definition of Terms Used Herein. All capitalized terms
used herein and not defined herein have the respective meanings provided
therefor in the Purchase Agreement or the Notes, as applicable. All terms
defined in the Uniform Commercial Code (hereinafter defined) as in effect from
time to time and used herein and not otherwise defined herein (whether or not
such terms are capitalized) have the same definitions herein as specified
therein.
Section 1.2. Definition of Certain Terms Used Herein. As used herein,
the following terms have the following meanings:
"Collateral" means all accounts receivable of the Grantor and all
personal and fixed property of every kind and nature, including, without
limitation, all furniture, fixtures, equipment, raw materials, inventory, as
extracted collateral, or other goods, accounts, contract rights, rights to the
payment of money, insurance refund claims and all other insurance claims and
proceeds, tort claims, chattel paper, documents, instruments, securities and
other investment property, deposit accounts, rights to proceeds of letters of
credit and all general intangibles including, without limitation, all tax refund
claims, license fees, patents, patent licenses, patent applications, trademarks,
trademark licenses, trademark applications, trade names, copyrights, copyright
licenses, copyright applications, rights to ▇▇▇ and recover for past
infringement of patents, trademarks and copyrights, computer programs, computer
software, engineering drawings, service marks, customer lists, goodwill, and all
licenses, permits, agreements of any kind or nature pursuant to which the
Grantor possesses, uses or has authority to possess or use property (whether
tangible or intangible) of others or others possess, use or have authority to
possess or use property (whether tangible or intangible) of the Grantor, and all
recorded data of any kind or nature, regardless of the medium of recording
including, without limitation, all books and records, software, writings, plans,
specifications and schematics, whether now owned or hereinafter acquired by the
Grantor; and all proceeds and products of each of the foregoing.
"Default" means any event or circumstance which, with the giving of
notice, the lapse of time, or both, would (if not cured, waived, or otherwise
remedied during such time) constitute an Event of Default.
"Event of Default" has the meaning specified in the Notes.
"Indemnitees" has the meaning specified in Section 7.5(b).
"Lien" means: (i) any interest in property securing an obligation owed
to, or a claim by, a Person other than the owner of the property, whether such
interest is based on the common law, statute, or contract, and including a
security interest, charge, claim, or lien arising from a mortgage, deed of
trust, encumbrance, pledge, hypothecation, assignment, deposit arrangement,
agreement, security agreement, conditional sale or trust receipt or a lease,
consignment or bailment for security purposes; (ii) to the extent not included
under clause (i), any reservation, exception, encroachment, easement,
right-of-way, covenant, condition, restriction, lease or other title exception
or encumbrance affecting property; and (iii) any contingent or other agreement
to provide any of the foregoing.
"Notes" has the meaning assigned to such term in the first recital of
this Agreement.
"Obligations" means all indebtedness, liabilities, obligations,
covenants and duties of the Grantor to the Secured Parties of every kind, nature
and description, direct or indirect, absolute or contingent, due or not due,
contractual or tortious, liquidated or unliquidated, arising by operation of law
or otherwise, now existing or hereafter arising under or in connection with the
Notes, this Agreement or the other Transaction Documents.
"Registered Organization" means an entity formed by filing a
registration document with a United States Governmental Authority, such as a
corporation, limited partnership or limited liability company.
"Security Interest" has the meaning specified in Section 2.1 of this
Agreement.
"Uniform Commercial Code" means the Uniform Commercial Code from time
to time in effect in the State of New York.
ARTICLE II. SECURITY INTEREST
Section 2.1. Security Interest. As security for the payment and
performance, in full of the Obligations, and any extensions, renewals,
modifications or refinancings of the Obligations, the Grantor hereby bargains,
sells, conveys, assigns, sets over, mortgages, pledges, hypothecates and
transfers to the Secured Parties, and hereby grants to the Secured Parties,
their successors and assigns, a security interest in, all of such Grantor's
right, title and interest in, to and under the Collateral and all hereinafter
acquired Collateral (the "Security Interest").
Section 2.2. No Assumption of Liability. The Security Interest is
granted as security only and shall not subject the Secured Parties to, or in any
way alter or modify, any obligation or liability of the Grantor with respect to
or arising out of the Collateral.
ARTICLE III. REPRESENTATIONS AND WARRANTIES
The Grantor represents and warrants to the Secured Parties that:
Section 3.1. Title and Authority. The Grantor has good and valid
rights in and title to the Collateral with respect to which it has purported to
grant a security interest hereunder and has full power and authority to grant to
the Secured Parties the Security Interest and to execute, deliver and perform
its obligations in accordance with the terms of this Agreement, without the
consent or approval of any other Person other than any consent or approval which
has been obtained.
Section 3.2. Filings; Actions to Achieve Perfection. Fully executed
Uniform Commercial Code financing statements (including fixture filings, as
applicable) or other appropriate filings, recordings or registrations containing
a description of the Collateral have been delivered to the Secured Parties for
filing in each United States governmental, municipal or other office specified
in Schedule A, which are all the filings, recordings and registrations that are
necessary to publish notice of and protect the validity of and to establish a
legal, valid and first priority perfected security interest in favor of the
Secured Parties in respect of all Collateral in which the Security Interest may
be perfected by filing, recording or registration in the United States (or any
political subdivision thereof) and its territories and possessions, and no
further or subsequent filing, refiling, recording, rerecording, registration or
reregistration is necessary in any such jurisdiction, except as provided under
applicable law with respect to the filing of continuation statements or with
respect to the filing of amendments or new filings to reflect the change of the
Grantor's name, location, identity or corporate structure. The Grantor's name is
listed in the preamble of this Agreement identically to how it appears on its
certificate of incorporation or other organizational documents.
