FIRST LIEN PLEDGE AND SECURITY AGREEMENT
Execution
Copy
This
FIRST
LIEN PLEDGE AND SECURITY AGREEMENT (the
"Security
Agreement"),
dated
as of August 17, 2007, between ENCOMPASS
GROUP AFFILIATES, INC.,
a
Delaware corporation, (“Encompass”),
ADVANCED
COMMUNICATIONS TECHNOLOGIES, INC.,
a
Florida corporation (“ACT”),
SPECTRUCELL,
INC.,
a
Delaware corporation (“SpectruCell”),
▇▇▇▇▇▇
STREET INVESTMENTS, INC.,
a
Delaware corporation (“▇▇▇▇▇▇
Street”),
Cyber-Test, Inc. a Delaware corporation (“Cyber-Test”)
and
▇▇▇▇▇
▇▇▇▇▇▇▇, INC., a
Florida
corporation (“▇▇▇▇▇
▇▇▇▇▇▇▇”
and,
together with Encompass, ACT, SpectruCell, ▇▇▇▇▇▇ Street and Cyber-Test,
each a
“Grantor”)
and
SANKATY
ADVISORS, LLC,
in its
capacity as first lien collateral agent (the “First
Lien Agent”)
for
the Senior Note Purchasers.
WITNESSETH:
WHEREAS,
pursuant to that certain Note Purchase Agreement, dated as of the date hereof,
by and among Encompass, ACT, SpectruCell, ▇▇▇▇▇▇ Street, Cyber-Test, ▇▇▇▇▇
▇▇▇▇▇▇▇, Persons designated as “Guarantors” on the signature pages thereof,
First Lien Agent, Second Lien Collateral Agent and the persons signatory
thereto
as Note Purchasers (including all annexes, exhibits and schedules thereto,
as
from time to time amended, restated, supplemented or otherwise modified,
the
“Note
Purchase Agreement”),
the
Senior Note Purchasers have agreed to purchase Senior Notes due 2012 and
the
Subordinated Note Purchasers have agreed to purchase Subordinated Notes due
2013
(the “Notes”);
WHEREAS,
in
order to induce the Senior Note Purchasers to enter into the Note Purchase
Agreement and other Note Documents and to induce the Senior Note Purchasers
to
purchase the Senior Notes as provided for in the Note Purchase Agreement,
each
Grantor has agreed to grant a continuing Lien on the Collateral (each as
hereinafter defined) to secure the Senior Note Obligations as provided
herein;
NOW,
THEREFORE,
in
consideration of the premises and mutual covenants herein contained and for
other good and valuable consideration, the receipt and sufficiency of which
are
hereby acknowledged, the parties hereto agree as follows:
1. DEFINED
TERMS.
(a) All
capitalized terms used but not otherwise defined herein have the meanings
given
to them in the Note Purchase Agreement or in Appendix
I
thereto.
All other terms contained in this Security Agreement, unless the context
indicates otherwise, have the meanings provided for by the Code to the extent
the same are used or defined therein.
(b) “Account
Debtor”
means
any Person who may become obligated to any Note Party under, with respect
to, or
on account of, an Account, Chattel Paper or General Intangibles (including
a
payment intangible).
(c) “Accounts”
means
collectively all “accounts,” as such term is defined in the Code, now owned or
hereafter acquired by any Note Party, including (a) all accounts receivable,
other receivables, book debts and other forms of obligations (including any
such
obligations that may be characterized as an account or contract right under
the
Code),
(b)
all of each Note Party’s rights in, to and under all purchase orders or receipts
for goods or services, (c) all of each Note Party’s rights to any goods
represented by any of the foregoing (including unpaid sellers’ rights of
rescission, replevin, reclamation and stoppage in transit and rights to
returned, reclaimed or repossessed goods), (d) all rights to payment due
to any
Note Party for property sold, leased, licensed, assigned or otherwise disposed
of, for a policy of insurance issued or to be issued, for a secondary obligation
incurred or to be incurred, or for services rendered or to be rendered by
such
Note Party or in connection with any other transaction (whether or not yet
earned by performance on the part of such Note Party) and (e) all collateral
security of any kind, given by any Account Debtor or any other Person with
respect to any of the foregoing.
(d) “Code”
means
the Uniform Commercial Code as the same may, from time to time, be enacted
and
in effect in the State of New York; provided,
that to
the extent that the Code is used to define any term herein or in any other
Note
Document and such term is defined differently in different Articles of the
Code,
the definition of such term contained in Article 9 shall govern; provided further,
that in
the event that, by reason of mandatory provisions of law, any or all of the
attachment, perfection or priority of, or remedies with respect to, First
Lien
Agent’s or any Note Purchaser’s Lien on any Collateral is governed by the
Uniform Commercial Code as enacted and in effect in a jurisdiction other
than
the State of New York, the term “Code”
shall
mean the Uniform Commercial Code as enacted and in effect in such other
jurisdiction solely for purposes of the provisions thereof relating to such
attachment, perfection, priority or remedies and for purposes of definitions
related to such provisions.
(e) “Contracts”
means
all “contracts,” as such term is defined in the Code, now owned or hereafter
acquired by any Note Party, in any event, including all contracts, undertakings,
or agreements (other than rights evidenced by Chattel Paper), Documents or
Instruments in or under which any Note Party may now or hereafter have any
right, title or interest, including any agreement relating to the terms of
payment or the terms of performance of any Account.
(f) “Control
Letter”
means
a
letter agreement between First Lien Agent and (i) the issuer of uncertificated
securities with respect to uncertificated securities in the name of any Note
Party, (ii) a securities intermediary with respect to securities, whether
certificated or uncertificated, securities entitlements and other financial
assets held in a securities account in the name of any Note Party, (iii)
a
futures commission merchant or clearing house, as applicable, with respect
to
commodity accounts and commodity contracts held by any Note Party, whereby,
among other things, the issuer, securities intermediary or futures commission
merchant, as applicable, disclaims, subordinates or limits its security interest
in the applicable financial assets, acknowledges the Lien of First Lien Agent,
for the benefit of Senior Note Purchasers, on such financial assets, and
agrees
to follow the instructions or entitlement orders of First Lien Agent without
further consent by the affected Note Party.
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(g) “Copyrights”
means
all of the following now owned or hereafter adopted or acquired by any Note
Party: (a) all copyrights and General Intangibles of like nature (whether
registered or unregistered), all registrations and recordings thereof, and
all
applications in connection therewith, including all registrations, recordings
and applications in the United States Copyright Office or in any similar
office
or agency of the United States, any state or territory thereof, or any other
country or any political subdivision thereof, and (b) all reissues, extensions
or renewals thereof.
(h) “License”
means
any Copyright License, Patent License, Trademark License or other license
of
rights or interests now held or hereafter acquired by any Note
Party.
(i) “Patents”
means
all of the following in which any Note Party now holds or hereafter acquires
any
interest: (a) all letters patent of the United States or of any other country,
all registrations and recordings thereof, and all applications for letters
patent of the United States or of any other country, including registrations,
recordings and applications in the United States Patent and Trademark Office
or
in any similar office or agency of the United States, any state, or any other
country, and (b) all reissues, continuations, continuations-in-part or
extensions thereof.
(j) “Software”
shall
mean all source and object code now owned or hereafter acquired by any Note
Party.
(k) “Trademarks”
means
all of the following now owned or hereafter existing or adopted or acquired
by
any Note Party: (a) all trademarks, trade names, corporate names, business
names, trade styles, service marks, logos, other source or business identifiers,
prints and labels on which any of the foregoing have appeared or appear,
designs
and general intangibles of like nature (whether registered or unregistered
and
any derivatives thereof), all registrations and recordings thereof, and all
applications in connection therewith, including registrations, recordings
and
applications in the United States Patent and Trademark Office or in any similar
office or agency of the United States, any state or territory thereof, or
any
other country or any political subdivision thereof; (b) all reissues, extensions
or renewals thereof; and (c) all goodwill associated with or symbolized by
any
of the foregoing.
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(l) "Uniform
Commercial Code jurisdiction"
means
any jurisdiction that has adopted all or substantially all of Article 9 as
contained in the 2004 Official Text of the Uniform Commercial Code, as
recommended by the National Conference of Commissioners on Uniform State
Laws
and the American Law Institute, together with any subsequent amendments or
modifications to the Official Text.
2. GRANT
OF LIEN.
