Exhibit 10.5
Form 8-K
Viking Systems, Inc.
File No. 000-49636
SECURITY AGREEMENT
dated as of March 22, 2005
among
VIKING SYSTEMS, INC.
and
ST. CLOUD CAPITAL PARTNERS, L.P.,
as Collateral Agent
TABLE OF CONTENTS
PAGE
Section 1. DEFINITIONS......................................................1
Section 2. GRANT OF SECURITY................................................9
Section 3. SECURITY FOR OBLIGATIONS........................................10
Section 4. REPRESENTATIONS AND WARRANTIES AND COVENANTS....................11
Section 5. DIVIDENDS, DISTRIBUTIONS AND VOTING.............................26
Section 6. FURTHER ASSURANCES..............................................27
Section 7. COLLATERAL AGENT APPOINTED ATTORNEY-IN-FACT, IRREVOCABLE POWER
OF ATTORNEY.....................................................28
Section 8. REMEDIES........................................................29
Section 9. COLLATERAL AGENT................................................33
Section 10. CONTINUING SECURITY INTEREST; TRANSFER OF SECURED OBLIGATIONS...34
Section 11. STANDARD OF CARE; COLLATERAL AGENT MAY PERFORM..................34
Section 12. INDEMNITY AND EXPENSES..........................................35
Section 13. MISCELLANEOUS...................................................36
SCHEDULE I - GENERAL INFORMATION
SCHEDULE II - LOCATION OF INVENTORY AND EQUIPMENT
SCHEDULE III - INVESTMENT RELATED PROPERTY
SCHEDULE IV - MATERIAL CONTRACTS
SCHEDULE V - LETTERS OF CREDIT
SCHEDULE VI - INTELLECTUAL PROPERTY
SCHEDULE VII - COMMERCIAL TORT CLAIMS
EXHIBIT A - PLEDGE SUPPLEMENT
EXHIBIT B - JOINDER AGREEMENT
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This SECURITY AGREEMENT, dated as of March 22, 2005 (this "Agreement"),
among Viking Systems, Inc., a Nevada corporation (together with any other Person
that executes a Joinder Agreement each, a "Grantor" and collectively, the
"Grantors"), and ST. CLOUD CAPITAL PARTNERS, L.P., acting in the capacity of
agent for the benefit of the Investors (the "Collateral Agent").
RECITALS:
WHEREAS, reference is made to that certain Securities Purchase Agreement,
dated as of the date hereof (as it may be amended, restated, supplemented or
otherwise modified from time to time, the "Securities Purchase Agreement"), by
and among Grantor, the Lead Lender and Collateral Agent and the Investors,
pursuant to which the Secured Parties have purchased the Notes.
WHEREAS, it is a condition precedent to the purchase of the Notes by the
Investors under the Securities Purchase Agreement that Grantor shall have
granted the security interests and undertaken the obligations contemplated by
this Agreement.
NOW, THEREFORE, in consideration of the premises and the agreements,
provisions and covenants herein contained, and in order to induce the Secured
Parties to purchase the Notes, Grantor and the Collateral Agent agree as
follows:
Section 1. DEFINITIONS
(a) General Definitions. In this Agreement, the following terms shall have
the following meanings:
"Account Debtor" shall mean each Person who is obligated on a Receivable or
any Supporting Obligation related thereto.
"Accounts" shall mean all "accounts" as defined in Article 9 of the UCC.
"Affiliate" shall mean, as applied to any Person, any other Person directly
or indirectly controlling, controlled by, or under common control with, that
Person. For the purposes of this definition, "control" (including, with
correlative meanings, the terms "controlling," "controlled by" and "under common
control with"), as applied to any Person, means the possession, directly or
indirectly, of the power (i) to vote ten percent (10%) or more of the Securities
having ordinary voting power for the election of directors of such Person or
(ii) to direct or cause the direction of the management and policies of that
Person, whether through the ownership of voting securities or by contract or
otherwise.
"Agreement" shall have the meaning set forth in the preamble.
"Authenticate" shall mean "authenticate" as defined in Article 9 of the
UCC.
"Bankruptcy Code" shall mean Title 11 of the United States Code entitled
"Bankruptcy", as now and hereafter in effect, or any successor statute.
"Cash Proceeds" shall mean all proceeds of any Collateral consisting of
cash, checks and other near-cash items.
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"Chattel Paper" shall mean all "chattel paper" as defined in Article 9 of
the UCC, including, without limitation, "electronic chattel paper" or "tangible
chattel paper", as each term is defined in the UCC.
"Collateral" shall have the meaning set forth in Section 2(a) hereof.
"Collateral Agent" shall have the meaning set forth in the preamble.
"Collateral Documents" shall mean this Agreement and all other instruments,
documents and agreements delivered by any of the parties to the Loan Documents
pursuant to this Agreement or any other Loan Document in order to grant, perfect
and/or establish or maintain the priority of a security interest in favor of the
Secured Parties and Collateral Agent on any real, personal or mixed property of
Grantor as security for the Secured Obligations.
"Collateral Records" shall mean books, records, ledger cards, files,
correspondence, customer lists, blueprints, technical specifications, manuals,
computer software, computer printouts, tapes, disks and other electronic storage
media and related data processing software and similar items that at any time
evidence or contain information relating to any of the Collateral or are
otherwise necessary or helpful in the collection thereof or realization
thereupon.
"Collateral Support" shall mean all property (real or personal) assigned,
hypothecated or otherwise securing any Collateral and shall include any security
agreement or other agreement granting a lien or security interest in such real
or personal property.
"Commercial Tort Claims" shall mean all "commercial tort claims" as defined
in the UCC, including, without limitation, all commercial tort claims listed and
described with specification on Schedule VII hereto (as such Schedule may be
amended or supplemented from time to time).
"Commodities Accounts" (i) shall mean all "commodity accounts" as defined
in Article 9 of the UCC and (ii) shall include, without limitation, all of the
accounts listed on Schedule III hereto under the heading "Commodities Accounts"
(as such Schedule may be amended or supplemented from time to time).
"Copyright Licenses" shall mean any and all agreements granting any right
in, to or under Copyrights (whether such Grantor is licensee or licensor
thereunder) including, without limitation, each agreement referred to in
Schedule VI(B) (as such Schedule may be amended or supplemented from time to
time).
"Copyrights" shall mean all United States, state and foreign copyrights,
including but not limited to copyrights in software and databases, and all Mask
Works (as defined under 17 U.S.C. 901 of the U.S. Copyright Act), whether
registered or unregistered, now or hereafter in force throughout the world, all
registrations and applications for any of the foregoing including, without
limitation, the applications referred to in Schedule VI(A) (as such Schedule may
be amended or supplemented from time to time), all rights corresponding thereto
throughout the world, all extensions and renewals of any thereof, the right to
▇▇▇ for past, present and future infringements of any of the foregoing, and all
proceeds of the foregoing, including, without limitation, licenses, royalties,
income, payments, claims, damages, and proceeds of suit.
"Deposit Accounts" (i) shall mean all "deposit accounts" as defined in
Article 9 of the UCC and (ii) shall include, without limitation, all of the
accounts listed on Schedule III hereto under the heading "Deposit Accounts" (as
such Schedule may be amended or supplemented from time to time).
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"Documents" shall mean all "documents" as defined in Article 9 of the UCC.
"Documents Evidencing Goods" shall mean all Documents evidencing,
representing or issued in connection with Goods.
"Equipment" shall mean: (i) all "equipment" as defined in the UCC, (ii) all
machinery, manufacturing equipment, data processing equipment, computers, office
equipment, furnishings, furniture, appliances, and tools (in each case,
regardless of whether characterized as equipment under the UCC), (iii) all
Fixtures and (iv) all accessions or additions thereto, all parts thereof,
whether or not at any time of determination incorporated or installed therein or
attached thereto, and all replacements therefor, wherever located, now or
hereafter existing.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any successor thereto.
"Event of Default" shall have the meaning set forth in the Notes.
"Fixtures" shall mean all "fixtures" as defined in Article 9 of the UCC.
"General Intangibles" (i) shall mean all "general intangibles" as defined
in Article 9 of the UCC and (ii) shall include, without limitation, all interest
rate or currency protection or hedging arrangements, all contracts, all tax
refunds and all licenses, permits, concessions and authorizations, (in each
case, regardless of whether characterized as general intangibles under the UCC).
"Goods" (i) shall mean all "goods" as defined in Article 9 of the UCC and
(ii) shall include, without limitation, all Inventory, Equipment, Documents
Evidencing Goods and Software Embedded In Goods.
"Indemnitee" shall mean the Secured Parties, the Collateral Agent, and
their Affiliates' officers, partners, directors, trustees, employees, agents.
"Instruments" shall mean all "instruments" as defined in Article 9 of the
UCC.
"Insurance" shall mean: (i) all insurance policies covering any or all of
the Collateral (regardless of whether the Collateral Agent is the loss payee
thereof) and (ii) any key man life insurance policies.
"Intellectual Property" shall mean, collectively, the Copyrights, the
Copyright Licenses, the Patents, the Patent Licenses, the Trademarks, the
Trademark Licenses, the Trade Secrets, and the Trade Secret Licenses.
"Intellectual Property Licenses" shall mean, collectively, the Copyright
Licenses, Patent Licenses, Trademark Licenses, and Trade Secret Licenses.
"Inventory" shall mean: (i) all "inventory" as defined in the UCC and (ii)
all goods held for sale or lease or to be furnished under contracts of service
or so leased or furnished, all raw materials, work in process, finished goods,
and materials used or consumed in the manufacture, packing, shipping,
advertising, selling, leasing, furnishing or production of such inventory or
otherwise used or consumed in Grantor's business; all goods in which Grantor has
an interest in mass or a joint or other interest or right of any kind; and all
goods which are returned to or repossessed by Grantor, and all accessions
thereto and products thereof (in each case, regardless of whether characterized
as inventory under the UCC).
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"Investment Accounts" shall mean the Securities Accounts, Commodities
Accounts and Deposit Accounts.
"Investment Related Property" shall mean: (a) all "investment property" (as
such term is defined in Article 9 of the UCC) and (b) all of the following
(regardless of whether classified as investment property under the UCC): all (i)
Pledged Equity Interests, (ii) Pledged Debt, (iii) the Investment Accounts and
(iv) Certificates of Deposit.
"Investor" shall have the meaning given such term in the Securities
Purchase Agreement.
"Joinder Agreement" means an agreement in the substantially the form of
Exhibit B hereto whereby an additional person becomes a Grantor hereunder as
required by the Securities Purchase Agreement.
"Letter of Credit Right" shall mean "letter-of-credit right" as defined in
the UCC.
"Lien" shall mean (i) any lien, mortgage, pledge, assignment, security
interest, charge or encumbrance of any kind (including any agreement to give any
of the foregoing, any conditional sale or other Title retention agreement, and
any lease in the nature thereof) and any option, trust or other preferential
arrangement having the practical effect of any of the foregoing and (ii) in the
case of Pledged Equity Interests, any purchase option, call or similar right of
a third party with respect to such Pledged Equity Interests.
"Loan Documents" shall have the meaning given such term in the Securities
Purchase Agreement.
"Material Adverse Effect" shall mean a material adverse effect on (i) the
business, operations, properties, assets, condition (financial or otherwise) or
prospects of Grantor and its subsidiaries, if any, taken as a whole; (ii) the
ability of Grantor to fully and timely perform its Secured Obligations; (iii)
the legality, validity, binding effect or enforceability against Grantor of a
Loan Document to which it is a party; or (iv) the rights, remedies and benefits
available to, or conferred upon, any agent, the Secured Parties and Collateral
Agent under any Secured Obligation.
"Material Contract" shall mean any contract or other arrangement to which
Grantor is a party for which breach, nonperformance, cancellation or failure to
renew could reasonably be expected to have a Material Adverse Effect.
"Money" shall mean "money" as defined in the UCC.
"Notes" means those certain Secured Convertible Promissory Notes, each
dated as of the date hereof and executed by Viking Systems, Inc. in favor of
each of the Investors, as the same may be amended, restated, supplemented or
otherwise modified from time to time.
"Patent Licenses" shall mean all agreements granting any right in, to, or
under Patents (whether such Grantor is licensee or licensor thereunder)
including without limitation, each agreement referred to in Schedule VI(D)
hereto (as such Schedule may be amended or supplemented from time to time).
"Patents" shall mean all United States, state and foreign patents and
applications for letters patent, including, but not limited to, each patent and
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patent application referred to in Schedule VI(C) hereto (as such Schedule may be
amended or supplemented from time to time), all reissues, divisions,
continuations, continuations-in-part, extensions, renewals, and reexaminations
of any of the foregoing, all rights corresponding thereto throughout the world,
the right to ▇▇▇ for past, present and future infringements of any of the
foregoing and all proceeds of the foregoing including, without limitation,
royalties, income, payments, claims, damages, and proceeds of suit.
"Payment Intangible" shall have the meaning specified in Article 9 of the
UCC.
"Permitted Lien" shall mean:
(a) Liens in favor of Collateral Agent granted pursuant to any Loan
Document;
(b) Liens for taxes if obligations with respect to such taxes are being
contested in good faith by appropriate proceedings promptly instituted
and diligently conducted;
(c) Statutory Liens of landlords, banks (and rights of set-off), of
carriers, warehousemen, mechanics, repairmen, workmen and materialmen,
and other Liens imposed by law (other than any such Lien imposed
pursuant to Section 401 (a)(29) or 412(n) of the Internal Revenue Code
or by ERISA), in each case incurred in the ordinary course of business
for amounts not yet overdue or for amounts that are overdue and that
(in the case of any such amounts overdue for a period in excess of
five days) are being contested in good faith by appropriate
proceedings, so long as such reserves or other appropriate provisions,
if any, as shall be required by generally accepted accounting
principles shall have been made for any such contested amounts;
(d) Liens incurred in the ordinary course of business in connection with
workers' compensation, unemployment insurance and other types of
social security, or to secure the performance of tenders, statutory
obligations, surety and appeal bonds, bids, leases, government
contracts, trade contracts, performance and return-of-money bonds and
other similar obligations (exclusive of obligations for the payment of
borrowed money or other indebtedness), so long as no foreclosure, sale
or similar proceedings have been commenced with respect to any portion
of the Collateral on account thereof;
(e) Easements, rights-of-way, restrictions, encroachments, and other minor
defects or irregularities in title, in each case which do not and will
not interfere in any material respect with the ordinary conduct of the
business of Grantor;
(f) Any interest or Title of a lessor or sublessor under any lease of real
estate permitted hereunder;
(g) Liens solely on any ▇▇▇▇ ▇▇▇▇▇▇▇ money deposits made by Grantor in
connection with any letter of intent or purchase agreement permitted
hereunder;
(h) Purported Liens evidenced by the filing of precautionary UCC financing
statements relating solely to operating leases of personal property
entered into in the ordinary course of business;
(i) Liens in favor of customs and revenue authorities arising as a matter
of law to secure payment of customs duties in connection with the
importation of goods;
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(j) Any zoning or similar law or right reserved to or vested in any
governmental office or agency to control or regulate the use of any
real property;
(k) Licenses of patents, trademarks and other intellectual property rights
granted by Grantor in the ordinary course of business and not
interfering in any respect with the ordinary conduct of the business
of Grantor or such subsidiary;
(l) Liens granted to Silicon Valley Bank pursuant to that certain Silicon
Valley Bank Loan and Security Agreement, dated as of September 14,
2004, between Silicon Valley Bank and Viking Systems, Inc.