Section 3.3. Validity and Priority of Security Interest. The Security
Interest constitutes (a) a legal and valid first priority security interest in
all the Collateral securing the payment and performance of the Obligations, (b)
subject only to any previously perfected security interests in the Collateral
listed on Schedule 3.3 to this Agreement ("Existing Liens"), a perfected first
priority security interest in all Collateral in which a security interest may be
perfected by filing, recording or registration in the United States pursuant to
the Uniform Commercial Code or other applicable law in the United States (or any
political subdivision thereof) and its territories and possessions or any other
country, state or nation (or any political subdivision thereof). The Security
Interest is and shall be subordinate to any other Existing Lien on any of the
Collateral.
Section 3.4. Absence of Other Liens. The Grantor's Collateral is
owned by the Grantor free and clear of any Lien other than Existing Liens.
Without limiting the foregoing and except as set forth on Schedule 3.4 to this
Agreement, the Grantor has not filed or consented to any filing of any financing
statement or similar filing in favor of any Person other than the Secured
Parties, nor permitted the granting or assignment of a security interest or
permitted perfection of any security interest in the Collateral in favor of any
Person other than the Secured Parties. The Grantor's having possession of all
instruments, certificates and cash constituting Collateral from time to time and
the filing of financing statements in the offices referred to in Schedule A
hereto results in the perfection of such security interest. Such Security
Interest is, or in the case of Collateral in which the Grantor obtain rights
after the date hereof, will be, a perfected, first
priority security interest. Such notices, filings and all other action necessary
or desirable to perfect and protect such security interest have been duly taken.
Section 3.5. Valid and Binding Obligation. This Agreement constitutes
the legal, valid and binding obligation of the Grantor, enforceable against the
Grantor in accordance with its terms, except (i) as limited by applicable
bankruptcy, insolvency, reorganization, moratorium, and other laws of general
application affecting enforcement of creditors' rights generally, (ii) as
limited by laws relating to the availability of specific performance, injunctive
relief, or other equitable remedies, and (iii) to the extent the indemnification
provisions contained in this Agreement may be limited by applicable federal or
state securities laws.
ARTICLE IV. COVENANTS
Section 4.1. Change of Name; Location of Collateral; Place of
Business, State of Formation or Organization.
(a) The Grantor shall notify the Secured Parties in
writing at least eleven (11) days prior to any change (i) in its
corporate name or in any trade name used to identify it in the conduct
of its business or in the ownership of its properties, (ii) in the
location of its chief executive office, its principal place of
business, any office in which it maintains books or records relating to
Collateral owned by it (including the establishment of any such new
office or facility), (iii) in its identity or corporate structure such
that a filed filing made under the Uniform Commercial Code becomes
misleading or (iv) in its Federal Taxpayer Identification Number.
Furthermore, the Grantor shall not effect or permit any change referred
to in the preceding sentence unless all filings have been made under
the Uniform Commercial Code or otherwise that are required in order for
the Secured Parties to continue at all times following such change to
have a valid, legal and perfected first priority security interest in
all the Collateral.
(b) Without limiting Section 4.1(a), without the prior
written consent of the Secured Parties in each instance, the Grantor
shall not change its (i) principal residence, if it is an individual,
(ii) place of business, if it has only one place of business and is not
a Registered Organization, (iii) principal place of business, if it has
more than one place of business and is not a Registered Organization,
or (iv) state of incorporation, formation or organization, if it is a
Registered Organization.
Section 4.2. Records. The Grantor shall maintain, at its own cost and
expense, such complete and accurate records with respect to the Collateral owned
by it as is consistent with its current practices and in accordance with such
prudent and standard practices used in industries that are the same as or
similar to those in which the Grantor is engaged, but in any event to include
complete accounting records indicating all payments and proceeds received with
respect to any part of the Collateral, and, at such time or times as the Secured
Parties may reasonably request, promptly to prepare and deliver to the Secured
Parties a duly certified schedule or schedules in form and detail satisfactory
to the Secured Parties showing the identity, amount and location of any and all
Collateral.
Section 4.3. Periodic Certification; Notice of Changes. In the event
there should at any time be any change in the information represented and
warranted herein or in the documents
and instruments executed and delivered in connection herewith, the Grantor shall
promptly notify the Secured Parties in writing of such change (this notice
requirement shall be in extension of and shall not limit or relieve the Grantor
of any other covenants hereunder).
Section 4.4. Protection of Security. The Grantor shall, at its own
cost and expense, take any and all actions necessary to defend title to the
Collateral against all persons and to defend the Security Interest of the
Secured Parties in the Collateral and the priority thereof against any Lien.
Section 4.5. Inspection and Verification. The Secured Parties and
such persons as the Secured Parties may reasonably designate shall have the
right, during normal business hours, to inspect the Collateral, all records
related thereto (and to make extracts and copies from such records) and the
premises upon which any of the Collateral is located, to discuss the Grantor's
affairs with the officers of the Grantor and its independent accountants and to
verify under reasonable procedures the validity, amount, quality, quantity,
value, condition and status of, or any other matter relating to, the Collateral,
including, in the case of collateral in the possession of any third Person, by
contacting any account debtor or third Person possessing such Collateral for the
purpose of making such a verification. Out-of-pocket expenses in connection with
any inspections by representatives of the Secured Parties shall be (a) the
obligations of the Grantor with respect to any inspection after the Secured
Parties' lawful demand for payment of the Notes and the nonpayment thereof by
Grantor or (b) the obligation of the Secured Parties in any other case.
Section 4.6. Taxes; Encumbrances. At their option, the Secured
Parties may discharge, Liens other than Existing Liens at any time levied or
placed on the Collateral and may pay for the maintenance and preservation of the
Collateral to the extent the Grantor fails to do so and the Grantor shall
reimburse the Secured Parties on demand for any payment made or any expense
incurred by the Secured Parties pursuant to the foregoing authorization;
provided, however, that nothing in this Section shall be interpreted as excusing
the Grantor from the performance of, or imposing any obligation on the Secured
Parties to cure or perform, any covenants or other obligation of the Grantor
with respect to any Lien or maintenance or preservation of Collateral as set
forth herein.
