AMENDED AND RESTATED SECURITY AGREEMENT
THIS AMENDED AND RESTATED SECURITY AGREEMENT (the "Agreement"), is entered
into and made effective as of January 31, 2006, by and between CONNECTED MEDIA
TECHNOLOGIES, INC., a Delaware corporation (the "Company"), and the BUYER(S)
listed on Schedule I attached to the Securities Purchase Agreement dated the
date hereof (the "Secured Party").
WHEREAS, the Company issued to the Secured Party a Promissory Note dated
April 14, 2005 in the original principal amount of Six Hundred Thousand Dollars
($600,000) (the "Note"). This Agreement shall amend and restate the Security
Agreement between the Company and the Secured Party dated April 14, 2005;
WHEREAS, the Company has requested the Secured Party to make additional
financing available to the Company;
WHEREAS, the Secured Party is willing to provide such additional financing
on the condition that the total financing is secured hereunder and under a UCC-1
filed as of the date hereof in connection with the Note;
WHEREAS, the Company shall issue and sell to the Secured Party, as provided
in the Securities Purchase Agreement of even date herewith between the Company
and the Secured Party (the "Securities Purchase Agreement"), and the Secured
Party shall purchase up to One Million Six Hundred Thousand Dollars ($1,600,000)
of secured convertible debentures (the "Convertible Debentures"), which shall be
convertible into shares of the Company's common stock, par value $0.0001 (the
"Common Stock") (as converted, the "Conversion Shares") in the respective
amounts set forth opposite each Buyer(s) name on Schedule I attached to the
Securities Purchase Agreement;
WHEREAS, to induce the Secured Party to enter into the transaction
contemplated by the Securities Purchase Agreement, the Convertible Debentures,
the Investor Registration Rights Agreement of even date herewith between the
Company and the Secured Party (the "Investor Registration Rights Agreement"),
the Amended and Restated Pledge and Escrow Agreement of even date herewith among
the Company, the Secured Party and ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Esq. (the "Pledge
Agreement"), and the Irrevocable Transfer Agent Instructions among the Company,
the Secured Party, the Transfer Agent, and ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Esq. (the "Transfer
Agent Instructions") (collectively referred to as the "Transaction Documents"),
the Company hereby grants to the Secured Party a security interest in and to the
pledged property identified on Exhibit A hereto (collectively referred to as the
"Pledged Property") until the satisfaction of the Obligations, as defined herein
below.
NOW, THEREFORE, in consideration of the promises and the mutual covenants
herein contained, and for other good and valuable consideration, the adequacy
and receipt of which are hereby acknowledged, the parties hereto hereby agree as
follows:
ARTICLE 1.
DEFINITIONS AND INTERPRETATIONS
-------------------------------
Section 1.1. Recitals.
---------
The above recitals are true and correct and are incorporated herein, in
their entirety, by this reference.
Section 1.2. Interpretations.
----------------
Nothing herein expressed or implied is intended or shall be construed to
confer upon any person other than the Secured Party any right, remedy or claim
under or by reason hereof.
Section 1.3. Obligations Secured.
--------------------
The obligations secured hereby are any and all obligations of the Company
now existing or hereinafter incurred to the Secured Party, whether oral or
written and whether arising before, on or after the date hereof including,
without limitation, those obligations of the Company to the Secured Party under
this Agreement, the Transaction Documents, the Convertible Debentures issued
under the Securities Purchase Agreement dated the date hereof, the Note, and any
other amounts now or hereafter owed to the Secured Party by the Company
thereunder or hereunder (collectively, the "Obligations").
ARTICLE 2.
PLEDGED PROPERTY, ADMINISTRATION OF COLLATERAL
AND TERMINATION OF SECURITY INTEREST
----------------------------------------------
Section 2.1. Pledged Property.
-----------------
(a) Company hereby pledges to the Secured Party, and creates in the
Secured Party for its benefit, a security interest for such time until the
Obligations are paid in full, in and to all of the property of the Company
as set forth in Exhibit "A" attached hereto and the products thereof and
the proceeds of all such items (collectively, the "Pledged Property"):
(b) Simultaneously with the execution and delivery of this Agreement,
the Company shall make, execute, acknowledge, file, record and deliver to
the Secured Party any documents reasonably requested by the Secured Party
to perfect its security interest in the Pledged Property. Simultaneously
with the execution and delivery of this Agreement, the Company shall make,
execute, acknowledge and deliver to the Secured Party such documents and
instruments, including, without limitation, financing statements,
certificates, affidavits and forms as may, in the Secured Party's
reasonable judgment, be necessary to effectuate, complete or perfect, or to
continue and preserve, the security interest of the Secured Party in the
Pledged Property, and the Secured Party shall hold such documents and
instruments as secured party, subject to the terms and conditions contained
herein.
