Exhibit 10.11
SECURITY AGREEMENT
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THIS SECURITY AGREEMENT (the "SECURITY AGREEMENT") is dated as of the 23th
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day of October, 2006 by and among XA, Inc., a Nevada Corporation ("XA"), The
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Experiential Agency, Inc., XA Scenes, Inc., XA Interactive, Inc., and Fiori XA,
Inc. (collectively the with XA, the "DEBTOR") and Vision Opportunity Master
Fund, Ltd. (the "SECURED PARTY").
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W I T N E S S E T H
WHEREAS, pursuant to a Securities Purchase Agreement, dated as of the date
hereof, as may be amended or supplemented from time to time (the "SPA"), the
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Debtor is selling to the Secured Party an 11% Senior Secured Convertible
Promissory Note, in the principal amount of $1,250,000, which is part of
$1,500,000 in 11% Senior Secured Convertible Promissory Note financing (each, a
"NOTE": and collectively, the "NOTES"); and
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WHEREAS, Debtor has agreed, pursuant to the terms and conditions of the
SPA, in connection with the Financing, to secure the repayment of the Note, as
more specifically provided herein;
NOW, THEREFORE, in consideration of the foregoing, Debtor and the Secured
Party agree as follows:
SECTION 1. DEFINITIONS.
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1.1 CERTAIN DEFINED TERMS. The following terms, as used herein, have the
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meanings set forth below:
"ACCOUNTS" means all "accounts" (as defined in the UCC) now owned or
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hereafter created or acquired by Debtor including all of the following now owned
or hereafter created or acquired by Debtor: (a) accounts receivable, contracts,
contract rights, book debts, notes, drafts and other obligations or indebtedness
owing to Debtor arising from the sale, lease or exchange of goods or other
property or the performance of services; (b) Debtor's rights in, to and under
all purchase orders for goods, services or other property; (c) Debtor's rights
to any goods, services or other property represented by any of the foregoing
(including returned or repossessed goods and unpaid sellers' rights of
rescission, repletion, reclamation and rights to stoppage in transit); (d)
monies due to or to become due to Debtor under all contracts for the sale, lease
or exchange of goods or other property or the performance of services (whether
or not yet earned by performance on the part of Debtor); and (e) Proceeds of any
of the foregoing and all collateral security and guaranties of any kind given by
any Person with respect to any of the foregoing.
"COLLATERAL" has the meaning assigned to that term in SECTION 2.
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"COMPUTER SOFTWARE" or "SOFTWARE" means a computer program and any
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supporting information provided in connection with a transaction relating to the
program.
"CONTRACTS" means all contracts and agreements (as defined in the UCC).
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"COPYRIGHTS" means collectively all of the following now owned or hereafter
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created or acquired by Debtor: (a) all literary works, derivative works, works
for hire, compositions, compilations of all or some of the foregoing, whether
published or unpublished, all registrations or recordings thereof, and all
applications in connection therewith including registrations, recordings and
applications in the Copyright Office of the United States, or any other country;
(b) all reissues, extensions or renewals thereof; (c) all income, royalties,
damages and payments now or hereafter due or payable under any of the foregoing
or with respect to any of the foregoing including damages or payments for past
or future infringements of any of the foregoing; (d) the right to ▇▇▇ for past,
present and future infringements or any of the foregoing; and (e) all rights
corresponding to any of the foregoing throughout the world.
"DEBTOR" has the meaning assigned to that term in the introduction to this
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Security Agreement.
"DOCUMENTS" means all "documents" (as defined in the UCC) or other receipts
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covering, evidencing or representing goods now owned or hereafter acquired by
Debtor.
"EQUIPMENT" means all "equipment" (as defined in the UCC) now owned or
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hereafter acquired by Debtor including all machinery, motor vehicles, trucks,
trailers, vessels, aircraft and rolling stock and all parts thereof and all
additions and accessions thereto and replacements therefor.
"EVENT OF DEFAULT" has the meaning assigned to that term in SECTION 8(A).
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"FIXTURES" means all of the following now owned or hereafter acquired by
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Debtor: plant fixtures; business fixtures; other fixtures and storage office
facilities, wherever located; and all additions and accessions thereto and
replacements therefor.