Section 4.7. Use and Disposition of Collateral. The Grantor shall not
make or permit to be made an assignment, pledge or hypothecation of any
Collateral or shall grant any other Lien in respect of the Collateral without
the prior written consent of the Secured Parties. The Grantor shall not make or
permit to be made any transfer of any Collateral other than with respect to
Existing Liens and other liens approved by the Secured Parties and the Grantor
shall remain at all times in possession of the Collateral owned by it.
Section 4.8. Insurance/Notice of Loss. Within a reasonable period of
time following the date of this Agreement, Grantor, at its own expense, shall
maintain or cause to be maintained insurance covering physical loss or damage to
the Collateral as described on Schedule 4.8 to this Agreement. In extension of
the foregoing and without limitation, such insurance shall be payable to the
Secured Parties as loss payee under a "standard" loss payee clause, and the
Secured Parties shall be listed as an "additional insured" on Grantor's general
liability insurance. Such insurance shall not be terminated, cancelled or not
renewed for any reason, including non-payment of insurance premiums, unless the
insurer shall have provided the Secured Parties at
least 30 days prior written notice. Grantor irrevocably makes, constitutes and
appoints the Secured Parties (and all officers, employees or agents designated
by the Secured Parties) as its true and lawful agent and attorney-in-fact for
the purpose, at any time following the Secured Parties' lawful demand for
payment of the Notes and the nonpayment thereof by Grantor, of making, settling
and adjusting claims in respect of Collateral under policies of insurance,
endorsing the name of Grantor on any check, draft, instrument or other item of
payment for the proceeds of such policies of insurance and for making all
determinations and decisions with respect thereto. In the event that Grantor at
any time or times shall fail to obtain or maintain any of the policies of
insurance required hereby or to pay any premium in whole or part relating
thereto, the Secured Parties may, without waiving or releasing any obligation or
liability of Grantor hereunder, in their sole discretion, obtain and maintain
such policies of insurance and pay such premium and take any other actions with
respect thereto as the Secured Parties deem advisable. All sums disbursed by the
Secured Parties in connection and in accordance with this Section, including
reasonable attorneys' fees, court costs, expenses and other charges relating
thereto, shall be payable upon demand, by Grantor to the Secured Parties and
shall be additional Obligations secured hereby. Grantor shall promptly notify
the Secured Parties if any material portion of the Collateral owned or held by
Grantor is damaged or destroyed. The proceeds of any casualty insurance in
respect of any casualty loss of any of the Collateral shall (i) so long as the
Secured Parties have not demanded payment of the Notes, be disbursed to Grantor
for direct application by Grantor solely to the repair or replacement of
Grantor's property so damaged or destroyed, and (ii) in all other circumstances,
be held by the Secured Parties as cash collateral for the Obligations. The
Secured Parties may, at their sole option, disburse from time to time all or any
part of such proceeds so held as cash collateral, upon such terms and conditions
as the Secured Parties may reasonably prescribe, for direct application by the
Secured Parties solely to the repair or replacement of Grantor's property so
damaged or destroyed, or Grantor may apply all or any part of such proceeds to
the Obligations.
Section 4.9. Legend. Grantor shall legend, in form and manner
satisfactory to the Secured Parties, its accounts and its books, records and
documents evidencing or pertaining thereto with an appropriate reference to the
fact that such accounts have been assigned to the Secured Parties and that the
Secured Parties have a security interest therein.
ARTICLE V. FURTHER ASSURANCES; POWER OF ATTORNEY
Section 5.1. Further Assurances. Grantor shall, at its own expense,
execute, acknowledge, deliver and cause to be duly filed all such further
instruments and documents and take all such actions as the Secured Parties may
from time to time reasonably request to better assure, preserve, protect and
perfect the Security Interest and the rights and remedies created hereby,
including the payment of any fees and taxes required in connection with the
execution and delivery of this Agreement, the granting of the Security Interest
and the filing of any financing statements (including fixture filings) or other
documents in connection herewith or therewith. If any amount payable under or in
connection with any of the Collateral shall be or become evidenced by any
promissory note or other instrument, such note or instrument shall be
immediately pledged and delivered to the Secured Parties, duly endorsed in a
manner satisfactory to the Secured Parties.
Section 5.2. Power of Attorney.
(a) Grantor hereby irrevocably (as a power coupled with
an interest) constitutes and appoints the Collateral Agent (as defined in
Section 7.14 hereof) and all officers, employees or agents designated by the
Collateral Agent, its attorney-in-fact with full power of substitution, for the
benefit of the Secured Parties,
(i) to take all appropriate action and to
execute all documents and instruments that may be necessary or
desirable to accomplish the purposes of this Agreement, and without
limiting the generality of the foregoing, Grantor hereby grants the
power to file one or more financing statements (including fixture
filings), continuation statements, filings with the United States
Patent and Trademark Office or United States Copyright Office (or any
successor office or any similar office in any other country) or other
documents for the purpose of perfecting, confirming, continuing,
enforcing or protecting the Security Interest granted by Grantor,
without the signature of Grantor, and naming Grantor as debtor and the
Collateral Agent and/or the Secured Parties as secured party; and
(ii) at any time following the Secured Parties'
lawful demand for payment of the Notes and the nonpayment thereof by
Grantor (i) to receive, endorse, assign and/or deliver any and all
notes, acceptances, checks, drafts, money orders or other evidences of
payment relating to the Collateral or any part thereof; (ii) to demand,
collect, receive payment of, give receipt for and give discharges and
releases of all or any of the Collateral; (iii) to sign the name of
Grantor on any invoice or ▇▇▇▇ of lading relating to any of the
Collateral; (iv) to send verifications of accounts to any account
debtor or any other Person liable for an account; (v) to commence and
prosecute any and all suits, actions or proceedings at law or in equity
in any court of competent jurisdiction to collect or otherwise realize
on all or any of the Collateral or to enforce any rights in respect of
any Collateral; (vi) to settle, compromise, compound, adjust or defend
any actions, suits or proceeding relating to all or any of the
Collateral; and (vii) to use, sell, assign, transfer, pledge, make any
agreement with respect to or otherwise deal with all or any of the
Collateral, and to do all other acts and things necessary to carry out
the purposes of this Agreement, as fully and completely as though the
Secured Parties were the absolute owner of the Collateral for all
purposes; provided, however, that nothing herein contained shall be
construed as requiring or obligating the Secured Parties to make any
commitment or to make any inquiry as to the nature or sufficiency of
any payment received by the Secured Parties, or to present or file any
claim or notice, or to take any action with respect to the Collateral
or any part thereof or the moneys due or to become due in respect
thereof or any property covered thereby, and no action taken or omitted
to be taken by the Secured Parties with respect to the Collateral or
any part thereof shall give rise to any defense, counterclaim or offset
in favor of Grantor or to any claim or action against the Secured
Parties.