(a) To
secure
the prompt and complete payment, performance and observance of all of the
Senior
Note Obligations (specifically including, without limitation, each Grantor’s
Note Obligations arising under the cross-guaranty provisions of Section 10
of
the Note Purchase Agreement), the Grantor hereby grants, assigns, conveys,
mortgages, pledges, hypothecates and transfers to First Lien Agent, for the
benefit of Senior Note Purchasers, a first priority Lien upon all of its
right,
title and interest in, to and under all personal property and other assets,
whether now owned by or owing to, or hereafter acquired by or arising in
favor
of the Grantor (including under any trade names, styles or derivations thereof),
and whether owned or consigned by or to, or leased from or to, the Grantor,
and
regardless of where located (all of which being hereinafter collectively
referred to as the “Collateral”),
including:
(i) all
Accounts;
(ii) all
Chattel Paper;
(iii) all
Documents;
(iv) all
General Intangibles (including payment intangibles and Software);
(v) all
Goods
(including Inventory, Equipment and Fixtures);
(vi) all
Instruments;
(vii) all
Investments;
(viii) all
Deposit Accounts of the Grantor;
(ix) all
money, cash or cash equivalents of the Grantor;
(x) all
supporting obligations and letter-of-credit rights of the Grantor;
(xi) all
commercial tort claims, including, without limitation, those set forth on
Schedule I;
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(xii) all
Securities and Investment Property, including without limitation the shares
of
stock or other equity interests listed on Schedule VI;
(xiii) all
Intellectual Property; and
(xiv) to
the
extent not otherwise included, all Proceeds, insurance claims and other rights
to payments not otherwise included in the foregoing and products of the
foregoing and all accessions to, substitutions and replacements for, and
rents
and profits of, each of the foregoing.
(b) In
addition, to secure the prompt and complete payment, performance and observance
of the Senior Note Obligations and in order to induce First Lien Agent and
Senior Note Purchasers as aforesaid, the Grantor hereby grants to First Lien
Agent, for the benefit of Senior Note Purchasers, a right of setoff against
the
property of the Grantor held by First Lien Agent or any Senior Note Purchaser,
consisting of property described above in Section
2(a)
now or
hereafter in the possession or custody of or in transit to First Lien Agent
or
any Senior Note Purchaser, for any purpose, including safekeeping, collection
or
pledge, for the account of the Grantor, or as to which the Grantor may have
any
right or power.
(c) Grantor
hereby acknowledges and agrees that upon the payment in full of the Senior
Notes, the First Lien Agent shall deliver (or cause to be delivered) to
the
Second Lien Collateral Agent such
Collateral that has been pledged to the Senior Note Purchasers under the
Note
Purchase Agreement and is in the possession of the First Lien Agent at the
time
of such payment in full of the Senior Notes, provided,
that,
in the
event any such Collateral comes into the possession of Grantor upon, or at
any
time following, the payment in full of the Senior Notes, it shall promptly
deliver the same to the Second Lien Collateral Agent pursuant
hereto.
(d) Grantor
and the First Lien Agent acknowledge their mutual intent that all security
interests contemplated herein are given as a contemporaneous exchange for
new
value to Grantor, regardless of when advances to Grantor are actually made
or
when the Collateral is created or acquired.
3. FIRST
LIEN AGENT’S AND SENIOR NOTE PURCHASERS’ RIGHTS: LIMITATIONS ON FIRST LIEN
AGENT’S AND SENIOR NOTE PURCHASERS’ OBLIGATIONS.
(a) It
is
expressly agreed by Grantor that, anything herein to the contrary
notwithstanding, the Grantor shall remain liable under each of its Contracts
and
each of its Licenses to observe and perform all the conditions and obligations
to be observed and performed by it thereunder. Neither First Lien Agent nor
any
Senior Note Purchaser shall have any obligation or liability under any Contract
or License by reason of or arising out of this Security Agreement or the
granting herein of a Lien thereon or the receipt by First Lien Agent or any
Senior Note Purchaser of any payment relating to any Contract or License
pursuant hereto. Neither First Lien Agent nor any Senior Note Purchaser shall
be
required or obligated in any manner to perform or fulfill any of the obligations
of the Grantor under or pursuant to any Contract or License, or to make any
payment, or to make any inquiry as to the nature or the sufficiency of any
payment received by it or the sufficiency of any performance by any party
under
any Contract or License, or to present or file any claims, or to take any
action
to collect or enforce any performance or the payment of any amounts which
may
have been assigned to it or to which it may be entitled at any time or
times.
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(b) First
Lien Agent may at any time after an Event of Default has occurred and be
continuing (or, if an Event of Default shall have occurred and be continuing,
if
any rights of set-off or contra accounts may be asserted with respect to
the
following), without prior notice to the Grantor, notify Account Debtors and
other Persons obligated on the Collateral that First Lien Agent has a security
interest therein, and that payments shall be made directly to First Lien
Agent.
Upon the request of First Lien Agent during the continuance of an Event of
Default, the Grantor shall so notify Account Debtors and other Persons obligated
on Collateral. Once any such notice has been given to any Account Debtor
or
other Person obligated on the Collateral, the Grantor shall not give any
contrary instructions to such Account Debtor or other Person without First
Lien
Agent’s prior written consent.
(c) First
Lien Agent may at any time in First Lien Agent’s own name, in the name of a
nominee of First Lien Agent or in the name of the Grantor communicate (by
mail,
telephone, facsimile or otherwise) with Account Debtors, parties to Contracts
and obligors in respect of Instruments to verify with such Persons, to First
Lien Agent’s satisfaction, the existence, amount, terms of, and any other matter
relating to, Accounts, payment intangibles, Instruments or Chattel Paper.
If a
Default or Event of Default shall have occurred and be continuing, the Grantor,
at its own expense, shall prepare and deliver to First Lien Agent and each
Senior Note Purchaser at any time and from time to time promptly upon First
Lien
Agent’s request the following reports with respect to the Grantor: (i) a
reconciliation of all Accounts; (ii) an aging of all such Accounts; (iii)
trial
balances; and (iv) a test verification of Accounts as First Lien Agent may
request. Upon request by First Lien Agent, the Grantor, at its own expense,
shall deliver to First Lien Agent the results of each physical verification,
if
any, which the Grantor may in its discretion have made, or caused any other
Person to have made on its behalf, of all or any portion of its
Inventory.
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4. REPRESENTATIONS
AND WARRANTIES.
The
Grantor represents and warrants that:
(a) (i)
The
Grantor has rights in and the power to transfer each item of the Collateral
upon
which it purports to ▇▇▇▇▇ ▇ ▇▇▇▇ hereunder free and clear of any and all
Liens,
other than Permitted Encumbrances.
(b) No
effective security agreement, financing statement, equivalent security or
Lien
instrument or continuation statement covering all or any part of the Collateral
is on file or of record in any public office, except such as may have been
filed
(i) by the Grantor in favor of First Lien Agent pursuant to this Security
Agreement or the other Note Documents, (ii) by the Grantor in favor of the
Second Lien Collateral Agent pursuant to the Second Lien Security Agreement
or
the other Note Documents, and (iii) in connection with any other Permitted
Encumbrances.
(c) This
Security Agreement is effective to create a valid and continuing Lien on
and
upon the filing of the appropriate financing statements in the correct filing
office of the respective jurisdictions listed on Schedule
II
hereto,
a perfected Lien in favor of First Lien Agent, for the benefit of Senior
Note
Purchasers, on the Collateral with respect to which a Lien may be perfected
by
filing pursuant to the Code. Subject to Permitted Encumbrances, such Lien
is
superior and prior to the rights of all other Persons and is enforceable
as such
as against any and all creditors of and purchasers from the Grantor (other
than
purchasers and lessees of Inventory in the ordinary course of business or
to the
extent permitted under the Note Purchase Agreement). All action by the Grantor
necessary or desirable to protect and perfect such Lien on each item of the
Collateral has been duly authorized by the Grantor to be taken by First Lien
Agent.
(d) Schedule
III
hereto
lists, as of the date of this Security Agreement, all Instruments and letter
of
credit rights of the Grantor evidencing obligations of more than $25,000
individually or in the aggregate. All action by the Grantor necessary or
desirable to protect and perfect the Lien of First Lien Agent on each item
set
forth on Schedule
III
has been
duly taken by the Grantor. The Lien of First Lien Agent, for the benefit
of the
Senior Note Purchasers, on the Collateral listed on Schedule
III
hereto
is prior to all other Liens, except Permitted Encumbrances, and is enforceable
as such against any and all creditors of and purchasers from the
Grantor.