"GENERAL INTANGIBLES" means all "general intangibles" (as defined in the
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UCC) now owned or hereafter acquired by Debtor including all right, title and
interest of Debtor in and to: (a) all Software of the Debtor, including all
source code and object code thereto; (b) all agreements, leases, licenses and
contracts to which Debtor is or may become a party; (c) all obligations or
indebtedness owing to Debtor (other than Accounts) from whatever source arising;
(d) all tax refunds; (e) Intellectual Property; and (f) all trade secrets and
other confidential information relating to the business of Debtor.
"INSTRUMENTS" means all "instruments" "chattel paper" or "letters of
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credit" (each as defined in the UCC) including promissory notes, drafts, bills
of exchange and trade acceptances, now owned or hereafter acquired by Debtor.
"INTELLECTUAL PROPERTY" means collectively all of the following:
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Copyrights, Copyright Licenses, Patents, Trademarks and Trademark Licenses.
"INVENTORY" means all "inventory" (as defined in the UCC), now owned or
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hereafter acquired by Debtor, wherever located including finished goods, raw
materials, work in process and other materials and supplies (including packaging
and shipping materials) used or consumed in the manufacture or production
thereof and goods which are returned to or repossessed by Debtor.
"PROCEEDS" means all proceeds of, and all other profits, rentals or
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receipts, in whatever form, arising from the collection, sale, lease, exchange,
assignment, licensing or other disposition of, or realization upon, any
Collateral including all claims of Debtor against third parties for loss of,
damage to or destruction of, or for proceeds payable under, or unearned premiums
with respect to, policies of insurance with respect to any Collateral, and any
condemnation or requisition payments with respect to any Collateral, in each
case whether now existing or hereafter arising.
"SECURED OBLIGATIONS" has the meaning assigned to that term in SECTION 3.
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"SECURITY AGREEMENT" means this Security Agreement as it may be amended,
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supplemented or otherwise modified from time to time.
"SECURITY INTERESTS" means the security interest granted pursuant to
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SECTION 2, as well as all other security interests created or assigned as
additional security for the Secured Obligations pursuant to the provisions of
this Security Agreement.
"SUBSIDIARIES" has the meaning assigned to that term in the introduction to
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this Security Agreement.
"TRADEMARKS" means collectively all of the following now owned or hereafter
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created or acquired by Debtor: (a) all trademarks, trade names, corporate names,
company names, business names, fictitious business names, trade styles, service
marks, logos, domain names and domain name registrations, other business
identifiers, prints and labels on which any of the foregoing have appeared or
appear, all registrations and recordings thereof (to the extent Debtor can
register such corporate, company or business name as a trademark), and all
applications in connection therewith including registrations, recordings and
applications in the Trademark Office or in any similar office or agency of the
United States, any State thereof or any other country or any political
subdivision thereof; (b) all reissues, extensions or renewals thereof; (c) all
income, royalties, damages and payments now or hereafter due or payable under
any of the foregoing or with respect to any of the foregoing including damages
or payments for past or future infringements of any of the foregoing; (d) the
right to ▇▇▇ for past, present and future infringements of any of the foregoing;
(e) all rights corresponding to any of the foregoing throughout the world; and
(f) all goodwill associated with and symbolized by any of the foregoing.
"UCC" means the Uniform Commercial Code as in effect on the date hereof in
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the State of Illinois, Nevada, or such state as property and/or fixtures may be
located, as the case may be, as amended from time to time, and any successor
statute; provided that if by reason of mandatory provisions of law, the
perfection or the effect of perfection or non-perfection of the Security
Interest in any Collateral is governed by the Uniform Commercial Code as in
effect on or after the date hereof in any other jurisdiction, "UCC" means the
Uniform Commercial Code as in effect in such other jurisdiction for purposes of
the provision hereof relating to such perfection or effect of perfection or
non-perfection.
1.2 OTHER DEFINITION PROVISIONS. References to "SECTIONS" "SUBSECTIONS,"
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"EXHIBITS" and "SCHEDULES" shall be to Sections, subsections, Exhibits and
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Schedules, respectively, of this Security Agreement unless otherwise
specifically provided. References to the words "including," "includes" and
"include" shall be deemed to be followed by the words "without limitation;" and
the term "or" has, except where otherwise indicated, the inclusive meaning
represented by the phrase "and/or." Any of the terms defined in subsection 1.1
may, unless the context otherwise requires, be used in the singular or the
plural depending on the reference. All references to statutes and related
regulations shall include any amendments of same and any successor statutes and
regulations.