2
Section 2.2. Rights; Interests; Etc.
-----------------------
(a) So long as no Event of Default (as hereinafter defined) shall have
occurred and be continuing:
(i) the Company shall be entitled to exercise any and all rights
pertaining to the Pledged Property or any part thereof for any purpose
not inconsistent with the terms hereof; and
(ii) the Company shall be entitled to receive and retain any and
all payments paid or made in respect of the Pledged Property.
(b) Upon the occurrence and during the continuance of an Event of
Default:
(i) All rights of the Company to exercise the rights which it
would otherwise be entitled to exercise pursuant to Section 2.2(a)(i)
hereof and to receive payments which it would otherwise be authorized
to receive and retain pursuant to Section 2.2(a)(ii) hereof shall be
suspended, and all such rights shall thereupon become vested in the
Secured Party who shall thereupon have the sole right to exercise such
rights and to receive and hold as Pledged Property such payments;
provided, however, that if the Secured Party shall become entitled and
shall elect to exercise its right to realize on the Pledged Property
pursuant to Article 5 hereof, then all cash sums received by the
Secured Party, or held by Company for the benefit of the Secured Party
and paid over pursuant to Section 2.2(b)(ii) hereof, shall be applied
against any outstanding Obligations; and
(ii) All interest, dividends, income and other payments and
distributions which are received by the Company contrary to the
provisions of Section 2.2(b)(i) hereof shall be received in trust for
the benefit of the Secured Party, shall be segregated from other
property of the Company and shall be forthwith paid over to the
Secured Party; or
(iii) The Secured Party in its sole discretion shall be
authorized to sell any or all of the Pledged Property at public or
private sale in order to recoup all of the outstanding principal plus
accrued interest owed pursuant to the Convertible Debenture as
described herein
(c) An "Event of Default" shall be deemed to have occurred under this
Agreement upon an Event of Default under the Convertible Debentures.
ARTICLE 3.
ATTORNEY-IN-FACT; PERFORMANCE
-----------------------------
Section 3.1. Secured Party Appointed Attorney-In-Fact.
-----------------------------------------
Upon the occurrence of an Event of Default, the Company hereby appoints the
Secured Party as its attorney-in-fact, with full authority in the place and
stead of the Company and in the name of the Company or otherwise, from time to
time in the Secured Party's discretion to take any action and to execute any
3
instrument which the Secured Party may reasonably deem necessary to accomplish
the purposes of this Agreement, including, without limitation, to receive and
collect all instruments made payable to the Company representing any payments in
respect of the Pledged Property or any part thereof and to give full discharge
for the same. The Secured Party may demand, collect, receipt for, settle,
compromise, adjust, ▇▇▇ for, foreclose, or realize on the Pledged Property as
and when the Secured Party may determine. To facilitate collection, the Secured
Party may notify account debtors and obligors on any Pledged Property to make
payments directly to the Secured Party.
Section 3.2. Secured Party May Perform.
--------------------------
If the Company fails to perform any agreement contained herein, the Secured
Party, at its option, may itself perform, or cause performance of, such
agreement, and the expenses of the Secured Party incurred in connection
therewith shall be included in the Obligations secured hereby and payable by the
Company under Section 8.3.
ARTICLE 4.
REPRESENTATIONS AND WARRANTIES
------------------------------
Section 4.1. Authorization; Enforceability.
------------------------------
Each of the parties hereto represents and warrants that it has taken all
action necessary to authorize the execution, delivery and performance of this
Agreement and the transactions contemplated hereby; and upon execution and
delivery, this Agreement shall constitute a valid and binding obligation of the
respective party, subject to applicable bankruptcy, insolvency, reorganization,
moratorium and similar laws affecting creditors' rights or by the principles
governing the availability of equitable remedies.
Section 4.2. Ownership of Pledged Property.