(b) The provisions of this Article shall in no event
relieve Grantor of any of its obligations hereunder with respect to the
Collateral or any part thereof or impose any obligation on the Secured Parties
to proceed in any particular manner with respect to the Collateral or any part
thereof, or in any way limit the exercise by the Secured Parties of any other or
further right which it may have on the date of this Agreement or hereafter,
whether hereunder, by law or otherwise.
ARTICLE VI. REMEDIES
Section 6.1. Remedies upon Default.
(a) Upon the occurrence and during the continuance of an
Event of Default, Grantor agrees to deliver each item of its Collateral
to the Secured Parties on demand, and it is agreed that the Secured
Parties shall have the right to take any of or all the following
actions at the same or different times (but at all times subject to any
Existing Liens): with or without legal process and with or without
prior notice or demand for performance, to take possession of the
Collateral and without liability for trespass to enter any premises
where the Collateral may be located for the purpose of taking
possession of or removing the Collateral, exercise Grantor's right to
▇▇▇▇ and receive payment for completed work and, generally, to exercise
any and all rights afforded to a secured party under the Uniform
Commercial Code or other applicable law. Without limiting the
generality of the foregoing, Grantor agrees that the Secured Parties
shall have the right, subject to the mandatory requirements of
applicable law, to sell or otherwise dispose of all or any part of the
Collateral, at public or private sale or at any broker's board or on
any securities exchange, for cash, upon credit or for future delivery
as the Secured Parties shall deem appropriate. The Secured Parties
shall be authorized at any such sale (if it deems it advisable to do
so) to restrict the prospective bidders or purchasers to persons who
will represent and agree that they are purchasing the Collateral for
their own account for investment and not with a view to the
distribution or sale thereof, and upon consummation of any such sale
the Secured Parties shall have the right to assign, transfer and
deliver to the purchaser or purchasers thereof the Collateral so sold.
Each such purchaser at any such sale shall hold the property sold
absolutely, free from any claim or right on the part of Grantor, and
Grantor hereby waives (to the extent permitted by law) all rights of
redemption, stay and appraisal which Grantor now has or may at any time
in the future have under any rule of law or statute now existing or
hereafter enacted.
(b) The Secured Parties shall give Grantor ten (10) days'
written notice (which Grantor agrees is reasonable notice within the
meaning of Section 9-504(3) of the Uniform Commercial Code) of the
Secured Parties' intention to make any sale of Collateral. Such notice,
in the case of a public sale, shall state the time and place for such
sale and, in the case of a sale at a broker's board or on a securities
exchange, shall state the board or exchange at which such sale is to be
made and the day on which the Collateral, or portion thereof, will
first be offered for sale at such board or exchange. Any such public
sale shall be held at such time or times within ordinary business hours
and at such place or places as the Secured Parties may fix and state in
the notice (if any) of such sale. At any such sale, the Collateral, or
portion thereof, to be sold may be sold in one lot as an entirety or in
separate parcels, as the Secured Parties may (in their sole and
absolute discretion) determine. The Secured Parties shall not be
obligated to make any sale of any Collateral if they shall determine
not to do so, regardless of the fact that notice of sale of such
Collateral shall have been given. The Secured Parties may, without
notice or publication, adjourn any public or private sale or cause the
same to be adjourned from time to time by announcement at the time and
place fixed for sale, and such sale may, without further notice, be
made at the time and place to which the same was so adjourned. In case
any sale of all or any part of the Collateral is made on credit or for
future delivery, the Collateral so sold may be retained by the Secured
Parties until the
sale price is paid by the purchaser or purchasers thereof, but the
Secured Parties shall not incur any liability in case any such
purchaser or purchasers shall fail to take up and pay for the
Collateral so sold and, in case of any such failure, such Collateral
may be sold again upon like notice. At any public (or, to the extent
permitted by law, private) sale made pursuant to this Section, the
Secured Parties may bid for or purchase, free (to the extent permitted
by law) from any right of redemption, stay, valuation or appraisal on
the part of Grantor (all said rights being also hereby waived and
released to the extent permitted by law), the Collateral or any part
thereof offered for sale and may make payment on account thereof by
using any claim then due and payable to the Secured Parties from
Grantor as a credit against the purchase price, and the Secured Parties
may, upon compliance with the terms of sale, hold, retain and dispose
of such property without further accountability to Grantor therefor.
For purposes hereof, a written agreement to purchase the Collateral or
any portion thereof shall be treated as a sale thereof; the Secured
Parties shall be free to carry out such sale pursuant to such agreement
and Grantor shall not be entitled to the return of the Collateral or
any portion thereof subject thereto, notwithstanding the fact that
after the Secured Parties shall have entered into such an agreement all
Obligations have been paid in full. As an alternative to exercising the
power of sale herein conferred upon it, the Secured Parties may proceed
by a suit or suits at law or in equity to foreclose this Agreement and
to sell the Collateral or any portion thereof pursuant to a judgment or
decree of a court or courts having competent jurisdiction or pursuant
to a proceeding by a court-appointed receiver.