"Permitted Sale" shall mean those sales, transfers or assignments permitted
by the Securities Purchase Agreement.
"Pledge Supplement" means an agreement in substantially the form of Exhibit
A hereto.
"Person" shall mean and include natural persons, corporations, limited
partnerships, general partnerships, limited liability companies, limited
liability partnerships, joint stock companies, joint ventures, associations,
companies, trusts, banks, trust companies, land trusts, business trusts or other
organizations, whether or not legal entities, and governmental authorities.
"Pledged Debt" shall mean all indebtedness for borrowed money owed to such
Grantor, whether or not evidenced by any instrument or promissory note,
including, without limitation, all indebtedness described on Schedule III hereto
under the heading "Pledged Debt" (as such Schedule may be amended or
supplemented from time to time), all monetary obligations owing to Grantor from
any other third party, the instruments evidencing any of the foregoing, and all
interest, cash, instruments and other property or proceeds from time to time
received, receivable or otherwise distributed in respect of or in exchange for
any or all of the foregoing.
"Pledged Equity Interests" shall mean all Pledged Stock, Pledged LLC
Interests, Pledged Partnership Interests, Pledged Trust Interests and any other
participation or other interests in any equity or profits of any business
entity.
"Pledged LLC Interests" shall mean all interests in any limited liability
company including, without limitation, all limited liability company interests
listed on Schedule III hereto under the heading "Pledged LLC Interests" (as such
Schedule may be amended or supplemented from time to time) and the certificates,
if any, representing such limited liability company interests and any interest
of such Grantor on the books and records of such limited liability company or on
the books and records of any securities intermediary pertaining to such interest
and all dividends, distributions, cash, warrants, rights, options, instruments,
securities and other property or proceeds from time to time received, receivable
or otherwise distributed in respect of or in exchange for any or all of such
limited liability company interests and any other warrant, right or option to
acquire any of the foregoing.
"Pledged Partnership Interests" shall mean all interests in any general
partnership, limited partnership, limited liability partnership or other
partnership including, without limitation, all partnership interests listed on
Schedule III hereto under the heading "Pledged Partnership Interests" (as such
Schedule may be amended or supplemented from time to time) and the certificates,
if any, representing such partnership interests and any interest of such Grantor
on the books and records of such partnership or on the books and records of any
securities intermediary pertaining to such interest and all dividends,
distributions, cash, warrants, rights, options, instruments, securities and
other property or proceeds from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of such partnership
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interests and any other warrant, right or option to acquire any of the
foregoing.
"Pledged Stock" shall mean all shares of capital stock owned by such
Grantor, including, without limitation, all shares of capital stock described on
Schedule III hereto under the heading "Pledged Stock" (as such Schedule may be
amended or supplemented from time to time), and the certificates, if any,
representing such shares and any interest of such Grantor in the entries on the
books of the issuer of such shares or on the books of any securities
intermediary pertaining to such shares, and all dividends, distributions, cash,
warrants, rights, options, instruments, securities and other property or
proceeds from time to time received, receivable or otherwise distributed in
respect of or in exchange for any or all of such shares and any other warrant,
right or option to acquire any of the foregoing.
"Pledged Trust Interests" shall mean all interests in a Delaware business
trust or other trust including, without limitation, all trust interests listed
on Schedule III hereto under the heading "Pledged Trust Interests" (as such
Schedule may be amended or supplemented from time to time) and the certificates,
if any, representing such trust interests and any interest of such Grantor on
the books and records of such trust or on the books and records of any
securities intermediary pertaining to such interest and all dividends,
distributions, cash, warrants, rights, options, instruments, securities and
other property or proceeds from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of such trust interests
and any other warrant, right or option to acquire any of the foregoing.
"Proceeds" shall mean: (i) all "proceeds" as defined in Article 9 of the
UCC, (ii) payments or distributions made with respect to any Investment Related
Property and (iii) whatever is receivable or received when Collateral or
proceeds are sold, leased, licensed, exchanged, collected or otherwise disposed
of, whether such disposition is voluntary or involuntary.
"Receivables" shall mean all (i) Accounts, (ii) Chattel Paper, (iii)
Payment Intangibles, (iv) Instruments and (v) to the extent not otherwise
covered above, all other rights to payment, whether or not earned by
performance, for goods or other property sold, leased, licensed, assigned or
otherwise disposed of, or services rendered or to be rendered, regardless of how
classified under the UCC together with all of Grantor's rights, if any, in any
goods or other property giving rise to such right to payment and all Collateral
Support and Supporting Obligations related thereto and all Receivables Records.
"Receivables Records" shall mean (i) all original copies of all documents,
instruments or other writings or electronic records or other Records evidencing
the Receivables, (ii) all books, correspondence, credit or other files, Records,
ledger sheets or cards, invoices, and other papers relating to Receivables,
including, without limitation, all tapes, cards, computer tapes, computer discs,
computer runs, record keeping systems and other papers and documents relating to
the Receivables, whether in the possession or under the control of Grantor or
any computer bureau or agent from time to time acting for Grantor or otherwise,
(iii) all evidences of the filing of financing statements and the registration
of other instruments in connection therewith, and amendments, supplements or
other modifications thereto, notices to other creditors or agents thereof, and
certificates, acknowledgments, or other writings, including, without limitation,
lien search reports, from filing or other registration officers, (iv) all credit
information, reports and memoranda relating thereto and (v) all other written or
non-written forms of information related in any way to the foregoing or any
Receivable.
"Record" shall have the meaning specified in the UCC.
"Registered Organization" shall mean an organization organized solely under
the law of a single State or the United States and as to which the State or the
United States must maintain a public record showing the organization to have
been organized.
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"Securities Purchase Agreement" shall have the meaning set forth in the
preamble.
"Secured Obligations" shall mean all obligations of every nature of Grantor
from time to time owing to the Collateral Agent or any Secured Party hereunder,
under the Securities Purchase Agreement, the Notes or any other Loan Document,
whether for principal, interest (including interest which, but for the filing of
a petition in bankruptcy with respect to such Grantor, would have accrued on any
obligation, whether or not a claim is allowed against such Grantor for such
interest in the related bankruptcy proceeding).
"Secured Party" shall mean the Collateral Agent, the Investors, and the
holders from time of time of any Secured Obligations.
"Securities" shall mean any stock, shares, units, limited liability company
interests, partnership interests, voting trust certificates, certificates of
interest or participation in any profit-sharing agreement or arrangement,
options, warrants, bonds, debentures, notes, or other evidences of indebtedness,
secured or unsecured, convertible, subordinated or otherwise, or in general any
instruments commonly known as "securities" or any certificates of interest,
shares or participations in temporary or interim certificates for the purchase
or acquisition of, or any right to subscribe to, purchase or acquire, any of the
foregoing.
"Securities Accounts" (i) shall mean all "securities accounts" as defined
in Article 8 of the UCC and (ii) shall include, without limitation, all of the
accounts listed on Schedule III hereto under the heading "Securities Accounts"
(as such Schedule may be amended or supplemented from time to time).
"Software Embedded in Goods" means, with respect to any Goods, any computer
program embedded in Goods and any supporting information provided in connection
with a transaction relating to the program if (i) the program is associated with
the Goods in such a manner that it customarily is considered part of the Goods
or (ii) by becoming the owner of the Goods a person acquires a right to use the
program in connection with the Goods.
"State" shall mean a State of the United States, the District of Columbia,
Puerto Rico, the United States Virgin Islands, or any territory or insular
possession subject to the jurisdiction of the United States.
"Supporting Obligation" shall mean all "supporting obligations" as defined
in the UCC.
"Trade Secret Licenses" shall mean any and all agreements granting any
right in or to Trade Secrets (whether such Grantor is licensee or licensor
thereunder) including, without limitation, each agreement referred to in
Schedule VI(G) hereto (as such Schedule may be amended or supplemented from time
to time).
"Trade Secrets" shall mean all trade secrets and all other confidential or
proprietary information and know-how, whether or not reduced to a writing or
other tangible form, including all documents and things embodying,
incorporating, or referring in any way to such Trade Secret, the right to ▇▇▇
for past, present and future infringement of any Trade Secret, and all proceeds
of the foregoing, including, without limitation, royalties, income, payments,
claims, damages, and proceeds of suit.
"Trademark Licenses" shall mean any and all agreements granting any right
in or to Trademarks (whether such Grantor is licensee or licensor thereunder)
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including, without limitation, each agreement referred to in Schedule VI(F)
hereto (as such Schedule may be amended or supplemented from time to time).
"Trademarks" shall mean all United States, state and foreign trademarks,
service marks, certification marks, collective marks, trade names, corporate
names, d/b/as, business names, fictitious business names, internet domain names,
trade styles, logos, other source or business identifiers, designs and general
intangibles of a like nature, rights of publicity and privacy pertaining to the
right to use names likeness and biographical data as real, all registrations and
applications for any of the foregoing including, but not limited to, the
registrations and applications referred to in Schedule VI(E) hereto (as such
Schedule may be amended or supplemented from time to time), the goodwill of the
business symbolized by the foregoing, the right to ▇▇▇ for past, present and
future infringement or dilution of any of the foregoing or for any injury to
goodwill, and all proceeds of the foregoing, including, without limitation,
royalties, income, payments, claims, damages, and proceeds of suit.
"UCC" shall mean the Uniform Commercial Code as in effect from time to time
in the State of California.
(b) Definitions; Interpretation. All capitalized terms used herein
(including the preamble and recitals hereto) and not otherwise defined herein
shall have the meanings ascribed thereto in the Securities Purchase Agreement
or, if not defined therein, in the UCC. With respect to terms defined in more
than one article of the UCC, unless otherwise specified such terms shall have
the meaning specified in Article 9 of the UCC. References to "Sections,"
"Exhibits" "Annexes" and "Schedules" shall be to Sections, Exhibits, Annexes and
Schedules, as the case may be, of this Agreement (as such Sections, Exhibits,
Annexes and Schedules may be amended or supplemented from time to time in
accordance with the terms of this Agreement), unless otherwise specifically
provided. Section headings in this Agreement are included herein for convenience
of reference only and shall not constitute a part of this Agreement for any
other purpose or be given any substantive effect. Any of the terms defined
herein may, unless the context otherwise requires, be used in the singular or
the plural, depending on the reference. The use herein of the word "include" or
"including", when following any general statement, term or matter, shall not be
construed to limit such statement, term or matter to the specific items or
matters set forth immediately following such word or to similar items or
matters, whether or not nonlimiting language (such as "without limitation" or
"but not limited to" or words of similar import) is used with reference thereto,
but rather shall be deemed to refer to all other items or matters that fall
within the broadest possible scope of such general statement, term or matter. If
any conflict or inconsistency exists between this Agreement and the Securities
Purchase Agreement, the Securities Purchase Agreement shall govern. All
references herein to provisions of the UCC shall include all successor
provisions under any subsequent version or amendment to any Article of the UCC.
Section 2. GRANT OF SECURITY
(a) Grant of Security. Grantor hereby grants to the Collateral Agent and
the Secured Parties a security interest and continuing lien on all of such
Grantor's right, title and interest in, to and under all personal property of
such Grantor including, but not limited to the following, in each case whether
now owned or existing or hereafter acquired or arising and wherever located (all
of which being hereinafter collectively referred to as the "Collateral"):
(1) Documents;
(2) General Intangibles;
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(3) Goods (including, without limitation, Documents Representing Goods
and Software Embedded in Goods);
(4) Insurance;
(5) Intellectual Property;
(6) Investment Related Property (including, without limitation,
Deposit Accounts);
(7) Letter of Credit Rights and letters of credit;
(8) Money;
(9) Receivables and Receivable Records;
(10) Commercial Tort Claims;
(11) to the extent not otherwise included above, Material Contracts,
motor vehicles, choses in action and all other personal property of any
kind and all Collateral Records, Collateral Support and Supporting
Obligations relating to any of the foregoing; and
(12) to the extent not otherwise included above, all Proceeds,
products, accessions, rents and profits of or in respect of any of the
foregoing.
(b) Certain Limited Exclusions. Notwithstanding anything herein to the
contrary, in no event shall the security interest granted under Section 2(a)
hereof attach to (i) any lease, license, contract, property rights or agreement
to which Grantor is a party or any of its rights or interests thereunder if and
for so long as the grant of such security interest shall constitute or result in
(1) the abandonment, invalidation or unenforceability of any right, title or
interest of Grantor therein or (2) in a breach or termination pursuant to the
terms of, or a default under, any such lease, license, contract property rights
or agreement (other than to the extent that any such term would be rendered
ineffective pursuant to Sections 9406, 9407, 9408 or 9409 of the UCC (or any
successor provision or provisions) of any relevant jurisdiction or any other
applicable law or principles of equity), provided, however, that such security
interest shall attach immediately at such time as the condition causing such
abandonment, invalidation or unenforceability shall be remedied and, to the
extent severable, shall attach immediately to any portion of such lease,
license, contract, property rights or agreement that does not result in any of
the consequences specified in (1) or (2) including, without limitation, any
proceeds of such lease, license, contract, property rights or agreement; or (ii)
in any of the outstanding capital stock of a "controlled foreign corporation"
(as defined in the Internal Revenue Code of 1986, as amended) in excess of 65%
of the voting power of all classes of capital stock of such controlled foreign
corporation entitled to vote; provided that immediately upon the amendment of
the Internal Revenue Code to allow the pledge of a greater percentage of the
voting power of capital stock in a controlled foreign corporation without
material adverse tax consequences to Grantor, the Collateral shall include, and
the security interest granted by such Grantor shall attach to, such greater
percentage of capital stock of each controlled foreign corporation.