(e) The
Grantor’s name as it appears in official filings in the state of its
incorporation or other organization, the type of entity of the Grantor
(including corporation, partnership, limited partnership or limited liability
company), organizational identification number issued by the Grantor’s state of
incorporation or organization or a statement that no such number has been
issued, the Grantor’s state of organization or incorporation, the location of
the Grantor’s chief executive office, principal place of business, and as of the
date of this Security Agreement, all offices, warehouses and premises where
Collateral is located other than (i) Collateral in transit between Grantor’s
locations as indicated on Schedule 5.2.1 of the Note Purchase Agreement,
and
(ii) Equipment with third parties for repair so long as such Equipment does
not
exceed $50,000 in the aggregate and at no time will such Equipment remain
at a
location other than listed in Schedule 5.2.1 of the Note Purchase Agreement
for
more than 120 days, and the locations of its books and records concerning
the
Collateral as of the date of this Security Agreement are set forth on
Schedule IV
hereto.
The Grantor has only one state of incorporation or organization.
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(f) With
respect to the Accounts, except as specifically disclosed in the most recent
collateral report delivered to the Senior Note Purchasers (i) they represent
bona fide sales of Inventory or rendering of services to Account Debtors
in the
ordinary course of the Grantor’s business and are not evidenced by a judgment or
instrument; (ii) to the Grantor’s knowledge, there are no material setoffs,
claims or disputes existing or asserted with respect thereto and the Grantor
has
not made any agreement with any Account Debtor for any extension of time
for the
payment thereof, any compromise or settlement for less than the full amount
thereof, any release of any Account Debtor from liability therefor, or any
deduction therefrom except a discount or allowance allowed by the Grantor
in the
ordinary course of its business and consistent with past practices; (iii)
to the
Grantor’s knowledge, there are no facts, events or occurrences which impairs the
validity or enforceability thereof in any material respect or could reasonably
be expected to reduce the amount payable thereunder as shown on the Grantor’s
books and records and any invoices, statements and collateral reports delivered
to First Lien Agent and Senior Note Purchasers with respect thereto in any
material respect; (iv) the Grantor has not received any notice of proceedings
or
actions which are threatened or pending against any Account Debtor which
might
result in any adverse change in such Account Debtor’s financial condition; and
(v) the Grantor does not have knowledge that any Account Debtor is unable
generally to pay its debts as they become due. Further with respect to the
Accounts (x) the amounts shown on all invoices, statements and collateral
reports which may be delivered to the First Lien Agent with respect thereto
are
actually owing to the Grantor as indicated thereon and are not contingent
in any
material respect; (y) no payments have been or shall be made thereon except
payments promptly delivered to the applicable Deposit Accounts in the ordinary
course of its business and consistent with past practices; and (z) to the
Grantor’s knowledge, all Account Debtors have the capacity to contract.
(g) With
respect to any Inventory scheduled or listed on the most recent collateral
report delivered to First Lien Agent pursuant to the terms of this Security
Agreement or the Note Purchase Agreement, (i) as of the date of this Security
Agreement, such Inventory is located at one of the Grantor’s locations set forth
on Schedule
IV
hereto,
(iii) subject to Permitted Encumbrances, the Grantor has good, indefeasible
and
merchantable title to such Inventory and such Inventory is not subject to
any
Lien or security interest or document whatsoever except for the Lien granted
to
First Lien Agent, for the benefit of the Senior Note Purchasers, and (iv)
except
as specifically disclosed in the most recent collateral report delivered
to
First Lien Agent, such Inventory is of good and merchantable quality in all
material respects, free from any material defects.
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(h) The
Grantor does not have any interest in, or title to, any Patent, Trademark
or
Copyright as of the date of this Security Agreement except as set forth in
Schedule V
hereto.
This Security Agreement is effective to create a valid and continuing Lien
on
and, upon filing of the Copyright Security Agreements with the United States
Copyright Office and filing of the Patent Security Agreements and the Trademark
Security Agreements with the United States Patent and Trademark Office,
perfected Liens in favor of First Lien Agent on the Grantor’s Patents,
Trademarks and Copyrights and such perfected Liens are enforceable as such
as
against any and all creditors of and purchasers from the Grantor except holders
of Permitted Encumbrances on any Patent, Trademark or Copyright securing
Indebtedness that is permitted under the Note Purchase Agreement. Upon filing
of
the Copyright Security Agreements with the United States Copyright Office
and
filing of the Patent Security Agreements and the Trademark Security Agreements
with the United States Patent and Trademark Office and the filing of appropriate
financing statements listed on Schedule II
hereto,
all action necessary or desirable to protect and perfect First Lien Agent’s Lien
on the Grantor’s Patents, Trademarks or Copyrights has been duly authorized by
the Grantor to be taken by First Lien Agent.
(i) The
Securities are not subject to any purchase agreement, voting trust or other
agreement affecting, restricting, or limiting the sale, transfer, disposition
or
voting rights concerning said Securities
5. COVENANTS.
The
Grantor covenants and agrees with First Lien Agent, for the benefit of Senior
Note Purchasers, that from and after the date of this Security Agreement
and so
long as any Senior Note remains outstanding:
(a) Further
Assurances: Pledge of Instruments.
(i) At
any
time and from time to time, upon the request of First Lien Agent and at the
sole
expense of Grantor, the Grantor shall promptly and duly execute and deliver
any
and all such further instruments and documents and take such further actions
as
First Lien Agent may reasonably deem desirable to obtain the full benefits
of
this Security Agreement and of the rights and powers herein granted, including
(A) using its commercially reasonable efforts to secure all consents and
approvals necessary or appropriate for the collateral assignment to or for
the
benefit of First Lien Agent of any License or Contract held by the Grantor
and
to enforce the security interests granted hereunder; and (B) filing any
financing or continuation statements under the Code with respect to the Liens
granted hereunder or under any other Note Document as to those jurisdictions
that are not Uniform Commercial Code jurisdictions.
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(ii) Unless
First Lien Agent shall otherwise consent in writing (which consent may be
revoked), the Grantor shall deliver to First Lien Agent all Collateral
consisting of negotiable documents, certificated securities, and Instruments
(in
each case, accompanied by stock powers, allonges or other instruments of
transfer executed in blank) which are not subject to Permitted Encumbrances,
evidencing obligations in excess of $25,000 individually, promptly after
such
Note Party receives the same.
(iii) The
Grantor shall obtain or use its commercially reasonable efforts to obtain
waivers or subordinations of Liens from landlords of property on which material
Collateral is located when and to the extent required by the Note Purchase
Agreement.
(iv) If
required by the terms of the Note Purchase Agreement and not waived by First
Lien Agent in writing (which waiver may be revoked) or if requested by the
First
Lien Agent or any Senior Note Purchaser, the Grantor shall use commercially
reasonable efforts to obtain authenticated Control Letters from each issuer
of
uncertificated securities, securities intermediary, or commodities intermediary
issuing or holding any financial assets or commodities to or for the
Grantor.
(v) The
Grantor shall obtain a deposit account control agreement with each bank or
financial institution holding a Deposit Account (other than payroll accounts)
for the Grantor to the extent required by the Note Purchase Agreement.
(vi) The
Grantor that is or becomes the beneficiary of a letter of credit having face
amounts of $25,000 individually, or in the aggregate, or more shall promptly,
and in any event within ten (10) Business Days after becoming a beneficiary,
notify First Lien Agent thereof and use commercially reasonable efforts to
enter
into a tri-party agreement with First Lien Agent and the issuer and/or
confirmation bank with respect to letter-of-credit rights assigning such
letter-of-credit rights to First Lien Agent and directing all payments
thereunder to the collection account, all in form and substance reasonably
satisfactory to First Lien Agent.
(vii) The
Grantor shall take all steps reasonably necessary to grant the First Lien
Agent
control of all electronic chattel paper in accordance with the Code and all
“transferable records” as defined in each of the Uniform Electronic Transactions
Act and the Electronic Signatures in Global and National Commerce
Act.
(viii) The
Grantor hereby irrevocably authorizes the First Lien Agent at any time and
from
time to time to file in any filing office in any Uniform Commercial Code
jurisdiction any initial financing statements and amendments thereto that
(a)
indicate the Collateral is described as set forth in Section 2, hereof,
regardless of whether any particular asset comprised in the Collateral falls
within the scope of Article 9 of the Code or such jurisdiction, or as being
of
an equal or lesser scope or with greater detail and (b) contain any other
information required by part 5 of Article 9 of the Code for the sufficiency
or
filing office acceptance of any financing statement or amendment, including
(i)
whether the Grantor is an organization, the type of organization and any
organization identification number issued to the Grantor, and (ii) in the
case
of a financing statement filed as a fixture filing or indicating Collateral
as
as-extracted collateral or timber to be cut, a sufficient description of
real
property to which the Collateral relates. The Grantor agrees to furnish any
such
information to the First Lien Agent promptly upon request. The Grantor also
ratifies its authorization for the First Lien Agent to have filed in any
Uniform
Commercial Code jurisdiction any initial financing statements or amendments
thereto if filed prior to the date hereof.