Section 6.2. Application of Proceeds. The Secured Parties shall apply
the proceeds of any collection or sale of the Collateral, as well as any
Collateral consisting of cash, as follows:
(a) FIRST, to the payment of all costs and expenses
incurred by the Secured Parties in connection with such collection or sale or
otherwise in connection with this Agreement or any of the Obligations, including
all court costs and the fees and expenses of its agents and legal counsel, and
any other costs or expenses incurred in connection with the exercise of any
right or remedy hereunder, under the Purchase Agreement, the Notes and the other
Transaction Documents;
(b) SECOND, to the payment in full of the Obligations;
and
(c) THIRD, to Grantor, its successors or assigns, or to
whomsoever may be lawfully entitled to receive the same, or as a court of
competent jurisdiction may otherwise direct.
Subject to the foregoing, the Secured Parties shall have absolute
discretion as to the time of application of such proceeds, moneys or balances in
accordance with this Agreement. Upon any sale of the Collateral by the Secured
Parties (including pursuant to a power of sale granted by statute or under a
judicial proceeding), the receipt of any such proceeds, moneys or balances by
the Secured Parties or of the officer making the sale shall be a sufficient
discharge to the purchaser or purchasers of the Collateral so sold and such
purchaser or purchasers shall not be obligated to see to the application of any
part of the purchase money paid over to the Secured Parties or such officer or
be answerable in any way for the misapplication thereof.
Section 6.3. Grant of License to Use Intellectual Property. For the
purpose of enabling the Secured Parties to exercise rights and remedies under
this Article at such time as the Secured Parties shall be lawfully entitled to
exercise such rights and remedies, Grantor hereby grants to the Secured Parties
an irrevocable, non-exclusive license (exercisable without payment of royalty or
other compensation to Grantor) to use, license or sub-license any of the
Collateral consisting of intellectual property now owned or hereafter acquired
by Grantor, and wherever the same may be located, and including in such license
reasonable 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. The use of such license by the Secured Parties
may be exercised, at the option of the Secured Parties, only following the
Secured Parties' lawful demand for payment of the Notes and the nonpayment
thereof by Grantor.
ARTICLE VII. MISCELLANEOUS
Section 7.1. Notices. All communications and notices hereunder to the
Grantor and to the Secured Parties shall (except as otherwise expressly
permitted herein) be in writing and delivered to the Grantor or the Secured
Parties, as the case may be, as provided in the Purchase Agreement.
Section 7.2. Security Interest Absolute. All rights of the Secured
Parties hereunder, the Security Interest and all obligations of Grantor
hereunder shall be absolute and unconditional irrespective of (a) any lack of
validity or enforceability of the Purchase Agreement, the Notes, any Transaction
Document or any agreement with respect to any of the Obligations or any other
agreement or instrument relating to any of the foregoing, (b) any change in the
time, manner or place of payment of, or in any other term of, all or any of the
Obligations, or any other amendment or waiver of or any consent to any departure
from the Purchase Agreement, the Notes, any Transaction Document or any other
agreement or instrument, (c) any exchange, release or non-perfection of any Lien
on other collateral, or any release or amendment or waiver of or consent under
or departure from any guarantee, securing or guaranteeing all or any of the
Obligations, or (d) any other circumstance that might otherwise constitute a
defense available to, or a discharge of, Grantor in respect of the Obligations
or this Agreement.
Section 7.3. Survival of Agreement. All covenants, agreements,
representations and warranties made by Grantor herein and in the certificates or
other instruments prepared or delivered in connection with or pursuant to this
Agreement shall be considered to have been relied upon by the Secured Parties
and shall survive the making of the loan and the execution and delivery to the
Secured Parties of the Notes, regardless of any investigation made by the
Secured Parties or on their behalf; and shall continue in full force and effect
until this Agreement shall terminate.
Section 7.4. Binding Effect; Several Agreement; Successors and
Assigns. This Agreement shall become effective as to Grantor when a counterpart
hereof executed on behalf of Grantor shall have been delivered to the Secured
Parties and a counterpart hereof shall have been executed on behalf of the
Secured Parties, and thereafter shall be binding upon Grantor and the Secured
Parties and their respective successors and assigns, and shall inure to the
benefit of Grantor, the Secured Parties and their respective successors and
assigns, except that Grantor shall not have the right to assign or transfer its
rights or obligations hereunder or any interest herein or in the Collateral (and
any such assignment or transfer shall be void) except as expressly
contemplated by this Agreement, the Purchase Agreement, the Notes or the other
Transaction Documents.
Section 7.5. Secured Parties' Fees and Expense; Indemnification.
(a) Grantor agrees to pay upon demand to the Secured
Parties the amount of any and all reasonable expenses, including all
reasonable fees, disbursements and other charges of its counsel and of
any experts or agents, which the Secured Parties may incur in
connection with (i) the administration of this Agreement (including the
customary fees and charges of the Secured Parties for any audits
conducted by them or on their behalf with respect to the accounts
inventory), (ii) the custody or preservation of, or the sale of,
collection from or other realization upon any of the Collateral, (iii)
the exercise, enforcement or protection of any of the rights of the
Secured Parties hereunder or (iv) the failure of Grantor to perform or
observe any of the provisions hereof.
(b) Grantor agrees to indemnify the Secured Parties and
the agent, contractors and employees of the Secured Parties
(collectively, the "Indemnitees") against, and hold each of them
harmless from, any and all losses, claims, damages, liabilities and
related expenses, including reasonable fees, disbursements and other
charges of counsel, incurred by or asserted against any of them arising
out of, in any way connected with, or as a result of, the execution,
delivery, or performance of this Agreement or any agreement or
instrument contemplated hereby or any claim, litigation, investigation
or proceeding relating hereto or to the Collateral, whether or not any
Indemnitee is a party thereto; provided that such indemnity shall not,
as to any Indemnitee, be available to the extent that such losses,
claims, damages, liabilities or related expenses are determined by a
court of competent jurisdiction by final and nonappealable judgment to
have resulted from the gross negligence or willful misconduct of such
Indemnitee.