Section 3. SECURITY FOR OBLIGATIONS.
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(a) Security for Obligations. This Agreement secures, and the Collateral is
collateral security for, the prompt and complete payment or performance in full
when due, whether at stated maturity, by required prepayment, declaration,
acceleration, demand or otherwise (including the payment of amounts that would
become due but for the operation of the automatic stay under Section 362(a) of
the Bankruptcy Code, 11 U.S.C. ss.362(a) (and any successor provision thereof)),
of all Secured Obligations.
(b) Continuing Liability under Collateral. Notwithstanding anything herein
to the contrary, (i) Grantor shall remain liable for all obligations under the
Collateral and nothing contained herein is intended or shall be a delegation of
duties to the Collateral Agent or any Secured Party and (ii) Grantor shall
remain liable under each of the agreements included in the Collateral,
including, without limitation, any agreements relating to Pledged Partnership
Interests or Pledged LLC Interests, to perform all of the obligations undertaken
by it thereunder all in accordance with and pursuant to the terms and provisions
thereof and neither the Collateral Agent nor any Secured Party shall have any
obligation or liability under any of such agreements by reason of or arising out
of this Agreement or any other document related thereto nor shall the Collateral
Agent nor any Secured Party have any obligation to make any inquiry as to the
nature or sufficiency of any payment received by it or have any obligation to
take any action to collect or enforce any rights under any agreement included in
the Collateral, including, without limitation, any agreements relating to
Pledged Partnership Interests or Pledged LLC Interests, (iii) the exercise by
the Collateral Agent or Secured Party of any of its rights hereunder shall not
release Grantor from any of its duties or obligations under the contracts and
agreements included in the Collateral.
Section 4. REPRESENTATIONS AND WARRANTIES AND COVENANTS.
(a) Generally.
(i) Representations and Warranties. Grantor hereby represents and
warrants that:
(1) such Grantor owns the Collateral purported to be owned by it
or otherwise has the rights it purports to have in each item of
Collateral and, as to all Collateral whether now existing or hereafter
acquired, will continue to own or have such rights in each item of the
Collateral (unless otherwise disposed of in connection with a
Permitted Sale), in each case free and clear of any and all Liens,
rights or claims of all other Persons (other than Permitted Liens),
including, without limitation, liens arising as a result of such
Grantor becoming bound (as a result of merger or otherwise) as debtor
under a security agreement entered into by another Person;
(2) such Grantor has been duly organized as a corporation solely
under the laws of the jurisdiction set forth in Schedule I(A) hereto
and remains duly existing as such. Such Grantor has not filed any
certificates of domestication, transfer or continuance in any other
jurisdiction;
(3) the execution and delivery of this Agreement by such Grantor
and the performance by it of its obligations under this Agreement are
within its corporate or other powers and have been duly authorized by
all necessary corporate or other action;
(4) upon the filing of UCC financing statements naming such
Grantor as debtor and the Collateral Agent as secured party and
describing the Collateral in the filing offices set forth opposite
such Grantor's name on Schedule I(E) hereof (as such Schedule may be
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amended or supplemented from time to time) and other filings delivered
by such Grantor, the security interests granted to the Collateral
Agent hereunder constitute valid and perfected Liens;
(5) other than the financing statements filed in favor of the
Collateral Agent, no effective UCC financing statement, fixture filing
or other instrument similar in effect under any applicable law
covering all or any part of the Collateral is on file in any filing or
recording office except for (x) financing statements for which proper
termination statements have been delivered to the Collateral Agent for
filing and (y) financing statements filed in connection with Permitted
Liens;
(6) no authorization, approval or other action by, and no notice
to or filing with, any Governmental Authority or regulatory body is
required for either (i) the pledge or grant by Grantor of the Liens
purported to be created in favor of the Collateral Agent hereunder or
(ii) the exercise by Collateral Agent of any rights or remedies in
respect of any Collateral (whether specifically granted or created
hereunder or created or provided for by applicable law), except (A)
for the filings contemplated by clause (4) above and (B) as may be
required, in connection with the disposition of any Investment Related
Property, by laws generally affecting the offering and sale of
Securities and as may be required under federal laws pertaining to
Intellectual Property;
(7) all actions and consents, including all filings, notices,
registrations and recordings necessary or desirable for the exercise
by the Collateral Agent of the voting or other rights provided for in
this Agreement or the exercise of remedies in respect of the
Collateral have been made or obtained;
(8) such Grantor has indicated on Schedule I(A) hereto (as such
Schedule may be amended or supplemented from time to time): (w) the
type of organization of such Grantor, (x) the jurisdiction of
organization of such Grantor, (y) its organizational identification
number, if any, and (z) the jurisdiction where the chief executive
office or its sole place of business is (or if such Grantor is a
natural person principal residence and principal place of business),
and for the one-year period preceding the date hereof has been,
located.
(9) the full legal name of such Grantor is as set forth on
Schedule I(A) and it has not done in the last five (5) years, and does
not do, business under any other name (including any trade-name or
fictitious business name) except for those names set forth on Schedule
I(B) (as such Schedule may be amended or supplemented from time to
time);
(10) except as provided on Schedule I(C), it has not changed its
jurisdiction of organization, chief executive office or sole place of
business (or, if such Grantor is a natural person, principal residence
or principal place of business) or its corporate structure in any way
(e.g. by merger, consolidation, change in corporate form or otherwise)
within the past five (5) years;
(11) such Grantor has not within the last five (5) years become
bound (whether as a result of merger or otherwise) as debtor under a
security agreement entered into by another Person, which has not
heretofore been terminated other than the agreements identified on
Schedule I(D) hereof (as such Schedule may be amended or supplemented
from time to time);
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(12) all information supplied by Grantor with respect to any of
the Collateral (in each case taken as a whole with respect to any
particular Collateral) is accurate and complete in all material
respects; and
(13) none of the Collateral constitutes, or is the Proceeds of,
"farm products" (as defined in the UCC).
(ii) Covenants and Agreements. Grantor hereby covenants and agrees
that:
(1) except for the security interest created by this Agreement,
it shall not create or suffer to exist any Lien upon or with respect
to any of the Collateral, except Permitted Liens, and such Grantor
shall defend the Collateral against all Persons at any time claiming
any interest therein;
(2) such Grantor shall not produce, use or permit any Collateral
to be used unlawfully or in violation of any provision of this
Agreement or any applicable statute, regulation or ordinance or any
policy of insurance covering the Collateral;
(3) without limiting any prohibitions or restrictions on mergers
in the Securities Purchase Agreement, such Grantor shall not change
such Grantor's name, identity, corporate structure (e.g. by merger,
consolidation, change in corporate form or otherwise), sole place of
business (or principal residence if such Grantor is a natural person),
chief executive office, type of organization or jurisdiction of
organization or establish any trade names unless such Grantor shall
have (a) notified the Collateral Agent in writing at least thirty (30)
days prior to any such change or establishment, identifying such new
proposed name, identity, corporate structure, sole place of business
(or principal residence if such Grantor is a natural person), chief
executive office, jurisdiction of organization or trade name and
providing such other information in connection therewith as the
Collateral Agent may reasonably request and (b) taken all actions
necessary or advisable to maintain the continuous validity, perfection
and the same or better priority of the Collateral Agent's security
interest in the Collateral granted or intended to be granted and
agreed to hereby, which in the case of any merger or other change in
corporate structure shall include, without limitation, executing and
delivering to the Collateral Agent a completed Pledge Supplement,
substantially in the form of Exhibit A attached hereto, upon
completion of such merger or other change in corporate structure
confirming the grant of the security interest hereunder;
(4) if the Collateral Agent or any Secured Party gives value to
enable Grantor to acquire rights in or the use of any Collateral, such
Grantor shall use such value for such purposes and such Grantor
further agrees that repayment of any Obligation shall apply on a
"first-in, first-out" basis so that the portion of the value used to
acquire rights in any Collateral shall be paid in the chronological
order such Grantor acquired rights therein;
(5) such Grantor shall pay promptly when due all property and
other taxes, assessments and governmental charges or levies imposed
upon, and all claims (including claims for labor, materials and
supplies) against, the Collateral, except to the extent the validity
thereof is being contested in good faith; provided, such Grantor shall
in any event pay such taxes, assessments, charges, levies or claims
not later than five (5) days prior to the date of any proposed sale
under any judgment, writ or warrant of attachment entered or filed
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against such Grantor or any of the Collateral as a result of the
failure to make such payment;
(6) upon such Grantor or any officer of such Grantor obtaining
knowledge thereof, such Grantor shall promptly notify the Collateral
Agent in writing of any event that may materially and adversely affect
the value of the Collateral or any portion thereof, the ability of
Grantor or the Collateral Agent to dispose of the Collateral or any
portion thereof, or the rights and remedies of the Collateral Agent in
relation thereto, including, without limitation, the levy of any legal
process against the Collateral or any portion thereof;
(7) such Grantor shall not take or permit any action which could
impair the Collateral Agent's rights in the Collateral; and
(8) such Grantor shall not sell, transfer or assign (by operation
of law or otherwise) any Collateral except for Permitted Sales.
(b) Equipment and Inventory.
(i) Representations and Warranties. Grantor represents and warrants
that:
(1) all of the Equipment and Inventory included in the Collateral
is kept for the past five (5) years only at the locations specified in
Schedule II hereto (as such Schedule may be amended or supplemented
from time to time);
(2) any Inventory now or hereafter produced by Grantor included
in the Collateral have been and will be produced in compliance with
the requirements of the Fair Labor Standards Act, as amended, and the
rules and regulations thereunder; and
(3) except as set forth on Schedule II, none of the Inventory or
Equipment is in the possession of an issuer of a negotiable document
(as defined in Section 7104 of the UCC) therefor or otherwise in the
possession of a bailee or warehouseman.
(ii) Covenants and Agreements. Grantor covenants and agrees that:
(1) such Grantor shall keep the Equipment and Inventory in the
locations specified on Schedule II hereto unless it shall have (a)
notified the Collateral Agent in writing at least thirty (30) days
prior to any change in locations, identifying such new locations and
providing such other information in connection therewith as the
Collateral Agent may reasonably request and (b) taken all actions
necessary or advisable to maintain the continuous validity, perfection
and the same or better priority of the Collateral Agent's security
interest in the Collateral intended to be granted and agreed to
hereby, or to enable the Collateral Agent to exercise and enforce its
rights and remedies hereunder, with respect to such Equipment and
Inventory;
(2) such Grantor shall keep correct and accurate records of the
Inventory, including, without limitation, itemizing and describing the
kind, type and quantity of such Inventory, such Grantor's cost
therefor and, where applicable, the current list prices for such
Inventory and such other information as is customarily maintained
under similar circumstances by Persons of established reputation
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engaged in similar business, and in any event in conformity with
generally accepted accounting principles;
(3) such Grantor shall not deliver any Document Evidencing Goods
to any Person other than the issuer of such Document to claim the
Goods evidenced therefor or the Collateral Agent;
(4) if any Equipment or Inventory is in possession or control of
any third party, including, without limitation, any warehouseman,
bailee or agent, Grantor shall join with the Collateral Agent in
notifying the third party of the Collateral Agent's security interest
and obtaining an Authenticated acknowledgment from such third party
that it is holding the Equipment and Inventory for the benefit of the
Collateral Agent; and
(5) with respect to any item of Equipment which is covered by a
certificate of Title under a statute of any jurisdiction under the law
of which indication of a security interest on such certificate is
required as a condition of perfection thereof, upon the reasonable
request of the Collateral Agent, (A) provide information with respect
to any such Equipment, (B) execute and file with the registrar of
motor vehicles or other appropriate authority in such jurisdiction an
application or other document requesting the notation or other
indication of the security interest created hereunder on such
certificate of title, and (C) deliver to the Collateral Agent copies
of all such applications or other documents filed during such calendar
quarter and copies of all such certificates of Title issued during
such calendar quarter indicating the security interest created
hereunder in the items of Equipment covered thereby.
(c) Receivables.
(i) Representations and Warranties. Grantor represents and warrants
that:
(1) each Receivable (a) is and will be the legal, valid and
binding obligation of the Account Debtor in respect thereof,
representing an unsatisfied obligation of such Account Debtor, (b) is
and will be enforceable in accordance with its terms, (c) is not and
will not be subject to any setoffs, defenses, taxes, counterclaims
(except with respect to refunds, returns and allowances in the
ordinary course of business with respect to damaged merchandise) and
(d) is and will be in compliance with all applicable laws, whether
federal, state, local or foreign;
(2) none of the Account Debtors in respect of any Receivable is
the government of the United States, any agency or instrumentality
thereof, any state or municipality or any foreign sovereign. No
Receivable requires the consent of the Account Debtor in respect
thereof in connection with the security interest hereunder, except any
consent which has been obtained;
(3) such Grantor has delivered to the Collateral Agent a complete
and correct copy of each standard form of document under which a
Receivable may arise.