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(ix) The
Grantor shall promptly, and in any event within ten (10) Business Days after
the
same is acquired by it in which the claim exceeds $100,000, notify First
Lien
Agent of any commercial tort claim (as defined in the Code) acquired by it
and
unless otherwise consented by First Lien Agent, the Grantor shall enter into
a
supplement to this Security Agreement, granting to First Lien Agent a Lien
in
such commercial tort claim.
(x) Upon
any
Subsidiary becoming a Note Party pursuant to Section
7.9
of the
Note Purchase Agreement, such Subsidiary shall concurrently become a party
to
this Security Agreement and grant to First Lien Agent, for the benefit of
the
Senior Note Purchasers, a Lien upon all of such Subsidiary’s right, title and
interest in, to and under all Collateral, then owned by or owing to, or
thereafter acquired by or arising in favor of such Subsidiary.
(b) Maintenance
of Records.
The
Grantor shall keep and maintain, at its own cost and expense, satisfactory
and
complete records of the Collateral, including without limitation a record
of all
related customer contracts and accounts receivable, furniture, fixtures,
information technology, vehicles, licensing arrangements and applicable proceeds
of the foregoing, Liens related thereto.
(c) Covenants
Regarding Patent, Trademark and Copyright Collateral.
(i) Unless
Grantor shall reasonably determine that the applicable Patent, Trademark
or
Copyright is not material to the conduct of its business or operations, the
Grantor shall notify First Lien Agent immediately if it knows or has reason
to
know that any application or registration relating to any material Patent,
Trademark or Copyright (now or hereafter existing) may become abandoned or
dedicated, or of any adverse determination or development (including the
institution of, or any such determination or development in, any proceeding
in
the United States Patent and Trademark Office, the United States Copyright
Office or any court) regarding the Grantor’s ownership of any material Patent,
Trademark or Copyright, its right to register the same, or to keep and maintain
the same.
(ii) In
no
event shall the Grantor, either itself or through any agent, employee, licensee
or designee, file an application for the registration of any Patent, Trademark
or Copyright with the United States Patent and Trademark Office, the United
States Copyright Office or any similar office or agency without giving First
Lien Agent prior written notice thereof, and, upon request of First Lien
Agent,
Grantor shall execute and deliver any and all Patent Security Agreements,
Copyright Security Agreements or Trademark Security Agreements as First Lien
Agent may request to evidence First Lien Agent’s Lien on such Patent, Trademark
or Copyright, and the General Intangibles of the Grantor relating thereto
or
represented thereby.
-11-
(iii) Unless
Grantor shall reasonably determine that the applicable Patent, Trademark
or
Copyright is not material to the conduct of its business or operations, the
Grantor shall take all actions necessary or reasonably requested by First
Lien
Agent to maintain and pursue (in each case, in a manner consistent with
reasonable responsible business and legal practices) each application, to
obtain
the relevant registration and to maintain the registration of each of the
Patents, Trademarks and Copyrights (now or hereafter existing), including
the
filing of applications for renewal, affidavits of use, affidavits of
noncontestability and opposition and interference and cancellation proceedings.
(iv) In
the
event that any material Patent, Trademark or Copyright Collateral is infringed
upon, or misappropriated or diluted by a third party, the Grantor shall,
unless
Grantor shall reasonably determine that such Patent, Trademark or Copyright
Collateral is not material to the conduct of its business or operations,
promptly ▇▇▇ for infringement, misappropriation or dilution and to recover
any
and all damages for such infringement, misappropriation or dilution, and
shall
take such other actions as are commercially reasonable under the circumstances
to protect such Patent, Trademark or Copyright Collateral.
(d) Indemnification.
In
consideration of the execution and delivery of the Note Purchase Agreement,
each
Note Party agrees to indemnify and hold each Senior Note Purchaser and each
Senior Note Purchaser’s directors, Affiliates, and agents (for the purposes of
this section each is an “Indemnified
Party”)
harmless from and against any and all claims, losses, Senior Note Obligations
and liabilities arising out of or resulting from any or all of (i) this Security
Agreement and (ii) the transactions contemplated by this Security Agreement
(including enforcement of this Security Agreement) in all cases, except for
claims, losses or liabilities to the extent resulting from an Indemnified
Party’s gross negligence or willful misconduct. The indemnification provided for
in this section is in addition to, and not in limitation of, any other
indemnification or insurance provided by any Note Party to any Senior Note
Purchaser.
(e) Compliance
with Terms of Accounts, etc.
In all
material respects, Grantor will perform and comply with all obligations in
respect of the Collateral and all other agreements to which it is a party
or by
which it is bound relating to the Collateral.
-12-
(f) Limitation
on Liens on Collateral.
Grantor
will not create, permit or suffer to exist, and Grantor will defend the
Collateral against, and take such other action as is necessary to remove,
any
Lien on the Collateral except Permitted Encumbrances, and will defend the
right,
title and interest of First Lien Agent and Senior Note Purchasers in and
to any
of the Grantor’s rights under the Collateral against the claims and demands of
all Persons whomsoever, other than holders of Permitted
Encumbrances.
(g) Limitations
on Disposition.
Grantor
will not sell, license, lease, transfer or otherwise dispose of any of the
Collateral, or attempt or contract to do so except as permitted by the Note
Purchase Agreement.
(h) Further
Identification of Collateral.
Grantor
will, if so reasonably requested by First Lien Agent, furnish to First Lien
Agent, as often as First Lien Agent requests, statements and schedules further
identifying and describing the Collateral and such other reports in connection
with the Collateral as First Lien Agent may reasonably request, all in such
detail as First Lien Agent may specify.
(i) Notices.
Grantor
will advise First Lien Agent promptly, in reasonable detail, (i) of any Lien
(other than Permitted Encumbrances) or material claim made or asserted against
any of the Collateral, and (ii) of the occurrence of any other event which
would
have a material adverse effect on the aggregate value of the Collateral or
on
the Liens created hereunder or under any other Note Document, other than
the
creation or occurrence of a Permitted Encumbrance.
(j) No
Reincorporation.
Without
limiting the prohibitions on mergers involving the Grantor contained in the
Note
Purchase Agreement, Grantor shall not reincorporate or reorganize itself
under
the laws of any jurisdiction other than the jurisdiction in which it is
incorporated or organized as of the date hereof without ten (10) Business
Days
prior written notice to First Lien Agent.
(k) Terminations;
Amendments Not Authorized.
Grantor
acknowledges that it is not authorized to file any financing statement or
amendment or termination statement with respect to any financing statement
without the prior written consent of First Lien Agent and agrees that it
will
not do so without the prior written consent of First Lien Agent, subject
to the
Grantor's rights under Section 9-509(d)(2) of the Code.
(l) Authorized
Terminations.
First
Lien Agent will promptly deliver to the Grantor for filing or authorize Grantor
to prepare and file termination statements and releases in accordance with
the
Note Purchase Agreement.
-13-
(m) New
Locations.
Upon
storing Inventory at any location other than those listed in Section
5.2.1
to the
Note Purchase Agreement, the Grantor shall make commercially reasonable efforts
to obtain, within ninety (90) days of storing Inventory at such location,
a duly
executed landlord consent permitting the First Lien Agent to remove the personal
property of the Note Parties from such location.
6. COLLECTION
OF DIVIDENDS.
During
the term of this Security Agreement, Grantor is authorized to collect all
dividends, distributions, payments and other amounts that may be or become
payable on any of the Collateral so long as no Event of Default has occurred.
Upon the occurrence of an Event of Default and during the continuance of
an
Event of Default, the First Lien Agent is authorized to collect all dividends,
distributions, payments or other amounts that may be or become payable on
any of
the Securities. Such amounts collected may, at the option of the First Lien
Agent, be applied to the indebtedness secured hereby. The First Lien Agent
shall
be under no obligation to collect any such amounts.
7. VOTING
RIGHTS.
Subject
to the immediately following sentence, Grantor shall have the right, where
applicable, to vote the Collateral on all corporate questions, or otherwise
exercise such similar rights as may arise from the Collateral. Upon the
occurrence of an Event of Default and during the continuance of an Event
of
Default, such right shall, at the option of the First Lien Agent, terminate
whereupon the First Lien Agent may exercise all such rights. Grantor agrees
to
appoint the First Lien Agent as its proxy for such purpose, and to execute
such
additional documents as are necessary to effect the same.
8. EXERCISE
OF OPTIONS.
In the
event that during the term of this Security Agreement subscription warrants
or
any other rights or options shall be issued in connection with the Collateral,
such warrants, rights and options shall constitute part of the Collateral.
