PLEDGE AND SECURITY AGREEMENT
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PLEDGE AND SECURITY AGREEMENT (as amended, restated, supplemented or
otherwise modified from time to time in accordance herewith and including all
attachments, exhibits and schedules hereto, this "Agreement"), dated as of
August 11, 2006, made by Manaris Corporation, a Nevada corporation ("Parent"),
and Parent's wholly owned subsidiary, C-Chip Technologies Corporation (North
America), a Canadian corporation ("C-Chip" and together with Parent, the
"Grantor"), in favor of the secured parties listed on Exhibit A to this
Agreement and their permitted successors and assigns (collectively, the "Secured
Parties").
WHEREAS, the Grantor has issued or will issue separate series B
subordinated secured convertible promissory notes and original issue discount
series B subordinated secured promissory notes (collectively, the "Notes") to
the Secured Parties pursuant to a Note and Warrant Purchase Agreement, dated as
of August 11, 2006 (the "Purchase Agreement"), by and among the Grantor and the
Secured Parties; and
WHEREAS, C-Chip acknowledges the direct benefit to it of Parent issuing
the Notes to the Secured Parties;
WHEREAS, the Secured Parties and the Grantor agree that the Grantor
execute and deliver to the Secured Parties a guaranty and security agreement
providing for the guaranty by C-Chip of the obligations of Parent to the Secured
Parties under the Transaction Documents and the grant to the Secured Parties of
a continuing security interest in all personal property and assets of the
Grantor, and the pledge of the capital stock of Parent's other wholly-owned
subsidiary, Avensys Inc., a Quebec corporation ("Avensys"), all in substantially
the form hereof to secure all Obligations (hereinafter defined).
NOW, THEREFORE, the parties agree as follows:
ARTICLE Definitions
Section 0.0. Definition of Terms Used Herein. All capitalized terms
used herein and not defined herein have the respective meanings provided
therefor in the Purchase Agreement or the Notes, as applicable. All terms
defined in the Uniform Commercial Code (hereinafter defined) as in effect from
time to time and used herein and not otherwise defined herein (whether or not
such terms are capitalized) have the same definitions herein as specified
therein.
Section 0.0. Definition of Certain Terms Used Herein. As used herein,
the following terms have the following meanings:
"Collateral" means all accounts receivable of the Grantor and all
personal and fixed property of every kind and nature, including, without
limitation, all furniture, fixtures, equipment, raw materials, inventory, as
extracted collateral, or other goods, accounts, contract rights, rights to the
payment of money, insurance refund claims and all other insurance claims and
proceeds, tort claims, chattel paper, documents, instruments, securities and
other investment property, deposit accounts, rights to proceeds of letters of
credit and all general intangibles including, without limitation, all tax refund
claims, license fees, patents, patent licenses, patent applications, trademarks,
trademark licenses, trademark applications, trade names, copyrights, copyright
licenses, copyright applications, rights to ▇▇▇ and recover for past
infringement of patents, trademarks and copyrights, computer programs, computer
software, engineering drawings, service marks, customer lists, goodwill, and all
licenses, permits, agreements of any kind or nature pursuant to which the
Grantor possesses, uses or has authority to possess or use property (whether
tangible or intangible) of others or others possess, use or have authority to
possess or use property (whether tangible or intangible) of the Grantor, and all
recorded data of any kind or nature, regardless of the medium of recording
including, without limitation, all books and records, software, writings, plans,
specifications and schematics, whether now owned or hereinafter acquired by the
Grantor; and all proceeds and products of each of the foregoing. Notwithstanding
the foregoing, without consent, the Grantor may hereinafter acquire assets,
properties, leases (including corporations, partnerships, and other entities
holding the foregoing) for use in its business, directly or through
subsidiaries, which may be secured by the asset acquired (the "Senior Security
Interest") and financed using cash payments of the Grantor and up to $2,000,000
of secured non-equity linked commercial debt. Said Senior Security Interest
shall rank senior to the Secured Parties' Security Interest granted pursuant to
this Agreement.
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"Default" means any event or circumstance which, with the giving of
notice, the lapse of time, or both, would (if not cured, waived, or otherwise
remedied during such time) constitute an Event of Default.
"Event of Default" has the meaning specified in the Notes.
"Indemnitees" has the meaning specified in Section 7.5(b).
"Lien" means: (i) any interest in property securing an obligation owed
to, or a claim by, a Person other than the owner of the property, whether such
interest is based on the common law, statute, or contract, and including a
security interest, charge, claim, or lien arising from a mortgage, deed of
trust, encumbrance, pledge, hypothecation, assignment, deposit arrangement,
agreement, security agreement, conditional sale or trust receipt or a lease,
consignment or bailment for security purposes; (ii) to the extent not included
under clause (i), any reservation, exception, encroachment, easement,
right-of-way, covenant, condition, restriction, lease or other title exception
or encumbrance affecting property; and (iii) any contingent or other agreement
to provide any of the foregoing.
"Notes" has the meaning assigned to such term in the first recital of
this Agreement.
"Obligations" means all indebtedness, liabilities, obligations,
covenants and duties of the Grantor to the Secured Parties of every kind, nature
and description, direct or indirect, absolute or contingent, due or not due,
contractual or tortious, liquidated or unliquidated, arising by operation of law
or otherwise, now existing of hereafter arising under or in connection with the
Notes, this Agreement or the other Transaction Documents.
"Registered Organization" means an entity formed by filing a
registration document with a United States Governmental Authority, such as a
corporation, limited partnership or limited liability company.
"Security Interest" has the meaning specified in Section 2.1 of this
Agreement.
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"Subsidiaries" means C-Chip and Avensys.
"Uniform Commercial Code" means the Uniform Commercial Code from time
to time in effect in the State of New York.
ARTICLE I. Security Interest
Section 1.1. Guaranty. C-Chip hereby guarantees that the Obligations of
Parent to the Secured Parties under the Transaction Documents will be paid
strictly in accordance with the terms of the Transaction Documents. The
liability of each of C-Chip is absolute and unconditional and C-Chip hereby
waives any defenses it may have in connection therewith. This guaranty is a
guaranty of payment, not merely of collection.
Section 1.2. Security Interest. As security for the payment and
performance, in full of the Obligations, and any extensions, renewals,
modifications or refinancings of the Obligations, the Grantor hereby bargains,
sells, conveys, assigns, sets over, mortgages, pledges, hypothecates and
transfers to the Secured Parties, and hereby grants to the Secured Parties,
their successors and assigns, a security interest in, all of such Grantor's
right, title and interest in, to and under the Collateral (the "Security
Interest"). In connection with the Security Interest and constituting a part of
the Collateral for all of the Obligations secured by the Security Interest
granted hereunder, the Parent hereby pledges and assigns to the Secured Parties,
and grants to the Secured Parties a continuing security interest in, items (a)
through (h) below, whether now existing or hereafter acquired or arising;
notwithstanding the foregoing, without consent, the Grantor may grant a Senior
Security Interest in hereinafter acquired assets, properties, leases (including
corporations, partnerships, and other entities holding the foregoing) for use in
its business, directly or through subsidiaries, which may be secured by the
asset acquired and financed using cash payments of the Grantor and up to
$2,000,000 of secured non-equity linked commercial debt. Said Senior Security
Interest shall rank senior to the Secured Parties' Security Interest granted
pursuant to this Agreement.