(ii) Covenants and Agreements: Grantor hereby covenants and agrees
that:
(1) such Grantor shall keep and maintain at its own cost and
expense satisfactory and complete records of the Receivables,
including, but not limited to, the originals of all documentation with
respect to all Receivables and records of all payments received and
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all credits granted on the Receivables, all merchandise returned and
all other dealings therewith;
(2) such Grantor shall perform in all material respects all of
its obligations with respect to the Receivables;
(3) such Grantor shall not amend, modify, terminate or waive any
provision of any Receivable in any manner which could reasonably be
expected to have a Material Adverse Effect on the value of such
Receivable as Collateral. Other than in the ordinary course of
business as generally conducted by such Grantor on and prior to the
date hereof, and except as otherwise provided in subsection (5) below,
following an Event of Default, such Grantor shall not, without the
prior written consent of the Collateral Agent (w) grant any extension
or renewal of the time of payment of any Receivable, (x) compromise or
settle any dispute, claim or legal proceeding with respect to any
Receivable in an amount in excess of One Hundred Thousand Dollars
($100,000) for less than the total unpaid balance thereof, (y)
release, wholly or partially, any Person liable for the payment
thereof, or (z) allow any credit or discount thereon;
(4) at the reasonable request of the Collateral Agent, such
Grantor shall ▇▇▇▇ conspicuously, in form and manner reasonably
satisfactory to the Collateral Agent, all Chattel Paper, Instruments
and other evidence of Receivables (other than any delivered to the
Collateral Agent as provided herein), as well as the Receivables
Records with an appropriate reference to the fact that the Collateral
Agent has a security interest therein;
(5) except as otherwise provided in this subsection, such Grantor
shall continue to collect all amounts due or to become due to such
Grantor under the Receivables and any Supporting Obligation and
diligently exercise each material right it may have under any
Receivable, any Supporting Obligation or Collateral Support, in each
case, at its own expense, and in connection with such collections and
exercise, such Grantor shall take such action as such Grantor or the
Collateral Agent may deem necessary or advisable. Notwithstanding the
foregoing, the Collateral Agent shall have the right at any time to
notify, or require Grantor to notify, any Account Debtor of the
Collateral Agent's security interest in the Receivables and any
Supporting Obligation and, in addition, at any time following the
occurrence and during the continuation of an Event of Default, the
Collateral Agent may: (1) direct the Account Debtors under any
Receivables to make payment of all amounts due or to become due to
such Grantor thereunder directly to the Collateral Agent; (2) notify,
or require Grantor to notify, each Person maintaining a lockbox or
similar arrangement to which Account Debtors under any Receivables
have been directed to make payment to remit all amounts representing
collections on checks and other payment items from time to time sent
to or deposited in such lockbox or other arrangement directly to the
Collateral Agent; and (3) and subject to Section 8 below, enforce, at
the expense of such Grantor, collection of any such Receivables and to
adjust, settle or compromise the amount or payment thereof, in the
same manner and to the same extent as such Grantor might have done. If
the Collateral Agent notifies Grantor that it has elected to collect
the Receivables in accordance with the preceding sentence, any
payments of Receivables received by such Grantor shall be forthwith
(and in any event within two (2) Business Days) deposited by such
Grantor in the exact form received, duly indorsed by such Grantor to
the Collateral Agent if required, into an account maintained under the
sole dominion and control of the Collateral Agent, and until so turned
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over, all amounts and proceeds (including checks and other
instruments) received by such Grantor in respect of the Receivables,
any Supporting Obligation or Collateral Support shall be received in
trust for the benefit of the Collateral Agent hereunder and shall be
segregated from other funds of such Grantor and such Grantor shall not
adjust, settle or compromise the amount or payment of any Receivable,
or release wholly or partly any Account Debtor or obligor thereof, or
allow any credit or discount thereon; and
(6) such Grantor shall use its best efforts to keep in full force
and effect any Supporting Obligation or Collateral Support relating to
any Receivable.
(iii) Delivery and Control of Receivables. With respect to any
Receivables in excess of $100,000 in the aggregate from a single Person or
its affiliates that are evidenced by, or constitutes, Tangible Chattel
Paper or Instruments, Grantor shall cause each originally executed copy
thereof to be delivered to the Collateral Agent (or its agent or designee)
appropriately indorsed to the Collateral Agent or indorsed in blank: (a)
with respect to any such Receivables in existence on the date hereof, on or
prior to the date hereof and (b) with respect to any such Receivables
hereafter arising, within ten (10) days of such Grantor acquiring rights
therein. With respect to any Receivables in excess of $100,000 in the
aggregate from a single Person or its affiliate which would constitute
"electronic chattel paper" under the UCC, Grantor shall take all steps
necessary to give the Collateral Agent control (within the meaning of
Section 9105 of the UCC) over such Receivables : (a) with respect to any
such Receivables in existence on the date hereof, on or prior to the date
hereof and (b) with respect to any such Receivables hereafter arising,
within ten (10) days of such Grantor acquiring rights therein. Any
Receivable not otherwise required to be delivered or subjected to the
control of the Collateral Agent in accordance with this subsection (iii)
shall be delivered or subjected to such control upon request of the
Collateral Agent.
(d) Pledged Equity Interests and Pledged Debt.
(i) Representations and Warranties. Grantor hereby represents and
warrants that:
(1) Schedule III hereto (as such Schedule may be amended or
supplemented from time to time) sets forth under the headings "Pledged
Stock," "Pledged LLC Interests," "Pledged Partnership Interests," and
"Pledged Trust Interests," respectively, all of the Pledged Stock,
Pledged LLC Interests, Pledged Partnership Interests and Pledged Trust
Interests owned by Grantor and such Pledged Equity Interests
constitute the percentage of issued and outstanding shares of stock,
percentage of membership interests, percentage of partnership
interests or percentage of beneficial interest of the respective
issuers thereof indicated on such Schedule;
(2) except as set forth on Schedule III(B) hereto, such Grantor
has not acquired any equity interests of another entity within the
past five (5) years.
(3) such Grantor is the record and beneficial owner of the
Pledged Equity Interests free of all Liens, rights or claims of other
Persons other than Permitted Liens and there are no outstanding
warrants, options or other rights to purchase, or shareholder, voting
trust or similar agreements outstanding with respect to, or property
that is convertible into, or that requires the issuance or sale of,
any Pledged Equity Interests;
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(4) except for any consents that have been obtained and remain in
full force and effect, no consent of any Person including any other
general or limited partner, any other member of a limited liability
company, any other shareholder or any other trust beneficiary is
necessary or desirable in connection with the creation, perfection or
first priority status of the security interest of the Collateral Agent
in any Pledged Equity Interests or the exercise by the Collateral
Agent of the voting or other rights provided for in this Agreement or
the exercise of remedies in respect thereof; and
(5) Schedule III hereto (as such Schedule may be amended or
supplemented from time to time) sets forth under the heading "Pledged
Debt" all of the Pledged Debt owned by Grantor and all of such Pledged
Debt has been duly authorized, authenticated or issued, and delivered
and is the legal, valid and binding obligation of the issuers thereof
and is not in default and constitutes all of the issued and
outstanding inter-company indebtedness evidenced by an instrument or
certificated security of the respective issuers thereof owing to such
Grantor.
(ii) Covenants and Agreements. Grantor hereby covenants and agrees
that:
(1) without the prior written consent of the Collateral Agent,
such Grantor shall not vote to enable or take any other action to: (a)
amend or terminate any partnership agreement, limited liability
company agreement, certificate of incorporation, by-laws or other
organizational documents in any way that materially changes the rights
of such Grantor with respect to any Investment Related Property or
adversely affects the validity, perfection or priority of the
Collateral Agent's security interest, (b) permit any issuer of any
Pledged Equity Interest that is a direct or indirect subsidiary of
Grantor to issue any additional stock, partnership interests, limited
liability company interests or other equity interests of any nature or
to issue securities convertible into or granting the right of purchase
or exchange for any stock or other equity interest of any nature of
such issuer, (c) other than as permitted under the Securities Purchase
Agreement, permit any issuer of any Pledged Equity Interest that is a
direct or indirect subsidiary of Grantor to dispose of all or a
material portion of their assets, (d) waive any default under or
breach of any terms of organizational document relating to the issuer
of any Pledged Equity Interest or the terms of any Pledged Debt, or
(e) cause any issuer of any Pledged Partnership Interests or Pledged
LLC Interests which are not securities (for purposes of the UCC) on
the date hereof to elect or otherwise take any action to cause such
Pledged Partnership Interests or Pledged LLC Interests to be treated
as securities for purposes of the UCC; provided, however,
notwithstanding the foregoing, if any issuer of any Pledged
Partnership Interests or Pledged LLC Interests takes any such action
in violation of the foregoing in this clause (e), such Grantor shall
promptly notify the Collateral Agent in writing of any such election
or action and, in such event, shall take all steps necessary or
advisable to establish the Collateral Agent's "control" thereof;
(2) such Grantor shall comply with all of its obligations under
any partnership agreement or limited liability company agreement
relating to Pledged Partnership Interests or Pledged LLC Interests and
shall enforce all of its rights with respect to any Investment Related
Property;
(3) without the prior written consent of the Collateral Agent,
such Grantor shall not permit any issuer of any Pledged Equity
Interest that is a direct or indirect subsidiary of Grantor to merge
or consolidate unless (i) such issuer creates a security interest that
is perfected by a filed financing statement (that is not effective
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solely under Section 9508 of the UCC) in collateral in which such new
debtor has or acquires rights, and (ii) all the outstanding capital
stock or other equity interests of the surviving or resulting
corporation, limited liability company, partnership or other entity
is, upon such merger or consolidation, pledged hereunder and no cash,
securities or other property is distributed in respect of the
outstanding equity interests of any other constituent Grantor;
provided that if the surviving or resulting Grantors upon any such
merger or consolidation involving an issuer which is a controlled
foreign corporation (as defined in the U.S. Internal Revenue Code of
1986, as amended), then such Grantor shall only be required to pledge
equity interests in accordance with Section 2(b);
(4) such Grantor consents to the grant of a security interest in
all Investment Related Property to the Collateral Agent and, without
limiting the foregoing, consents to the transfer of any Pledged
Partnership Interest and any Pledged LLC Interest to the Collateral
Agent or its designee following an Event of Default and to the
substitution of the Collateral Agent or its designee as a partner in
any partnership or as a member in any limited liability company with
all the rights and powers related thereto;
(5) such Grantor shall notify the Collateral Agent of any default
under any Pledged Debt that has caused, either in any case or in the
aggregate, a Material Adverse Effect; and
(6) in the event such Grantor acquires rights in any Pledged
Equity Interest or Pledged Debt after the date hereof, it shall
deliver to the Collateral Agent a completed Pledge Supplement,
substantially in the form of Exhibit A attached hereto, together with
all Supplements to Schedules thereto, reflecting such new Pledged
Equity Interest or Pledged Debt and all other Pledged Equity Interest
or Pledged Debt. Notwithstanding the foregoing, it is understood and
agreed that the security interest of the Collateral Agent shall attach
to all Pledged Equity Interest or Pledged Debt immediately upon
Grantor's acquisition of rights therein and shall not be affected by
the failure of Grantor to deliver a supplement to Schedule III as
required hereby.
(iii) Delivery and Control. Grantor agrees that with respect to any
Pledged Equity Interest or Pledged Debt hereafter acquired by such Grantor,
it shall comply with the provisions of this subsection (iii) immediately
upon acquiring rights therein, in each case in form and substance
satisfactory to the Collateral Agent. With respect to any Pledged Equity
Interest or Pledged Debt that is represented by a certificate or that is an
"instrument" (other than any Investment Related Property credited to a
Securities Account) such Grantor shall cause such certificate or instrument
to be delivered to the Collateral Agent, indorsed in blank by an "effective
indorsement" (as defined in Section 8107 of the UCC), regardless of whether
such certificate constitutes a "certificated security" for purposes of the
UCC. With respect to any Pledged Equity Interest or Pledged Debt that is an
"uncertificated security" for purposes of the UCC (other than any
"uncertificated securities" credited to a Securities Account), such Grantor
shall cause the issuer of such uncertificated security to either (i)
register the Collateral Agent as the registered owner thereof on the books
and records of the issuer or (ii) execute an agreement, in form and
substance satisfactory to the Collateral Agent, pursuant to which such
issuer agrees to comply with the Collateral Agent's instructions with
respect to such uncertificated security without further consent by such
Grantor. If any issuer of any Pledged Equity Interest or Pledged Debt is
located in a jurisdiction outside of the United States, Grantor shall take
such additional actions, including, without limitation, causing the issuer
to register the pledge on its books and records or making such filings or
recordings, in each case as may be necessary or advisable, under the laws
of such issuer's jurisdiction to insure the validity, perfection and
priority of the security interest of the Collateral Agent. Upon the
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occurrence of an Event of Default, the Collateral Agent shall have the
right, without notice to Grantor, to transfer all or any portion of Pledged
Equity Interest or Pledged Debt to its name or the name of its nominee or
agent. In addition, the Collateral Agent shall have the right at any time,
without notice to Grantor, to exchange any certificates or instruments
representing any Pledged Equity Interest or Pledged Debt for certificates
or instruments of smaller or larger denominations.
(e) Investment Accounts.
(i) Representations and Warranties. Grantor hereby represents and
warrants that:
(1) Schedule III hereto (as such Schedule may be amended or
supplemented from time to time) sets forth under the headings
"Securities Accounts" and "Commodities Accounts," respectively, all of
the Securities Accounts and Commodities Accounts in which such Grantor
has an interest. Such Grantor is the sole entitlement holder of each
such Securities Account and Commodities Account, and such Grantor has
not consented to, and is not otherwise aware of, any Person (other
than the Collateral Agent pursuant hereto) having "control" (within
the meanings of Sections 8106 and 9106 of the UCC) over, or any other
interest in, any such Securities Account or Commodity Account or any
securities or other property credited thereto;
(2) Schedule III hereto (as such Schedule may be amended or
supplemented from time to time) sets forth under the heading "Deposit
Accounts" all of the Deposit Accounts in which such Grantor has an
interest and such Grantor is the sole account holder of each such
Deposit Account and such Grantor has not consented to, and is not
otherwise aware of, any Person (other than the Collateral Agent
pursuant hereto) having either sole dominion and control (within the
meaning of common law) or "control" (within the meaning of Section
9104 of the UCC) over, or any other interest in, any such Deposit
Account or any money or other property deposited therein; and
(ii) Covenants and Agreements. In the event Grantor acquires rights in
any Securities Accounts, Securities Entitlements, Deposit Accounts or
Commodity Accounts after the date hereof, such Grantor shall deliver to the
Collateral Agent a completed Pledge Supplement, substantially in the form
of Exhibit A attached hereto, together with all Supplements to Schedules
thereto, reflecting such new Securities Accounts, Securities Entitlements,
Deposit Accounts or Commodity Accounts and all other Securities Accounts,
Securities Entitlements, Deposit Accounts or Commodity Accounts.
Notwithstanding the foregoing, it is understood and agreed that the
security interest of the Collateral Agent shall attach to all Securities
Accounts, Securities Entitlements, Deposit Accounts or Commodity Accounts
immediately upon Grantor's acquisition of rights therein and shall not be
affected by the failure of Grantor to deliver a supplement to Schedule III
as required hereby.