If
such subscription warrants or other rights or options shall expire during
the
term of this Security Agreement and Grantor has not elected to exercise such
warrants or options, the First Lien Agent may elect (without any duty to
do so)
to exercise such warrants, rights and options at its own expense and to the
extent assignable, Grantor will assign his rights thereunder. All new equity
interests so acquired shall be subject to and held under the terms hereof
as
Collateral.
9. FIRST
LIEN AGENT’S APPOINTMENT AS ATTORNEY-IN-FACT.
On
the
Closing Date, Grantor shall execute and deliver to First Lien Agent a power
of
attorney (the “Power
of Attorney”)
substantially in the form attached hereto as Exhibit
A.
The
power of attorney granted pursuant to the Power of Attorney is a power coupled
with an interest and shall be irrevocable until the Senior Note Obligations
have
been paid in full. The powers conferred on First Lien Agent, for the benefit
of
the Senior Note Purchasers, under the Power of Attorney are solely to protect
First Lien Agent’s interests (for the benefit of the Senior Note Purchasers) in
the Collateral and shall not impose any duty upon First Lien Agent or any
Senior
Note Purchaser to exercise any such powers. First Lien Agent agrees that
(a)
except for the powers granted in clause (h) of the Power of Attorney, it
shall
not exercise any power or authority granted under the Power of Attorney unless
an Event of Default has occurred and is continuing, and (b) First Lien Agent
shall account to the Grantors for any moneys received by First Lien Agent
in
respect of any foreclosure on or disposition of Collateral pursuant to the
Power
of Attorney provided that except as set forth in Section
15
hereof,
none of First Lien Agent or any Senior Note Purchaser shall have any duty
as to
any Collateral, and First Lien Agent and Senior Note Purchasers shall be
accountable only for amounts that they actually receive as a result of the
exercise of such powers. NONE OF FIRST LIEN AGENT, SENIOR NOTE PURCHASERS
OR
THEIR RESPECTIVE AFFILIATES, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS OR
REPRESENTATIVES SHALL BE RESPONSIBLE TO GRANTOR FOR ANY ACT OR FAILURE TO
ACT
UNDER ANY POWER OF ATTORNEY OR OTHERWISE, EXCEPT IN RESPECT OF DAMAGES
ATTRIBUTABLE SOLELY TO THEIR OWN GROSS NEGLIGENCE OR WILLFUL MISCONDUCT AS
FINALLY DETERMINED BY A COURT OF COMPETENT JURISDICTION, NOR FOR ANY PUNITIVE,
EXEMPLARY, INDIRECT OR CONSEQUENTIAL DAMAGES.
-14-
10. REMEDIES:
RIGHTS UPON DEFAULT.
(a) In
addition to all other rights and remedies granted to it under this Security
Agreement, the Note Purchase Agreement, the other Note Documents and under
any
other instrument or agreement securing, evidencing or relating to any of
the
Senior Note Obligations, if any Event of Default shall have occurred and
be
continuing, First Lien Agent may exercise all rights and remedies of a secured
party under the Code. Without limiting the generality of the foregoing, the
Grantor expressly agrees that in any such event First Lien Agent, without
demand
of performance or other demand, advertisement or notice of any kind (except
the
notices specified in the Note Purchase Agreement or the notices below of
time
and place of public or private sale) to or upon Grantor or any other Person
(all
and each of which demands, advertisements and other notices are hereby expressly
waived to the maximum extent permitted by the Code and other applicable law),
may forthwith enter upon the premises of the Grantor where any Collateral
is
located through self-help, without judicial process, without first obtaining
a
final judgment or giving the Grantor or any other Person notice and opportunity
for a hearing on First Lien Agent’s claim or action and may collect, receive,
assemble, process, appropriate and realize upon the Collateral, or any part
thereof, and may forthwith sell, lease, license, assign, give an option or
options to purchase, or sell or otherwise dispose of and deliver said Collateral
(or contract to do so), or any part thereof, in one or more parcels at a
public
or private sale or sales, at any exchange at such prices as it may deem
acceptable, for cash or on credit or for future delivery without assumption
of
any credit risk. First Lien Agent or any Senior Note Purchaser shall have
the
right upon any such public sale or sales and, to the extent permitted by
law,
upon any such private sale or sales, to purchase for the benefit of the Senior
Note Purchasers, the whole or any part of said Collateral so sold, free of
any
right or equity of redemption, which equity of redemption the Grantor hereby
releases. Such sales may be adjourned and continued from time to time with
or
without notice. First Lien Agent shall have the right to conduct such sales
on
the Grantor’s premises or elsewhere and shall have the right to use the
Grantor’s premises without charge for such time or times as First Lien Agent
deems necessary or advisable.
-15-
If
any
Event of Default shall have occurred and be continuing, the Grantor further
agrees, at First Lien Agent’s request, to assemble the Collateral and make it
available to First Lien Agent at a place or places designated by First Lien
Agent which are reasonably convenient to First Lien Agent and the Grantor,
whether at the Grantor’s premises or elsewhere. Until First Lien Agent is able
to effect a sale, lease, or other disposition of Collateral, First Lien Agent
shall have the right to hold or use Collateral, or any part thereof, to the
extent that it deems appropriate for the purpose of preserving Collateral
or its
value or for any other purpose deemed appropriate by First Lien Agent. First
Lien Agent shall have no obligation to the Grantor to maintain or preserve
the
rights of the Grantor as against third parties with respect to Collateral
while
Collateral is in the possession of First Lien Agent. First Lien Agent may,
if it
so elects, seek the appointment of a receiver or keeper to take possession
of
Collateral and to enforce any of First Lien Agent’s remedies (for the benefit of
Senior Note Purchasers), with respect to such appointment without prior notice
or hearing as to such appointment. First Lien Agent shall apply the net proceeds
of any such collection, recovery, receipt, appropriation, realization or
sale to
the Senior Note Obligations as provided in the Note Purchase Agreement, and
only
after so paying over such net proceeds, and after the payment by First Lien
Agent of any other amount required by any provision of law, need First Lien
Agent account for the surplus, if any, to the Grantor. To the maximum extent
permitted by applicable law, the Grantor waives all claims, damages, and
demands
against First Lien Agent or any Senior Note Purchaser arising out of the
repossession, retention or sale of the Collateral except such as arise solely
out of the gross negligence or willful misconduct of First Lien Agent or
such
Senior Note Purchaser as finally determined by a court of competent
jurisdiction. The Grantor agrees that ten (10) days’ prior notice by First Lien
Agent of the time and place of any public sale or of the time after which
a
private sale may take place is reasonable notification of such matters. Grantor
shall remain liable for any deficiency if the proceeds of any sale or
disposition of the Collateral are insufficient to pay all Senior Note
Obligations, including any attorneys’ fees and other expenses incurred by First
Lien Agent or any Senior Note Purchaser to collect such deficiency.
(b) Except
as
otherwise specifically provided herein, Grantor hereby waives presentment,
demand, protest or any notice (to the maximum extent permitted by applicable
law) of any kind in connection with this Security Agreement or any Collateral.
(c) To
the
extent that applicable law imposes duties on the First Lien Agent to exercise
remedies in a commercially reasonable manner, Grantor acknowledges and agrees
that it is not commercially unreasonable for the First Lien Agent in its
exercise of remedies pursuant to this Section
10
(i) to
fail to incur expenses reasonably deemed significant by the First Lien Agent
to
prepare Collateral for disposition or otherwise to complete raw material
or work
in process into finished goods or other finished products for disposition,
(ii)
to fail to obtain third party consents for access to Collateral to be disposed
of, or to obtain or, if not required by other law, to fail to obtain
governmental or third party consents for the collection or disposition of
Collateral to be collected or disposed of, (iii) to fail to exercise collection
remedies against Account Debtors or other Persons obligated on Collateral
or to
remove Liens on or any adverse claims against Collateral, (iv) to exercise
collection remedies against Account Debtors and other Persons obligated on
Collateral directly or through the use of collection agencies and other
collection specialists, (v) to advertise dispositions of Collateral through
publications or media of general circulation, whether or not the Collateral
is
of a specialized nature, (vi) to contact other Persons, whether or not in
the
same business as the Grantor, for expressions of interest in acquiring all
or
any portion of such Collateral, (vii) to hire one or more professional
auctioneers to assist in the disposition of Collateral, whether or not the
Collateral is of a specialized nature, (viii) to dispose of Collateral by
utilizing internet sites that provide for the auction of assets of the types
included in the Collateral or that have the reasonable capacity of doing
so, or
that match buyers and sellers of assets, (ix) to dispose of assets in wholesale
rather than retail markets, (x) to disclaim disposition warranties, such
as
title, possession or quiet enjoyment, (xi) to purchase insurance or credit
enhancements to insure the First Lien Agent against risks of loss, collection
or
disposition of Collateral or to provide to the First Lien Agent a guaranteed
return from the collection or disposition of Collateral, or (xii) to the
extent
deemed appropriate by the First Lien Agent, to obtain the services of other
brokers, investment bankers, consultants and other professionals to assist
the
First Lien Agent in the collection or disposition of any of the Collateral.