(a) all of the Parent's right, title and interest in the
Subsidiaries;
(b) all of the Parent's share and interest as shareholders in
the business, assets, capital, profits, goodwill and other property of the
Subsidiaries;
(c) all of the Parent's rights, powers and privileges under
the articles of incorporation, bylaws and other organizational documents of the
Subsidiaries;
(d) any and all fees, distributions and other payments and
compensation due and to become due to each Grantor from the Subsidiaries;
(e) any and all securities, stock, partnership interests,
membership interests, financial assets, founders fees, fees, distributions,
receivables, contract rights, general intangibles and other amounts now or
hereafter payable in respect of the Parent's interest in the Subsidiaries;
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(f) all investment property and securities entitlements in or
arising from any of the foregoing;
(g) the proceeds (whether cash or non-cash) to be paid and
payable to the Parent or the Subsidiaries upon any sale or other transfer of any
right, title or interest of the Parent in the Subsidiaries; and
(h) any and all cash and non-cash proceeds of any of the
foregoing.
Section 1.3. Stock Powers. Concurrently with the delivery to the
Secured Parties of each certificate representing the shares of pledged stock of
the Subsidiaries, the Parent in respect of such certificates shall deliver an
undated stock power covering such certificate, duly executed by the Parent in
blank with, if the Secured Parties so request, signature guaranteed.
Section 1.4. Voting Rights. Unless an Event of Default shall have
occurred and be continuing and the Secured Parties shall have given notice to
the Grantors of the Secured Parties' intent to exercise its rights pursuant to
Article VI hereof, the Parent shall be entitled to receive all cash dividends
paid in the normal course of business of the Subsidiaries and consistent with
past practice and to exercise all voting and corporate rights with respect to
the pledged stock of the Subsidiaries; provided, however, that no vote shall be
cast or corporate right exercised or action taken which, in the reasonable
judgment of the Secured Parties, would impair the Collateral or otherwise be
inconsistent with or result in any violation of any provision of this Agreement.
Section 1.5. No Assumption of Liability. The Security Interest is
granted as security only and shall not subject the Secured Parties to, or in any
way alter or modify, any obligation or liability of the Grantor with respect to
or arising out of the Collateral.
Section 1.6. Additional Subsidiaries. Grantor hereby agrees that any
and all future subsidiaries of the Parent shall be wholly owned by the Parent
and such subsidiaries shall grant security on its assets to the Secured Parties
pursuant to this Agreement and the Parent shall pledge the stock of such
subsidiaries to the Secured Parties in accordance with the terms of this
Agreement.
ARTICLE II. Representations and Warranties
The Grantor represents and warrants to the Secured Parties that:
Section 2.1. Title and Authority. The Grantor has good and valid rights
in and title to the Collateral with respect to which it has purported to grant a
security interest hereunder and has full power and authority to grant to the
Secured Parties the Security Interest and to execute, deliver and perform its
obligations in accordance with the terms of this Agreement, without the consent
or approval of any other Person other than any consent or approval which has
been obtained.
Section 2.2. Filings; Actions to Achieve Perfection. Fully executed
Uniform Commercial Code financing statements (including fixture filings, as
applicable) or other appropriate filings, recordings or registrations containing
a description of the Collateral have been delivered to the Secured Parties for
filing in each United States governmental, municipal or other office specified
in Schedule A, which are all the filings, recordings and registrations that are
necessary to publish notice of and protect the validity of and to establish a
legal, valid and perfected security interest in favor of the Secured Parties in
respect of all Collateral in which the Security Interest may be perfected by
filing, recording or registration in the United States (or any political
subdivision thereof) and its territories and possessions, and no further or
subsequent filing, refiling, recording, rerecording, registration or
reregistration is necessary in any such jurisdiction, except as provided under
applicable law with respect to the filing of continuation statements or with
respect to the filing of amendments or new filings to reflect the change of the
Grantor's name, location, identity or corporate structure. The Grantor's name is
listed in the preamble of this Agreement identically to how it appears on its
certificate of incorporation or other organizational documents.
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Section 2.3. Validity and Priority of Security Interest. The Security
Interest constitutes (a) a legal and valid security interest in all the
Collateral securing the payment and performance of the Obligations, (b) subject
only to the filings described in Section 3.2 above and other previously
perfected security interests in the Collateral listed on Schedule 3.3 to this
Agreement ("Existing Liens"), a perfected first priority security interest in
all Collateral in which a security interest may be perfected by filing,
recording or registration in the United States pursuant to the Uniform
Commercial Code or other applicable law in the United States (or any political
subdivision thereof) and its territories and possessions or any other country,
state or nation (or any political subdivision thereof). The Security Interest is
and shall be subordinate to (i) any other Existing Lien on any of the Collateral
and (ii) a Senior Security Interest.
Section 2.4. Absence of Other Liens. The Grantor's Collateral is owned
by the Grantor free and clear of any Lien other than Existing Liens. Without
limiting the foregoing and except as set forth on Schedule 3.4 to this
Agreement, the Grantor has not filed or consented to any filing of any financing
statement or similar filing in favor of any Person other than the Secured
Parties, nor permitted the granting or assignment of a security interest or
permitted perfection of any security interest in the Collateral in favor of any
Person other than the Secured Parties. The Grantor's having possession of all
instruments, certificates and cash constituting Collateral from time to time and
the filing of financing statements in the offices referred to in Schedule A
hereto results in the perfection of such security interest. Such Security
Interest is, or in the case of Collateral in which the Grantor obtain rights
after the date hereof, will be, a perfected security interest. Such notices,
filings and all other action necessary or desirable to perfect and protect such
security interest have been duly taken.
Section 2.5. Valid and Binding Obligation. This Agreement constitutes
the legal, valid and binding obligation of the Grantor, enforceable against the
Grantor in accordance with its terms, except (i) as limited by applicable
bankruptcy, insolvency, reorganization, moratorium, and other laws of general
application affecting enforcement of creditors' rights generally, (ii) as
limited by laws relating to the availability of specific performance, injunctive
relief, or other equitable remedies, and (iii) to the extent the indemnification
provisions contained in this Agreement may be limited by applicable federal or
state securities laws.
Section 2.6. Subordination. The Security Interest granted pursuant to
this Agreement shall be subordinated and made junior in all respects to (i) any
other Existing Lien on any of the Collateral and (ii) a Senior Security
Interest.
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ARTICLE III. Covenants
Section 3.1. Change of Name; Location of Collateral; Place of Business,
State of Formation or Organization.
(a) The Grantor shall notify the Secured Parties in writing at
least eleven (11) days prior to any change (i) in its corporate name or
in any trade name used to identify it in the conduct of its business or
in the ownership of its properties, (ii) in the location of its chief
executive office, its principal place of business, any office in which
it maintains books or records relating to Collateral owned by it
(including the establishment of any such new office or facility), (iii)
in its identity or corporate structure such that a filed filing made
under the Uniform Commercial Code becomes misleading or (iv) in its
Federal Taxpayer Identification Number. Furthermore, the Grantor shall
not effect or permit any change referred to in the preceding sentence
unless all filings have been made under the Uniform Commercial Code or
otherwise that are required in order for the Secured Parties to
continue at all times following such change to have a valid, legal and
perfected security interest in all the Collateral subject to the
Existing Liens.