------------------------------
The Company warrants and represents that it is the legal and beneficial
owner of the Pledged Property free and clear of any lien, security interest,
option or other charge or encumbrance except for the security interest created
by this Agreement.
ARTICLE 5.
DEFAULT; REMEDIES; SUBSTITUTE COLLATERAL
----------------------------------------
Section 5.1. Default and Remedies.
---------------------
(a) If an Event of Default occurs, then in each such case the Secured
Party may declare the Obligations to be due and payable immediately, by a
notice in writing to the Company, and upon any such declaration, the
Obligations shall become immediately due and payable.
(b) Upon the occurrence of an Event of Default, the Secured Party
shall: (i) be entitled to receive all distributions with respect to the
Pledged Property, (ii) to cause the Pledged Property to be transferred into
4
the name of the Secured Party or its nominee, (iii) to dispose of the
Pledged Property, and (iv) to realize upon any and all rights in the
Pledged Property then held by the Secured Party.
Section 5.2. Method of Realizing Upon the Pledged Property: Other Remedies.
--------------------------------------------------------------
Upon the occurrence of an Event of Default, in addition to any rights and
remedies available at law or in equity, the following provisions shall govern
the Secured Party's right to realize upon the Pledged Property:
(a) Any item of the Pledged Property may be sold for cash or other
value in any number of lots at brokers board, public auction or private
sale and may be sold without demand, advertisement or notice (except that
the Secured Party shall give the Company ten (10) days' prior written
notice of the time and place or of the time after which a private sale may
be made (the "Sale Notice")), which notice period is hereby agreed to be
commercially reasonable. At any sale or sales of the Pledged Property, the
Company may bid for and purchase the whole or any part of the Pledged
Property and, upon compliance with the terms of such sale, may hold,
exploit and dispose of the same without further accountability to the
Secured Party. The Company will execute and deliver, or cause to be
executed and delivered, such instruments, documents, assignments, waivers,
certificates, and affidavits and supply or cause to be supplied such
further information and take such further action as the Secured Party
reasonably shall require in connection with any such sale.
(b) Any cash being held by the Secured Party as Pledged Property and
all cash proceeds received by the Secured Party in respect of, sale of,
collection from, or other realization upon all or any part of the Pledged
Property shall be applied as follows:
(i) to the payment of all amounts due the Secured Party for the
expenses reimbursable to it hereunder or owed to it pursuant to
Section 8.3 hereof;
(ii) to the payment of the Obligations then due and unpaid.
(iii) the balance, if any, to the person or persons entitled
thereto, including, without limitation, the Company.
(c) In addition to all of the rights and remedies which the Secured
Party may have pursuant to this Agreement, the Secured Party shall have all
of the rights and remedies provided by law, including, without limitation,
those under the Uniform Commercial Code.
(i) If the Company fails to pay such amounts due upon the
occurrence of an Event of Default which is continuing, then the
Secured Party may institute a judicial proceeding for the collection
of the sums so due and unpaid, may prosecute such proceeding to
judgment or final decree and may enforce the same against the Company
and collect the monies adjudged or decreed to be payable in the manner
provided by law out of the property of Company, wherever situated.
(ii) The Company agrees that it shall be liable for any
reasonable fees, expenses and costs incurred by the Secured Party in
connection with enforcement, collection and preservation of the
5
Transaction Documents, including, without limitation, reasonable legal
fees and expenses, and such amounts shall be deemed included as
Obligations secured hereby and payable as set forth in Section 8.3
hereof.
Section 5.3. Proofs of Claim.
----------------
In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, adjustment, composition or other
judicial proceeding relating to the Company or the property of the Company or of
such other obligor or its creditors, the Secured Party (irrespective of whether
the Obligations shall then be due and payable as therein expressed or by
declaration or otherwise and irrespective of whether the Secured Party shall
have made any demand on the Company for the payment of the Obligations), subject
to the rights of Previous Security Holders, shall be entitled and empowered, by
intervention in such proceeding or otherwise:
(i) to file and prove a claim for the whole amount of the Obligations
and to file such other papers or documents as may be necessary or advisable
in order to have the claims of the Secured Party (including any claim for
the reasonable legal fees and expenses and other expenses paid or incurred
by the Secured Party permitted hereunder and of the Secured Party allowed
in such judicial proceeding), and
(ii) to collect and receive any monies or other property payable or
deliverable on any such claims and to distribute the same; and any
custodian, receiver, assignee, trustee, liquidator, sequestrator or other
similar official in any such judicial proceeding is hereby authorized by
the Secured Party to make such payments to the Secured Party and, in the
event that the Secured Party shall consent to the making of such payments
directed to the Secured Party, to pay to the Secured Party any amounts for
expenses due it hereunder.