SECTION 2. GRANT OF SECURITY INTEREST.
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In order to secure the payment and performance of the Secured Obligations
in accordance with the terms thereof, except as otherwise specifically provided
in this Security Agreement, the Debtor hereby grants to the Secured Party, a
continuing first priority security interest and lien in and to all right, title
and interest of Debtor in the following property, whether now owned or existing
or hereafter acquired or arising and regardless of where located, which first
priority security interest shall be pari passu to the first priority security
interest of the Prior Purchasers (as defined in the SPA) and the other
purchasers who invest during the offering to which this Security Agreement is a
part), and subject only to the prior first priority security interest of LaSalle
Bank National Association (all being collectively referred to as the
"COLLATERAL").
(a) Accounts;
(b) Inventory;
(c) Computer Software;
(d) General Intangibles;
(e) Documents;
(f) Instruments;
(g) Equipment;
(h) Fixtures;
(i) Contracts;
(j) All deposit accounts of Debtor maintained with any bank or
financial institution;
(k) All books, records, ledger cards, files, correspondence, computer
programs, tapes, disks and related data processing software that at any
time evidence or contain information relating to any of the property
described in subparts (a) - (k) above or are otherwise necessary or helpful
in the collection thereof or realization thereon;
(l) any and all other assets of the Debtor, whether currently held or
hereafter acquired; and
(m) Proceeds of all or any of the property described in subparts (a) -
(l) above.
Notwithstanding the foregoing, so long as no Event of Default has occurred and
is continuing, Debtor shall have the exclusive, non-transferable right and
license to use the Collateral and the exclusive right to sell, transfer, convey,
rent, lease, and grant to third parties licenses and sublicenses with respect to
the Collateral, provided that any such sale, transfer, conveyance, rental,
lease, license or sublicense is effected in the Debtor's ordinary course of
business. In the event that the Debtor sells any of its inventory in the
ordinary course of business, such shall be transferred without any liens under
the terms of this Security Agreement.
SECTION 3. SECURITY FOR OBLIGATIONS.
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This Security Agreement secures the payment and performance of all
obligations, liabilities, duties and covenants of Debtor to the Secured Party
with respect to the Notes, plus any and all accrued (and accruing) but unpaid
interest on all such indebtedness (all such debts, obligations and liabilities
of Debtor being collectively called the "SECURED OBLIGATIONS").
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SECTION 4. DEBTOR REMAINS LIABLE.
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Anything herein to the contrary notwithstanding: (a) Debtor shall remain
liable under the contracts and agreements included in the Collateral to the
extent set forth therein to perform all of its duties and obligations thereunder
to the same extent as if this Security Agreement had not been executed; (b) the
exercise by the Secured Party of any of the rights hereunder shall not release
Debtor from any of its duties or obligations under the contracts and agreements
included in the Collateral; and (c) the Secured Party shall not have any
obligation or liability under the contracts and agreements included in the
Collateral by reason of this Security Agreement, nor shall the Secured Party be
obligated to perform any of the obligations or duties of Debtor thereunder or to
take any action to collect or enforce any claim for payment assigned hereunder.
SECTION 5. REPRESENTATIONS AND WARRANTIES. Debtor represents and warrants as
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follows:
5.1. BINDING OBLIGATION; AUTHORIZATION. This Security Agreement and the
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Note are legally valid and binding obligations of Debtor, enforceable against it
in accordance with their terms, except as limited by applicable bankruptcy,
insolvency, reorganization, moratorium and other laws of general application
affecting enforcement of creditors' rights generally. The execution, delivery
and performance of this Security Agreement and the Note by the Debtor has been
duly approved by the Board of Directors of the Debtor and all other actions
required to authorize and effect the granting of the Security Interests and the
issuance of the Note has been duly taken and approved by the Debtor.
5.2. LOCATION OF EQUIPMENT AND INVENTORY. All of the Equipment and
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Inventory is located at the places specified on SCHEDULE I.
5.3. OWNERSHIP OF COLLATERAL; OUTSTANDING LOANS. The Company owns the
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Collateral free and clear of any liens, security interests, charges or other
encumbrances (collectively, "LIENS"). No financing statement or other form of
Lien notice covering all or any part of the Collateral is on file in any
recording office, except for those in favor of the Secured Party.