(iii) Delivery and Control. Grantor agrees that with respect to any
Investment Related Property consisting of Securities Accounts or Securities
Entitlements, such Grantor shall cause the securities intermediary
maintaining such Securities Account or Securities Entitlement to enter into
an agreement, in form and substance satisfactory to the Collateral Agent,
pursuant to which such securities intermediary shall agree to comply with
the Collateral Agent's "entitlement orders" without further consent by such
Grantor and shall establish the Collateral Agent shall have "control"
(within the meaning of Section 9106 of the UCC) over such Securities
Accounts or Securities Entitlements. With respect to any Investment Related
S-I-20
Property that is a "Deposit Account," such Grantor shall cause the
depositary institution maintaining such account to enter into an agreement,
in form and substance satisfactory to the Collateral Agent, pursuant to
which the depositary institution shall agree to comply with the Collateral
Agent's instructions without further consent by such Grantor and shall
establish the Collateral Agent shall have "control" (within the meaning of
Section 9104 of the UCC) over such Deposit Account. With respect to any
Investment Related Property that is a "Commodity Account," such Grantor
shall cause the commodity intermediary maintaining such account to enter
into an agreement, in form and substance satisfactory to the Collateral
Agent, pursuant to which the Collateral Agent shall have "control" (within
the meaning of Section 9106 of the UCC) over such Commodity Account. Each
Grantor shall have entered into such control agreement or agreements with
respect to: (i) any Securities Accounts, Securities Entitlements or Deposit
Accounts that exist on the date hereof, on or prior to the date hereof and
(ii) any Securities Accounts, Securities Entitlements, Deposit Accounts or
Commodity Accounts that are created or acquired after the date hereof, as
of or prior to the deposit or transfer of any such Securities Entitlements
or funds, whether constituting moneys or investments, into such Securities
Accounts, Deposit Accounts or Commodity Accounts.
(f) Material Contracts.
(i) Representations and Warranties. Grantor hereby represents and
warrants that:
(1) Schedule IV hereto sets forth all of the Material Contracts
to which such Grantor has rights;
(2) the Material Contracts, true and complete copies (including
any amendments or supplements thereof) of which have been furnished to
the Collateral Agent, have been duly authorized, executed and
delivered by Grantor, are in full force and effect and are binding
upon and enforceable against such Grantor in accordance with their
respective terms. There exists no default under any Material Contract
by any party thereto and neither such Grantor, nor to its best
knowledge, any other Person party thereto is likely to become in
default thereunder and no Person party thereto has any defenses,
counterclaims or right of set-off with respect to any Material
Contract; and
(3) no Material Contract prohibits assignment or requires consent
of or notice to any Person in connection with the transactions
contemplated hereunder, except such as has been given or made.
(ii) Covenants and Agreements. Grantor hereby covenants and agrees
that:
(1) in addition to any rights under this Agreement relating to
Receivables, the Collateral Agent may at any time notify, or require
Grantor to so notify, the counterparty on any Material Contract of the
security interest of the Collateral Agent therein. In addition, after
the occurrence and during the continuance of an Event of Default, the
Collateral Agent may upon written notice to Grantor, notify, or
require Grantor to notify, the counterparty to make all payments under
the Material Contracts directly to the Collateral Agent;
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(2) such Grantor shall deliver promptly to the Collateral Agent a
copy of each material demand, notice or document received by it
relating in any way to any Material Contract;
(3) such Grantor shall deliver promptly to the Collateral Agent,
and in any event within ten (10) Business Days, after (1) any Material
Contract of such Grantor is terminated or amended in a manner that is
materially adverse to such Grantor or (2) any new Material Contract is
entered into by such Grantor, a written statement describing such
event, with copies of such material amendments or new contracts,
delivered to the Collateral Agent (to the extent such delivery is
permitted by the terms of any such Material Contract, provided, no
prohibition on delivery shall be effective if it were bargained for by
such Grantor with the intent of avoiding compliance with this
Agreement, and an explanation of any actions being taken with respect
thereto);
(4) such Grantor shall perform in all material respects all of
its obligations with respect to the Material Contracts;
(5) such Grantor shall promptly and diligently exercise each
material right (except the right of termination) it may have under any
Material Contract, any Supporting Obligation or Collateral Support, in
each case, at its own expense, and in connection with such collections
and exercise, such Grantor shall take such action as such Grantor or
the Collateral Agent may deem necessary or advisable; and
(6) such Grantor shall use its best efforts to keep in full force
and effect any Supporting Obligation or Collateral Support relating to
any Material Contract.
(g) Letter of Credit Rights.
(i) Representations and Warranties. Grantor hereby represents and
warrants that:
(1) all material letters of credit to which such Grantor has
rights is listed on Schedule V hereto; and
(2) such Grantor has obtained the consent of each issuer of any
material letter of credit to the assignment of the proceeds of the
letter of credit to the Collateral Agent.
(ii) Covenants and Agreements. Grantor hereby covenants and agrees
that with respect to any material letter of credit hereafter arising, such
Grantor shall obtain the consent of the issuer thereof to the assignment of
the proceeds of the letter of credit to the Collateral Agent and shall
deliver to the Collateral Agent a completed Pledge Supplement,
substantially in the form of Exhibit A attached hereto, together with all
Supplements to Schedules thereto. Notwithstanding the foregoing, it is
understood and agreed that the security interest of the Collateral Agent
shall attach to all letters of credit immediately upon Grantor's
acquisition of rights therein and shall not be affected by the failure of
Grantor to deliver a supplement to Schedule V as required hereby.
(h) Intellectual Property.
(i) Representations and Warranties. Except as disclosed in Schedule
VI(H) (as such Schedule may be amended or supplemented from time to time),
Grantor hereby represents and warrants that:
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(1) Schedule VI (as such Schedule may be amended or supplemented
from time to time) sets forth a true and complete list of (i) all
United States, state and foreign registrations of and applications for
Patents, Trademarks, and Copyrights owned by such Grantor and (ii) all
Patent Licenses, Trademark Licenses and Copyright Licenses, granting
rights in any Patents, Trademarks or Copyrights owned by Grantor and
any other such licenses that are material to the business of such
Grantor;
(2) all registrations and applications of such Grantor for
Copyrights, Patents and Trademarks are standing in the name of such
Grantor;
(3) such Grantor is the sole and exclusive owner of the entire
right, title, and interest in and to all Intellectual Property on
Schedule VI (as such Schedule may be amended or supplemented from time
to time), and owns or has the valid right to use all other
Intellectual Property used in or necessary to conduct its business,
free and clear of all Liens, claims, encumbrances and licenses, except
for Permitted Liens and the Intellectual Property Licenses set forth
on Schedule VI(B), (D), (F) and (G) (as each may be amended or
supplemented from time to time);
(4) all Intellectual Property owned by such Grantor and, to the
best of such Grantor's knowledge, licensed to such Grantor: (i) is
subsisting, (ii) is valid and enforceable and (iii) has not been
adjudged invalid or unenforceable, in whole or in part; and such
Grantor has performed all acts and has paid all renewal, maintenance,
and other fees and taxes required to maintain each and every
registration and application of Intellectual Property that such
Grantor owns in full force and effect;
(5) no action or proceeding before any court or administrative
authority is pending or, to such Grantor's knowledge, threatened
against such Grantor challenging such Grantor's right to register, the
validity of, or such Grantor's rights to own, use, or license any
Intellectual Property;
(6) such Grantor has been using appropriate statutory notice of
registration in connection with its use of registered Trademarks,
proper marking practices in connection with the use of Patents, and
appropriate notice of copyright in connection with the publication of
Copyrights material to the business of such Grantor;
(7) such Grantor uses adequate standards of quality in the
manufacture, distribution, and sale of all products sold and in the
provision of all services rendered under or in connection with all
Trademarks owned by such Grantor and has taken all action necessary to
insure that all licensees of such Trademarks use such adequate
standards of quality;
(8) the conduct of such Grantor's business does not infringe upon
any trademark, patent, copyright, trade secret or similar intellectual
property right owned or controlled by a third party; no claim is
pending, or to the best of such Grantor's knowledge, threatened, that
the conduct of such Grantor's business or the use of any Intellectual
Property owned or used by Grantor violates the asserted rights of any
third party;
(9) to the best of such Grantor's knowledge, no third party is
infringing upon any Intellectual Property owned or used by such
Grantor;
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(10) no settlement or consents, covenants not to ▇▇▇,
nonassertion assurances, or releases have been entered into by such
Grantor or to which such Grantor is bound that adversely effect such
Grantor's rights to own or use any Intellectual Property; and
(11) such Grantor has not made any agreements to assign, sell,
transfer or grant an option or license for any Intellectual Property
that has not been terminated or released. There is no effective
financing statement or other document or instrument now executed, or
on file or recorded in any public office, granting a security interest
in or otherwise encumbering any part of the Intellectual Property,
other than in favor of the Collateral Agent.
(ii) Covenants and Agreements. Grantor hereby covenants and agrees as
follows:
(1) except for Intellectual Property that is not in use and has
negligible value, such Grantor shall not do any act or omit to do any
act whereby any of the Intellectual Property which is material to the
business of Grantor may lapse, or become abandoned, dedicated to the
public, or unenforceable, or which would adversely affect the
validity, grant, or enforceability of the security interest granted
therein;
(2) except for copyrights of negligible value, such Grantor
shall, within thirty (30) days of the creation or acquisition of any
Copyrightable work which is material to the business of Grantor, apply
to register the Copyright in the United States Copyright Office;
(3) such Grantor shall promptly notify the Collateral Agent if
such Grantor knows or has reason to know that any item of the
Intellectual Property of Grantor that is in use or has more than
negligible value may become (a) abandoned or dedicated to the public
or placed in the public domain, (b) invalid or unenforceable, or (c)
subject to any adverse determination or development (including the
institution of proceedings) in any action or proceeding in the United
States Patent and Trademark Office, the United States Copyright
Office, and state registry, any foreign counterpart of the foregoing,
or any court arbitral tribunal or regulatory agency;
(4) such Grantor shall take all reasonable steps in the United
States Patent and Trademark Office, the United States Copyright
Office, any state registry or any foreign counterpart of the
foregoing, to pursue any application and maintain any registration of
each Trademark, Patent, and Copyright owned by Grantor and which is
now or shall become included in the Intellectual Property including,
but not limited to, those items on Schedule VI(A), (C) and (E) (as
each may be amended or supplemented from time to time) except for
those pertaining to Intellectual Property that are no longer in use
and have negligible value;
(5) in the event that any Intellectual Property owned by or
exclusively licensed to Grantor is infringed, misappropriated, or
diluted by a third party, such Grantor shall promptly take all
reasonable actions to stop such infringement, misappropriation, or
dilution and protect its exclusive rights in such Intellectual
Property including, but not limited to, the initiation of a suit for
injunctive relief and to recover damages;
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(6) Grantor shall maintain the level of the quality of products
sold and services rendered under any Trademark at a level at least
substantially consistent with the quality of such products and
services as of the date hereof, and Grantor shall take all steps
necessary to insure that licensees of such Trademarks use such
standards of quality;
(7) such Grantor shall take all steps reasonably necessary to
protect the confidentiality of all material Trade Secrets of Grantor,
including, without limitation, entering into confidentiality
agreements with employees and labeling and restricting access to
confidential information and documents;
(8) such Grantor shall promptly (but in no event more than thirty
(30) days) report to the Collateral Agent (i) the filing of any
application to register any Intellectual Property whether it owns in
whole or in part or to the best of its knowledge which it is
exclusively licensing from a third party with the United States Patent
and Trademark Office, the United States Copyright Office, or any state
registry or foreign counterpart of the foregoing (whether such
application is filed by such Grantor or through any agent, employee,
licensor, licensee, or designee thereof), (ii) the registration of any
Intellectual Property by any such office, or (iii) the acquisition of
any application or registration and, in each case, shall execute and
deliver to the Collateral Agent a completed Pledge Supplement,
substantially in the form of Exhibit A attached hereto, together with
all Supplements to Schedules thereto an executed Trademark Security
Agreement, Patent Security Agreement, or Copyright Security Agreement
in form and substance satisfactory to the Agent;
(9) except with the prior consent of the Collateral Agent or as
permitted under the Securities Purchase Agreement, Grantor shall not
execute, and there will not be on file in any public office, any
financing statement or other document or instruments, except financing
statements or other documents or instruments filed or to be filed in
favor of the Collateral Agent, and Grantor shall not sell, assign,
transfer, license, grant any option, or create or suffer to exist any
Lien upon or with respect to the Intellectual Property, except for the
Lien created by and under this Security Agreement and the other Loan
Documents.
(10) such Grantor shall hereafter use commercially reasonable
efforts so as not to permit the inclusion in any contract to which it
hereafter becomes a party of any provision that would impair or
prevent the creation of a security interest in, or the assignment of,
such Grantor's rights and interests in any Intellectual Property
acquired under such Contracts;
(11) such Grantor shall use proper statutory notice in connection
with its use of any of the Intellectual Property; and
(12) such Grantor shall continue to collect, at its own expense,
all amounts due or to become due to such Grantor in respect of any
Intellectual Property. In connection with such collections, such
Grantor may take (and, at the Collateral Agent's reasonable direction,
shall take) such action as such Grantor or the Collateral Agent may
deem reasonably necessary or advisable to enforce collection of such
amounts. Notwithstanding the foregoing, the Collateral Agent shall
have the right at any time, to notify, or require Grantor to notify,
any obligors with respect to any such amounts of the existence of the
security interest created hereby.
S-I-25
(i) Commercial Tort Claims
(i) Representations and Warranties. Grantor hereby represents and
warrants that Schedule VII (as such Schedule may be amended or supplemented
from time to time) sets forth all Commercial Tort Claims of Grantor.
(ii) Covenants and Agreements. Grantor hereby covenants and agrees
that with respect to any Commercial Tort Claim hereafter arising, such
Grantor shall deliver to the Collateral Agent a completed Pledge
Supplement, substantially in the form of Exhibit A attached hereto,
together with all Supplements to Schedules thereto, identifying such new
Commercial Tort Claims.
Section 5. DIVIDENDS, DISTRIBUTIONS AND VOTING(a) Dividends and
Distributions. Except as provided in the next sentence, in the event Grantor
receives (x) any dividends, interest or distributions on any Investment Related
Property, or (y) any securities or other property upon the merger,
consolidation, liquidation or dissolution of any issuer of any Investment
Related Property, then (1) such dividends, interest or distributions and
securities or other property shall be included in the definition of Collateral
without further action and (2) such Grantor shall immediately take all steps, if
any, necessary or advisable to ensure the validity, perfection, priority and, if
applicable, control of the Collateral Agent over such dividends, distributions,
interest, securities or other property (including, without limitation, delivery
thereof to the Collateral Agent) and pending any such action such Grantor shall
be deemed to hold such dividends, distributions, interest, securities or other
property in trust for the benefit of the Collateral Agent and shall be
segregated from all other property of such Grantor. Notwithstanding the
foregoing, so long as no Event of Default shall have occurred and be continuing,
the Collateral Agent authorizes Grantor to retain all ordinary cash dividends
and distributions paid in the normal course of the business of the issuer and
consistent with the past practice of the issuer and all scheduled payments of
interest;
(b) Voting.