Section 5.4. Duties Regarding Pledged Property.
----------------------------------
The Secured Party shall have no duty as to the collection or protection of
the Pledged Property or any income thereon or as to the preservation of any
rights pertaining thereto, beyond the safe custody and reasonable care of any of
the Pledged Property actually in the Secured Party's possession.
ARTICLE 6.
AFFIRMATIVE COVENANTS
---------------------
The Company covenants and agrees that, from the date hereof and until the
Obligations have been fully paid and satisfied, unless the Secured Party shall
consent otherwise in writing (as provided in Section 8.4 hereof):
Section 6.1. Existence, Properties, Etc.
---------------------------
(a) The Company shall do, or cause to be done, all things, or proceed
with due diligence with any actions or courses of action, that may be
reasonably necessary (i) to maintain Company's due organization, valid
existence and good standing under the laws of its state of incorporation,
6
and (ii) to preserve and keep in full force and effect all qualifications,
licenses and registrations in those jurisdictions in which the failure to
do so could have a Material Adverse Effect (as defined below); and (b) the
Company shall not do, or cause to be done, any act impairing the Company's
corporate power or authority (i) to carry on the Company's business as now
conducted, and (ii) to execute or deliver this Agreement or any other
document delivered in connection herewith, including, without limitation,
any UCC-1 Financing Statements required by the Secured Party to which it is
or will be a party, or perform any of its obligations hereunder or
thereunder. For purpose of this Agreement, the term "Material Adverse
Effect" shall mean any material and adverse affect as determined by Secured
Party in its sole discretion, whether individually or in the aggregate,
upon (a) the Company's assets, business, operations, properties or
condition, financial or otherwise; (b) the Company's to make payment as and
when due of all or any part of the Obligations; or (c) the Pledged
Property.
Section 6.2. Financial Statements and Reports.
---------------------------------
The Company shall furnish to the Secured Party within a reasonable time
such financial data as the Secured Party may reasonably request, including,
without limitation, the following:
(a) The balance sheet of the Company as of the close of each fiscal
year, the statement of earnings and retained earnings of the Company as of
the close of such fiscal year, and statement of cash flows for the Company
for such fiscal year, all in reasonable detail, prepared in accordance with
generally accepted accounting principles consistently applied, certified by
the chief executive and chief financial officers of the Company as being
true and correct and accompanied by a certificate of the chief executive
and chief financial officers of the Company, stating that the Company has
kept, observed, performed and fulfilled each covenant, term and condition
of this Agreement during such fiscal year and that no Event of Default
hereunder has occurred and is continuing, or if an Event of Default has
occurred and is continuing, specifying the nature of same, the period of
existence of same and the action the Company proposes to take in connection
therewith;
(b) A balance sheet of the Company as of the close of each month, and
statement of earnings and retained earnings of the Company as of the close
of such month, all in reasonable detail, and prepared substantially in
accordance with generally accepted accounting principles consistently
applied, certified by the chief executive and chief financial officers of
the Company as being true and correct; and
(c) Copies of all accountants' reports and accompanying financial
reports submitted to the Company by independent accountants in connection
with each annual examination of the Company.
Section 6.3. Accounts and Reports.
---------------------
The Company shall maintain a standard system of accounting in accordance
with generally accepted accounting principles consistently applied and provide,
at its sole expense, to the Secured Party the following:
(a) as soon as available, a copy of any notice or other communication
alleging any nonpayment or other material breach or default, or any
foreclosure or other action respecting any material portion of its assets
7
and properties, received respecting any of the indebtedness of the Company
in excess of $50,000 (other than the Obligations), or any demand or other
request for payment under any guaranty, assumption, purchase agreement or
similar agreement or arrangement respecting the indebtedness or obligations
of others in excess of $50,000, including any received from any person
acting on behalf of the Secured Party or beneficiary thereof; and
(b) within fifteen (15) days after the making of each submission or
filing, a copy of any report, financial statement, notice or other
document, whether periodic or otherwise, submitted to the shareholders of
the Company, or submitted to or filed by the Company with any governmental
authority involving or affecting (i) the Company that could have a Material
Adverse Effect; (ii) the Obligations; (iii) any part of the Pledged
Property; or (iv) any of the transactions contemplated in this Agreement or
the Loan Instruments.