5.4. OFFICE LOCATIONS; FICTITIOUS NAMES. The chief place of business, the
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chief executive office and the office where Debtor keeps its books and records
are located at the places specified on SCHEDULE I.
5.5. PERFECTION. This Security Agreement creates a valid and perfected
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security interest in the Collateral, securing the payment of the Secured
Obligations, and all filings and other actions necessary or desirable to perfect
and protect such security interest have been duly taken (or will be taken
immediately after the Closing , as defined in the SPA, by the Debtor at the
request of the Secured Party); provided, nothing herein constitutes a
representation as to actions that must be taken, if any, to perfect a security
interest in any item of Equipment, the ownership of which is evidenced by a
certificate of title.
5.6. GOVERNMENTAL AUTHORIZATIONS. No authorization, approval or other
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action by, and no notice to or filing with, any governmental authority or
regulatory body is required either (a) for the grant by Debtor of the Security
Interests granted hereby or for the execution, delivery or performance of this
Security Agreement and/or the Note by Debtor or (b) for the perfection of or the
exercise by the Secured Party of its rights and remedies hereunder (except as
may have been taken by or at the direction of Debtor or the Secured Party).
5.7. ACCURATE INFORMATION. All information heretofore, herein or hereafter
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supplied to the Secured Party by or on behalf of Debtor with respect to the
Collateral is and will be accurate and complete in all material respects.
SECTION 6. FURTHER ASSURANCES; COVENANTS.
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6.1. OTHER DOCUMENTS AND ACTIONS. Debtor will, from time to time, at its
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expense, immediately execute and deliver all further instruments and documents
and take all further action that may be necessary or desirable, or that the
Secured Party may request, in order to perfect and protect any security interest
granted or purported to be granted hereby or to enable the Secured Party to
exercise and enforce their rights and remedies hereunder with respect to any
Collateral. Without limiting the generality of the foregoing, Debtor will
immediately upon request of the Secured Party: (a) execute and file such
financing or continuation statements, or amendments thereto, and such other
instruments or notices, as may be necessary or desirable, or as the Secured
Party may request, in order to perfect and preserve the security interests
granted or purported to be granted hereby (in such jurisdictions and with such
officers as the Secured Party so request); (b) upon demand by the Secured Party
exhibit the Collateral to allow inspection of the Collateral by the Secured
Party or persons designated by the Secured Party; and (c) upon the Secured
Party's request, appear in and defend any action or proceeding that may affect
Debtor's title to or the Secured Party's security interest in the Collateral.
6.2. BUSINESS LOCATIONS. Debtor will keep the Collateral at the locations
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specified on SCHEDULE I hereto.
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6.3. INSURANCE. At its sole expense, the Debtor shall insure the Collateral
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at all times for the full insurable value thereof against casualty and theft and
against such other risks, in such form and with such insurers, as may be
satisfactory to the Secured Party from time to time. In addition, each such
policy shall (i) name the Secured Party as mortgagee and loss payee as its
interest may appear and name the Secured Party as an additional insured relating
to liability risks, (ii) provide that no act of omission or commission or
misrepresentation or breach of warranty by the Debtor shall affect the Secured
Party's rights thereunder, (iii) provide that the Secured Party shall not be
liable for any premiums or other amounts and (iv) upon the agreement of the
insurer, at the Debtor's request, provide that the insurer shall give the
Secured Party not less than twenty (20) days' prior written notice of
cancellation or lapse. If the Debtor shall fail at any time to maintain such
insurance, the Secured Party may obtain such insurance coverage and the Debtor
agrees to reimburse the Secured Party therefor on demand with interest thereon
at the rate specified in the Note. The Debtor shall notify the Secured Party
promptly if any loss or casualty relating to the Collateral occurs.
6.4. TAXES AND CLAIMS. Debtor will pay promptly when due all property and
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other taxes, assessments and governmental charges or levies imposed upon, and
all claims against, the Collateral (including claims for labor, materials and
supplies), except to the extent the validity thereof is being contested in good
faith.
6.5. USE OF COLLATERAL. Debtor will not use or permit any Collateral to be
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used unlawfully or in violation of any provision of this Security Agreement or
any applicable statute, regulation or ordinance or any policy of insurance
covering any of the Collateral.