(c) Any such amounts payable as provided hereunder shall
be additional Obligations secured hereby. The provisions of this
Section shall remain operative and in full force and effect regardless
of the termination of this Agreement, the Purchase Agreement, the Notes
or the other Transaction Documents, the consummation of the
transactions contemplated hereby, the repayment of any of the
Obligations, the invalidity or unenforceability of any term or
provision of this Agreement, the Purchase Agreement, the Notes or the
other Transaction Documents, or any investigation made by or on behalf
of the Secured Parties. All amounts due under this Section shall be
payable on written demand therefor.
Section 7.6. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT
GIVING EFFECT TO ANY OF THE CONFLICTS OF LAW PRINCIPLES WHICH WOULD RESULT IN
THE APPLICATION OF THE SUBSTANTIVE LAW OF ANOTHER JURISDICTION. THIS AGREEMENT
SHALL NOT BE INTERPRETED OR CONSTRUED WITH ANY PRESUMPTION AGAINST THE PARTY
CAUSING THIS AGREEMENT TO BE DRAFTED.
Section 7.7. Waivers; Amendment.
(a) No failure or delay of the Secured Parties in
exercising any power or right hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right or
power, or any abandonment or discontinuance of steps to enforce such a
right or power, preclude any other or further exercise thereof or the
exercise of any other right or power. The rights and remedies of the
Secured Parties hereunder and under the Purchase Agreement are
cumulative and are not exclusive of any rights or remedies that they
would otherwise have. No waiver of any provisions of this Agreement,
the Purchase Agreement, the Notes or the other Transaction Documents or
consent to any departure by Grantor therefrom shall in any event be
effective unless the same shall be permitted by paragraph (b) below,
and then such waiver or consent shall be effective only in the specific
instance and for the purpose for which given. No notice to or demand on
Grantor in any case shall entitle Grantor to any other or further
notice or demand in similar or other circumstances.
(b) Neither this Agreement nor any provision hereof may
be waived, amended or modified except pursuant to an agreement or
agreements, in writing entered into by the Secured Parties and Grantor.
Section 7.8. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES,
TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A
TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT
OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT, THE PURCHASE AGREEMENT OR THE
NOTES. EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY
OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER
PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING
WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN
INDUCED TO ENTER INTO THIS AGREEMENT, THE PURCHASE AGREEMENT AND THE NOTES, AS
APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN
THIS SECTION.
Section 7.9. Severability. In the event any one or more of the
provisions contained in this Agreement should be held invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein shall not in any way be affected or
impaired thereby (it being understood that the invalidity of a particular
provision in a particular jurisdiction shall not in and of itself affect the
validity of such provision in any other jurisdiction). The parties shall
endeavor in good-faith negotiations to replace the invalid, illegal or
unenforceable provisions with valid provisions the economic effect of which
comes as close as possible to that of the invalid, illegal or unenforceable
provisions.
Section 7.10. Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall constitute an original but all of which
when taken together shall constitute but one contract. Each party shall be
entitled to rely on a facsimile signature of any other party hereunder as if it
were an original.
Section 7.11. Jurisdiction; Consent to Service of Process.
(a) Grantor hereby irrevocably and unconditionally
submits, for itself and its property, to the nonexclusive jurisdiction
of any New York State court or Federal court of the United States of
America sitting in New York City, and any appellate court from any
thereof, in any action or proceeding arising out of or relating to this
Agreement, the Purchase Agreement or the Notes, or for recognition or
enforcement of any judgment, and each of the parties hereto hereby
irrevocably and unconditionally agrees that all claims in respect of
any such action or proceeding may be heard and determined in such New
York State or, to the extent permitted by law, in such Federal court.
Each of the parties hereto agrees that a final judgment in any such
action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided
by law. Nothing in this Agreement shall affect any right that the
Secured Parties may otherwise have to bring any action or proceeding
relating to this Agreement, the Purchase Agreement, the Notes or the
other Transaction Documents against Grantor or its properties in the
courts of any jurisdiction.
(b) Grantor hereby irrevocably and unconditionally
waives, to the fullest extent it may legally and effectively do so, any
objection which it may now or hereafter have to the laying of venue of
any suit, action or proceeding arising out of or relating to this
Agreement, the Purchase Agreement, the Notes or the other Transaction
Documents in any New York State or Federal court. Each of the parties
hereto hereby irrevocably waives, to the fullest extent permitted by
law, the defense of an inconvenient forum to the maintenance of such
action or proceeding in any such court.
(c) Each party to this Agreement irrevocably consents to
service of process in the manner provided for notices in Section 7.1.
Nothing in this Agreement will affect the right of any party to this
Agreement to process in any other manner permitted by law.
Section 7.12. Termination. This Agreement and the Security Interest
shall terminate when all the Obligations have been paid in full, at which time
the Secured Parties shall execute and deliver to Grantor, at Grantor's expense,
all Uniform Commercial Code termination statements and similar documents which
Grantor shall reasonably request to evidence such termination. Any execution and
delivery of termination statements or documents pursuant to this Section shall
be without recourse to or warranty by the Secured Parties.
Section 7.13. Prejudgment Remedy Waiver. Grantor acknowledges that
this Agreement, the Purchase Agreement, the Notes and the other Transaction
Documents evidence a commercial transaction and that it could, under certain
circumstances have the right, to notice of and hearing on the right of the
Secured Parties to obtain a prejudgment remedy, such as attachment, garnishment
and/or replevin, upon commencing any litigation against Grantor.