Section 6.4. Maintenance of Books and Records; Inspection.
---------------------------------------------
The Company shall maintain its books, accounts and records in accordance
with generally accepted accounting principles consistently applied, and permit
the Secured Party, its officers and employees and any professionals designated
by the Secured Party in writing, at any time to visit and inspect any of its
properties (including but not limited to the collateral security described in
the Transaction Documents and/or the Loan Instruments), corporate books and
financial records, and to discuss its accounts, affairs and finances with any
employee, officer or director thereof.
Section 6.5. Maintenance and Insurance.
--------------------------
(a) The Company shall maintain or cause to be maintained, at its own
expense, all of its assets and properties in good working order and
condition, making all necessary repairs thereto and renewals and
replacements thereof.
(b) The Company shall maintain or cause to be maintained, at its own
expense, insurance in form, substance and amounts (including deductibles),
which the Company deems reasonably necessary to the Company's business, (i)
adequate to insure all assets and properties of the Company, which assets
and properties are of a character usually insured by persons engaged in the
same or similar business against loss or damage resulting from fire or
other risks included in an extended coverage policy; (ii) against public
liability and other tort claims that may be incurred by the Company; (iii)
as may be required by the Transaction Documents and/or applicable law and
(iv) as may be reasonably requested by Secured Party, all with adequate,
financially sound and reputable insurers.
Section 6.6. Contracts and Other Collateral.
-------------------------------
The Company shall perform all of its obligations under or with respect to
each instrument, receivable, contract and other intangible included in the
Pledged Property to which the Company is now or hereafter will be party on a
timely basis and in the manner therein required, including, without limitation,
this Agreement.
8
Section 6.7. Defense of Collateral, Etc.
---------------------------
The Company shall defend and enforce its right, title and interest in and
to any part of: (a) the Pledged Property; and (b) if not included within the
Pledged Property, those assets and properties whose loss could have a Material
Adverse Effect, the Company shall defend the Secured Party's right, title and
interest in and to each and every part of the Pledged Property, each against all
manner of claims and demands on a timely basis to the full extent permitted by
applicable law.
Section 6.8. Payment of Debts, Taxes, Etc.
-----------------------------
The Company shall pay, or cause to be paid, all of its indebtedness and
other liabilities and perform, or cause to be performed, all of its obligations
in accordance with the respective terms thereof, and pay and discharge, or cause
to be paid or discharged, all taxes, assessments and other governmental charges
and levies imposed upon it, upon any of its assets and properties on or before
the last day on which the same may be paid without penalty, as well as pay all
other lawful claims (whether for services, labor, materials, supplies or
otherwise) as and when due.
Section 6.9. Taxes and Assessments; Tax Indemnity.
-------------------------------------
The Company shall (a) file all tax returns and appropriate schedules
thereto that are required to be filed under applicable law, prior to the date of
delinquency, (b) pay and discharge all taxes, assessments and governmental
charges or levies imposed upon the Company, upon its income and profits or upon
any properties belonging to it, prior to the date on which penalties attach
thereto, and (c) pay all taxes, assessments and governmental charges or levies
that, if unpaid, might become a lien or charge upon any of its properties;
provided, however, that the Company in good faith may contest any such tax,
assessment, governmental charge or levy described in the foregoing clauses (b)
and (c) so long as appropriate reserves are maintained with respect thereto.
Section 6.10. Compliance with Law and Other Agreements.
-----------------------------------------
The Company shall maintain its business operations and property owned or
used in connection therewith in compliance with (a) all applicable federal,
state and local laws, regulations and ordinances governing such business
operations and the use and ownership of such property, and (b) all agreements,
licenses, franchises, indentures and mortgages to which the Company is a party
or by which the Company or any of its properties is bound. Without limiting the
foregoing, the Company shall pay all of its indebtedness promptly in accordance
with the terms thereof.
Section 6.11. Notice of Default.