6.6. CONDITION OF COLLATERAL. The Debtor shall maintain the Collateral in
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good condition and operate the Collateral with reasonable care and caution and
the Debtor hereby indemnifies and holds the Secured Party harmless from any and
all loss, damage and liability suffered, incurred or asserted by or against the
Secured Party as a result of the use and operation of the Collateral.
6.7. RECORDS RELATING TO COLLATERAL. The Debtor will keep its records
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concerning the Collateral at its address designated on SCHEDULE I hereof or at
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such other place or places of which the Secured Party shall have been notified
in writing upon no less than ten (10) days' advance written notice. The Debtor
(a) will hold and preserve such records and will permit representatives of the
Secured Party at any time during normal business hours without disrupting the
Debtor's business to examine, inspect and to make abstracts from such records
and (b) will furnish to the Secured Party such information and reports regarding
the Collateral as the Secured Party may from time to time request.
6.8. OTHER INFORMATION. Debtor will, promptly upon request, provide to the
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Secured Party all information and evidence they may reasonably request
concerning the Collateral, and in particular the Accounts, to enable the Secured
Party to enforce the provisions of this Security Agreement.
SECTION 7. TRANSFERS AND OTHER LIENS.
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Except in the ordinary course of business, Debtor shall not:
(a) Sell, assign (by operation of law or otherwise) or otherwise
dispose of, or grant any option with respect to, any of the Collateral; or
(b) Create or suffer to exist any Liens with respect to any of the
Collateral to secure indebtedness of any Person except for (i) the Security
Interests created by this Security Agreement, (ii) any Liens and/or
security interests existing prior to the date of this Security Agreement;
(iii) any security interests that are junior and subordinate to the
Security Interests created by this Security Agreement, and (iv) any
purchase money security interests required in connection with Debtor's
purchase or lease of Equipment.
SECTION 8. EVENTS OF DEFAULT; REMEDIES
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(a) Each of the following events shall be an "EVENT OF DEFAULT" (i)
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the non-payment of any of the Secured Obligations; (ii) the failure of the
Debtor to observe or perform any other term, provision or condition of the
SPA, the Notes, the Warrants (as defined in the SPA), or this Security
Agreement, after receipt of notice from the Secured Party of such failure
to observe or perform and the failure of the Debtor to cure such
non-performance or non-observance within fifteen (15) days after receipt
thereof; (iii) dissolution or termination of existence of, or the
suspension or termination of operations of the Debtor; (iv) the inability
of the Debtor, or the Debtor's admission that it is unable, to pay its
debts as they become due or any petition in bankruptcy is filed by or
against the Debtor, or any proceeding in bankruptcy, or under any other
laws of any jurisdiction relating to the relief of debtors is commenced
against the Debtor for the relief or readjustment of any indebtedness of
the Debtor, either through reorganization, composition, extension or
otherwise, (v) the appointment of a receiver of any property of the Debtor,
(vi) the making by the Debtor of any assignment for the benefit of
creditors or the taking advantage of any insolvency law; (vii) any seizure,
vesting, or intervention by or under authority of a government, by which
the management of the Debtor is displaced or its authority in the conduct
of its business is curtailed; or (viii) any representation or warranty
contained the Note or this Security Agreement, shall prove to be materially
false when made.
(b) If any Event of Default shall have occurred and be continuing, the
Secured Party may exercise in respect of the Collateral, in addition to all
other rights and remedies provided for herein or otherwise available to
them, all the right and remedies of a secured party on default under the
UCC (whether or not the UCC applies to the affected Collateral) and also
may: (a) require Debtor to, and Debtor hereby agrees that it will, at its
expense and upon request of the Secured Party forthwith, assemble all or
part of the Collateral as directed by the Secured Party and make it
available to the Secured Party at a place to be designated by the Secured
Party which is reasonably convenient to the Debtor; (b) without notice or
demand or legal process, enter upon any premises of Debtor and take
possession of the Collateral; and (c) without notice except as specified
below, sell the Collateral or any part thereof in one or more parcels at
public or private sale, at such time or times, for cash, on credit or for
future delivery, and at such price or prices and upon such other terms as
the Secured Party may deem commercially reasonable. Debtor agrees that, to
the extent notice of sale shall be required by law, at least two (2) days'
notice to Debtor 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. At any sale of the Collateral, if permitted by law, the
Secured Party may bid (which bid may be, in whole or in part, in the form
of cancellation of indebtedness) for the purchase of the Collateral or any
portion thereof for the account of the Secured Party. The Secured Party
shall not be obligated to make any sale of Collateral regardless of notice
of sale having been given. The Secured Party 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. To the extent permitted by law,
Debtor hereby specifically waives all rights of redemption, stay or
appraisal which it has or may have under any law now existing or hereafter
enacted. All cash proceeds received by the Secured Party resulting from the
disposition of or collection from the Collateral may be held by the Secured
Party as collateral for the Secured Obligations and/or then or at any time
thereafter applied in payment of all or any of the Secured Obligations in
such order as the Secured Party shall elect. The balance of such cash
proceeds held by the Secured Party and remaining after payment in full of
the Secured Obligations shall be paid over to the Debtor or to the person
who may be lawfully entitled to such balance. The remedies provided in this
Security Agreement are cumulative and not exclusive of any other remedies
provided by law including, without limitation, any rights of setoff
available to the Secured Party.