(i) So long as no Event of Default shall have occurred and be
continuing:
(1) except as otherwise provided under the covenants and
agreements relating to Investment Related Property in this Agreement
or elsewhere herein or in the Securities Purchase Agreement, Grantor
shall be entitled to exercise or refrain from exercising any and all
voting and other consensual rights pertaining to the Investment
Related Property or any part thereof for any purpose not inconsistent
with the terms of this Agreement or the Securities Purchase Agreement;
provided, Grantor shall not exercise or refrain from exercising any
such right if the Collateral Agent shall have notified such Grantor
that, in the Collateral Agent's reasonable judgment, such action would
have a Material Adverse Effect on the value of the Investment Related
Property or any part thereof; and provided further, such Grantor shall
give the Collateral Agent at least five (5) Business Days prior
written notice of the manner in which it intends to exercise, or the
reasons for refraining from exercising, any such right; it being
understood, however, that neither the voting by such Grantor of any
Pledged Stock for, or such Grantor's consent to, the election of
directors (or similar governing body) at a regularly scheduled annual
or other meeting of stockholders or with respect to incidental matters
at any such meeting, nor such Grantor's consent to or approval of any
action otherwise permitted under this Agreement and the Securities
Purchase Agreement, shall be deemed inconsistent with the terms of
S-I-26
this Agreement or the Securities Purchase Agreement, and no notice of
any such voting or consent need be given to the Collateral Agent; and
(2) the Collateral Agent shall promptly execute and deliver (or
cause to be executed and delivered) to Grantor all proxies, and other
instruments as such Grantor may from time to time reasonably request
for the purpose of enabling such Grantor to exercise the voting and
other consensual rights when and to the extent which it is entitled to
exercise pursuant to clause (1) above;
(ii) Upon the occurrence and during the continuation of an Event of
Default:
(1) all rights of Grantor to exercise or refrain from exercising
the voting and other consensual rights which it would otherwise be
entitled to exercise pursuant hereto shall cease and all such rights
shall thereupon become vested in the Collateral Agent who shall
thereupon have the sole right to exercise such voting and other
consensual rights; and
(2) in order to permit the Collateral Agent to exercise the
voting and other consensual rights which it may be entitled to
exercise pursuant hereto and to receive all dividends and other
distributions which it may be entitled to receive hereunder: (1)
Grantor shall promptly execute and deliver (or cause to be executed
and delivered) to the Collateral Agent all proxies, dividend payment
orders and other instruments as the Collateral Agent may from time to
time reasonably request and (2) Grantor acknowledges that the
Collateral Agent may utilize the power of attorney set forth in
Section 7.
Section 6. ACCESS; RIGHT OF INSPECTION AND FURTHER ASSURANCES.
(a) Access; Right of Inspection. The Collateral Agent shall have the same
access and inspection rights as the Investors under the Securities Purchase
Agreement.
(b) Further Assurances.
(i) Grantor agrees that from time to time, at the expense of such
Grantor, that such Grantor shall promptly Authenticate, execute and deliver
all further instruments and documents, and take all further action, that
may be necessary or desirable, or that the Collateral Agent may reasonably
request, in order to create and/or maintain the validity, perfection or
priority of and protect any security interest granted or purported to be
granted hereby or to enable the Collateral Agent to exercise and enforce
its rights and remedies hereunder with respect to any Collateral. Without
limiting the generality of the foregoing, Grantor shall:
(1) file such financing or continuation statements, or amendments
thereto, and execute and deliver such other agreements, instruments,
endorsements, powers of attorney or notices, as may be necessary or
desirable, or as the Collateral Agent may reasonably request, in order
to perfect and preserve the security interests granted or purported to
be granted hereby;
(2) take all actions necessary to ensure the recordation of
appropriate evidence of the liens and security interest granted
hereunder in the Intellectual Property with any intellectual property
registry in which said Intellectual Property is registered or in which
an application for registration is pending including, without
S-I-27
limitation, the United States Patent and Trademark Office, the United
States Copyright Office, the various Secretaries of State, and the
foreign counterparts on any of the foregoing;
(3) at any reasonable time, upon request by the Collateral Agent,
exhibit the Collateral to and allow inspection of the Collateral by
the Collateral Agent, or persons designated by the Collateral Agent;
and
(4) at the Collateral Agent's request, appear in and defend any
action or proceeding that may affect such Grantor's title to or the
Collateral Agent's security interest in all or any part of the
Collateral.
(ii) Grantor hereby authorizes the filing of any financing statements
or continuation statements, and amendments to financing statements, or any
similar document, or the filing or recording of this Agreement (and all
schedules, annexes and exhibits hereto), in any jurisdictions and with any
filing offices as the Collateral Agent may determine, in its sole
discretion, are necessary or advisable to perfect or otherwise protect the
security interest granted to the Secured Parties and Collateral Agent
herein. Such financing statements may describe the Collateral in the same
manner as described herein or may contain an indication or description of
collateral that describes such property in any other manner as the
Collateral Agent may determine, in its sole discretion, is necessary,
advisable or prudent to ensure the perfection of the security interest in
the Collateral granted to the Collateral Agent herein, including, without
limitation, describing such property as "all assets" or "all personal
property, whether now owned or hereafter acquired. Grantor shall furnish to
the Collateral Agent from time to time statements and schedules further
identifying and describing the Collateral and such other reports in
connection with the Collateral as the Collateral Agent may reasonably
request, all in reasonable detail.
(iii) Grantor hereby authorizes the Collateral Agent to modify this
Agreement after obtaining such Grantor's approval of or signature to such
modification by amending Schedule VI hereto (as such Schedule may be
amended or supplemented from time to time) to include reference to any
right, Title or interest in any existing Intellectual Property or any
Intellectual Property acquired or developed by Grantor after the execution
hereof.
Section 7. COLLATERAL AGENT APPOINTED ATTORNEY-IN-FACT, IRREVOCABLE POWER
OF ATTORNEY. Grantor hereby irrevocably appoints the Collateral Agent (such
appointment being coupled with an interest) as such Grantor's attorney-in-fact,
with full authority in the place and stead of such Grantor and in the name of
such Grantor, the Collateral Agent or otherwise, from time to time in the
Collateral Agent's discretion to take any action and to execute any instrument
that the Collateral Agent may deem reasonably necessary or advisable to
accomplish the purposes of this Agreement, including, without limitation, the
following:
(i) upon the occurrence and during the continuance of any Event of
Default, to obtain and adjust insurance required to be maintained by such
Grantor or paid to the Collateral Agent pursuant to the Loan Documents;
(ii) upon the occurrence and during the continuance of any Event of
Default, to ask for, demand, collect, ▇▇▇ for, recover, compound, receive
and give acquittance and receipts for moneys due and to become due under or
in respect of any of the Collateral;
S-I-28
(iii) upon the occurrence and during the continuance of any Event of
Default, to receive, endorse and collect any drafts or other instruments,
documents and chattel paper in connection with clause (ii) above;
(iv) upon the occurrence and during the continuance of any Event of
Default, to file any claims or take any action or institute any proceedings
that the Collateral Agent may deem necessary or desirable for the
collection of any of the Collateral or otherwise to enforce the rights of
the Secured Parties and the Collateral Agent with respect to any of the
Collateral;
(v) to prepare, sign, and file for recordation in any intellectual
property registry, appropriate evidence of the lien and security interest
granted herein in the Intellectual Property in the name of such Grantor as
assignor;
(vi) to take or cause to be taken all actions necessary to perform or
comply or cause performance or compliance with the terms of this Agreement,
including, without limitation, access to pay or discharge taxes or Liens
(other than Permitted Liens) levied or placed upon or threatened against
the Collateral, the legality or validity thereof and the amounts necessary
to discharge the same to be determined by the Collateral Agent in its sole
discretion, any such payments made by the Collateral Agent to become
obligations of such Grantor to the Secured Parties and the Collateral
Agent, due and payable immediately without demand; and
(vii) upon the occurrence and during the continuance of any Event of
Default, generally to sell, transfer, lease, license, pledge, make any
agreement with respect to or otherwise deal with any of the Collateral as
fully and completely as though the Collateral Agent were the absolute owner
thereof for all purposes, and to do, at the Collateral Agent's option and
such Grantor's expense, at any time or from time to time, all acts and
things that the Collateral Agent deems reasonably necessary or appropriate
to protect, preserve or realize upon the Collateral and the Collateral
Agent's and the Secured Parties' security interest therein in order to
effect the intent of this Agreement, all as fully and effectively as such
Grantor might do.
Section 8. REMEDIES.
(a) Generally.
(i) If any Event of Default shall have occurred and be
continuing, the Collateral Agent may exercise in respect of the
Collateral, in addition to all other rights and remedies provided for
herein or otherwise available to it at law or in equity, all the
rights and remedies of the Collateral Agent and the Secured Parties on
default under the UCC (whether or not the UCC applies to the affected
Collateral) to collect, enforce or satisfy any Secured Obligations
then owing, whether by acceleration or otherwise, and also may pursue
any of the following separately, successively or simultaneously:
(1) require Grantor to, and Grantor hereby agrees that it
shall at its expense and promptly upon request of the Collateral
Agent forthwith, assemble all or part of the Collateral as
directed by the Collateral Agent and make it available to the
Collateral Agent at a place to be designated by the Collateral
Agent that is reasonably convenient to both parties;
(2) enter onto the property where any Collateral is located
and take possession thereof with or without judicial process;
S-I-29
(3) prior to the disposition of the Collateral, store,
process, repair or recondition the Collateral or otherwise
prepare the Collateral for disposition in any manner to the
extent the Collateral Agent deems appropriate;
(4) without notice except as specified below or under the
UCC, sell, assign, lease, license (on an exclusive or
nonexclusive basis) or otherwise dispose of the Collateral or any
part thereof in one or more parcels at public or private sale, at
any of the Collateral Agent's offices or elsewhere, for cash, on
credit or for future delivery, at such time or times and at such
price or prices and upon such other terms as the Collateral Agent
may deem commercially reasonable; and
(ii) The Collateral Agent or any Secured Party may be the
purchaser of any or all of the Collateral at any public or private (to
the extent to portion of the Collateral being privately sold is of a
kind that is customarily sold on a recognized market or the subject of
widely distributed standard price quotations) sale in accordance with
the UCC and the Collateral Agent, as collateral agent for and
representative of the Secured Parties, shall be entitled, for the
purpose of bidding and making settlement or payment of the purchase
price for all or any portion of the Collateral sold at any such sale
made in accordance with the UCC, to use and apply any of the Secured
Obligations as a credit on account of the purchase price for any
Collateral payable by the Collateral Agent at such sale. Each
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 applicable law) all rights
of redemption, stay and/or appraisal which it now has or may at any
time in the future have under any rule of law or statute now existing
or hereafter enacted. Grantor agrees that, to the extent notice of
sale shall be required by law, at least ten (10) days notice to such
Grantor of the time and place of any public sale or the time after
which any private sale is to be made shall constitute reasonable
notification. The Collateral Agent shall not be obligated to make any
sale of Collateral regardless of notice of sale having been given. The
Collateral Agent may adjourn any public or private sale from time to
time by announcement at the time and place fixed therefor, and such
sale may, without further notice, be made at the time and place to
which it was so adjourned. Grantor agrees that it would not be
commercially unreasonable for the Collateral Agent to dispose of the
Collateral or any portion thereof by using Internet sites that provide
for the auction of assets of the types included in the Collateral or
that have the reasonable capability of doing so, or that match buyers
and sellers of assets. Grantor hereby waives any claims against the
Collateral Agent and the Secured Parties arising by reason of the fact
that the price at which any Collateral may have been sold at such a
private sale was less than the price which might have been obtained at
a public sale, even if the Collateral Agent accepts the first offer
received and does not offer such Collateral to more than one offeree.
If the proceeds of any sale or other disposition of the Collateral are
insufficient to pay all the Secured Obligations, Grantor shall be
liable for the deficiency and the fees of any attorneys employed by
the Collateral Agent to collect such deficiency. Grantor further
agrees that a breach of any of the covenants contained in this Section
will cause irreparable injury to the Collateral Agent and the Secured
Parties, that each of the Collateral Agent and the Secured Parties has
no adequate remedy at law in respect of such breach and, as a
consequence, that each and every covenant contained in this Section
shall be specifically enforceable against such Grantor, and such
Grantor hereby waives and agrees not to assert any defenses against an
action for specific performance of such covenants except for a defense
that no default has occurred giving rise to the Secured Obligations
becoming due and payable prior to their stated maturities. Nothing in
this Section shall in any way alter the rights of the Collateral Agent
or the Secured Parties hereunder.
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(iii) The Collateral Agent may sell the Collateral without giving
any warranties as to the Collateral. The Collateral Agent may
specifically disclaim or modify any warranties of title or the like.
This procedure will not be considered to adversely effect the
commercial reasonableness of any sale of the Collateral.
(iv) The Collateral Agent shall have no obligation to marshal any
of the Collateral.
(v) If any Event of Default shall have occurred and be
continuing, the Collateral Agent shall have the right to notify, or
require Grantor to notify, any obligors with respect to amounts due or
to become due to such Grantor in respect of the Collateral, of the
existence of the security interest created herein, to direct such
obligors to make payment of all such amounts directly to the
Collateral Agent, and, upon such notification and at the expense of
such Grantor, to enforce collection of any such amounts and to adjust,
settle or compromise the amount or payment thereof, in the same manner
and to the same extent as such Grantor might have done:
(1) all amounts and proceeds (including checks and other
instruments) received by Grantor in respect of amounts due to
such Grantor in respect of the Collateral or any portion thereof
shall be received in trust for the benefit of the Collateral
Agent hereunder, shall be segregated from other funds of such
Grantor and shall be forthwith paid over or delivered to the
Collateral Agent in the same form as so received (with any
necessary endorsement) to be held as cash Collateral and applied
as provided by the sections of this Agreement relating to Cash
Proceeds; and
(2) Grantor shall not adjust, settle or compromise the
amount or payment of any such amount in excess of One Hundred
Thousand Dollars ($100,000) or release wholly or partly any
obligor with respect thereto or allow any credit or discount
thereon, except as done in the ordinary course of business.