(b) Without limiting Section 4.1(a), without the prior written
consent of the Secured Parties in each instance, the Grantor shall not
change its (i) principal residence, if it is an individual, (ii) place
of business, if it has only one place of business and is not a
Registered Organization, (iii) principal place of business, if it has
more than one place of business and is not a Registered Organization,
or (iv) state of incorporation, formation or organization, if it is a
Registered Organization.
Section 3.2. Records. The Grantor shall maintain, at its own cost and
expense, such complete and accurate records with respect to the Collateral owned
by it as is consistent with its current practices and in accordance with such
prudent and standard practices used in industries that are the same as or
similar to those in which the Grantor is engaged, but in any event to include
complete accounting records indicating all payments and proceeds received with
respect to any part of the Collateral, and, at such time or times as the Secured
Parties may reasonably request, promptly to prepare and deliver to the Secured
Parties a duly certified schedule or schedules in form and detail satisfactory
to the Secured Parties showing the identity, amount and location of any and all
Collateral.
Section 3.3. Periodic Certification; Notice of Changes. In the event
there should at any time be any change in the information represented and
warranted herein or in the documents and instruments executed and delivered in
connection herewith, the Grantor shall immediately notify the Secured Parties in
writing of such change (this notice requirement shall be in extension of and
shall not limit or relieve the Grantor of any other covenants hereunder).
Section 3.4. Protection of Security. The Grantor shall, at its own cost
and expense, take any and all actions reasonably necessary to defend title to
the Collateral against all persons and to defend the Security Interest of the
Secured Parties in the Collateral and the priority thereof against any Lien
other than the Existing Liens.
Section 3.5. Inspection and Verification. The Secured Parties and such
persons as the Secured Parties may reasonably designate shall, upon reasonable
advanced notice and during normal business hours, have the right to inspect the
Collateral, all records related thereto (and to make extracts and copies from
such records) and the premises upon which any of the Collateral is located, to
discuss the Grantor's affairs with the officers of the Grantor and its
independent accountants and to verify under reasonable procedures the validity,
amount, quality, quantity, value, condition and status of, or any other matter
relating to, the Collateral, including, in the case of collateral in the
possession of any third Person, by contacting any account debtor or third Person
possessing such Collateral for the purpose of making such a verification.
Out-of-pocket expenses in connection with any inspections by representatives of
the Secured Parties shall be (a) the obligations of the Grantor with respect to
any inspection after the Secured Parties' demand payment of the Notes or (b) the
obligation of the Secured Parties in any other case.
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Section 3.6. Taxes; Encumbrances. At their option, the Secured Parties
may discharge, Liens other than Existing Liens at any time levied or placed on
the Collateral and may pay for the maintenance and preservation of the
Collateral to the extent the Grantor fails to do so and the Grantor shall
reimburse the Secured Parties on demand for any payment made or any expense
incurred by the Secured Parties pursuant to the foregoing authorization;
provided, however, that nothing in this Section shall be interpreted as excusing
the Grantor from the performance of, or imposing any obligation on the Secured
Parties to cure or perform, any covenants or other obligation of the Grantor
with respect to any Lien or maintenance or preservation of Collateral as set
forth herein.
Section 3.7. Use and Disposition of Collateral. Except as my be
permitted pursuant to the Purchase Agreement, the Grantor shall not make or
permit to be made an assignment, pledge or hypothecation of any Collateral or
shall grant any other Lien in respect of the Collateral without the prior
written consent of the Secured Parties. Except as my be permitted pursuant to
the Purchase Agreement, the Grantor shall not make or permit to be made any
transfer of any Collateral other than with respect to Existing Liens and other
liens approved by the Secured Parties and the Grantor shall remain at all times
in possession of the Collateral owned by it except in the ordinary course of
business.
Section 3.8. Insurance/Notice of Loss. Within a reasonable period of
time following the date of this Agreement, Grantor, at its own expense, shall
maintain or cause to be maintained insurance covering physical loss or damage to
the Collateral as described on Schedule 4.8 to this Agreement. In extension of
the foregoing and without limitation, such insurance shall be payable to the
Secured Parties as loss payee under a "standard" loss payee clause, and the
Secured Parties shall be listed as an "additional insured" on Grantor's general
liability insurance. Such insurance shall not be terminated, cancelled or not
renewed for any reason, including non-payment of insurance premiums, unless the
insurer shall have provided the Secured Parties at least 30 days prior written
notice. Grantor irrevocably makes, constitutes and appoints the Secured Parties
(and all officers, employees or agents designated by the Secured Parties) as its
true and lawful agent and attorney-in-fact for the purpose, at any time
following the Secured Parties' demand for payment of the Notes during the
continuance of an Event of Default, of making, settling and adjusting claims in
respect of Collateral under policies of insurance, endorsing the name of Grantor
on any check, draft, instrument or other item of payment for the proceeds of
such policies of insurance and for making all determinations and decisions with
respect thereto. In the event that Grantor at any time or times shall fail to
obtain or maintain any of the policies of insurance required hereby or to pay
any premium in whole or part relating thereto, the Secured Parties may, without
waiving or releasing any obligation or liability of Grantor hereunder, in their
sole discretion, obtain and maintain such policies of insurance and pay such
premium and take any other actions with respect thereto as the Secured Parties
reasonably deem advisable. All sums disbursed by the Secured Parties in
connection and in accordance with this Section, including reasonable attorneys'
fees, court costs, expenses and other charges relating thereto, shall be payable
upon demand, by Grantor to the Secured Parties and shall be additional
Obligations secured hereby. Grantor shall promptly notify the Secured Parties if
any material portion of the Collateral owned or held by Grantor is damaged or
destroyed. The proceeds of any casualty insurance in respect of any casualty
loss of any of the Collateral shall (i) so long as the Secured Parties have not
demanded payment of the Notes during the continuance of an Event of Default, be
disbursed to Grantor for direct application by Grantor solely to the repair or
replacement of Grantor's property so damaged or destroyed, and (ii) in all other
circumstances, be held by the Secured Parties as cash collateral for the
Obligations. The Secured Parties may, at their sole option, disburse from time
to time all or any part of such proceeds so held as cash collateral, upon such
terms and conditions as the Secured Parties may reasonably prescribe, for direct
application by the Secured Parties solely to the repair or replacement of
Grantor's property so damaged or destroyed, or Grantor may apply all or any part
of such proceeds to the Obligations.
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Section 3.9. Legend. Grantor shall legend, in form and manner
satisfactory to the Secured Parties, its accounts and its books, records and
documents evidencing or pertaining thereto with an appropriate reference to the
fact that such accounts have been assigned to the Secured Parties and that the
Secured Parties have a security interest therein.
Section 3.10. Equivalent Amount. All payments of any kind whatsoever
made by Grantor (or any other applicable Person) under or in connection with
this Agreement, the Notes or any other Transaction Document shall be made in
U.S. dollars. Notwithstanding the foregoing, the Secured Parties shall use the
Equivalent Amount (as defined below) to determine whether any repayment or any
other payment amount of any kind whatsoever made by Grantor (or any other
applicable Person) to Secured Parties in Canadian dollars equals the equivalent
of the applicable U.S. Dollar amount as determined by the Secured Parties with
regard to such repayment or other payment amount. For purposes of this
Agreement, the term "Equivalent Amount" shall mean the amount of U.S. dollars
into which Canadian dollars may be converted or the amount of Canadian dollars
into which U.S. dollars may be converted at the noon spot buying rate of
[________] in New York, New York, USA as determined by the Secured Parties on
any repayment or any other payment amount date, as the case may be.