The
Grantor acknowledges that the purpose of this Section
10(c)
is to
provide non-exhaustive indications of what actions or omissions by the First
Lien Agent would not be commercially unreasonable in the First Lien Agent's
exercise of remedies against the Collateral and that other actions or omissions
by the First Lien Agent shall not be deemed commercially unreasonable solely
on
account of not being indicated in this Section
10(c).
Without
limitation upon the foregoing, nothing contained in this Section
10(c)
shall be
construed to grant any rights to the Grantor or to impose any duties on First
Lien Agent that would not have been granted or imposed by this Security
Agreement or by applicable law in the absence of this Section
10(c).
-16-
(d) In
the
exercise of remedies pursuant to this Section 10, neither the First Lien
Agent
nor the Senior Note Purchasers shall be required to make any demand upon,
or
pursue or exhaust any of their rights or remedies against, the Grantor, any
other obligor, guarantor, pledgor or any other Person with respect to the
payment of the Senior Note Obligations or to pursue or exhaust any of their
rights or remedies with respect to any Collateral therefor or any direct
or
indirect guarantee thereof. Neither the First Lien Agent nor the Senior Note
Purchasers shall be required to marshal the Collateral or any guarantee of
the
Senior Note Obligations or to resort to the Collateral or any such guarantee
in
any particular order, and all of its and their rights hereunder or under
any
other Note Document shall be cumulative. To the extent it may lawfully do
so,
the Grantor absolutely and irrevocably waives and relinquishes the benefit
and
advantage of, and covenants not to assert against the First Lien Agent or
any
Senior Note Purchaser, any valuation, stay, appraisement, extension, redemption
or similar laws and any and all rights or defenses it may have as a surety
now
or hereafter existing which, but for this provision, might be applicable
to the
sale of any Collateral made under the judgment, order or decree of any court,
or
privately under the power of sale conferred by this Security Agreement, or
otherwise.
-17-
11. GRANT
OF LICENSE TO USE INTELLECTUAL PROPERTY COLLATERAL.
For the
purpose of enabling First Lien Agent to exercise rights and remedies under
Section
10
hereof
(including, without limiting the terms of Section
10
hereof,
in order to take possession of, hold, preserve, process, assemble, prepare
for
sale, market for sale, sell or otherwise dispose of Collateral) at such time
as
First Lien Agent shall be lawfully entitled to exercise such rights and
remedies, the Grantor hereby grants to First Lien Agent, for the benefit
of
Senior Note Purchasers, an irrevocable, nonexclusive license (exercisable
without payment of royalty or other compensation to the Grantor) to use or
license Intellectual Property now owned or hereafter acquired by the Grantor
and
use commercially reasonable efforts to sublicense any hereafter acquired
Intellectual Property 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.
12. LIMITATION
ON FIRST LIEN AGENT’S AND SENIOR NOTE PURCHASERS’ DUTY IN RESPECT OF
COLLATERAL.
First
Lien Agent and each Senior Note Purchaser shall use reasonable care with
respect
to the Collateral in its possession or under its control. Neither First Lien
Agent nor any Senior Note Purchaser shall have any other duty as to any
Collateral in its possession or control or in the possession or control of
any
agent or nominee of First Lien Agent or such Senior Note Purchaser, or any
income thereon or as to the preservation of rights against prior parties
or any
other rights pertaining thereto.
13. REINSTATEMENT.
This
Security Agreement shall remain in full force and effect and continue to
be
effective should any petition be filed by or against the Grantor for liquidation
or reorganization, should the Grantor become insolvent or make an assignment
for
the benefit of any creditor or creditors or should a receiver or trustee
be
appointed for all or any significant part of the Grantor’s assets, and shall
continue to be effective or be reinstated, as the case may be, if at any
time
payment and performance of the Senior Note Obligations, or any part thereof,
is,
pursuant to applicable law, rescinded or reduced in amount, or must otherwise
be
restored or returned by any obligee of the Senior Note Obligations, whether
as a
“voidable preference,” “fraudulent conveyance,” or otherwise, all as though such
payment or performance had not been made. In the event that any payment,
or any
part thereof, is rescinded, reduced, restored or returned, the Senior Note
Obligations shall be reinstated and deemed reduced only by such amount paid
and
not so rescinded, reduced, restored or returned.
14. NOTICES.
Except
as otherwise provided herein, whenever it is provided herein that any notice,
demand, request, consent, approval, declaration or other communication shall
or
may be given to or served upon any of the parties by any other party, or
whenever any of the parties desires to give and serve upon any other party
any
communication with respect to this Security Agreement, each such notice,
demand,
request, consent, approval, declaration or other communication shall be in
writing and shall be given in the manner, and deemed received, as provided
for
in the Note Purchase Agreement.
15. SEVERABILITY.
Whenever possible, each provision of this Security Agreement shall be
interpreted in a manner as to be effective and valid under applicable law,
but
if any provision of this Security Agreement shall be prohibited by or invalid
under applicable law, such provision shall be ineffective to the extent of
such
prohibition or invalidity without invalidating the remainder of such provision
or the remaining provisions of this Security Agreement. This Security Agreement
is to be read, construed and applied together with the Note Purchase Agreement
and the other Note Documents which, taken together, set forth the complete
understanding and agreement of First Lien Agent, Senior Note Purchasers and
Grantor with respect to the matters referred to herein and therein.
-18-
16. NO
WAIVER; CUMULATIVE REMEDIES.
Neither
First Lien Agent nor any Senior Note Purchaser shall by any act, delay, omission
or otherwise be deemed to have waived any of its rights or remedies hereunder,
and no waiver shall be valid unless in writing, signed by First Lien Agent
and
then only to the extent therein set forth. A waiver by First Lien Agent of
any
right or remedy hereunder on any one occasion shall not be construed as a
bar to
any right or remedy which First Lien Agent would otherwise have had on any
future occasion. No failure to exercise nor any delay in exercising on the
part
of First Lien Agent or any Senior Note Purchaser, any right, power or privilege
hereunder, shall operate as a waiver thereof, nor shall any single or partial
exercise of any right, power or privilege hereunder preclude any other or
future
exercise thereof or the exercise of any other right, power or privilege.
The
rights and remedies hereunder provided are cumulative and may be exercised
singly or concurrently, and are not exclusive of any rights and remedies
provided by law. None of the terms or provisions of this Security Agreement
may
be waived, altered, modified or amended except by an instrument in writing,
duly
executed by First Lien Agent and Grantor.
17. LIMITATION
BY LAW.
All
rights, remedies and powers provided in this Security Agreement may be exercised
only to the extent that the exercise thereof does not violate any applicable
provision of law, and all the provisions of this Security Agreement are intended
to be subject to all applicable mandatory provisions of law that may be
controlling and to be limited to the extent necessary so that they shall
not
render this Security Agreement invalid, unenforceable, in whole or in part,
or
not entitled to be recorded, registered or filed under the provisions of
any
applicable law
18. TERMINATION
OF THIS SECURITY AGREEMENT.
Subject
to Section
10
hereof,
this Security Agreement shall terminate when the Senior Note Obligations
are
paid in full.
19. SUCCESSORS
AND ASSIGNS.
This
Security Agreement and all obligations of Grantor hereunder shall be binding
upon the successors and assigns of the Grantor (including any
debtor-in-possession on behalf of the Grantor) and shall, together with the
rights and remedies of First Lien Agent, for the benefit of Senior Note
Purchasers, hereunder, inure to the benefit of First Lien Agent and Senior
Note
Purchasers, all future holders of any instrument evidencing any of the Senior
Note Obligations and their respective successors and assigns permitted under
the
Note Purchase Agreement. No sales of participations, other sales, assignments,
transfers or other dispositions of any agreement governing or instrument
evidencing the Senior Note Obligations or any portion thereof or interest
therein shall in any manner impair the Lien granted to First Lien Agent,
for the
benefit of Senior Note Purchasers, hereunder. Grantor may not assign, sell,
hypothecate or otherwise transfer any interest in or obligation under this
Security Agreement.