-----------------
The Company shall give written notice to the Secured Party of the
occurrence of any default or Event of Default under this Agreement, the
Transaction Documents or any other Loan Instrument or any other agreement of
Company for the payment of money, promptly upon the occurrence thereof.
9
Section 6.12. Notice of Litigation.
--------------------
The Company shall give notice, in writing, to the Secured Party of (a) any
actions, suits or proceedings wherein the amount at issue is in excess of
$50,000, instituted by any persons against the Company, or affecting any of the
assets of the Company, and (b) any dispute, not resolved within fifteen (15)
days of the commencement thereof, between the Company on the one hand and any
governmental or regulatory body on the other hand, which might reasonably be
expected to have a Material Adverse Effect on the business operations or
financial condition of the Company.
ARTICLE 7.
NEGATIVE COVENANTS
------------------
The Company covenants and agrees that, from the date hereof until the
Obligations have been fully paid and satisfied, the Company shall not, unless
the Secured Party shall consent otherwise in writing:
Section 7.1. Indebtedness.
-------------
Except pursuant to the acquisition of Natcom Marketing International, Inc.
("Natcom") and its rights and obligations as set forth in the Stock Purchase
Agreement between the Company and Natcom dated as of the date hereof (the
"SPA"), the Company shall not directly or indirectly permit, create, incur,
assume, permit to exist, increase, renew or extend on or after the date hereof
any indebtedness on its part, including commitments, contingencies and credit
availabilities, or apply for or offer or agree to do any of the foregoing
(excluding any indebtedness of the Company to the Secured Party, trade accounts
payable and accrued expenses incurred in the ordinary course of business and the
endorsement of negotiable instruments payable to the Company, respectively for
deposit or collection in the ordinary course of business).
Section 7.2. Liens and Encumbrances.
-----------------------
Except as set forth in the Purchase and Sale Agreement and the Royalty
Bearing License Agreement between the Company and Rothschild Trust Holdings, LLC
(the "Trust Documents") and in the SPA, the Company shall not directly or
indirectly make, create, incur, assume or permit to exist any assignment,
transfer, pledge, mortgage, security interest or other lien or encumbrance of
any nature in, to or against any part of the Pledged Property or of the
Company's capital stock, or offer or agree to do so, or own or acquire or agree
to acquire any asset or property of any character subject to any of the
foregoing encumbrances (including any conditional sale contract or other title
retention agreement), or assign, pledge or in any way transfer or encumber its
right to receive any income or other distribution or proceeds from any part of
the Pledged Property or the Company's capital stock; or enter into any
sale-leaseback financing respecting any part of the Pledged Property as lessee,
or cause or assist the inception or continuation of any of the foregoing.
10
Section 7.3. Certificate of Incorporation, By-Laws, Mergers,
Consolidations, Acquisitions and Sales.
---------------------------------------------------------
Except as set forth in the Trust Documents and in the SPA, without the
prior express written consent of the Secured Party, the Company shall not: (a)
Amend its Certificate of Incorporation or By-Laws; (b) issue or sell its stock,
stock options, bonds, notes or other corporate securities or obligations; (c) be
a party to any merger, consolidation or corporate reorganization, (d) purchase
or otherwise acquire all or substantially all of the assets or stock of, or any
partnership or joint venture interest in, any other person, firm or entity, (e)
sell, transfer, convey, grant a security interest in or lease all or any
substantial part of its assets, nor (f) create any subsidiaries nor convey any
of its assets to any subsidiary.
Section 7.4. Management, Ownership.
----------------------
Except as set forth in the SPA, the Company shall not materially change its
ownership, executive staff or management without the prior written consent of
the Secured Party. The ownership, executive staff and management of the Company
are material factors in the Secured Party's willingness to institute and
maintain a lending relationship with the Company.
Section 7.5. Dividends, Etc.
---------------
The Company shall not declare or pay any dividend of any kind, in cash or
in property, on any class of its capital stock, nor purchase, redeem, retire or
otherwise acquire for value any shares of such stock, nor make any distribution
of any kind in respect thereof, nor make any return of capital to shareholders,
nor make any payments in respect of any pension, profit sharing, retirement,
stock option, stock bonus, incentive compensation or similar plan (except as
required or permitted hereunder), without the prior written consent of the
Secured Party.