Section 3.11. Judgment Currency. Notwithstanding the foregoing, if for
the purpose of obtaining judgment in any court of competent jurisdiction located
in Canada, it is necessary to convert a sum due or payable of any kind
whatsoever under or in connection with any of these Notes or any other
Transaction Document in U.S. dollars into Canadian dollars (the "Judgment
Currency"), the rate of exchange which shall be applied shall be that at which,
in accordance with normal banking procedures, a party could purchase U.S.
dollars with the Judgment Currency at a bank located in New York, New York, USA
on the business day on which such payment is received. The obligation of a party
in respect of any such sum due or payable from it (the "Obligor Party") to the
other party shall, notwithstanding the rate of exchange actually applied in
rendering such judgment, be discharged only to the extent that any sum adjudged
to be due or payable under or in connection with this Agreement, the Notes or
any other Transaction Document in the Judgment Currency may, in accordance with
normal banking procedures, be used by such other party as and when provided
above to purchase and transfer U.S. dollars with the amount of the Judgment
Currency so adjudged to be due or payable. The Grantor hereby agrees, as a
separate obligation and notwithstanding any such judgment, to indemnify the
other party against, and to pay such other party on demand, U.S. dollars in the
amount equal to any difference between the sum originally due or payable to such
other party in U.S. dollars and the amount of U.S. dollars so purchased and
transferred.
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Section 3.12. Interest Act. For the purposes of only the Interest Act
(Canada) and disclosure thereunder, whenever interest to be paid with respect to
this Agreement, the Notes or any other Transaction Document is to be calculated
on the basis of a year of 360 days or any other period of time that is less than
a calendar year, the yearly rate of interest to which the rate determined
pursuant to such calculation is equivalent is the rate so determined multiplied
by the actual number of days in the calendar year in which the same is to be
ascertained and divided by either 360 or such other period of time, as the case
may be.
Section 3.13. Taxes. Any and all payments of any kind whatsoever by the
Grantor under or in connection with any of this Agreement, the Notes or any
other Transaction Document shall be made free and clear of and without deduction
for any and all present or future taxes, levies, imposts, deductions, charges or
withholdings, and all liabilities of any kind whatsoever with respect thereto,
excluding taxes imposed on the net income of the Secured Parties (or any
transferee or assignee thereof, including a participation holder (any such
entity, a "Transferee")) by the jurisdiction in which such person or party is
organized or has its principal office (all such nonexcluded taxes, levies,
imposts, deductions, charges withholdings and liabilities, collectively or
individually, "Taxes"). If the Grantor shall be required to deduct any Taxes
from or in respect of any sum payable under or in connection with any of this
Agreement, the Notes or any other Transaction Document to the Secured Parties
(or any Transferee), (i) the sum payable shall be increased by the amount (an
"additional amount") necessary so that after making all required deductions
(including deductions applicable to additional sums payable under or in
connection with this Section 4.13) the Secured Parties (or such Transferee)
shall receive an amount equal to the sum they would have received had no such
deductions been made, (ii) the Grantor shall make such deductions and (iii) the
Grantor shall pay the full amount deducted to and file any required tax and
information return with the relevant governmental authority in accordance with
applicable law.
ARTICLE IV. Further Assurances; Power of Attorney
Section 4.1. Further Assurances. Grantor shall, at its own expense,
execute, acknowledge, deliver and cause to be duly filed all such further
instruments and documents and take all such actions as the Secured Parties may
from time to time reasonably request to better assure, preserve, protect and
perfect the Security Interest and the rights and remedies created hereby,
including the payment of any fees and taxes required in connection with the
execution and delivery of this Agreement, the granting of the Security Interest
and the filing of any financing statements (including fixture filings) or other
documents in connection herewith or therewith. If any amount payable under or in
connection with any of the Collateral shall be or become evidenced by any
promissory note or other instrument, such note or instrument shall be
immediately pledged and delivered to the Secured Parties, duly endorsed in a
manner satisfactory to the Secured Parties.
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Section 4.2. Power of Attorney.
(a) Grantor hereby irrevocably (as a power coupled with an
interest) constitutes and appoints the Collateral Agent (as defined in Section
7.14 hereof) and all officers, employees or agents designated by the Collateral
Agent, its attorney-in-fact with full power of substitution, for the benefit of
the Secured Parties,
(i) to take all appropriate action and to execute all
documents and instruments that may be necessary or desirable to
accomplish the purposes of this Agreement, and without limiting the
generality of the foregoing, Grantor hereby grants the power to file
one or more financing statements (including fixture filings),
continuation statements, filings with the United States Patent and
Trademark Office or United States Copyright Office (or any successor
office or any similar office in any other country) or other documents
for the purpose of perfecting, confirming, continuing, enforcing or
protecting the Security Interest granted by Grantor, without the
signature of Grantor, and naming Grantor as debtor and the Collateral
Agent and/or the Secured Parties as secured party; and
(ii) at any time following the Secured Parties'
demand for payment of the Notes during the continuance of an Event of
Default (i) to receive, endorse, assign and/or deliver any and all
notes, acceptances, checks, drafts, money orders or other evidences of
payment relating to the Collateral or any part thereof; (ii) to demand,
collect, receive payment of, give receipt for and give discharges and
releases of all or any of the Collateral; (iii) to sign the name of
Grantor on any invoice or ▇▇▇▇ of lading relating to any of the
Collateral; (iv) to send verifications of accounts to any account
debtor or any other Person liable for an account; (v) to commence and
prosecute any and all suits, actions or proceedings at law or in equity
in any court of competent jurisdiction to collect or otherwise realize
on all or any of the Collateral or to enforce any rights in respect of
any Collateral; (vi) to settle, compromise, compound, adjust or defend
any actions, suits or proceeding relating to all or any of the
Collateral; and (vii) to use, sell, assign, transfer, pledge, make any
agreement with respect to or otherwise deal with all or any of the
Collateral, and to do all other acts and things necessary to carry out
the purposes of this Agreement, as fully and completely as though the
Secured Parties were the absolute owner of the Collateral for all
purposes; provided, however, that nothing herein contained shall be
construed as requiring or obligating the Secured Parties to make any
commitment or to make any inquiry as to the nature or sufficiency of
any payment received by the Secured Parties, or to present or file any
claim or notice, or to take any action with respect to the Collateral
or any part thereof or the moneys due or to become due in respect
thereof or any property covered thereby, and no action taken or omitted
to be taken by the Secured Parties with respect to the Collateral or
any part thereof shall give rise to any defense, counterclaim or offset
in favor of Grantor or to any claim or action against the Secured
Parties.
(b) The provisions of this Article shall in no event relieve
Grantor of any of its obligations hereunder with respect to the Collateral or
any part thereof or impose any obligation on the Secured Parties to proceed in
any particular manner with respect to the Collateral or any part thereof, or in
any way limit the exercise by the Secured Parties of any other or further right
which it may have on the date of this Agreement or hereafter, whether hereunder,
by law or otherwise.
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ARTICLE V. Remedies
Section 5.1. Remedies upon Default.