Notwithstanding, Grantor hereby waives, to the extent it may lawfully do so, all
rights to notice, judicial hearing or prior court order to which it might
otherwise have the right under any state or federal statute or constitution in
connection with the obtaining by the Secured Parties of any prejudgment remedy
by reason of this Agreement, the Purchase Agreement, the Notes, the other
Transaction Documents or by reason of the Obligations or any renewals or
extensions of the same. Grantor also waives, to the extent it may lawfully do
so, any and all objection which it might otherwise
assert, now or in the future, to the exercise or use by the Secured Parties of
any right of setoff, repossession or self help as may presently exist under
statute or common law.
Section 7.14. Collateral Agent.
(a) Each Secured Party hereby appoints ▇▇▇▇ ▇▇▇▇, P.A.
(the "Collateral Agent") as the Collateral Agent hereunder and each Secured
Party authorizes the Collateral Agent to take such action as agent on its behalf
and to exercise such powers under this Agreement and the other Transaction
Documents as are delegated to the Collateral Agent under such agreements and to
exercise such powers as are reasonably incidental thereto. Without limiting the
foregoing, each Secured Party hereby authorizes the Collateral Agent to execute
and deliver, and to perform its obligations under, each of the documents to
which the Collateral Agent is a party relating to security for the obligations
under the Notes, to exercise all rights, powers and remedies that the Collateral
Agent may have under such Transaction Documents and, in the case of the
Transaction Documents, to act as agent for the Secured Parties under such
Transaction Documents.
(b) As to any matters not expressly provided for by this
Agreement and the other document relating thereto (including enforcement or
collection), the Collateral Agent shall not be required to exercise any
discretion or take any action, but shall be required to act or to refrain from
acting (and shall be fully protected in so acting or refraining from acting)
upon the instructions of the Secured Parties, and such instructions shall be
binding upon all Secured Parties; provided, however, that the Collateral Agent
shall not be required to take any action that (i) the Collateral Agent in good
faith believes exposes it to personal liability unless the Collateral Agent
receives an indemnification satisfactory to it from the Secured Parties with
respect to such action or (ii) is contrary to this Agreement or applicable law.
The Collateral Agent agrees to give to each Secured Party prompt notice of each
notice given to it by the Grantor pursuant to the terms of this Agreement or the
other Transaction Documents. If the Collateral Agent receives conflicting
instructions from the Secured Parties it will not be required to act until it
receives instructions from the Secured Parties holding a majority of the Notes
then outstanding (calculated in dollar amounts rather than noteholders).
(c) In performing its functions and duties hereunder and
under the Transaction Documents and the other documents required to be executed
or delivered in connection therewith, the Collateral Agent is acting solely on
behalf of the Secured Parties and its duties are entirely administrative in
nature. The Collateral Agent does not assume and shall not be deemed to have
assumed any obligation other than as expressly set forth herein, in the
Transaction Documents and any other documents required to be executed or
delivered in connection therewith related hereto or any other relationship as
the agent, fiduciary or trustee of or for any Secured Party or holder of any
other obligation under this Agreement or the Notes. The Collateral Agent may
perform any of its duties under any Transaction Document by or through its
agents or employees.
(d) None of the Collateral Agent, any of its affiliates
or any of their respective directors, officers, agents or employees shall be
liable for any action taken or omitted to be taken by it, him, her or them under
or in connection with this Agreement or the other Transaction Documents, except
for its, his, her or their own gross negligence or willful misconduct.
(e) Each Secured Party acknowledges that it shall,
independently and without reliance upon the Collateral Agent or any other
Secured Party conduct its own independent investigation of the financial
condition and affairs of the Grantor and its Subsidiaries in connection with the
issuance of the Securities. Each Secured Party also acknowledges that it shall,
independently and without reliance upon the Collateral Agent or any other
Secured Party and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under this Agreement and other Transaction Documents. For
avoidance of doubt, each Secured Party represents that it has had no contact
with the Collateral Agent; that the Collateral Agent has had no role in the
negotiation or preparation of the Transaction Documents and was contacted after
such negotiations and documents were finalized for the purpose of serving solely
in the administrative role of Collateral Agent under this Agreement.
(f) Each Secured Party agrees to indemnify the Collateral
Agent and each of its affiliates, and each of their respective directors,
officers, employees, agents and advisors (to the extent not reimbursed by the
Grantor), from any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses and disbursements (including fees,
expenses and disbursements of financial and legal advisors) of any kind or
nature whatsoever that may be imposed on, incurred by, or asserted against, the
Collateral Agent or any of its affiliates, directors, officers, employees,
agents and advisors in any way relating to or arising out of this Agreement or
the other Transaction Documents or any action taken or omitted by the Collateral
Agent under this Agreement or the document related thereto; provided, however,
that no Secured Party shall be liable for any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements resulting from the Collateral Agent's or such
affiliate's gross negligence or willful misconduct.
(g) The Collateral Agent may resign at any time by giving
written notice thereof to the Secured Parties and the Grantor. Upon any such
resignation, the Secured Parties holding a majority of the Notes then
outstanding shall have the right to appoint a successor Collateral Agent. If no
successor Collateral Agent shall have been so appointed by the Secured Parties
holding a majority of the Notes then outstanding, and shall have accepted such
appointment, within 30 days after the retiring Collateral Agent's giving of
notice of resignation, then the retiring Collateral Agent may, on behalf of the
Secured Parties, appoint a successor Collateral Agent, selected from among the
Secured Parties. Upon the acceptance of any appointment as Collateral Agent by a
successor Collateral Agent, such successor Collateral Agent shall succeed to,
and become vested with, all the rights, powers, privileges and duties of the
retiring Collateral Agent, and the retiring Collateral Agent shall be discharged
from its duties and obligations under this Agreement, the Transaction Documents
and any other documents required to be executed or delivered in connection
therewith. Prior to any retiring Collateral Agent's resignation hereunder as
Collateral Agent, the retiring Collateral Agent shall take such action as may be
reasonably necessary to assign to the successor Collateral Agent its rights as
Collateral Agent under the Transaction Documents. After such resignation, the
retiring Collateral Agent shall continue to have the benefit of this Agreement
as to any actions taken or omitted to be taken by it while it was Collateral
Agent under this Agreement, the Transaction Documents and any other documents
required to be executed or delivered in connection therewith.