-19-
20. COUNTERPARTS.
This
Security Agreement may be authenticated in any number of separate counterparts,
each of which shall collectively and separately constitute one agreement.
This
Security Agreement may be authenticated by manual signature, facsimile or,
if
approved in writing by First Lien Agent, electronic means, all of which shall
be
equally valid.
21. GOVERNING
LAW.
EXCEPT
AS OTHERWISE EXPRESSLY PROVIDED IN ANY OF THE OTHER NOTE DOCUMENTS, IN ALL
RESPECTS, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE,
THIS
SECURITY AGREEMENT AND THE OBLIGATIONS ARISING HEREUNDER SHALL BE GOVERNED
BY,
AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK
APPLICABLE TO CONTRACTS MADE AND PERFORMED IN THAT STATE, AND ANY APPLICABLE
LAWS OF THE UNITED STATES OF AMERICA. THE GRANTOR HEREBY CONSENTS AND AGREES
THAT THE STATE OR FEDERAL COURTS LOCATED IN NEW YORK COUNTY, CITY OF NEW
YORK,
NEW YORK, SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS
OR
DISPUTES BETWEEN GRANTOR, FIRST LIEN AGENT AND SENIOR NOTE PURCHASERS PERTAINING
TO THIS SECURITY AGREEMENT OR ANY OF THE OTHER NOTE DOCUMENTS OR TO ANY MATTER
ARISING OUT OF OR RELATING TO THIS SECURITY AGREEMENT OR ANY OF THE OTHER
NOTE
DOCUMENTS, PROVIDED,
THAT
FIRST LIEN AGENT, SENIOR NOTE PURCHASERS AND GRANTOR ACKNOWLEDGE THAT ANY
APPEALS FROM THOSE COURTS MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE
OF NEW
YORK COUNTY, AND, PROVIDED, FURTHER,
NOTHING
IN THIS AGREEMENT SHALL BE DEEMED OR OPERATE TO PRECLUDE FIRST LIEN AGENT
FROM
BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN ANY OTHER JURISDICTION TO REALIZE
ON THE COLLATERAL OR ANY OTHER SECURITY FOR THE OBLIGATIONS, OR TO ENFORCE
A
JUDGMENT OR OTHER COURT ORDER IN FAVOR OF FIRST LIEN AGENT. GRANTOR EXPRESSLY
SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR SUIT
COMMENCED IN ANY SUCH COURT, AND GRANTOR HEREBY WAIVES ANY OBJECTION WHICH
IT
MAY HAVE BASED UPON LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR
FORUM NON CONVENIENS
AND
HEREBY CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED
APPROPRIATE BY SUCH COURT. GRANTOR HEREBY WAIVES PERSONAL SERVICE OF THE
SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND
AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINTS AND OTHER PROCESS MAY BE
MADE BY
REGISTERED OR CERTIFIED MAIL ADDRESSED TO GRANTOR AT THE ADDRESS SET FORTH
ON
ANNEX
I
TO THIS
AGREEMENT AND THAT SERVICE SO MADE SHALL BE DEEMED COMPLETED UPON THE EARLIER
OF
ACTUAL RECEIPT THEREOF OR THREE (3) DAYS AFTER DEPOSIT IN THE U.S. MAILS,
PROPER
POSTAGE PREPAID.
22. WAIVER
OF JURY TRIAL.
BECAUSE
DISPUTES ARISING IN CONNECTION WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST
QUICKLY AND ECONOMICALLY RESOLVED BY AN EXPERIENCED AND EXPERT PERSON AND
THE
PARTIES WISH APPLICABLE STATE AND FEDERAL LAWS TO APPLY (RATHER THAN ARBITRATION
RULES), THE PARTIES DESIRE THAT DISPUTES ARISING HEREUNDER OR RELATING HERETO
BE
RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE
THE
BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION,
THE
PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT OR
PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE, WHETHER SOUNDING IN CONTRACT,
TORT,
OR OTHERWISE, AMONG FIRST LIEN AGENT, SENIOR NOTE PURCHASERS, AND GRANTOR
ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP
ESTABLISHED IN CONNECTION WITH, THIS SECURITY AGREEMENT OR ANY OF THE OTHER
NOTE
DOCUMENTS OR THE TRANSACTIONS RELATED HERETO OR THERETO.
-20-
23. SECTION
TITLES.
The
Section titles contained in this Security Agreement are and shall be without
substantive meaning or content of any kind whatsoever and are not a part
of the
agreement between the parties hereto.
24. NO
STRICT CONSTRUCTION.
The
parties hereto have participated jointly in the negotiation and drafting
of this
Security Agreement. In the event an ambiguity or question of intent or
interpretation arises, this Security Agreement shall be construed as if drafted
jointly by the parties hereto and no presumption or burden of proof shall
arise
favoring or disfavoring any party by virtue of the authorship of any provisions
of this Security Agreement.
25. ADVICE
OF COUNSEL.
Each of
the parties represents to each other party hereto that it has discussed this
Security Agreement and, specifically, the provisions of Section
21
and
Section
22,
with
its counsel.
26. BENEFIT
OF SENIOR NOTE PURCHASERS.
All
Liens granted or contemplated hereby shall be for the benefit of Senior Note
Purchasers, and all proceeds or payments realized from Collateral in accordance
herewith shall be applied to the Senior Note Obligations in accordance with
the
terms of the Note Purchase Agreement.
-21-
IN
WITNESS WHEREOF,
each of
the parties hereto has caused this Security Agreement to be executed and
delivered by its duly authorized officer as of the date first set forth
above.
| ENCOMPASS GROUP AFFILIATES, INC., a Delaware corporation | ||
| |
|
|
| By: | /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ | |
|
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ |
||
|
Title:
Chief Financial Officer
|
||
| ADVANCED COMMUNICATIONS TECHNOLOGIES, INC., a Florida corporation | ||
| |
|
|
| By: | /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ | |
|
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ |
||
| Title: Chief Financial Officer | ||
| SPECTRUCELL, INC., a Delaware corporation | ||
| |
|
|
| By: | /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ | |
|
Name:
▇▇▇▇ ▇. ▇▇▇▇▇▇▇
|
||
|
Title:
Chief Financial Officer
|
||
| ▇▇▇▇▇▇ STREET INVESTMENTS, INC., a Delaware corporation | ||
| |
|
|
| By: | /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ | |
|
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ |
||
| Title: Chief Financial Officer | ||
| CYBER-TEST, INC., a Delaware corporation | ||
| |
|
|
| By: | /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ | |
|
Name:
▇▇▇▇ ▇. ▇▇▇▇▇▇▇
|
||
| Title: Chief Financial Officer | ||
|
▇▇▇▇▇
▇▇▇▇▇▇▇, INC.,
a
Florida corporation
|
||
| |
|
|
| By: | /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ | |
|
Name:
▇▇▇▇ ▇. ▇▇▇▇▇▇▇
|
||
|
Title:
Chief Financial Officer
|
||
| ▇▇▇▇▇ ▇▇▇▇▇▇▇, INC., a Florida corporation | ||
| |
|
|
| By: |
/s/
▇▇▇▇ ▇. ▇▇▇▇▇▇▇
|
|
|
Name:
▇▇▇▇
▇. ▇▇▇▇▇▇▇
|
||
|
Title:
Chief Financial Officer
|
||
| SANKATY ADVISORS, LLC, as First Lien Agent | ||
| |
|
|
| By: | /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇ | |
|
Name:
▇▇▇▇▇▇ ▇▇▇▇▇▇
|
||
|
Title:
Managing Director
|
||
[SIGNATURE
PAGE TO ACT SECURITY
AGREEMENT]
SCHEDULE
I
to
SECURITY
AGREEMENT
COMMERCIAL
TORT CLAIMS
SCHEDULE
II
to
SECURITY
AGREEMENT
FILING
JURISDICTIONS
SCHEDULE
III
to
SECURITY
AGREEMENT
INSTRUMENTS
AND
LETTER
OF CREDIT RIGHTS
SCHEDULE
IV
to
SECURITY
AGREEMENT
SCHEDULE
OF OFFICES, LOCATIONS OF COLLATERAL
AND
RECORDS CONCERNING EACH GRANTOR’S COLLATERAL
SCHEDULE
V
to
SECURITY
AGREEMENT
PATENTS,
TRADEMARKS, DOMAIN NAMES AND COPYRIGHTS
PATENTS
AND PATENT APPLICATIONS
TRADEMARK
REGISTRATIONS
COPYRIGHTS
SCHEDULE
VI
to
SECURITY
AGREEMENT
INVESTMENT
PROPERTY
ANNEX
I
to
SECURITY
AGREEMENT
ENCOMPASS
GROUP AFFILIATES, INC.