Section 7.6. Guaranties; Loans.
------------------
Except as set forth in the SPA, the Company shall not guarantee nor be
liable in any manner, whether directly or indirectly, or become contingently
liable after the date of this Agreement in connection with the obligations or
indebtedness of any person or persons, except for (i) the indebtedness currently
secured by the liens identified on the Pledged Property identified on Exhibit A
hereto and (ii) the endorsement of negotiable instruments payable to the Company
for deposit or collection in the ordinary course of business. The Company shall
not make any loan, advance or extension of credit to any person other than in
the normal course of its business.
Section 7.7. Conduct of Business.
--------------------
The Company will continue to engage, in an efficient and economical manner,
in a business of the same general type as conducted by it on the date of this
Agreement.
Section 7.8. Places of Business.
-------------------
The location of the Company's chief place of business is Plantation,
Florida. The Company shall not change the location of its chief place of
11
business, chief executive office or any place of business disclosed to the
Secured Party or move any of the Pledged Property from its current location
without thirty (30) days' prior written notice to the Secured Party in each
instance.
ARTICLE 8.
MISCELLANEOUS
-------------
Section 8.1. Notices.
--------
All notices or other communications required or permitted to be given
pursuant to this Agreement shall be in writing and shall be considered as duly
given on: (a) the date of delivery, if delivered in person, by nationally
recognized overnight delivery service or (b) five (5) days after mailing if
mailed from within the continental United States by certified mail, return
receipt requested to the party entitled to receive the same:
If to the Secured Party: ▇▇▇▇▇▇▇▇▇▇ Equity Partners, Ltd.
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇-▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇
Portfolio Manager
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Esq.
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
And if to the Company: Connected Media Technologies, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇-▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to: ▇▇▇▇▇▇ & ▇▇▇▇▇▇, LLP
▇▇▇ ▇▇▇▇▇ ▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Any party may change its address by giving notice to the other party
stating its new address. Commencing on the tenth (10th) day after the giving of
12
such notice, such newly designated address shall be such party's address for the
purpose of all notices or other communications required or permitted to be given
pursuant to this Agreement.
Section 8.2. Severability.
-------------
If any provision of this Agreement shall be held invalid or unenforceable,
such invalidity or unenforceability shall attach only to such provision and
shall not in any manner affect or render invalid or unenforceable any other
severable provision of this Agreement, and this Agreement shall be carried out
as if any such invalid or unenforceable provision were not contained herein.
Section 8.3. Expenses.
---------
In the event of an Event of Default, the Company will pay to the Secured
Party the amount of any and all reasonable expenses, including the reasonable
fees and expenses of its counsel, which the Secured Party may incur in
connection with: (i) the custody or preservation of, or the sale, collection
from, or other realization upon, any of the Pledged Property; (ii) the exercise
or enforcement of any of the rights of the Secured Party hereunder or (iii) the
failure by the Company to perform or observe any of the provisions hereof.
Section 8.4. Waivers, Amendments, Etc.
-------------------------
The Secured Party's delay or failure at any time or times hereafter to
require strict performance by Company of any undertakings, agreements or
covenants shall not waiver, affect, or diminish any right of the Secured Party
under this Agreement to demand strict compliance and performance herewith. Any
waiver by the Secured Party of any Event of Default shall not waive or affect
any other Event of Default, whether such Event of Default is prior or subsequent
thereto and whether of the same or a different type. None of the undertakings,
agreements and covenants of the Company contained in this Agreement, and no
Event of Default, shall be deemed to have been waived by the Secured Party, nor
may this Agreement be amended, changed or modified, unless such waiver,
amendment, change or modification is evidenced by an instrument in writing
specifying such waiver, amendment, change or modification and signed by the
Secured Party.
Section 8.5. Continuing Security Interest.
-----------------------------
This Agreement shall create a continuing security interest in the Pledged
Property and shall: (i) remain in full force and effect until payment in full of
the Obligations; and (ii) be binding upon the Company and its successors and
heirs and (iii) inure to the benefit of the Secured Party and its successors and
assigns. Upon the payment or satisfaction in full of the Obligations, the
Company shall be entitled to the return, at its expense, of such of the Pledged
Property as shall not have been sold in accordance with Section 5.2 hereof or
otherwise applied pursuant to the terms hereof.