SECTION 9. LIMITATION ON DUTY OF THE SECURED PARTY WITH RESPECT TO COLLATERAL.
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Beyond the safe custody thereof, the Secured Party shall have no duty with
respect to any Collateral in their possession or control (or in the possession
or control of the Secured Party or bailee) or with respect to any income thereon
or the preservation of rights against prior parties or any other rights
pertaining thereto. The Secured Party shall be deemed to have exercised
reasonable care in the custody and preservation of the Collateral in their
possession if the Collateral is accorded treatment substantially equal to that
which they accord their own property. The Secured Party shall not be liable or
responsible for any loss or damage to any of the Collateral, or for any
diminution in the value thereof, by reason of the act or omission of any
warehouseman, carrier, forwarding agency, consignee or other agent or bailee
selected by the Secured Party in good faith.
SECTION 10. SECURED PARTY APPOINTED ATTORNEY-IN-FACT.
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Debtor hereby irrevocably appoints the Secured Party as Debtor's
attorney-in-fact, with full authority in the place and stead of Debtor and in
the name of Debtor to take any action and to execute any instrument that the
Secured Party may deem necessary and/or advisable as follows:
(a) to obtain and adjust insurance required to be paid to the Secured
Party if Debtor has not done so in the ordinary course of its business;
(b) to ask, demand, collect, ▇▇▇ for, recover, compound, receive and
give receipts for moneys due and to become due under or in respect of any
of the Collateral upon the occurrence of an Event of Default;
(c) to receive, endorse, and collect any drafts or other instruments,
documents and chattel paper, in connection with clauses (a) and (b) above
upon the occurrence of an Event of Default;
(d) to file any claims or take any action or institute any proceedings
that the Secured Party may deem necessary or desirable for the collection
of any of the Collateral or otherwise to enforce the rights of the Secured
Party with respect to any of the Collateral if Debtor has not done so in
the ordinary course of its business;
(e) to pay or discharge taxes or 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 Secured
Party in its sole discretion, and such payments made by the Secured Party
to become obligations of Debtor to the Secured Party, due and payable
immediately without demand if Debtor has not done so in the ordinary course
of its business;
(f) to sign and endorse any invoices, freight or express bills, bills
of lading, storage or warehouse receipts, assignments, verifications and
notices in connection with Accounts and other documents relating to the
Collateral upon the occurrence of an Event of Default;
(g) generally to sell, transfer, pledge, make any agreement with
respect to or otherwise deal with any of the Collateral as fully and
completely as though the Secured Party were the absolute owner thereof for
all purposes, and to do, at the Secured Party's option and Debtor's
expense, at any time or from time to time, all acts and things that the
Secured Party deems necessary to protect, preserve or realize on the
Collateral upon the occurrence of an Event of Default; and
(h) to accomplish the purposes of this Security Agreement if Debtor
has not done so in the ordinary course of its business.
Neither the Secured Party nor any person designated by the Secured Party
shall be liable for any acts or omissions or for any error of judgment or
mistake of fact or law. This power, being coupled with an interest, is
irrevocable so long as this Security Agreement shall remain in force.
SECTION 11. EXPENSES.