c/o
HIG
Capital
▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇
▇▇▇▇▇
▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
Telephone:
(▇▇▇) ▇▇▇-▇▇▇▇
Facsimile:
(▇▇▇) ▇▇▇-▇▇▇▇
ADVANCED
COMMUNICATIONS TECHNOLOGIES, INC.
c/o
HIG
Capital
▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇
▇▇▇▇▇
▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
Telephone:
(▇▇▇) ▇▇▇-▇▇▇▇
Facsimile:
(▇▇▇) ▇▇▇-▇▇▇▇
SPECTRUCELL,
INC.
c/o
HIG
Capital
▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇
▇▇▇▇▇
▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
Telephone:
(▇▇▇) ▇▇▇-▇▇▇▇
Facsimile:
(617) 262-1505
▇▇▇▇▇▇
STREET INVESTMENTS, INC.
c/o
HIG
Capital
▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇
▇▇▇▇▇
▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
Telephone:
(▇▇▇) ▇▇▇-▇▇▇▇
Facsimile:
(▇▇▇) ▇▇▇-▇▇▇▇
CYBER-TEST,
INC.
c/o
HIG
Capital
▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇
▇▇▇▇▇
▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
Telephone:
(▇▇▇) ▇▇▇-▇▇▇▇
Facsimile:
(▇▇▇) ▇▇▇-▇▇▇▇
▇▇▇▇▇
▇▇▇▇▇▇▇, INC.
c/o
HIG
Capital
▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇
▇▇▇▇▇
▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
Telephone:
(▇▇▇) ▇▇▇-▇▇▇▇
Facsimile:
(▇▇▇) ▇▇▇-▇▇▇▇
EXHIBIT
A
POWER
OF ATTORNEY
This
Power of Attorney is executed and delivered by Encompass
Group Affiliates, Inc., a Delaware corporation, Advanced Communications
Technologies, Inc., a Florida corporation, SpectruCell, Inc., a Delaware
corporation, ▇▇▇▇▇▇ Street Investments, Inc., a Delaware corporation,
Cyber-Test, Inc. a Delaware corporation and ▇▇▇▇▇ ▇▇▇▇▇▇▇, Inc., a
Florida
corporation
(each a
“Grantor”)
to
Sankaty Advisors, LLC (hereinafter referred to as “Attorney”),
as
First Lien Agent for the benefit of Senior Note Purchasers, under a Note
Purchase Agreement and a Security Agreement, both dated as of August 17,
2007,
and other related documents (the “Note
Documents”).
No
person to whom this Power of Attorney is presented, as authority for Attorney
to
take any action or actions contemplated hereby, shall be required to inquire
into or seek confirmation from Grantor as to the authority of Attorney to
take
any action described below, or as to the existence of or fulfillment of any
condition to this Power of Attorney, which is intended to grant to Attorney
unconditionally the authority to take and perform the actions contemplated
herein, and Grantor irrevocably waives any right to commence any suit or
action,
in law or equity, against any person or entity which acts in reliance upon
or
acknowledges the authority granted under this Power of Attorney. The power
of
attorney granted hereby is coupled with an interest, and may not be revoked
or
canceled by Grantor without Attorney’s written consent until the Grantor’s
obligations under the Note Documents are paid in full. Attorney shall exercise
this Power of Attorney subject to and consistent with the terms of the Note
Documents and this Power of Attorney; provided that the foregoing statement
shall bind Attorney only and no person or entity acting in reliance upon
or
acknowledging the authority granted under this Power of Attorney shall be
responsible for ascertaining whether Attorney’s actions are consistent with such
terms.
Grantor
hereby irrevocably constitutes and appoints Attorney (and all officers,
employees or agents designated by Attorney), with full power of substitution,
as
Grantor’s true and lawful attorney-in-fact with full irrevocable power and
authority in the place and stead of Grantor and in the name of Grantor or
in its
own name, from time to time in Attorney’s discretion, until the Grantor’s
obligations under the Note Documents are paid in full, to take any and all
appropriate action and to execute and deliver any and all documents and
instruments which may be necessary or desirable to accomplish the purposes
of
the Note Documents and, without limiting the generality of the foregoing,
Grantor hereby grants to Attorney the power and right, on behalf of Grantor,
without notice to or assent by Grantor, and at any time, to do the following:
(a) change the mailing address of Grantor, open a post office box on behalf
of
Grantor, open mail for Grantor, and ask, demand, collect, give acquittances
and
receipts for, take possession of, endorse any invoices, freight or express
bills, bills of lading, storage or warehouse receipts, drafts against debtors,
assignments, verifications, and notices in connection with any property of
Grantor; (b) effect any repairs to any asset of Grantor, or continue or obtain
any insurance and pay all or any part of the premiums therefor and costs
thereof, and make, settle and adjust all claims under such policies of
insurance, and make all determinations and decisions with respect to such
policies; (c) pay or discharge any taxes, liens, security interests, or other
encumbrances levied or placed on or threatened against Grantor or its property;
(d) defend any suit, action or proceeding brought against Grantor if Grantor
does not defend such suit, action or proceeding or if Attorney believes that
Grantor is not pursuing such defense in a manner that will maximize the recovery
to Attorney, and settle, compromise or adjust any suit, action, or proceeding
described above and, in connection therewith, give such discharges or releases
as Attorney may deem appropriate; (e) file or prosecute any claim, litigation,
suit or proceeding in any court of competent jurisdiction or before any
arbitrator, or take any other action otherwise deemed appropriate by Attorney
for the purpose of collecting any and all such moneys due to Grantor whenever
payable and to enforce any other right in respect of Grantor’s property; (f)
cause the certified public accountants then engaged by Grantor to prepare
and
deliver to Attorney at any time and from time to time, promptly upon Attorney’s
request, the following reports: (1) a reconciliation of all accounts, (2)
an
aging of all accounts, (3) trial balances, (4) test verifications of such
accounts as Attorney may request, and (5) the results of each physical
verification of inventory; (g) communicate in its own name with any party
to any
Contract with regard to the assignment of the right, title and interest of
the
Grantor in and under the Contracts and other matters relating thereto; (h)
to
file such financing statements with respect to the Security Agreement, with
or
without Grantor's signature, or to file a photocopy of the Security Agreement
in
substitution for a financing statement, as the First Lien Agent may deem
appropriate and to execute in Grantor's name such financing statements and
amendments thereto and continuation statements which may require the Grantor's
signature; and (i) execute, in connection with any sale provided for in any
Note
Document, any endorsements, assignments or other instruments of conveyance
or
transfer with respect to the Collateral and to otherwise direct such sale
or
resale, all as though Attorney were the absolute owner of the property of
Grantor for all purposes, and to do, at Attorney’s option and Grantor’s expense,
at any time or from time to time, all acts and other things that Attorney
reasonably deems necessary to perfect, preserve, or realize upon Grantor’s
property or assets and Attorney’s Liens thereon, all as fully and effectively as
Grantor might do. Grantor hereby ratifies, to the extent permitted by law,
all
that said Attorney shall lawfully do or cause to be done by virtue
hereof.
IN
WITNESS WHEREOF, this Power of Attorney is executed by Grantor pursuant to
the
authority of its board of directors this 17th day of August, 2007.
| ENCOMPASS GROUP AFFILIATES, INC., a Delaware corporation | ||
| |
|
|
| By: | /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ | |
|
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ |
||
|
Title:
Chief Financial Officer
|
||
| ADVANCED COMMUNICATIONS TECHNOLOGIES, INC., a Florida corporation | ||
| |
|
|
| By: | /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ | |
|
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ |
||
| Title: Chief Financial Officer | ||
| SPECTRUCELL, INC., a Delaware corporation | ||
| |
|
|
| By: | /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ | |
|
Name:
▇▇▇▇ ▇. ▇▇▇▇▇▇▇
|
||
|
Title:
Chief Financial Officer
|
||
| ▇▇▇▇▇▇ STREET INVESTMENTS, INC., a Delaware corporation | ||
| |
|
|
| By: | /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ | |
|
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ |
||
| Title: Chief Financial Officer | ||
| CYBER-TEST, INC., a Delaware corporation | ||
| |
|
|
| By: | /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ | |
|
Name:
▇▇▇▇ ▇. ▇▇▇▇▇▇▇
|
||
| Title: Chief Financial Officer | ||
|
▇▇▇▇▇
▇▇▇▇▇▇▇, INC.,
a
Florida corporation
|
||
| |
|
|
| By: | /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ | |
|
Name:
▇▇▇▇ ▇. ▇▇▇▇▇▇▇
|
||
|
Title:
Chief Financial Officer
|
||