13
Section 8.6. Independent Representation.
---------------------------
Each party hereto acknowledges and agrees that it has received or has had
the opportunity to receive independent legal counsel of its own choice and that
it has been sufficiently apprised of its rights and responsibilities with regard
to the substance of this Agreement.
Section 8.7. Applicable Law: Jurisdiction.
-----------------------------
This Agreement shall be governed by and interpreted in accordance with the
laws of the State of New Jersey without regard to the principles of conflict of
laws. The parties further agree that any action between them shall be heard in
▇▇▇▇▇▇ County, New Jersey, and expressly consent to the jurisdiction and venue
of the Superior Court of New Jersey, sitting in ▇▇▇▇▇▇ County and the United
States District Court for the District of New Jersey sitting in Newark, New
Jersey for the adjudication of any civil action asserted pursuant to this
Paragraph.
Section 8.8. Waiver of Jury Trial.
---------------------
AS A FURTHER INDUCEMENT FOR THE SECURED PARTY TO ENTER INTO THIS AGREEMENT
AND TO MAKE THE FINANCIAL ACCOMMODATIONS TO THE COMPANY, THE COMPANY HEREBY
WAIVES ANY RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING RELATED IN ANY WAY TO
THIS AGREEMENT AND/OR ANY AND ALL OTHER DOCUMENTS RELATED TO THIS TRANSACTION.
Section 8.9. Entire Agreement.
-----------------
This Agreement constitutes the entire agreement among the parties and
supersedes any prior agreement or understanding among them with respect to the
subject matter hereof.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
14
IN WITNESS WHEREOF, the parties hereto have executed this Security
Agreement as of the date first above written.
COMPANY:
CONNECTED MEDIA TECHNOLOGIES, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
--------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Title: CEO
SECURED PARTY:
▇▇▇▇▇▇▇▇▇▇ EQUITY PARTNERS, LTD.
By: Yorkville Advisors, LLC
Its: General Partner
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇
Title: Portfolio Manager
15
EXHIBIT A
DEFINITION OF PLEDGED PROPERTY
------------------------------
For the purpose of securing prompt and complete payment and performance by
the Company of all of the Obligations, the Company unconditionally and
irrevocably hereby grants to the Secured Party a continuing security interest in
and to, and lien upon, the following Pledged Property of the Company:
(a) all goods of the Company, including, without limitation,
machinery, equipment, furniture, furnishings, fixtures, signs, lights,
tools, parts, supplies and motor vehicles of every kind and description,
now or hereafter owned by the Company or in which the Company may have or
may hereafter acquire any interest, and all replacements, additions,
accessions, substitutions and proceeds thereof, arising from the sale or
disposition thereof, and where applicable, the proceeds of insurance and of
any tort claims involving any of the foregoing;
(b) all inventory of the Company, including, but not limited to, all
goods, wares, merchandise, parts, supplies, finished products, other
tangible personal property, including such inventory as is temporarily out
of Company's custody or possession and including any returns upon any
accounts or other proceeds, including insurance proceeds, resulting from
the sale or disposition of any of the foregoing;
(c) all contract rights and general intangibles of the Company,
including, without limitation, goodwill, trademarks, trade styles, trade
names, leasehold interests, partnership or joint venture interests, patents
and patent applications, copyrights, deposit accounts whether now owned or
hereafter created;
(d) all documents, warehouse receipts, instruments and chattel paper
of the Company whether now owned or hereafter created;
(e) all accounts and other receivables, instruments or other forms of
obligations and rights to payment of the Company (herein collectively
referred to as "Accounts"), together with the proceeds thereof, all goods
represented by such Accounts and all such goods that may be returned by the
Company's customers, and all proceeds of any insurance thereon, and all
guarantees, securities and liens which the Company may hold for the payment
of any such Accounts including, without limitation, all rights of stoppage
in transit, replevin and reclamation and as an unpaid vendor and/or lienor,
all of which the Company represents and warrants will be bona fide and
existing obligations of its respective customers, arising out of the sale
of goods by the Company in the ordinary course of business;
(f) to the extent assignable, all of the Company's rights under all
present and future authorizations, permits, licenses and franchises issued
or granted in connection with the operations of any of its facilities;
(g) all products and proceeds (including, without limitation,
insurance proceeds) from the above-described Pledged Property.
A-1