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Debtor shall pay all insurance expenses and all expenses of protecting,
storing, warehousing, appraising, insuring, handling, maintaining and shipping
the Collateral, all costs, fees and expenses of perfecting, and maintaining the
Security Interest, any and all excise, property, sales and use taxes imposed by
any state, federal or local authority on any of the Collateral, or with respect
to periodic appraisals and inspections of the Collateral, or with respect to the
sale or other disposition thereof. If Debtor fails to promptly pay any portion
of the above expenses when due or to perform any other obligation of Debtor
under this Security Agreement, the Secured Party may, at their option, but shall
not be required to, pay or perform the same and charge Debtor's account for all
costs and expenses incurred therefor, and Debtor agrees to reimburse the Secured
Party therefor on demand. All sums so paid or incurred by the Secured Party for
any of the foregoing, any and all other sums for which Debtor may become liable
hereunder and all costs and expenses (including reasonable and documented
attorneys' fees, legal expenses and court costs) incurred by the Secured Party
in enforcing or protecting the Security Interests or any of their rights or
remedies under this Security Agreement, the Notes, the Warrants and/or the SPA
shall be payable on demand, shall constitute Secured Obligations and shall be
secured by the Collateral.
SECTION 12. TERMINATION OF SECURITY INTERESTS; RELEASE OF COLLATERAL.
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Upon payment in full of all Secured Obligations, including the aggregate
principal amount of the Note, including all Interest, the Security Interests
shall immediately terminate and all rights to the Collateral shall revert to
Debtor automatically and without the need for further action to be taken on the
part of the Debtor or the Secured Party. Upon such termination of the Security
Interests or release of any Collateral, the Secured Party will, at the expense
of Debtor, execute and deliver to Debtor such documents as Debtor shall
reasonably request to evidence the termination of the Security Interests or the
release of such Collateral, as the case may be.
SECTION 13. NOTICES.
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All notices, requests, demands and other communications provided for
hereunder shall be in writing and directed to the applicable party at the
addresses set forth on the signature page hereof or, as to each party, at such
other address as shall be designated by such party in a written notice to the
other parties complying as to delivery with the terms of this Section. Notice to
the Secured Party on terms designated in this SECTION 14 shall be deemed proper
----------
notice the Secured Party. All such notices, requests, demands and other
communication shall be deemed given upon the earlier to occur of (i) the third
day following deposit thereof with the United States Postal Service for mailing
via certified or registered mail, return receipt requested, or (ii) the actual
receipt by the party to whom such notice is directed.
SECTION 14. WAIVERS, NON-EXCLUSIVE REMEDIES.
---------------------------------
No failure on the part of the Secured Party to exercise, and no delay in
exercising and no course of dealing with respect to, any right under the Note or
this Security Agreement shall operate as a waiver thereof; nor shall any single
or partial exercise by the Secured Party of any right under the Note or this
Security Agreement preclude any other or further exercise thereof or the
exercise of any other right. The rights in this Security Agreement and/or the
Note are cumulative and are not exclusive of any other remedies provided by law.
SECTION 15. SUCCESSORS AND ASSIGNS.
------------------------
This Security Agreement is for the benefit of the Secured Party and each of
its successors and assigns, and in no event shall the Debtor without the prior
express written consent of the Secured Party, assign all or any portion of the
Secured Obligations, the rights hereunder, or the Note. This Security Agreement
shall be binding on Debtor and its successors and all permitted assigns.
SECTION 16. SEVERABILITY.
------------
If any provisions hereof are invalid or unenforceable in any jurisdiction,
the other provisions hereof shall remain in full force and effect in such
jurisdiction and shall be liberally construed in favor of the Secured Party.
SECTION 17. CHANGES IN WRITING.
--------------------
No amendment, modification, termination or waiver of any provision of this
Security Agreement or consent to any departure by Debtor therefrom, shall in any
event be effective without the written concurrence of the Secured Party, and the
Debtor.
SECTION 18. APPLICABLE LAW, ETC.
---------------------
This Security Agreement will be governed by and construed exclusively under
the laws of the State of New York as applied to agreements among New York
residents entered into and to be performed entirely within New York. Each of the
parties hereto (1) agree that any legal suit, action or proceeding arising out
of or relating to this Agreement will be instituted exclusively in New York
State Supreme Court, County of New York, or in the United States District Court
for the Southern District of New York, (2) waive any objection which the Company
may have now or hereafter to the venue of any such suit, action or proceeding,
and (3) irrevocably consent to the jurisdiction of the New York State Supreme
Court, County of New York, and the United States District Court for the Southern
District of New York in any such suit, action or proceeding. Each of the parties
hereto further agrees to accept and acknowledge service of any and all process
which may be served in any such suit, action or proceeding in the New York State
Supreme Court, County of New York, or in the United States District Court for
the Southern District of New York and agree that service of process upon it
mailed by certified mail to its address will be deemed in every respect
effective service of process upon it, in any such suit, action or proceeding.