(a) Upon the occurrence and during the continuance of an Event
of Default, Grantor agrees to deliver each item of its Collateral to
the Secured Parties on demand, and it is agreed that the Secured
Parties shall have the right to take any of or all the following
actions at the same or different times (but at all times subject to any
Existing Liens): with or without legal process and with or without
prior notice or demand for performance, to take possession of the
Collateral and without liability for trespass to enter any premises
where the Collateral may be located for the purpose of taking
possession of or removing the Collateral, exercise Grantor's right to
▇▇▇▇ and receive payment for completed work and, generally, to exercise
any and all rights afforded to a secured party under the Uniform
Commercial Code or other applicable law. Without limiting the
generality of the foregoing, Grantor agrees that the Secured Parties
shall have the right, subject to the mandatory requirements of
applicable law, to sell or otherwise dispose of all or any part of the
Collateral, at public or private sale or at any broker's board or on
any securities exchange, for cash, upon credit or for future delivery
as the Secured Parties shall deem appropriate. The Secured Parties
shall be authorized at any such sale (if it deems it advisable to do
so) to restrict the prospective bidders or purchasers to persons who
will represent and agree that they are purchasing the Collateral for
their own account for investment and not with a view to the
distribution or sale thereof, and upon consummation of any such sale
the Secured Parties shall have the right to assign, transfer and
deliver to the purchaser or purchasers thereof the Collateral so sold.
Each such purchaser at any such sale shall hold the property sold
absolutely, free from any claim or right on the part of Grantor, and
Grantor hereby waives (to the extent permitted by law) all rights of
redemption, stay and appraisal which Grantor now has or may at any time
in the future have under any rule of law or statute now existing or
hereafter enacted.
(b) The Secured Parties shall give Grantor ten (10) days'
written notice (which Grantor agrees is reasonable notice within the
meaning of Section 9-504(3) of the Uniform Commercial Code) of the
Secured Parties' intention to make any sale of Collateral. Such notice,
in the case of a public sale, shall state the time and place for such
sale and, in the case of a sale at a broker's board or on a securities
exchange, shall state the board or exchange at which such sale is to be
made and the day on which the Collateral, or portion thereof, will
first be offered for sale at such board or exchange. Any such public
sale shall be held at such time or times within ordinary business hours
and at such place or places as the Secured Parties may fix and state in
the notice (if any) of such sale. At any such sale, the Collateral, or
portion thereof, to be sold may be sold in one lot as an entirety or in
separate parcels, as the Secured Parties may (in their sole and
absolute discretion) determine. The Secured Parties shall not be
obligated to make any sale of any Collateral if it shall determine not
to do so, regardless of the fact that notice of sale of such Collateral
shall have been given. The Secured Parties may, without notice or
publication, adjourn any public or private sale or cause the same to be
adjourned from time to time by announcement at the time and place fixed
for sale, and such sale may, without further notice, be made at the
time and place to which the same was so adjourned. In case any sale of
all or any part of the Collateral is made on credit or for future
delivery, the Collateral so sold may be retained by the Secured Parties
until the sale price is paid by the purchaser or purchasers thereof,
but the Secured Parties shall not incur any liability in case any such
purchaser or purchasers shall fail to take up and pay for the
Collateral so sold and, in case of any such failure, such Collateral
may be sold again upon like notice. At any public (or, to the extent
permitted by law, private) sale made pursuant to this Section, the
Secured Parties may bid for or purchase, free (to the extent permitted
by law) from any right of redemption, stay, valuation or appraisal on
the part of Grantor (all said rights being also hereby waived and
released to the extent permitted by law), the Collateral or any part
thereof offered for sale and may make payment on account thereof by
using any claim then due and payable to the Secured Parties from
Grantor as a credit against the purchase price, and the Secured Parties
may, upon compliance with the terms of sale, hold, retain and dispose
of such property without further accountability to Grantor therefor.
For purposes hereof, a written agreement to purchase the Collateral or
any portion thereof shall be treated as a sale thereof; the Secured
Parties shall be free to carry out such sale pursuant to such agreement
and Grantor shall not be entitled to the return of the Collateral or
any portion thereof subject thereto, notwithstanding the fact that
after the Secured Parties shall have entered into such an agreement all
Obligations have been paid in full. As an alternative to exercising the
power of sale herein conferred upon it, the Secured Parties may proceed
by a suit or suits at law or in equity to foreclose this Agreement and
to sell the Collateral or any portion thereof pursuant to a judgment or
decree of a court or courts having competent jurisdiction or pursuant
to a proceeding by a court-appointed receiver.
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Section 5.2. Application of Proceeds. The Secured Parties shall apply
the proceeds of any collection or sale of the Collateral, as well as any
Collateral consisting of cash, as follows:
(a) FIRST, to the payment of all reasonable costs and expenses
incurred by the Secured Parties in connection with such collection or sale or
otherwise in connection with this Agreement or any of the Obligations, including
all court costs and the fees and expenses of its agents and legal counsel, and
any other costs or expenses incurred in connection with the exercise of any
right or remedy hereunder, under the Purchase Agreement, the Notes and the other
Transaction Documents;
(b) SECOND, to the payment in full of the Obligations; and
(c) THIRD, to Grantor, its successors or assigns, or to
whomsoever may be lawfully entitled to receive the same, or as a court of
competent jurisdiction may otherwise direct.
Subject to the foregoing, the Secured Parties shall have absolute
discretion as to the time of application of such proceeds, moneys or balances in
accordance with this Agreement. Upon any sale of the Collateral by the Secured
Parties (including pursuant to a power of sale granted by statute or under a
judicial proceeding), the receipt of any such proceeds, moneys or balances by
the Secured Parties or of the officer making the sale shall be a sufficient
discharge to the purchaser or purchasers of the Collateral so sold and such
purchaser or purchasers shall not be obligated to see to the application of any
part of the purchase money paid over to the Secured Parties or such officer or
be answerable in any way for the misapplication thereof.
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Section 5.3. Grant of License to Use Intellectual Property. For the
purpose of enabling the Secured Parties to exercise rights and remedies under
this Article at such time as the Secured Parties shall be lawfully entitled to
exercise such rights and remedies, Grantor hereby grants to the Secured Parties
an irrevocable, non-exclusive license (exercisable without payment of royalty or
other compensation to Grantor) to use, license or sub-license any of the
Collateral consisting of intellectual property now owned or hereafter acquired
by Grantor, and wherever the same may be located, and including in such license
reasonable access to all media in which any of the licensed items may be
recorded or stored and to all computer software and programs used for the
compilation or printout thereof. The use of such license by the Secured Parties
may be exercised, at the option of the Secured Parties, only following the
Secured Parties' demand for payment of the Notes during the continuance of an
Event of Default.
ARTICLE VI. Miscellaneous
Section 6.1. Notices. All communications and notices hereunder to the
Grantor and to the Secured Parties shall (except as otherwise expressly
permitted herein) be in writing and delivered to the Grantor or the Secured
Parties, as the case may be, as provided in the Purchase Agreement.
Section 6.2. Security Interest Absolute. All rights of the Secured
Parties hereunder, the Security Interest and all obligations of Grantor
hereunder shall be absolute and unconditional irrespective of (a) any lack of
validity or enforceability of the Purchase Agreement, the Notes, any Transaction
Document or any agreement with respect to any of the Obligations or any other
agreement or instrument relating to any of the foregoing, (b) any change in the
time, manner or place of payment of, or in any other term of, all or any of the
Obligations, or any other amendment or waiver of or any consent to any departure
from the Purchase Agreement, the Notes, any Transaction Document or any other
agreement or instrument, (c) any exchange, release or non-perfection of any Lien
on other collateral, or any release or amendment or waiver of or consent under
or departure from any guarantee, securing or guaranteeing all or any of the
Obligations, or (d) any other circumstance that might otherwise constitute a
defense available to, or a discharge of, Grantor in respect of the Obligations
or this Agreement.