(b) Application of Proceeds. Except as expressly provided elsewhere in this
Agreement, all proceeds received by the Collateral Agent in respect of any sale,
any collection from, or other realization upon all or any part of the Collateral
shall be applied in full or in part by the Collateral Agent against, the Secured
Obligations in the following order of priority: first, to the payment of all
costs and expenses of such sale, collection or other realization, including
reasonable compensation to the Collateral Agent and its agents and counsel, and
all other expenses, liabilities and advances made or incurred by the Collateral
Agent in connection therewith, and all amounts for which the Collateral Agent is
entitled to indemnification hereunder (in its capacity as the Collateral Agent)
and all advances made by the Collateral Agent hereunder for the account of
Grantor, and to the payment of all costs and expenses paid or incurred by the
Collateral Agent in connection with the exercise of any right or remedy
hereunder or under any Loan Document, all in accordance with the terms hereof or
thereof; second, to the extent of any excess of such proceeds, to the payment of
all other Secured Obligations for the ratable benefit of each Secured Party; and
third, to the extent of any excess of such proceeds, to the payment to or upon
the order of such Grantor or to whosoever may be lawfully entitled to receive
the same or as a court of competent jurisdiction may direct.
(c) Sales on Credit. If Collateral Agent sells any of the Collateral upon
credit, Grantors will be credited only with payments actually made by purchaser
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and received by Collateral Agent and applied to indebtedness of the Investor. In
the event the purchaser fails to pay for the Collateral, Collateral Agent may
resell the Collateral and Grantors shall be credited with proceeds of the sale.
(d) Cash and Cash Proceeds. If an Event of Default shall have occurred and
be continuing, (1) the Collateral Agent shall have the right to apply the
balance from any Deposit Account or instruct the bank at which any Deposit
Account is maintained to pay the balance of any Deposit Account to or for the
benefit of the Collateral Agent and (2) all Cash and Cash Proceeds shall be held
by such Grantor in trust for the Collateral Agent, segregated from other funds
of such Grantor, and shall, forthwith upon receipt by such Grantor, be turned
over to the Collateral Agent in the exact form received by such Grantor (duly
indorsed by such Grantor to the Collateral Agent, if required) and held by the
Collateral Agent. All such funds from any Deposit Account, Cash and Cash
Proceeds or any other Money held by the Collateral Agent may, in the sole
discretion of the Collateral Agent, (A) be held by the Collateral Agent for the
ratable benefit of each Secured Party, as collateral security for the Secured
Obligations (whether matured or unmatured) and/or (B) then, or at any time
thereafter, be applied by the Collateral Agent against the Secured Obligations
then due and owing.
(e) Investment Related Property. In addition to the rights and remedies
specified above, the following provisions shall also be applicable to Investment
Related Property. Grantor recognizes that, by reason of certain prohibitions
contained in the Securities Act of 1933, as amended (the "Securities Act") and
applicable state securities laws, the Collateral Agent may be compelled, with
respect to any sale of all or any part of the Investment Related Property
conducted without prior registration or qualification of such Investment Related
Property under the Securities Act and/or such state securities laws, to limit
purchasers to those who will agree to, among other things, acquire the
Investment Related Property for their own account, for investment and not with a
view to the distribution or resale thereof. Grantor acknowledges that any such
private sale may be at prices and on terms less favorable than those obtainable
through a public sale without such restrictions (including a public offering
made pursuant to a registration statement under the Securities Act) and,
notwithstanding such circumstances, Grantor agrees that any such private sale
shall be deemed to have been made in a commercially reasonable manner and that
the Collateral Agent shall have no obligation to engage in public sales and no
obligation to delay the sale of any Investment Related Property for the period
of time necessary to permit the issuer thereof to register it for a form of
public sale requiring registration under the Securities Act or under applicable
state securities laws, even if such issuer would, or should, agree to so
register it. If the Collateral Agent determines to exercise its right to sell
any or all of the Investment Related Property, upon written request, Grantor
shall and shall cause each issuer of any Pledged Stock to be sold hereunder,
each partnership and each limited liability company from time to time to furnish
to the Collateral Agent all such information as the Collateral Agent may request
in order to determine the number and nature of interest, shares or other
instruments included in the Investment Related Property which may be sold by the
Collateral Agent in exempt transactions under the Securities Act and the rules
and regulations of the Securities and Exchange Commission thereunder, as the
same are from time to time in effect.
(f) Intellectual Property. In addition to the rights and remedies specified
above, the following provisions shall also be applicable to Intellectual
Property.
(i) Anything contained herein to the contrary notwithstanding, upon
the occurrence and during the continuation of an Event of Default:
(1) the Collateral Agent shall have the right (but not the
obligation) to bring suit or otherwise commence any action or
proceeding in the name of Grantor, the Collateral Agent or otherwise,
in the Collateral Agent's sole discretion, to enforce any Intellectual
Property, in which event such Grantor shall, at the request of the
Collateral Agent, do any and all lawful acts and execute any and all
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documents required by the Collateral Agent in aid of such enforcement
and such Grantor shall promptly, upon demand, reimburse and indemnify
the Collateral Agent as provided in the Section in this Agreement
relating to indemnity and expenses in connection with the exercise of
its rights under this Section, and, to the extent that the Collateral
Agent shall elect not to bring suit to enforce any Intellectual
Property as provided in this Section, Grantor agrees to use all
reasonable measures, whether by action, suit, proceeding or otherwise,
to prevent the infringement of any of the Intellectual Property by
others and for that purpose agrees to diligently maintain any action,
suit or proceeding against any Person so infringing as shall be
necessary to prevent such infringement;
(2) upon written demand from the Collateral Agent, Grantor shall
grant, assign, convey or otherwise transfer to the Collateral Agent or
such Collateral Agent's designee all of such Grantor's right, title
and interest in and to the Intellectual Property and shall execute and
deliver to the Collateral Agent such documents as are reasonably
necessary or appropriate to carry out the intent and purposes of this
Agreement;
(3) within five (5) Business Days after written notice from the
Collateral Agent, Grantor shall make available to the Collateral
Agent, to the extent within such Grantor's power and authority, such
personnel in such Grantor's employ on the date of such Event of
Default as the Collateral Agent may reasonably designate, by name,
title or job responsibility, to permit such Grantor to continue,
directly or indirectly, to produce, advertise and sell the products
and services sold or delivered by such Grantor under or in connection
with the Trademarks, Trademark Licenses, such persons to be available
to perform their prior functions on the Collateral Agent's behalf and
to be compensated by the Collateral Agent at such Grantor's expense on
a per diem, pro-rata basis consistent with the salary and benefit
structure applicable to each as of the date of such Event of Default.
(ii) Solely for the purpose of enabling the Collateral Agent to
exercise rights and remedies under this Section 8(f)(ii) and at such time
as the Collateral Agent shall be lawfully entitled to exercise such rights
and remedies, Grantor hereby grants to the Collateral Agent, to the extent
it has the right to do so, an irrevocable, nonexclusive worldwide license
(exercisable without payment of royalty or other compensation to such
Grantor), subject, in the case of Trademarks, to sufficient rights to
quality control and inspection in favor of the Trademark Owner to avoid the
risk of invalidation of said Trademarks, to use, operate under, license, or
sublicense any Intellectual Property now or hereafter owned by or licensed
to such Grantor.
Section 9. COLLATERAL AGENT
The Collateral Agent has been appointed to act as Collateral Agent
hereunder by each Secured Party by their acceptance of the benefits hereof. The
Collateral Agent shall be obligated, and shall have the right hereunder, to make
demands, to give notices, to exercise or refrain from exercising any rights, and
to take or refrain from taking any action (including, without limitation, the
release or substitution of Collateral), solely in accordance with this Agreement
and the Securities Purchase Agreement. Without the written consent of the
Collateral Agent, no amendment, modification, termination, or consent shall be
effective if the effect thereof would release all or substantially all of the
Collateral except as expressly provided herein. In furtherance of the foregoing
provisions of this Section, each Secured Party, by its acceptance of the
benefits hereof, agrees that it shall have no right individually to realize upon
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any of the Collateral hereunder, it being understood and agreed by such Secured
Party that all rights and remedies hereunder may be exercised solely by the
Collateral Agent for the benefit of each Secured Party in accordance with the
terms of this Section. Collateral Agent may resign at any time by giving thirty
(30) days' prior written notice thereof to each Secured Party and Grantor, and
Collateral Agent may be removed at any time with or without cause by an
instrument or concurrent instruments in writing delivered to Grantor and
Collateral Agent signed by the parties holding more than 50% of the Secured
Obligations (the "Requisite Parties"). Upon any such notice of resignation or
any such removal, Requisite Parties shall have the right, upon five (5) Business
Days' notice to the Collateral Agent, following receipt of Grantor's consent
(which shall not be unreasonably withheld or delayed and which shall not be
required while an Event of Default exists), to appoint a successor Collateral
Agent. Upon the acceptance of any appointment as Collateral Agent hereunder by a
successor Collateral Agent, that successor shall become Collateral Agent under
this Agreement, and such successor Collateral Agent shall thereupon succeed to
and become vested with all the rights, powers, privileges and duties of the
retiring or removed Collateral Agent under this Agreement, and the retiring or
removed Collateral Agent under this Agreement shall promptly (i) transfer to
such successor Collateral Agent all sums, Securities and other items of
Collateral held hereunder, together with all records and other documents
necessary or appropriate in connection with the performance of the duties of the
successor Collateral Agent under this Agreement, and (ii) execute and deliver to
such successor Collateral Agent such amendments to financing statements, and
take such other actions, as may be necessary or appropriate in connection with
the assignment to such successor Collateral Agent of the security interests
created hereunder, whereupon such retiring or removed Collateral Agent shall be
discharged from its duties and obligations under this Agreement. After any
retiring or removed Collateral Agent's resignation or removal hereunder as the
Collateral Agent, the provisions of this Agreement shall inure to its benefit as
to any actions taken or omitted to be taken by it under this Agreement while it
was the Collateral Agent hereunder.
Section 10. CONTINUING SECURITY INTEREST; TRANSFER OF SECURED OBLIGATIONS
This Agreement shall create a continuing security interest in the
Collateral and shall remain in full force and effect until the payment in full
of all Secured Obligations, the cancellation or termination of the commitments
and any other contingent obligation included in the Secured Obligations, be
binding upon Grantor, its successors and assigns, and inure, together with the
rights and remedies of the Collateral Agent and the Secured Parties hereunder,
to the benefit of each of the Secured Parties and the Collateral Agent and its
successors, transferees and assigns. Without limiting the generality of the
foregoing, but subject to the terms of the Loan Documents, each Secured Party
may assign or otherwise transfer any Secured Obligations held by it to any other
Person, and such other Person shall thereupon become vested with all the
benefits in respect thereof granted to each Secured Party herein or otherwise.
Upon the payment in full of all Secured Obligations, the cancellation or
termination of the commitments and any other contingent obligation included in
the Secured Obligations, the security interest granted hereby shall terminate
hereunder and of record and all rights to the Collateral shall revert to
Grantors. Upon any such termination the Collateral Agent shall, at Grantor's
expense, execute and deliver to Grantor such documents as Grantor shall
reasonably request to evidence such termination.
Section 11. STANDARD OF CARE; COLLATERAL AGENT MAY PERFORM.
The powers conferred on the Collateral Agent hereunder are solely to
protect its interest in the Collateral and the interests of the Secured Parties
and shall not impose any duty upon it to exercise any such powers. Except for
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the exercise of reasonable care in the custody of any Collateral in its
possession and the accounting for moneys actually received by it hereunder, the
Collateral Agent shall have no duty as to any Collateral or as to the taking of
any necessary steps to preserve rights against prior parties or any other rights
pertaining to any Collateral. The Collateral Agent shall be deemed to have
exercised reasonable care in the custody and preservation of Collateral in its
possession if such Collateral is accorded treatment substantially equal to that
which the Collateral Agent accords its own property. Neither the Collateral
Agent nor any of its directors, officers, employees or agents shall be liable
for failure to demand, collect or realize upon all or any part of the Collateral
or for any delay in doing so or shall be under any obligation to sell or
otherwise dispose of any Collateral upon the request of Grantor or otherwise. If
Grantor fails to perform any agreement contained herein, the Collateral Agent
may itself perform, or cause performance of, such agreement, and the expenses of
the Collateral Agent incurred in connection therewith shall be payable by
Grantor and pending such payment shall be included in the obligations secured
hereby.
Section 12. INDEMNITY AND EXPENSES.
(a) Indemnity. Grantor agrees:
(i) to defend (subject to Indemnitees' selection of counsel),
indemnify, pay and hold harmless each Indemnitee, from and against any and
all claims, losses and liabilities in any way relating to, growing out of
or resulting from this Agreement and the transactions contemplated hereby
and by the other Loan Documents (including without limitation enforcement
of this Agreement and the other Loan Documents), except to the extent such
claims, losses or liabilities result from such Indemnitee's gross
negligence or willful misconduct; and
(ii) to pay to the Collateral Agent promptly following written demand
the amount of any and all reasonable costs and reasonable expenses as set
forth in this Agreement.
(b) Expenses. Grantor agrees to pay promptly all the actual costs and
reasonable expenses of creating and perfecting Liens in favor of Collateral
Agent, for the benefit of each Secured Party pursuant hereto, including search,
filing and recording fees, expenses and taxes, stamp or documentary taxes,
search fees, title insurance premiums and reasonable fees, expenses and
disbursements of counsel to Collateral Agent and of counsel providing any
opinions that Collateral Agent may request in respect of the Collateral or the
Liens created pursuant to the Collateral Documents; all the actual costs and
reasonable fees, expenses and disbursements of any auditors, accountants,
consultants or appraisers; all the actual costs and reasonable expenses
(including the reasonable fees, expenses and disbursements of any appraisers,
consultants, advisors and agents employed or retained by Collateral Agent and
its counsel) in connection with the custody or preservation of any of the
Collateral; and after the occurrence of an Event of Default, all costs and
expenses, including reasonable attorneys' fees (including allocated costs of
internal counsel) and costs of settlement, incurred by Collateral Agent in
enforcing any Secured Obligations of or in collecting any payments due from
Grantor hereunder or under the other Loan Documents by reason of such Event of
Default (including in connection with the sale of, collection from, or other
realization upon any of the Collateral) or in connection with any refinancing or
restructuring of the credit arrangements provided hereunder in the nature of a
"work-out" or pursuant to any insolvency or bankruptcy cases or proceedings.