SECTION 19. ACTIONS BY SECURED PARTY; DISTRIBUTIONS.
-------------------------------------------
Unless otherwise specifically provided herein, wherever this Security
Agreement provides for actions to be taken by the Secured Party, or any
determination to be made by the Secured Party, the actions of those Holders
representing, in the aggregate, more than 50% of the outstanding Note shall
represent the actions or agreement of the Secured Party. In addition, whenever
the Secured Party is entitled to the distribution of monies, Collateral or any
other property, pursuant to the terms of this Security Agreement, such monies,
Collateral and/or other property shall be distributed to the Secured Party, on a
pro-rata basis, based on the outstanding principal amounts under the Note.
SECTION 20. HEADINGS.
--------
Section and subsection headings in this Security Agreement are included
herein for convenience of reference only and shall not constitute a part of this
Security Agreement for any other purpose or be given any substantive effect.
SECTION 21. EXECUTION.
---------
This Agreement may be executed simultaneously in two or more counterparts,
each of which shall be deemed an original but all of which together shall
constitute one and the same instrument.
SECTION 22. WAIVER OF JURY TRIAL.
-----------------------
DEBTOR AND SECURED PARTY HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY
TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS SECURITY
AGREEMENT. DEBTOR AND SECURED PARTY ALSO WAIVE ANY BOND OR INDEMNITY OR SECURITY
UPON SUCH BOND WHICH MIGHT, BUT FOR THIS WAIVER, BE REQUIRED OF DEBTOR OR THE
SECURED PARTY HERETO. 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.
DEBTOR AND SECURED PARTY ACKNOWLEDGE THAT THIS WAIVER IS A MATERIAL INDUCEMENT
TO ENTER INTO A BUSINESS RELATIONSHIP THAT EACH HAS ALREADY RELIED ON THE WAIVER
IN ENTERING INTO THIS SECURITY AGREEMENT AND THAT EACH WILL CONTINUE TO RELY ON
THE WAIVER IN THEIR RELATED FUTURE DEALINGS. DEBTOR AND SECURED PARTY FURTHER
WARRANT AND REPRESENT THAT EACH HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL,
AND EACH 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 AND THE WAIVER SHALL APPLY TO ANY
SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS SECURITY
AGREEMENT. IN THE EVENT OF LITIGATION. THIS SECURITY AGREEMENT MAY BE FILED AS A
WRITTEN CONSENT TO A TRIAL BY THE COURT.
SIGNATURE PAGE FOLLOWS
WITNESS the due execution hereof by the respective duly authorized officers
of the undersigned as of the day first above written.
DEBTORS:
XA, INC.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
----------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: President and CEO
XA SCENES, INC.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
----------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: President and CEO
THE EXPERIENTIAL AGENCY, INC.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
----------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: President and CEO
XA INTERACTIVE, INC.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
---------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: President and CEO
FIORI XA, INC.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
---------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: President
SECURED PARTY:
Vision Opportunity Master Fund, Ltd.
------------------------------------
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇
----------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Portfolio Manager
SCHEDULE I TO SECURITY AGREEMENT
--------------------------------
Locations of Equipment, Inventory, Books and Records, Chief Executive Officer
Locations of Equipment and Inventory:
----------------------------------------
Chicago, Illinois - Event decor, furniture and fixtures
Office - ▇▇▇▇ ▇▇▇▇▇▇▇ Center, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ - The Experiential Agency, Inc.
Design Center - ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ - Fiori,
XA, Inc.
Bergen, New Jersey (warehouse) - Event decor, furniture and fixtures
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ - The Experiential Agency, Inc.
New York, New York and Manhattan, New York - (office space and
warehouse),- Event decor, furniture and fixtures
New York Office and venue - ▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇, ▇▇▇
▇▇▇▇, ▇▇ ▇▇▇▇▇ - XA Scenes, Inc.
Los Angeles, California (office equipment)
▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ The
Experiential Agency, Inc.
Location of Books and Records and Chief Executive Officer:
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▇▇▇▇ ▇▇▇▇▇▇▇ Center, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇ - The Experiential Agency, Inc.