Section 6.3. Survival of Agreement. All covenants, agreements,
representations and warranties made by Grantor herein and in the certificates or
other instruments prepared or delivered in connection with or pursuant to this
Agreement shall be considered to have been relied upon by the Secured Parties
and shall survive the making of the loan and the execution and delivery to the
Secured Parties of the Notes, regardless of any investigation made by the
Secured Parties or on their behalf; and shall continue in full force and effect
until this Agreement shall terminate.
Section 6.4. Binding Effect; Several Agreement; Successors and Assigns.
This Agreement shall become effective as to Grantor when a counterpart hereof
executed on behalf of Grantor shall have been delivered to the Secured Parties
and a counterpart hereof shall have been executed on behalf of the Secured
Parties, and thereafter shall be binding upon Grantor and the Secured Parties
and their respective successors and assigns, and shall inure to the benefit of
Grantor, the Secured Parties and their respective successors and assigns, except
that Grantor shall not have the right to assign or transfer its rights or
obligations hereunder or any interest herein or in the Collateral (and any such
assignment or transfer shall be void) except as expressly contemplated by this
Agreement, the Purchase Agreement, the Notes or the other Transaction Documents.
14
Section 6.5. Secured Parties' Fees and Expense; Indemnification.
(a) Grantor agrees to pay upon demand to the Secured Parties
the amount of any and all reasonable expenses, including all reasonable
fees, disbursements and other charges of its counsel and of any experts
or agents, which the Secured Parties may incur in connection with (i)
the administration of this Agreement (including the customary fees and
charges of the Secured Parties for any audits conducted by them or on
their behalf with respect to the accounts inventory), (ii) the custody
or preservation of, or the sale of, collection from or other
realization upon any of the Collateral, (iii) the exercise, enforcement
or protection of any of the rights of the Secured Parties hereunder or
(iv) the failure of Grantor to perform or observe any of the provisions
hereof.
(b) Grantor agrees to indemnify the Secured Parties and the
agent, contractors and employees of the Secured Parties (collectively,
the "Indemnitees") against, and hold each of them harmless from, any
and all losses, claims, damages, liabilities and related expenses,
including reasonable fees, disbursements and other charges of counsel,
incurred by or asserted against any of them arising out of, in any way
connected with, or as a result of, the execution, delivery, or
performance of this Agreement or any agreement or instrument
contemplated hereby or any claim, litigation, investigation or
proceeding relating hereto or to the Collateral, whether or not any
Indemnitee is a party thereto; provided that such indemnity shall not,
as to any Indemnitee, be available to the extent that such losses,
claims, damages, liabilities or related expenses are determined by a
court of competent jurisdiction by final and nonappealable judgment to
have resulted from the gross negligence or willful misconduct of such
Indemnitee.
(c) Any such amounts payable as provided hereunder shall be
additional Obligations secured hereby. The provisions of this Section
shall remain operative and in full force and effect regardless of the
termination of this Agreement, the Purchase Agreement, the Notes or the
other Transaction Documents, the consummation of the transactions
contemplated hereby, the repayment of any of the Obligations, the
invalidity or unenforceability of any term or provision of this
Agreement, the Purchase Agreement, the Notes or the other Transaction
Documents, or any investigation made by or on behalf of the Secured
Parties. All amounts due under this Section shall be payable on written
demand therefor.
Section 6.6. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT
GIVING EFFECT TO ANY OF THE CONFLICTS OF LAW PRINCIPLES WHICH WOULD RESULT IN
THE APPLICATION OF THE SUBSTANTIVE LAW OF ANOTHER JURISDICTION. THIS AGREEMENT
SHALL NOT BE INTERPRETED OR CONSTRUED WITH ANY PRESUMPTION AGAINST THE PARTY
CAUSING THIS AGREEMENT TO BE DRAFTED.
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Section 6.7. Waivers; Amendment.
(a) No failure or delay of the Secured Parties in exercising
any power or right hereunder shall operate as a waiver thereof, nor shall any
single or partial exercise of any such right or power, or any abandonment or
discontinuance of steps to enforce such a right or power, preclude any other or
further exercise thereof or the exercise of any other right or power. The rights
and remedies of the Secured Parties hereunder and under the Purchase Agreement
are cumulative and are not exclusive of any rights or remedies that they would
otherwise have. No waiver of any provisions of this Agreement, the Purchase
Agreement, the Notes or the other Transaction Documents or consent to any
departure by Grantor therefrom shall in any event be effective unless the same
shall be permitted by paragraph (b) below, and then such waiver or consent shall
be effective only in the specific instance and for the purpose for which given.
No notice to or demand on Grantor in any case shall entitle Grantor to any other
or further notice or demand in similar or other circumstances.
(b) Neither this Agreement nor any provision hereof may be
waived, amended or modified except pursuant to an agreement or agreements, in
writing entered into by the Secured Parties and Grantor.
Section 6.8. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO
THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL
BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF,
UNDER OR IN CONNECTION WITH THIS AGREEMENT, THE PURCHASE AGREEMENT OR THE NOTES.
EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY
OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD
NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B)
ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER
INTO THIS AGREEMENT, THE PURCHASE AGREEMENT AND THE NOTES, AS APPLICABLE, BY,
AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.
Section 6.9. Severability. In the event any one or more of the
provisions contained in this Agreement should be held invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein shall not in any way be affected or
impaired thereby (it being understood that the invalidity of a particular
provision in a particular jurisdiction shall not in and of itself affect the
validity of such provision in any other jurisdiction). The parties shall
endeavor in good-faith negotiations to replace the invalid, illegal or
unenforceable provisions with valid provisions the economic effect of which
comes as close as possible to that of the invalid, illegal or unenforceable
provisions.
Section 6.10. Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall constitute an original but all of which
when taken together shall constitute but one contract. Each party shall be
entitled to rely on a facsimile signature of any other party hereunder as if it
were an original.
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Section 6.11. Jurisdiction; Consent to Service of Process.
(a) Grantor hereby irrevocably and unconditionally submits,
for itself and its property, to the nonexclusive jurisdiction of any
New York State court or Federal court of the United States of America
sitting in New York City, and any appellate court from any thereof, in
any action or proceeding arising out of or relating to this Agreement,
the Purchase Agreement or the Notes, or for recognition or enforcement
of any judgment, and each of the parties hereto hereby irrevocably and
unconditionally agrees that all claims in respect of any such action or
proceeding may be heard and determined in such New York State or, to
the extent permitted by law, in such Federal court. Each of the parties
hereto agrees that a final judgment in any such action or proceeding
shall be conclusive and may be enforced in other jurisdictions by suit
on the judgment or in any other manner provided by law. Nothing in this
Agreement shall affect any right that the Secured Parties may otherwise
have to bring any action or proceeding relating to this Agreement, the
Purchase Agreement, the Notes or the other Transaction Documents
against Grantor or its properties in the courts of any jurisdiction.
(b) Grantor hereby irrevocably and unconditionally waives, to
the fullest extent it may legally and effectively do so, any objection
which it may now or hereafter have to the laying of venue of any suit,
action or proceeding arising out of or relating to this Agreement, the
Purchase Agreement, the Notes or the other Transaction Documents in any
New York State or Federal court. Each of the parties hereto hereby
irrevocably waives, to the fullest extent permitted by law, the defense
of an inconvenient forum to the maintenance of such action or
proceeding in any such court.