(c) Survival. The obligations of Grantor in this Section 12 shall survive
the termination of this Agreement and the discharge of such Grantor's other
obligations under this Agreement, the Securities Purchase Agreement and any
other Loan Document.
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Section 13. MISCELLANEOUS.
(a) Notices. Unless otherwise specifically provided herein, any notice or
other communication herein required or permitted to be given to Grantor or
Collateral Agent, shall be sent to such Person's address as set forth in the
Securities Purchase Agreement or in the other relevant Loan Document. Each
notice hereunder shall be in writing and may be personally served, telexed or
sent by telefacsimile or United States mail or courier service and shall be
deemed to have been given when delivered in person or by courier service and
signed for against receipt thereof, upon receipt of telefacsimile or telex, or
three Business Days after depositing it in the United States mail with postage
prepaid and properly addressed; provided, no notice to Collateral Agent shall be
effective until received by Collateral Agent.
(b) Amendments and Waivers.
(i) Collateral Agent's Consent. Subject to Section 9, no amendment,
modification, termination or waiver of any provision of this Agreement, or
consent to any departure by Grantor therefrom, shall in any event be
effective without the written concurrence of the Collateral Agent.
(ii) No Waiver; Remedies Cumulative. No failure or delay on the part
of the Collateral Agent in the exercise of any power, right or privilege
hereunder or under any other Loan Document shall impair such power, right
or privilege or be construed to be a waiver of any default or acquiescence
therein, nor shall any single or partial exercise of any such power, right
or privilege preclude other or further exercise thereof or of any other
power, right or privilege. All rights, powers and remedies existing under
this Agreement and the other Loan Documents are cumulative, and not
exclusive of, any rights or remedies otherwise available. Any forbearance
or failure to exercise, and any delay in exercising, any right, power or
remedy hereunder shall not impair any such right, power or remedy or be
construed to be a waiver thereof, nor shall it preclude the further
exercise of any such right, power or remedy.
(c) Successors and Assigns. This Agreement shall be binding upon the
parties hereto and their respective successors and assigns including all persons
who become bound as debtor to this Agreement. Grantor shall not, without the
prior written consent of the Collateral Agent, assign any right, duty or
obligation hereunder.
(d) Independence of Covenants. All covenants hereunder shall be given
independent effect so that if a particular action or condition is not permitted
by any of such covenants, the fact that it would be permitted by an exception
to, or would otherwise be within the limitations of, another covenant shall not
avoid the occurrence of an Event of Default if such action is taken or condition
exists.
(e) Survival of Representations, Warranties and Agreements. All
representations, warranties and agreements made herein shall survive the
execution and delivery hereof. Notwithstanding anything herein or implied by law
to the contrary, the agreements of Grantor set forth in Sections 11 and 12 shall
survive the payment of the Secured Obligations and the termination of this
Agreement.
(f) Marshalling; Payments Set Aside. Collateral Agent shall not be under
any obligation to marshal any assets in favor of Grantor or any other Person or
against or in payment of any or all of the Secured Obligations.
(g) Severability. In case any provision in or obligation hereunder shall be
invalid, illegal or unenforceable in any jurisdiction, the validity, legality
and enforceability of the remaining provisions or obligations, or of such
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provision or obligation in any other jurisdiction, shall not in any way be
affected or impaired thereby.
(h) Headings. Section headings herein are included herein for convenience
of reference only and shall not constitute a part hereof for any other purpose
or be given any substantive effect.
(i) APPLICABLE LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF CALIFORNIA.
(j) CONSENT TO JURISDICTION. ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST
GRANTOR ARISING OUT OF OR RELATING HERETO OR ANY OTHER LOAN DOCUMENT, OR ANY OF
THE OBLIGATIONS, MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT
JURISDICTION IN THE STATE, COUNTY AND CITY OF LOS ANGELES. BY EXECUTING AND
DELIVERING THIS AGREEMENT, GRANTOR, FOR ITSELF AND IN CONNECTION WITH ITS
PROPERTIES, IRREVOCABLY ACCEPTS GENERALLY AND UNCONDITIONALLY THE NONEXCLUSIVE
JURISDICTION AND VENUE OF SUCH COURTS; WAIVES ANY DEFENSE OF FORUM NON
CONVENIENS; AGREES THAT SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDING IN ANY
SUCH COURT MAY BE MADE BY REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT
REQUESTED, TO GRANTOR AT ITS ADDRESS PROVIDED IN ACCORDANCE WITH THIS SECTION
13; AGREES THAT SUCH SERVICE IS SUFFICIENT TO CONFER PERSONAL JURISDICTION OVER
GRANTOR IN ANY SUCH PROCEEDING IN ANY SUCH COURT, AND OTHERWISE CONSTITUTES
EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT; AND AGREES COLLATERAL AGENT
RETAINS THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO
BRING PROCEEDINGS AGAINST GRANTOR IN THE COURTS OF ANY OTHER JURISDICTION.
(k) WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY AGREES TO WAIVE
ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON
OR ARISING HEREUNDER OR UNDER ANY OF THE OTHER LOAN DOCUMENTS. THE SCOPE OF THIS
WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE
FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS TRANSACTION,
INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS AND ALL OTHER
COMMON LAW AND STATUTORY CLAIMS. EACH PARTY HERETO ACKNOWLEDGES THAT THIS WAIVER
IS A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT EACH HAS
ALREADY RELIED ON THIS WAIVER IN ENTERING INTO THIS AGREEMENT, AND THAT EACH
WILL CONTINUE TO RELY ON THIS WAIVER IN ITS RELATED FUTURE DEALINGS. EACH PARTY
HERETO FURTHER WARRANTS AND REPRESENTS THAT IT HAS REVIEWED THIS WAIVER WITH ITS
LEGAL COUNSEL AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS
FOLLOWING CONSULTATION WITH LEGAL COUNSEL. THIS WAIVER IS IRREVOCABLE, MEANING
THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING (OTHER THAN BY A MUTUAL
WRITTEN WAIVER SPECIFICALLY REFERRING TO THIS SECTION 13(K) AND EXECUTED BY EACH
OF THE PARTIES HERETO), AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT
AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS HERETO. IN THE EVENT OF
LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE
COURT.
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(l) Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed an
original, but all such counterparts together shall constitute but one and the
same instrument.
(m) Effectiveness. This Agreement shall become effective upon the execution
of a counterpart hereof by each of the parties hereto and receipt by Grantor and
the Collateral Agent of written or telephonic notification of such execution and
authorization of delivery thereof.
(n) Entire Agreement. This Agreement and the other Loan Documents embody
the entire agreement and understanding between Grantor and the Collateral Agent
and supersede all prior agreements and understandings between such parties
relating to the subject matter hereof and thereof. Accordingly, the Loan
Documents may not be contradicted by evidence of prior, contemporaneous or
subsequent oral agreements of the parties. There are no unwritten oral
agreements between the parties.
IN WITNESS WHEREOF, Grantor and the Collateral Agent have caused this
Agreement to be duly executed and delivered by their respective officers
thereunto duly authorized as of the date first written above.
"GRANTOR"
VIKING SYSTEMS, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: President/CEO
"COLLATERAL AGENT" and a "SECURED PARTY"
ST. CLOUD CAPITAL PARTNERS, L.P.
as the Collateral Agent and a Secured
Party
By: SCGP, LLC
Its: General Partner
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Senior Managing Member
SCHEDULE I
TO SECURITY AGREEMENT
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GENERAL INFORMATION
(a) Full Legal Name, Type of Organization, Jurisdiction of Organization,
Chief Executive Office/Sole Place of Business (or Residence if Grantor is a
Natural Person) and Organizational Identification Number of Grantor:
Chief
Executive
Office/Sole
Place of
Business (or
Residence if
Type of Jurisdiction Grantor is a Organization
Full Legal Name Organization of Organization Natural Person) I.D.#
---------------- -------------- ---------------- ---------------- --------------
(b) Other Names (including any Trade-Name or Fictitious Business Name)
under which Grantor has conducted business for the past five (5) years:
Full Legal Name Trade Name or Fictitious Business Name
(c) Changes in Name, Jurisdiction of Organization, Chief Executive Office
or Sole Place of Business (or Principal Residence if Grantor is a Natural
Person) and Corporate Structure within past five (5) years:
Name of Grantor Date of Change Description of Change
(d) Agreements pursuant to which Grantor is found as debtor within past
five (5) years:
Name of Grantor Description of Agreement
(e) Financing Statements:
Name of Grantor Filing Jurisdiction(s)
S-I-39
SCHEDULE II
TO SECURITY AGREEMENT
LOCATION OF EQUIPMENT AND INVENTORY
Name of Grantor Location of Equipment and Inventory
S-II-1
SCHEDULE III
TO SECURITY AGREEMENT
INVESTMENT RELATED PROPERTY
Pledged Stock:
================================================================================
% of
Outstanding
Stock No. of Stock of
Stock Class of Certificate Certificate Par Pledged the Stock
Grantor Issuer Stock (Y/N) No. Value Stock Issuer
================================================================================
Pledged LLC Interests:
================================================================================
% of
Outstanding
LLC Interests
Limited of the Limited
Liability Certificated Certificate No. of Pledged Liability
Grantor Company (Y/N) No. (if any) Units Company
================================================================================
Pledged Partnership Interests:
================================================================================
% of
Type of Outstanding
Partnership Partnership
Interests (e.g., Interests of
general or Certificated Certificate the
Grantor Partnership Limited) (Y/N) No. (if any) Partnership
================================================================================
Pledged Trust Interests:
================================================================================
% of
Outstanding
Trust
Class of Trust Certificated Certificate Interests of
Grantor Trust Interests (Y/N) No. (if any) the Trust
================================================================================
S-III-1
Pledged Debt:
================================================================================
Original Outstanding
Principal Principal
Grantor Issuer Amount Balance Issue Date Maturity Date
================================================================================
Securities Account:
================================================================================
Share of Securities
Grantor Intermediary Account Number Account Name
================================================================================
Commodities Accounts:
================================================================================
Name of Commodities
Grantor Intermediary Account Number Account Name
================================================================================
Deposit Accounts:
================================================================================
Name of Depositary
Grantor Intermediary Account Number Account Name
================================================================================
(B)
Name of Grantor Date of Acquisition Description of Acquisition
--------------- ------------------- --------------------------
S-III-2
SCHEDULE IV
TO SECURITY AGREEMENT
MATERIAL CONTRACTS
Name of Grantor Description of Material Contract
--------------- --------------------------------
S-IV-1
SCHEDULE V
TO SECURITY AGREEMENT
LETTERS OF CREDIT
Name of Grantor Description of Letters of Credit
--------------- --------------------------------
S-V-1
SCHEDULE VI
TO SECURITY AGREEMENT
INTELLECTUAL PROPERTY
(A) Copyrights
(B) Copyright Licenses
(C) Patents
(D) Patent Licenses
(E) Trademarks
(F) Trademark Licenses
(G) Trade Secret Licenses
(H) Intellectual Property Matters
S-VI-1
EXHIBIT A-1
SCHEDULE VII
TO SECURITY AGREEMENT
COMMERCIAL TORT CLAIMS
Name of Grantor Commercial Tort Claims
--------------- ----------------------
EXHIBIT A-1
EXHIBIT A
PLEDGE SUPPLEMENT
This PLEDGE SUPPLEMENT, dated ________ , is delivered by [NAME OF GRANTOR
OR GRANTORS] a [NAME OF STATE OF INCORPORATION] [Corporation] (the "Grantor")
pursuant to the Security Agreement, dated as of ___________ ___, 2005 (as it may
be from time to time amended, restated, modified or supplemented, the "Security
Agreement"), among [NAME OF COMPANY], the other Grantors named therein, and St.
Cloud Capital Partners, L.P., as the Collateral Agent. Capitalized terms used
herein not otherwise defined herein shall have the meanings ascribed thereto in
the Security Agreement.
Grantor hereby confirms the grant to the Collateral Agent set forth in the
Security Agreement of, and does hereby grant to the Collateral Agent, a security
interest in all of such Grantor's right, title and interest in and to all
Investment Related Property and Letter of Credit Rights including, without
limitation, those specified on the Schedule attached hereto and agrees that such
attached schedule shall supplement and become a part of Schedule [III][V] to the
Security Agreement. Grantor represents and warrants that the attached Schedule
is a true and correct list of all [Investment Related Property][Letter of Credit
Rights] in which it has rights and that it has complied with all provisions of
the Security Agreement relating thereto and that the Collateral Agent has a
valid, perfected first priority security interest therein.
IN WITNESS WHEREOF, New Grantor has caused this Pledge Supplement to be
duly executed and delivered by its duly authorized officer as of _________.
[NAME OF GRANTOR]
By: _____________________________
Name:
Title:
EXHIBIT A-1
EXHIBIT B
JOINDER AGREEMENT
This JOINDER AGREEMENT, dated ______, is delivered by [NAME OF NEW GRANTOR]
a [NAME OF STATE OF INCORPORATION] [corporation] (the "New Grantor") pursuant to
the Security Agreement, dated as of _________ __, 2005 (as it may be from time
to time amended, restated, modified or supplemented, the "Security Agreement"),
among Viking Systems, Inc., the other Grantors named therein, and St. Cloud
Capital Partners, L.P., as the Collateral Agent. Capitalized terms used herein
not otherwise defined herein shall have the meanings ascribed thereto in the
Security Agreement.
New Grantor hereby confirms the grant to the Collateral Agent set forth in
the Security Agreement of, and does hereby grant to the Collateral Agent, a
security interest in all of New Grantor's right, Title and interest in and to
all Collateral to secure the Secured Obligations [and SPECIFY ANY NEW
OBLIGATIONS TO BE SECURED, E.G. NEW GUARANTEES], in each case whether now or
hereafter existing or in which New Grantor now has or hereafter acquires an
interest and wherever the same may be located. From and after the date hereof,
New Grantor shall be a "Grantor" for all purposes of the Security Agreement. New
Grantor hereby makes all of the representations and warranties set forth in the
Security Agreement. New Grantor represents and warrants that the attached
Supplements to Schedules accurately and completely set forth all additional
information required pursuant to the Security Agreement and hereby agrees that
such Supplements to Schedules shall constitute part of the Schedules to the
Security Agreement.
IN WITNESS WHEREOF, New Grantor has caused this Joinder Agreement to be
duly executed and delivered by its duly authorized officer as of ______.
[NAME OF NEW GRANTOR]
By: _____________________________
Name:
Title:
Appendix B-2