(h) Each Secured Party agrees that any action taken by
the Collateral Agent in accordance with the provisions of this Agreement or of
the other document relating thereto, and
the exercise by the Collateral Agent or the Secured Parties of the powers set
forth herein or therein, together with such other powers as are reasonably
incidental thereto, shall be authorized and binding upon all of the Secured
Parties. The Secured Parties holding a majority of the Notes then outstanding
may elect to remove or replace the Collateral Agent.
(i) Each of the Secured Parties hereby directs, in
accordance with the terms hereof, the Collateral Agent to release (or in the
case of clause (ii) below, release or subordinate) any Lien held by the
Collateral Agent for the benefit of the Secured Parties against any of the
following: (i) all of the Collateral upon payment and satisfaction in full of
all obligations under the Notes and all other obligations under the Transaction
Documents that the Collateral Agent has been notified in writing are then due
and payable and (ii) any part of the Collateral sold or disposed of by the
Grantor or any Subsidiary if such sale or disposition is permitted by this
Agreement and the Notes (or permitted pursuant to a waiver or consent of a
transaction otherwise prohibited by this Agreement and the Notes). Each of the
Secured Parties hereby directs the Collateral Agent to execute and deliver or
file such termination and partial release statements and do such other things as
are necessary to release Liens to be released pursuant to this Section 7.14
promptly upon the effectiveness of any such release.
(j) The contact information for the Collateral Agent is:
▇▇▇▇ ▇▇▇▇, P.A., ▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇, ▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇
▇▇▇▇▇▇▇▇. The fax number for ▇▇▇▇ ▇▇▇▇, P.A. is (▇▇▇) ▇▇▇-▇▇▇▇ and the E-mail
address is ▇▇▇▇▇▇▇▇▇@▇▇▇▇▇▇▇▇.▇▇▇. The telephone number for ▇▇▇▇ ▇▇▇▇, P.A. is
(▇▇▇) ▇▇▇-▇▇▇▇.
(k) The Collateral Agent:
(i) shall not be responsible in any
manner for the validity, correctness or sufficiency of any
document or instrument received by or made available to it, in
its capacity as Collateral Agent hereunder.
(ii) shall be entitled to act upon any
written certificate, statement, notice, demand, request,
consent, agreement or other instrument whatever, not only in
reliance upon its due execution and the validity and
effectiveness of its provisions, but also as to the accuracy
and completeness of any information therein contained, which
the Collateral Agent shall in good faith believe to be genuine
and to have been signed or presented by any authorized person.
(iii) shall be entitled to request and
receive from any party hereto such documents in addition to
those provided for herein as the Collateral Agent may deem
necessary to resolve any questions of fact involved in the
administration of its duties hereunder.
(iv) may, at the expense of the
remaining parties, consult independent counsel of its choice
in respect to any question relating to its duties or
responsibilities under this Agreement, and shall not
be liable for any action taken or omitted in good faith on
advice of such counsel.
(v) shall be under no obligation to
advance any monetary sum in connection with the maintenance or
administration of this Agreement, to institute or defend any
action, suit or legal proceeding in connection herewith, or to
take any other action likely to involve the Collateral Agent
in expense, unless first indemnified by the remaining parties
to the Collateral Agent's satisfaction.
(vi) shall not be bound by any amendment
to this Agreement or by any other such amendment or agreement
unless the same shall have been executed by the Collateral
Agent.
(vii) shall have only such duties and
responsibilities as are expressly set forth in this Agreement
in the performance of its obligations hereunder.
(viii) shall be indemnified and held
harmless by the remaining parties against any and all
liabilities incurred by it hereunder (including all costs,
expenses and fees incurred in defending any legal action or
administrative proceeding or in resisting any claim), except
for those resulting from its own willful misconduct or gross
negligence.
(ix) may, if it becomes uncertain
concerning its rights and responsibilities with respect to its
duties or if it receives instructions with respect to the
Collateral that it believes to be in conflict with this
Agreement or is advised that a dispute has arisen with respect
to its duties under this Agreement, without liability, refrain
from taking any action until it is directed otherwise in a
writing signed by all of the Secured Parties or by an order of
a court of competent jurisdiction. The Collateral Agent is not
obligated to institute or defend any legal proceedings,
although it may, in its sole discretion and at the remaining
parties' expense, institute or defend such proceedings
(including proceedings seeking a declaratory judgment) and
join interested parties.
(x) The Collateral Agent will be paid a
fee of $3,000 for its agreement to serve as the Collateral
Agent. This fee is payable upon the execution of this
Agreement.
[SIGNATURE PAGES FOLLOW]
IN WITNESS WHEREOF, the parties have duly executed this Security
Agreement as of the day and year first written above.
GLOWPOINT, INC.
By:
-------------------------------------
Name:
Title:
SECURED PARTY:
By:
-------------------------------------
Name:
Title:
ACKNOWLEDGED AND AGREED:
COLLATERAL AGENT:
By:
---------------------------------
Name:
Title:
EXHIBIT A
SECURED PARTIES
SCHEDULE A
STATE OF INCORPORATION; CHIEF EXECUTIVE OFFICE; FILING LOCATIONS
State of Incorporation:
Delaware
Chief Executive Office:
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Filing Locations:
Secretary of State of the State of Delaware
SCHEDULE 3.3
EXISTING LIENS
None.
SCHEDULE 3.4
ABSENCE OF OTHER LIENS
None.
SCHEDULE 4.8
INSURANCE
Business Property Insurance - $5.5 million