(c) Each party to this Agreement irrevocably consents to
service of process in the manner provided for notices in Section 7.1.
Nothing in this Agreement will affect the right of any party to this
Agreement to process in any other manner permitted by law.
Section 6.12. Termination. This Agreement and the Security Interest
shall terminate when all the Obligations have been paid in full, at which time
the Secured Parties shall execute and deliver to Grantor, at Grantor's expense,
all Uniform Commercial Code termination statements and similar documents which
Grantor shall reasonably request to evidence such termination. Any execution and
delivery of termination statements or documents pursuant to this Section shall
be without recourse to or warranty by the Secured Parties.
Section 6.13. Prejudgment Remedy Waiver. Grantor acknowledges that this
Agreement, the Purchase Agreement, the Notes and the other Transaction Documents
evidence a commercial transaction and that it could, under certain circumstances
have the right, to notice of and hearing on the right of the Secured Parties to
obtain a prejudgment remedy, such as attachment, garnishment and/or replevin,
upon commencing any litigation against Grantor. Notwithstanding, Grantor hereby
waives all rights to notice, judicial hearing or prior court order to which it
might otherwise have the right under any state or federal statute or
constitution in connection with the obtaining by the Secured Parties of any
prejudgment remedy by reason of this Agreement, the Purchase Agreement, the
Notes, the other Transaction Documents or by reason of the Obligations or any
renewals or extensions of the same. Grantor also waives any and all objection
which it might otherwise assert, now or in the future, to the exercise or use by
the Secured Parties of any right of setoff, repossession or self help as may
presently exist under statute or common law.
17
Section 7.14. Collateral Agent.
(a) Each Secured Party hereby appoints ▇▇▇▇ ▇▇▇▇, P.A. (the
"Collateral Agent") as the Collateral Agent hereunder and each Secured Party
authorizes the Collateral Agent to take such action as agent on its behalf and
to exercise such powers under this Agreement and the other Transaction Documents
as are delegated to the Collateral Agent under such agreements and to exercise
such powers as are reasonably incidental thereto. Without limiting the
foregoing, each Secured Party hereby authorizes the Collateral Agent to execute
and deliver, and to perform its obligations under, each of the documents to
which the Collateral Agent is a party relating to security for the obligations
under the Notes, to exercise all rights, powers and remedies that the Collateral
Agent may have under such Transaction Documents and, in the case of the
Transaction Documents, to act as agent for the Secured Parties under such
Transaction Documents.
(b) As to any matters not expressly provided for by this
Agreement and the other document relating thereto (including enforcement or
collection), the Collateral Agent shall not be required to exercise any
discretion or take any action, but shall be required to act or to refrain from
acting (and shall be fully protected in so acting or refraining from acting)
upon the instructions of the Secured Parties, and such instructions shall be
binding upon all Secured Parties; provided, however, that the Collateral Agent
shall not be required to take any action that (i) the Collateral Agent in good
faith believes exposes it to personal liability unless the Collateral Agent
receives an indemnification satisfactory to it from the Secured Parties with
respect to such action or (ii) is contrary to this Agreement or applicable law.
The Collateral Agent agrees to give to each Secured Party prompt notice of each
notice given to it by the Grantor pursuant to the terms of this Agreement or the
other Transaction Documents. If the Collateral Agent receives conflicting
instructions from the Secured Parties it will not be required to act until it
receives instructions from the Secured Parties holding a majority of the Notes
(calculated in dollar amounts rather than noteholders).
(c) In performing its functions and duties hereunder and under
the Transaction Documents and the other documents required to be executed or
delivered in connection therewith, the Collateral Agent is acting solely on
behalf of the Secured Parties and its duties are entirely administrative in
nature. The Collateral Agent does not assume and shall not be deemed to have
assumed any obligation other than as expressly set forth herein, in the
Transaction Documents and any other documents required to be executed or
delivered in connection therewith related hereto or any other relationship as
the agent, fiduciary or trustee of or for any Secured Party or holder of any
other obligation under this Agreement or the Notes. The Collateral Agent may
perform any of its duties under any Transaction Document by or through its
agents or employees.
(d) None of the Collateral Agent, any of its affiliates or any
of their respective directors, officers, agents or employees shall be liable for
any action taken or omitted to be taken by it, him, her or them under or in
connection with this Agreement or the other Transaction Documents, except for
its, his, her or their own gross negligence or willful misconduct.
18
(e) Each Secured Party acknowledges that it shall,
independently and without reliance upon the Collateral Agent or any other
Secured Party conduct its own independent investigation of the financial
condition and affairs of the Parent and its Subsidiaries in connection with the
issuance of the Securities. Each Secured Party also acknowledges that it shall,
independently and without reliance upon the Collateral Agent or any other
Secured Party and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under this Agreement and other Transaction Documents. For
avoidance of doubt, each Secured Party represents that it has had no contact
with the Collateral Agent; that the Collateral Agent has had no role in the
negotiation or preparation of the Transaction Documents and was contacted after
such negotiations and documents were finalized for the purpose of serving solely
in the administrative role of Collateral Agent under this Agreement.
(f) Each Secured Party agrees to indemnify the Collateral
Agent and each of its affiliates, and each of their respective directors,
officers, employees, agents and advisors (to the extent not reimbursed by the
Borrower), from any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses and disbursements
(including fees, expenses and disbursements of financial and legal advisors) of
any kind or nature whatsoever that may be imposed on, incurred by, or asserted
against, the Collateral Agent or any of its affiliates, directors, officers,
employees, agents and advisors in any way relating to or arising out of this
Agreement or the other Transaction Documents or any action taken or omitted by
the Collateral Agent under this Agreement or the document related thereto;
provided, however, that no Secured Party shall be liable for any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements resulting from the Collateral Agent's or such
Affiliate's gross negligence or willful misconduct.
(g) The Collateral Agent may resign at any time by giving
written notice thereof to the Secured Parties and the Parent. Upon any such
resignation, the Secured Parties shall have the right to appoint a successor
Collateral Agent. If no successor Collateral Agent shall have been so appointed
by the Secured Parties, and shall have accepted such appointment, within 30 days
after the retiring Collateral Agent's giving of notice of resignation, then the
retiring Collateral Agent may, on behalf of the Secured Parties, appoint a
successor Collateral Agent, selected from among the Secured Parties. Upon the
acceptance of any appointment as Collateral Agent by a successor Collateral
Agent, such successor Collateral Agent shall succeed to, and become vested with,
all the rights, powers, privileges and duties of the retiring Collateral Agent,
and the retiring Collateral Agent shall be discharged from its duties and
obligations under this Agreement, the Transaction Documents and any other
documents required to be executed or delivered in connection therewith. Prior to
any retiring Collateral Agent's resignation hereunder as Collateral Agent, the
retiring Collateral Agent shall take such action as may be reasonably necessary
to assign to the successor Collateral Agent its rights as Collateral Agent under
the Transaction Documents. After such resignation, the retiring Collateral Agent
shall continue to have the benefit of this Agreement as to any actions taken or
omitted to be taken by it while it was Collateral Agent under this Agreement,
the Transaction Documents and any other documents required to be executed or
delivered in connection therewith.
(h) Each Secured Party agrees that any action taken by the
Collateral Agent in accordance with the provisions of this Agreement or of the
other document relating thereto, and the exercise by the Collateral Agent or the
Secured Parties of the powers set forth herein or therein, together with such
other powers as are reasonably incidental thereto, shall be authorized and
binding upon all of the Secured Parties.
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(i) Each of the Secured Parties hereby directs, in accordance
with the terms hereof, the Collateral Agent to release (or in the case of clause
(ii) below, release or subordinate) any Lien held by the Collateral Agent for
the benefit of the Secured Parties against any of the following: (i) all of the
Collateral upon payment and satisfaction in full of all obligations under the
Notes and all other obligations under the Transaction Documents that the
Collateral Agent has been notified in writing are then due and payable; (ii) any
assets that are subject to a Lien permitted by Section 3.2); and (iii) any part
of the Collateral sold or disposed of by the Parent or any Subsidiary if such
sale or disposition is permitted by this Agreement and the Notes (or permitted
pursuant to a waiver or consent of a transaction otherwise prohibited by this
Agreement and the Notes). Each of the Secured Parties hereby directs the
Collateral Agent to execute and deliver or file such termination and partial
release statements and do such other things as are necessary to release Liens to
be released pursuant to this Section 7.14 promptly upon the effectiveness of any
such release.
(j) The contact information for the Collateral Agent is: ▇▇▇▇
▇▇▇▇, P.A., ▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇, ▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇ ▇▇▇▇▇▇▇▇.
The fax number for ▇▇▇▇ ▇▇▇▇, P.A. is (▇▇▇) ▇▇▇-▇▇▇▇ and the E-mail address is
▇▇▇▇▇▇▇▇▇@▇▇▇▇▇▇▇▇.▇▇▇. The telephone number for ▇▇▇▇ ▇▇▇▇, P.A. is (813)
224-9255.
(k) The Collateral Agent:
(i) shall not be responsible in any manner for the
validity, correctness or sufficiency of any document or
instrument received by or made available to it, in its
capacity as Collateral Agent hereunder.
(ii) shall be entitled to act upon any written
certificate, statement, notice, demand, request, consent,
agreement or other instrument whatever, not only in reliance
upon its due execution and the validity and effectiveness of
its provisions, but also as to the accuracy and completeness
of any information therein contained, which the Collateral
Agent shall in good faith believe to be genuine and to have
been signed or presented by any authorized person.
(iii) shall be entitled to request and receive from
any party hereto such documents in addition to those provided
for herein as the Collateral Agent may deem necessary to
resolve any questions of fact involved in the administration
of its duties hereunder.
(iv) may, at the expense of the remaining parties,
consult independent counsel of its choice in respect to any
question relating to its duties or responsibilities under
this Agreement, and shall not be liable for any action taken
or omitted in good faith on advice of such counsel.
20
(v) shall be under no obligation to advance any
monetary sum in connection with the maintenance or
administration of this Agreement, to institute or defend any
action, suit or legal proceeding in connection herewith, or
to take any other action likely to involve the Collateral
Agent in expense, unless first indemnified by the remaining
parties to the Collateral Agent's satisfaction.
(vi) shall not be bound by any amendment to this
Agreement or by any other such amendment or agreement unless
the same shall have been executed by the Collateral Agent.
(vii) shall have only such duties and
responsibilities as are expressly set forth in this Agreement
in the performance of its obligations hereunder.
(viii) shall be indemnified and held harmless by the
remaining parties against any and all liabilities incurred by
it hereunder (including all costs, expenses and fees incurred
in defending any legal action or administrative proceeding or
in resisting any claim), except for those resulting from its
own willful misconduct or gross negligence.
(ix) may, if it becomes uncertain concerning its
rights and responsibilities with respect to its duties or if
it receives instructions with respect to the Collateral that
it believes to be in conflict with this Agreement or is
advised that a dispute has arisen with respect to its duties
under this Agreement, without liability, refrain from taking
any action until it is directed otherwise in a writing signed
by all of the Secured Parties or by an order of a court of
competent jurisdiction. The Collateral Agent is not obligated
to institute or defend any legal proceedings, although it
may, in its sole discretion and at the remaining parties'
expense, institute or defend such proceedings (including
proceedings seeking a declaratory judgment) and join
interested parties.
(x) The Collateral Agent will be paid a fee of
$3,000 for its agreement to serve as the Collateral Agent.
This fee is payable upon the execution of this Agreement.
Section 7.15. Appointment as "Fonde De Pouvoir".
(a) Without limiting the powers of the Collateral Agent acting
as a mandatory (i.e. agent) hereunder or under any of the other Transaction
Documents, each Grantor hereby acknowledges that, for purposes of holding any
security granted by each Grantor on property pursuant to the laws of the
Province of Quebec to secure obligations of a Grantor under any bond, debenture
or other title of indebtedness issued by a Grantor, the Collateral Agent shall
be the holder of an irrevocable power of attorney (fonde de pouvoir) (within the
meaning of the Civil Code of Quebec) for itself and for all present and future
Secured Parties and in particular for all present and future holders of any
bond, debenture or other title of indebtedness issued by a Grantor.
21
(b) Each of the Secured Parties hereby irrevocably
constitutes, to the extent necessary, the Collateral Agent as the holder of an
irrevocable power of attorney (fonde de pouvoir) (within the meaning of Article
2692 of the Civil Code of Quebec) in order to hold security or hypothecs granted
by each Grantor in the Province of Quebec to secure the obligations of a Grantor
under any bond, debenture or other title of indebtedness issued by a Grantor,
and hereby agrees that the Collateral Agent may act as the bondholder and
mandatary with respect to any bond, debenture or similar title of indebtedness
that may be issued by a Grantor and pledged in favor of the Collateral Agent for
itself and for the benefit of the Secured Parties. Each assignee of a Secured
Parties shall be deemed to have confirmed and ratified the constitution of the
Collateral Agent as the holder of such irrevocable power of attorney (fonde de
pouvoir) by execution of an assignment and acceptance.
(c) The execution by the Collateral Agent, acting as fonde de
pouvoir and mandatary, prior to this Agreement under any deeds of hypothec or
other security documents is hereby ratified and confirmed. Notwithstanding the
provisions of Section 32 of the An Act respecting the special powers of legal
persons (Quebec), the Collateral Agent may acquire and be the holder of any
bond, debenture or other title of indebtedness. Each Grantor hereby acknowledges
that each such bond or debenture constitutes a title of indebtedness, as such
term is used in Article 2692 of the Civil Code of Quebec.
(d) The Collateral Agent, acting as the holder of an
irrevocable power of attorney (fonde de pouvoir), shall have the same rights,
powers, immunities, indemnities and exclusions from liability as are prescribed
in favor of the Collateral Agent in this Agreement, which shall apply mutatis
mutandis. Without limitation, the provisions of this Agreement allowing
resignation of a Collateral Agent, shall apply mutatis mutandis to the
resignation and appointment of a successor Collateral Agent, acting as the
holder of an irrevocable power of attorney (fonde de pouvoir).
[SIGNATURE PAGES FOLLOW]
IN WITNESS WHEREOF, the parties have duly executed this Pledge and
Security Agreement as of the day and year first written above.
MANARIS CORPORATION
By:_________________________________
Name:
Title:
C-CHIP TECHNOLOGIES CORPORATION
(NORTH AMERICA)
By:_________________________________
Name:
Title:
SECURED PARTY:
By:_________________________________
Name:
Title:
Acknowledged and Agreed:
COLLATERAL AGENT:
By:_____________________________________
Name:
Title: