Exhibit 10.3
EXHIBIT E
SECURITY AGREEMENT
SECURITY AGREEMENT, dated as of February __, 2006 (this "AGREEMENT"),
among Secured Services, Inc., a Delaware corporation (the "COMPANY") and all of
the Subsidiaries of the Company (such subsidiaries, the "GUARANTORS") (the
Company and Guarantors are collectively referred to as the "DEBTORS") and the
holder or holders of the Company's 7% Secured Convertible Debentures due
February ___, 2009 in the original aggregate principal amount of $_____ (the
"DEBENTURE"), signatory hereto, their endorsees, transferees and assigns
(collectively referred to as, the "SECURED PARTIES").
W I T N E S S E T H:
WHEREAS, pursuant to the Purchase Agreement (as defined in the
Debentures), the Secured Parties have severally agreed to extend the loans to
the Company evidenced by the Debentures;
WHEREAS, pursuant to a certain Subsidiary Guarantee dated as of the
date hereof (the "GUARANTY"), the Guarantors have jointly and severally agreed
to guaranty and act as surety for payment of such loans; and
WHEREAS, in order to induce the Secured Parties to extend the loans
evidenced by the Debentures, each Debtor has agreed to execute and deliver to
the Secured Parties this Agreement and to grant the Secured Parties, PARI PASSU
with each other Secured Party, a perfected security interest in certain property
of such Debtor to secure the prompt payment, performance and discharge in full
of all of the Company's obligations under the Debenture and the other Debtor's
obligations under the Guaranty.
WHEREAS, since the Company has previously granted a security interest
in the Collateral to VASCO Data Security International ("PRIOR SECURED PARTY")
pursuant to a security agreement, the Company and the Secured Parties agree that
the terms of this Security Agreement and the grant of a perfected security
interest herein are subject, to the extent required by law, to the prior grant
of a security interest to the Prior Secured Party.
WHEREAS, the Debtors and the Secured Parties executed a security
agreement on December 7, 2005 and this Agreement is intended to be an extension
of such security agreement.
NOW, THEREFORE, in consideration of the agreements herein contained and
for other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, the parties hereto hereby agree as follows:
1. CERTAIN DEFINITIONS. As used in this Agreement, the following
terms shall have the meanings set forth in this Section 1. Terms used but not
otherwise defined in this Agreement that are defined in Article 9 of the UCC
(such as "account", "chattel paper", "commercial tort
1
claim", "deposit account", "document", "equipment", "fixtures", "general
intangibles", "goods", "instruments", "inventory", "investment property",
"letter-of-credit rights", "proceeds" and "supporting obligations") shall have
the respective meanings given such terms in Article 9 of the UCC.
(a) "COLLATERAL" means the collateral in which the
Secured Parties are granted a security interest by this Agreement and
which shall include the following personal property of the Debtors,
whether presently owned or existing or hereafter acquired or coming
into existence, wherever situated, and all additions and accessions
thereto and all substitutions and replacements thereof, and all
proceeds, products and accounts thereof, including, without limitation,
all proceeds from the sale or transfer of the Collateral and of
insurance covering the same and of any tort claims in connection
therewith, and all dividends, interest, cash, notes, securities, equity
interest or other property at any time and from time to time acquired,
receivable or otherwise distributed in respect of, or in exchange for,
any or all of the Pledged Securities (as defined below):
(i) All goods, including, without limitations,
(A) all machinery, equipment, computers, motor vehicles,
trucks, tanks, boats, ships, appliances, furniture, special
and general tools, fixtures, test and quality control devices
and other equipment of every kind and nature and wherever
situated, together with all documents of title and documents
representing the same, all additions and accessions thereto,
replacements therefor, all parts therefor, and all substitutes
for any of the foregoing and all other items used and useful
in connection with any Debtor's businesses and all
improvements thereto; and (B) all inventory;
(ii) All contract rights and other general
intangibles, including, without limitation, all partnership
interests, membership interests, stock or other securities,
rights under any of the Organizational Documents, agreements
related to the Pledged Securities, licenses, distribution and
other agreements, computer software (whether "off-the-shelf",
licensed from any third party or developed by any Debtor),
computer software development rights, leases, franchises,
customer lists, quality control procedures, grants and rights,
goodwill, trademarks, service marks, trade styles, trade
names, patents, patent applications, copyrights, and income
tax refunds;
(iii) All accounts, together with all instruments,
all documents of title representing any of the foregoing, all
rights in any merchandising, goods, equipment, motor vehicles
and trucks which any of the same may represent, and all right,
title, security and guaranties with respect to each account,
including any right of stoppage in transit;
(iv) All documents, letter-of-credit rights,
instruments and chattel paper;
(v) All commercial tort claims;
2
(vi) All deposit accounts and all cash (whether
or not deposited in such deposit accounts);
(vii) All investment property;
(viii) All supporting obligations; and
(ix) All files, records, books of account,
business papers, and computer programs; and
(x) the products and proceeds of all of the
foregoing Collateral set forth in clauses (i)-(ix) above.
Without limiting the generality of the foregoing, the
"COLLATERAL" shall include all investment property and general
intangibles respecting ownership and/or other equity interests
in each Guarantor, including, without limitation, the shares
of capital stock and the other equity interests listed on
SCHEDULE H hereto (as the same may be modified from time to
time pursuant to the terms hereof), and any other shares of
capital stock and/or other equity interests of any other
direct or indirect subsidiary of any Debtor obtained in the
future, and, in each case, all certificates representing such
shares and/or equity interests and, in each case, all rights,
options, warrants, stock, other securities and/or equity
interests that may hereafter be received, receivable or
distributed in respect of, or exchanged for, any of the
foregoing (all of the foregoing being referred to herein as
the "PLEDGED SECURITIES") and all rights arising under or in
connection with the Pledged Securities, including, but not
limited to, all dividends, interest and cash.
Notwithstanding the foregoing, nothing herein shall
be deemed to constitute an assignment of any asset which, in
the event of an assignment, becomes void by operation of
applicable law or the assignment of which is otherwise
prohibited by applicable law (in each case to the extent that
such applicable law is not overridden by Sections 9-406, 9-407
and/or 9-408 of the UCC or other similar applicable law);
provided, however, that to the extent permitted by applicable
law, this Agreement shall create a valid security interest in
such asset and, to the extent permitted by applicable law,
this Agreement shall create a valid security interest in the
proceeds of such asset.
Notwithstanding anything herein to the contrary,
until the Note dated July 7, 2003 issued to VASCO Data
Security International, Inc. ("VASCO") is no longer
outstanding, Collateral shall not include the following: (i)
the IDENTIPRISE SECUREDUSER software plus any and all
enhancements, improvements or modifications made to it, (ii)
the customer contract with Integic Corporation and accounts
receivable from the Integic contract, (iii) the fixed assets
acquired by the Company from VASCO and (iv) any and all
proceeds and products which the Company receives or which it
may become entitled to receive on account of any
3
sale, exchange, collection or other disposition of all of the
above, or any part thereof.
(b) "INTELLECTUAL PROPERTY" means the collective
reference to all rights, priorities and privileges relating to
intellectual property, whether arising under United States,
multinational or foreign laws or otherwise, including, without
limitation, (i) all copyrights arising under the laws of the United
States, any other country or any political subdivision thereof, whether
registered or unregistered and whether published or unpublished, all
registrations and recordings thereof, and all applications in
connection therewith, including, without limitation, all registrations,
recordings and applications in the United States Copyright Office, (ii)
all letters patent of the United States, any other country or any
political subdivision thereof, all reissues and extensions thereof, and
all applications for letters patent of the United States or any other
country and all divisions, continuations and continuations-in-part
thereof, (iii) all trademarks, trade names, corporate names, company
names, business names, fictitious business names, trade dress, service
marks, logos, domain names and other source or business identifiers,
and all goodwill associated therewith, now existing or hereafter
adopted or acquired, all registrations and recordings thereof, and all
applications in connection therewith, whether in the United States
Patent and Trademark Office or in any similar office or agency of the
United States, any State thereof or any other country or any political
subdivision thereof, or otherwise, and all common law rights related
thereto, (iv) all trade secrets arising under the laws of the United
States, any other country or any political subdivision thereof, (v) all
rights to obtain any reissues, renewals or extensions of the foregoing,
(vi) all licenses for any of the foregoing, and (vii) all causes of
action for infringement of the foregoing.
(c) "MAJORITY IN INTEREST" shall mean, at any time of
determination, the majority in interest (based on then-outstanding
principal amounts of Debentures at the time of such determination) of
the Secured Parties.
(d) "NECESSARY ENDORSEMENT" shall mean undated stock
powers endorsed in blank or other proper instruments of assignment duly
executed and such other instruments or documents as the Agent (as that
term is defined below) may reasonably request.
(e) "OBLIGATIONS" means all of the liabilities and
obligations (primary, secondary, direct, contingent, sole, joint or
several) due or to become due, or that are now or may be hereafter
contracted or acquired, or owing to, of any Debtor to the Secured
Parties, including, without limitation, all obligations under this
Agreement, the Debentures, the Guaranty and any other instruments,
agreements or other documents executed and/or delivered in connection
herewith or therewith, in each case, whether now or hereafter existing,
voluntary or involuntary, direct or indirect, absolute or contingent,
liquidated or unliquidated, whether or not jointly owed with others,
and whether or not from time to time decreased or extinguished and
later increased, created or incurred, and all or any portion of such
obligations or liabilities that are paid, to the extent all or any
4
part of such payment is avoided or recovered directly or indirectly
from any of the Secured Parties as a preference, fraudulent transfer or
otherwise as such obligations may be amended, supplemented, converted,
extended or modified from time to time. Without limiting the generality
of the foregoing, the term "Obligations" shall include, without
limitation: (i) principal of, and interest on the Debentures and the
loans extended pursuant thereto; (ii) any and all other fees,
indemnities, costs, obligations and liabilities of the Debtors from
time to time under or in connection with this Agreement, the
Debentures, the Guaranty and any other instruments, agreements or other
documents executed and/or delivered in connection herewith or
therewith; and (iii) all amounts (including but not limited to
post-petition interest) in respect of the foregoing that would be
payable but for the fact that the obligations to pay such amounts are
unenforceable or not allowable due to the existence of a bankruptcy,
reorganization or similar proceeding involving any Debtor.
(f) "ORGANIZATIONAL DOCUMENTS" means with respect to any
Debtor, the documents by which such Debtor was organized (such as a
certificate of incorporation, certificate of limited partnership or
articles of organization, and including, without limitation, any
certificates of designation for preferred stock or other forms of
preferred equity) and which relate to the internal governance of such
Debtor (such as bylaws, a partnership agreement or an operating,
limited liability or members agreement).
(g) "UCC" means the Uniform Commercial Code of the State
of New York and or any other applicable law of any state or states
which has jurisdiction with respect to all, or any portion of, the
Collateral or this Agreement, from time to time. It is the intent of
the parties that defined terms in the UCC should be construed in their
broadest sense so that the term "Collateral" will be construed in its
broadest sense. Accordingly if there are, from time to time, changes to
defined terms in the UCC that broaden the definitions, they are
incorporated herein and if existing definitions in the UCC are broader
than the amended definitions, the existing ones shall be controlling.
2. GRANT OF PERFECTED FIRST PRIORITY SECURITY INTEREST. As an
inducement for the Secured Parties to extend the loans as evidenced by the
Debentures and to secure the complete and timely payment, performance and
discharge in full, as the case may be, of all of the Obligations, each Debtor
hereby unconditionally and irrevocably pledges, grants and hypothecates to the
Secured Parties a continuing and perfected security interest in and to, a lien
upon and a right of set-off against all of their respective right, title and
interest of whatsoever kind and nature in and to, the Collateral (the "SECURITY
INTEREST").
3. DELIVERY OF CERTAIN COLLATERAL. Contemporaneously or prior to
the execution of this Agreement, each Debtor shall deliver or cause to be
delivered to the Agent (a) any and all certificates and other instruments
representing or evidencing the Pledged Securities, and (b) any and all
certificates and other instruments or documents representing any of the other
Collateral, in each case, together with all Necessary Endorsements. The Debtors
are, contemporaneously with the execution hereof, delivering to Agent, or have
previously delivered to Agent, a true and correct copy of each Organizational
Document governing any of the Pledged Securities.
5
4. REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS OF THE
DEBTORS. Each Debtor represents and warrants to, and covenants and agrees with,
the Secured Parties as follows:
(a) Each Debtor has the requisite corporate, partnership,
limited liability company or other power and authority to enter into
this Agreement and otherwise to carry out its obligations hereunder.
The execution, delivery and performance by each Debtor of this
Agreement and the filings contemplated therein have been duly
authorized by all necessary action on the part of such Debtor and no
further action is required by such Debtor. This Agreement has been duly
executed by each Debtor. This Agreement constitutes the legal, valid
and binding obligation of each Debtor, enforceable against each Debtor
in accordance with its terms except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization and
similar laws of general application relating to or affecting the rights
and remedies of creditors and by general principles of equity.
(b) The Debtors have no place of business or offices
where their respective books of account and records are kept (other
than temporarily at the offices of its attorneys or accountants) or
places where Collateral is stored or located, except as set forth on
SCHEDULE A attached hereto. Except as specifically set forth on
SCHEDULE A, each Debtor is the record owner of the real property where
such Collateral is located, and there exist no mortgages or other liens
on any such real property except for Permitted Liens (as defined in the
Debentures). Except as disclosed on SCHEDULE A, none of such Collateral
is in the possession of any consignee, bailee, warehouseman, agent or
processor.
(c) Except for Permitted Liens (as defined in the
Debentures) and except as set forth on SCHEDULE B attached hereto, the
Debtors are the sole owner of the Collateral (except for non-exclusive
licenses granted by any Debtor in the ordinary course of business),
free and clear of any liens, security interests, encumbrances, rights
or claims, and are fully authorized to grant the Security Interest.
There is not on file in any governmental or regulatory authority,
agency or recording office an effective financing statement, security
agreement, license or transfer or any notice of any of the foregoing
(other than those that will be filed in favor of the Secured Parties
pursuant to this Agreement) covering or affecting any of the
Collateral. So long as this Agreement shall be in effect, the Debtors
shall not execute and shall not knowingly permit to be on file in any
such office or agency any such financing statement or other document or
instrument (except to the extent filed or recorded in favor of the
Secured Parties pursuant to the terms of this Agreement).
(d) No written claim has been received that any
Collateral or Debtor's use of any Collateral violates the rights of any
third party. There has been no adverse decision to any Debtor's claim
of ownership rights in or exclusive rights to use the Collateral in any
jurisdiction or to any Debtor's right to keep and maintain such
Collateral in full force and effect, and there is no proceeding
involving said rights pending or, to the best knowledge
6
of any Debtor, threatened before any court, judicial body,
administrative or regulatory agency, arbitrator or other governmental
authority.
(e) Each Debtor shall at all times maintain its books of
account and records relating to the Collateral at its principal place
of business and its Collateral at the locations set forth on SCHEDULE A
attached hereto and may not relocate such books of account and records
or tangible Collateral unless it delivers to the Secured Parties at
least 30 days prior to such relocation (i) written notice of such
relocation and the new location thereof (which must be within the
United States) and (ii) evidence that appropriate financing statements
under the UCC and other necessary documents have been filed and
recorded and other steps have been taken to perfect the Security
Interest to create in favor of the Secured Parties a valid, perfected
and continuing perfected first priority lien in the Collateral.
(f) This Agreement creates in favor of the Secured
Parties a valid, security interest in the Collateral, subject only to
Permitted Liens (as defined in the Debentures) securing the payment and
performance of the Obligations. Upon making the filings described in
the immediately following paragraph, all security interests created
hereunder in any Collateral which may be perfected by filing Uniform
Commercial Code financing statements shall have been duly perfected.
Except for the filing of the Uniform Commercial Code financing
statements referred to in the immediately following paragraph, the
recordation of the Intellectual Property Security Agreement (as defined
below) with respect to copyrights and copyright applications in the
United States Copyright Office referred to in paragraph (m), the
execution and delivery of deposit account control agreements satisfying
the requirements of Section 9-104(a)(2) of the UCC with respect to each
deposit account of the Debtors, and the delivery of the certificates
and other instruments provided in Section 3, no action is necessary to
create, perfect or protect the security interests created hereunder.
Without limiting the generality of the foregoing, except for the filing
of said financing statements, the recordation of said Intellectual
Property Security Agreement, and the execution and delivery of said
deposit account control agreements, no consent of any third parties and
no authorization, approval or other action by, and no notice to or
filing with, any governmental authority or regulatory body is required
for (i) the execution, delivery and performance of this Agreement, (ii)
the creation or perfection of the Security Interests created hereunder
in the Collateral or (iii) the enforcement of the rights of the Secured
Parties hereunder.
(g) Each Debtor hereby authorizes the Secured Parties, or
any of them, to file one or more financing statements under the UCC,
with respect to the Security Interest with the proper filing and
recording agencies in any jurisdiction deemed proper by them.
(h) The execution, delivery and performance of this
Agreement by the Debtors does not (i) violate any of the provisions of
any Organizational Documents of any Debtor or any judgment, decree,
order or award of any court, governmental body or arbitrator or any
applicable law, rule or regulation applicable to any Debtor or (ii)
conflict with, or constitute a default (or an event that with notice or
lapse of time or both would
7
become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation (with or without notice, lapse
of time or both) of, any agreement, credit facility, debt or other
instrument (evidencing any Debtor's debt or otherwise) or other
understanding to which any Debtor is a party or by which any property
or asset of any Debtor is bound or affected. No consent (including,
without limitation, from stockholders or creditors of any Debtor) is
required for any Debtor to enter into and perform its obligations
hereunder.
(i) The capital stock and other equity interests listed
on SCHEDULE H hereto represent all of the capital stock and other
equity interests of the Guarantors, and represent all capital stock and
other equity interests owned, directly or indirectly, by the Company.
All of the Pledged Securities are validly issued, fully paid and
nonassessable, and the Company is the legal and beneficial owner of the
Pledged Securities, free and clear of any lien, security interest or
other encumbrance except for the security interests created by this
Agreement and other Permitted Liens (as defined in the Debenture).
(j) The ownership and other equity interests in
partnerships and limited liability companies (if any) included in the
Collateral (the "PLEDGED INTERESTS") by their express terms do not
provide that they are securities governed by Article 8 of the UCC and
are not held in a securities account or by any financial intermediary.
(k) Each Debtor shall at all times maintain the liens and
Security Interest provided for hereunder as valid and perfected first
priority liens and security interests in the Collateral in favor of the
Secured Parties until this Agreement and the Security Interest
hereunder shall be terminated pursuant to Section 14 hereof. Each
Debtor hereby agrees to defend the same against the claims of any and
all persons and entities. Each Debtor shall safeguard and protect all
Collateral for the account of the Secured Parties. At the request of
the Secured Parties, each Debtor will sign and deliver to the Secured
Parties at any time or from time to time one or more financing
statements pursuant to the UCC in form reasonably satisfactory to the
Secured Parties and will pay the cost of filing the same in all public
offices wherever filing is, or is deemed by the Secured Parties to be,
necessary or desirable to effect the rights and obligations provided
for herein. Without limiting the generality of the foregoing, each
Debtor shall pay all fees, taxes and other amounts necessary to
maintain the Collateral and the Security Interest hereunder, and each
Debtor shall obtain and furnish to the Secured Parties from time to
time, upon demand, such releases and/or subordinations of claims and
liens which may be required to maintain the priority of the Security
Interest hereunder.
(l) No Debtor will transfer, pledge, hypothecate,
encumber, license, sell or otherwise dispose of any of the Collateral
(except for non-exclusive licenses granted by a Debtor in its ordinary
course of business and sales of inventory by a Debtor in its ordinary
course of business) without the prior written consent of a Majority in
Interest.
(m) Each Debtor shall keep and preserve its equipment,
inventory and other tangible Collateral in good condition, repair and
order and shall not operate or locate any
8
such Collateral (or cause to be operated or located) in any area
excluded from insurance coverage.
(n) Each Debtor shall maintain with financially sound and
reputable insurers, insurance with respect to the Collateral against
loss or damage of the kinds and in the amounts customarily insured
against by entities of established reputation having similar properties
similarly situated and in such amounts as are customarily carried under
similar circumstances by other such entities and otherwise as is
prudent for entities engaged in similar businesses but in any event
sufficient to cover the full replacement cost thereof. Each Debtor
shall cause each insurance policy issued in connection herewith to
provide, and the insurer issuing such policy to certify to the Agent
that (a) the Agent will be named as lender loss payee and additional
insured under each such insurance policy; (b) if such insurance be
proposed to be cancelled or materially changed for any reason
whatsoever, such insurer will promptly notify the Agent and such
cancellation or change shall not be effective as to the Agent for at
least thirty (30) days after receipt by the Agent of such notice,
unless the effect of such change is to extend or increase coverage
under the policy; and (c) the Agent will have the right (but no
obligation) at its election to remedy any default in the payment of
premiums within thirty (30) days of notice from the insurer of such
default. If no Event of Default (as defined in the Debenture) exists
and if the proceeds arising out of any claim or series of related
claims do not exceed $100,000, loss payments in each instance will be
applied by the applicable Debtor to the repair and/or replacement of
property with respect to which the loss was incurred to the extent
reasonably feasible, and any loss payments or the balance thereof
remaining, to the extent not so applied, shall be payable to the
applicable Debtor, provided, however, that payments received by any
Debtor after an Event of Default occurs and is continuing or in excess
of $100,000 for any occurrence or series of related occurrences shall
be paid to the Agent and, if received by such Debtor, shall be held in
trust for and immediately paid over to the Agent unless otherwise
directed in writing by the Agent. Copies of such policies or the
related certificates, in each case, naming the Agent as lender loss
payee and additional insured shall be delivered to the Agent at least
annually and at the time any new policy of insurance is issued.
(o) Each Debtor shall, within ten (10) days of obtaining
knowledge thereof, advise the Secured Parties promptly, in sufficient
detail, of any substantial change in the Collateral, and of the
occurrence of any event which would have a material adverse effect on
the value of the Collateral or on the Secured Parties' security
interest therein.
(p) Each Debtor shall promptly execute and deliver to the
Secured Parties such further deeds, mortgages, assignments, security
agreements, financing statements or other instruments, documents,
certificates and assurances and take such further action as the Secured
Parties may from time to time request and may in its sole discretion
deem necessary to perfect, protect or enforce its security interest in
the Collateral including, without limitation, if applicable, the
execution and delivery of a separate security agreement with respect to
each Debtor's Intellectual Property ("INTELLECTUAL PROPERTY SECURITY
AGREEMENT") in which the Secured Parties have been granted a security
interest
9
hereunder, substantially in a form acceptable to the Secured Parties,
which Intellectual Property Security Agreement, other than as stated
therein, shall be subject to all of the terms and conditions hereof.
(q) Each Debtor shall permit the Secured Parties and
their representatives and agents to inspect the Collateral at any
reasonable time, and to make copies of records pertaining to the
Collateral as may be requested by a Secured Party from time to time.
(r) Each Debtor shall take all steps reasonably necessary
to diligently pursue and seek to preserve, enforce and collect any
rights, claims, causes of action and accounts receivable in respect of
the Collateral.
(s) Each Debtor shall promptly notify the Secured Parties
in sufficient detail upon becoming aware of any attachment,
garnishment, execution or other legal process levied against any
Collateral and of any other information received by such Debtor that
may materially affect the value of the Collateral, the Security
Interest or the rights and remedies of the Secured Parties hereunder.
(t) All information heretofore, herein or hereafter
supplied to the Secured Parties by or on behalf of any Debtor with
respect to the Collateral is accurate and complete in all material
respects as of the date furnished.
(u) The Debtors shall at all times preserve and keep in
full force and effect their respective valid existence and good
standing and any rights and franchises material to its business.
(v) No Debtor will change its name, type of organization,
jurisdiction of organization, organizational identification number (if
it has one), legal or corporate structure, or identity, or add any new
fictitious name unless it provides at least 30 days prior written
notice to the Secured Parties of such change and, at the time of such
written notification, such Debtor provides any financing statements or
fixture filings necessary to perfect and continue perfected the
perfected security Interest granted and evidenced by this Agreement.
(w) No Debtor may consign any of its Inventory or sell
any of its Inventory on ▇▇▇▇ and hold, sale or return, sale on
approval, or other conditional terms of sale without the consent of a
Majority in Interest which shall not be unreasonably withheld, except
to the extent such consignment or sale does not exceed 15% of the total
value of all of the Company's finished goods in Inventory.
(x) No Debtor may relocate its chief executive office to
a new location without providing 30 days prior written notification
thereof to the Secured Parties and so long as, at the time of such
written notification, such Debtor provides any financing statements or
fixture filings necessary to perfect and continue perfected the
perfected security Interest granted and evidenced by this Agreement.
10
(y) Each Debtor was organized and remains organized
solely under the laws of the state set forth next to such Debtor's name
in the first paragraph of this Agreement. SCHEDULE D attached hereto
sets forth each Debtor's organizational identification number or, if
any Debtor does not have one, states that one does not exist.
(z) (i) The actual name of each Debtor is the name set
forth on the signature page hereto; (ii) no Debtor has any trade names
except as set forth on SCHEDULE E attached hereto; (iii) no Debtor has
used any name other than that stated in the preamble hereto or as set
forth on SCHEDULE E for the preceding five years; and (iv) no entity
has merged into any Debtor or been acquired by any Debtor within the
past five years except as set forth on SCHEDULE E.
(aa) At any time and from time to time that any Collateral
consists of instruments, certificated securities or other items that
require or permit possession by the secured party to perfect the
security interest created hereby, the applicable Debtor shall deliver
such Collateral to the Agent.
(bb) Each Debtor, in its capacity as issuer, hereby agrees
to comply with any and all orders and instructions of Agent regarding
the Pledged Interests consistent with the terms of this Agreement
without the further consent of any Debtor as contemplated by Section
8-106 (or any successor section) of the UCC. Further, each Debtor
agrees that it shall not enter into a similar agreement (or one that
would confer "control" within the meaning of Article 8 of the UCC) with
any other person or entity.
(cc) Each Debtor shall cause all tangible chattel paper
constituting Collateral to be delivered to the Agent, or, if such
delivery is not possible, then to cause such tangible chattel paper to
contain a legend noting that it is subject to the security interest
created by this Agreement. To the extent that any Collateral consists
of electronic chattel paper, the applicable Debtor shall cause the
underlying chattel paper to be "marked" within the meaning of Section
9-105 of the UCC (or successor section thereto).
(dd) If there is any investment property or deposit
account included as Collateral that can be perfected by "control"
through an account control agreement, the applicable Debtor shall cause
such an account control agreement, in form and substance in each case
satisfactory to the Secured Parties, to be entered into and delivered
to the Secured Parties.
(ee) To the extent that any Collateral consists of
letter-of-credit rights, the applicable Debtor shall cause the issuer
of each underlying letter of credit to consent to an assignment of the
proceeds thereof to the Secured Parties.
(ff) To the extent that any Collateral is in the
possession of any third party, the applicable Debtor shall join with
the Secured Parties in notifying such third party of the Secured
Parties' security interest in such Collateral and shall use its best
efforts to obtain
11
an acknowledgement and agreement from such third party with respect to
the Collateral, in form and substance satisfactory to the Secured
Parties.
(gg) If any Debtor shall at any time hold or acquire a
commercial tort claim, such Debtor shall promptly notify the Secured
Parties in a writing signed by such Debtor of the particulars thereof
and grant to the Secured Parties in such writing a security interest
therein and in the proceeds thereof, all upon the terms of this
Agreement, with such writing to be in form and substance satisfactory
to the Secured Parties.
(hh) Each Debtor shall immediately provide written notice
to the Secured Parties of any and all accounts which arise out of
contracts with any governmental authority and, to the extent necessary
to perfect or continue the perfected status of the Security Interest in
such accounts and proceeds thereof, shall execute and deliver to the
Secured Parties an assignment of claims for such accounts and cooperate
with the Secured Parties in taking any other steps required, in their
judgment, under the Federal Assignment of Claims Act or any similar
federal, state or local statute or rule to perfect or continue the
perfected status of the Security Interest in such accounts and proceeds
thereof.
(ii) Each Debtor shall cause each subsidiary of such
Debtor to immediately become a party hereto (an "ADDITIONAL DEBTOR"),
by executing and delivering an Additional Debtor Joinder in
substantially the form of Annex A attached hereto and comply with the
provisions hereof applicable to the Debtors. Concurrent therewith, the
Additional Debtor shall deliver replacement schedules for, or
supplements to all other Schedules to (or referred to in) this
Agreement, as applicable, which replacement schedules shall supersede,
or supplements shall modify, the Schedules then in effect. The
Additional Debtor shall also deliver such opinions of counsel,
authorizing resolutions, good standing certificates, incumbency
certificates, organizational documents, financing statements and other
information and documentation as the Secured Parties may reasonably
request. Upon delivery of the foregoing to the Secured Parties, the
Additional Debtor shall be and become a party to this Agreement with
the same rights and obligations as the Debtors, for all purposes hereof
as fully and to the same extent as if it were an original signatory
hereto and shall be deemed to have made the representations, warranties
and covenants set forth herein as of the date of execution and delivery
of such Additional Debtor Joinder, and all references herein to the
"Debtors" shall be deemed to include each Additional Debtor.
(jj) Each Debtor shall vote the Pledged Securities to
comply with the covenants and agreements set forth herein and in the
Debentures.
(kk) Each Debtor shall register the pledge of the
applicable Pledged Securities on the books of such Debtor. Each Debtor
shall notify each issuer of Pledged Securities to register the pledge
of the applicable Pledged Securities in the name of the Secured Parties
on the books of such issuer. Further, except with respect to
certificated securities delivered to the Agent, the applicable Debtor
shall deliver to Agent an acknowledgement
12
of pledge (which, where appropriate, shall comply with the requirements
of the relevant UCC with respect to perfection by registration) signed
by the issuer of the applicable Pledged Securities, which
acknowledgement shall confirm that: (a) it has registered the pledge on
its books and records; and (b) at any time directed by Agent during the
continuation of an Event of Default, such issuer will transfer the
record ownership of such Pledged Securities into the name of any
designee of Agent, will take such steps as may be necessary to effect
the transfer, and will comply with all other instructions of Agent
regarding such Pledged Securities without the further consent of the
applicable Debtor.
(ll) In the event that, upon an occurrence of an Event of
Default, Agent shall sell all or any of the Pledged Securities to
another party or parties (herein called the "TRANSFEREE") or shall
purchase or retain all or any of the Pledged Securities, each Debtor
shall, to the extent applicable: (i) deliver to Agent or the
Transferee, as the case may be, the articles of incorporation, bylaws,
minute books, stock certificate books, corporate seals, deeds, leases,
indentures, agreements, evidences of indebtedness, books of account,
financial records and all other Organizational Documents and records of
the Debtors and their direct and indirect subsidiaries; (ii) use its
best efforts to obtain resignations of the persons then serving as
officers and directors of the Debtors and their direct and indirect
subsidiaries, if so requested; and (iii) use its best efforts to obtain
any approvals that are required by any governmental or regulatory body
in order to permit the sale of the Pledged Securities to the Transferee
or the purchase or retention of the Pledged Securities by Agent and
allow the Transferee or Agent to continue the business of the Debtors
and their direct and indirect subsidiaries.
(mm) Without limiting the generality of the other
obligations of the Debtors hereunder, each Debtor shall promptly (i)
cause to be registered at the United States Copyright Office all of its
material copyrights, (ii) cause the security interest contemplated
hereby with respect to all Intellectual Property registered at the
United States Copyright Office or United States Patent and Trademark
Office to be duly recorded at the applicable office, and (iii) give the
Agent notice whenever it acquires (whether absolutely or by license) or
creates any additional material Intellectual Property.
(nn) Each Debtor will from time to time, at the joint and
several expense of the Debtors, promptly execute and deliver all such
further instruments and documents, and take all such further action as
may be necessary or desirable, or as the Secured Parties may reasonably
request, in order to perfect and protect any security interest granted
or purported to be granted hereby or to enable the Secured Parties to
exercise and enforce their rights and remedies hereunder and with
respect to any Collateral or to otherwise carry out the purposes of
this Agreement.
(oo) SCHEDULE F attached hereto lists all of the patents,
patent applications, trademarks, trademark applications, registered
copyrights, and domain names owned by any of the Debtors as of the date
hereof. SCHEDULE F lists all material licenses in favor of any Debtor
for the use of any patents, trademarks, copyrights and domain names as
of the date hereof. All material patents and trademarks of the Debtors
have been duly recorded
13
at the United States Patent and Trademark Office and all material
copyrights of the Debtors have been duly recorded at the United States
Copyright Office.
(pp) Except as set forth on SCHEDULE G attached hereto,
none of the account debtors or other persons or entities obligated on
any of the Collateral is a governmental authority covered by the
Federal Assignment of Claims Act or any similar federal, state or local
statute or rule in respect of such Collateral.
5. EFFECT OF PLEDGE ON CERTAIN RIGHTS. If any of the Collateral
subject to this Agreement consists of nonvoting equity or ownership interests
(regardless of class, designation, preference or rights) that may be converted
into voting equity or ownership interests upon the occurrence of certain events
(including, without limitation, upon the transfer of all or any of the other
stock or assets of the issuer), it is agreed that the pledge of such equity or
ownership interests pursuant to this Agreement or the enforcement of any of
Agent's rights hereunder shall not be deemed to be the type of event which would
trigger such conversion rights notwithstanding any provisions in the
Organizational Documents or agreements to which any Debtor is subject or to
which any Debtor is party.
6. DEFAULTS. The following events shall be "EVENTS OF DEFAULT":
(a) The occurrence of an Event of Default (as defined in
the Debenture) under the Debenture;
(b) Any representation or warranty of any Debtor in this
Agreement shall prove to have been incorrect in any material respect
when made;
(c) The failure by any Debtor to observe or perform any
of its obligations hereunder for five (5) days after delivery to such
Debtor of notice of such failure by or on behalf of a Secured Party
unless such default is capable of cure but cannot be cured within such
time frame and such Debtor is using best efforts to cure same in a
timely fashion; or
(d) If any provision of this Agreement shall at any time
for any reason be declared to be null and void, or the validity or
enforceability thereof shall be contested by any Debtor, or a
proceeding shall be commenced by any Debtor, or by any governmental
authority having jurisdiction over any Debtor, seeking to establish the
invalidity or unenforceability thereof, or any Debtor shall deny that
any Debtor has any liability or obligation purported to be created
under this Agreement.
7. DUTY TO HOLD IN TRUST.
(a) Upon the occurrence of any Event of Default and at
any time thereafter, each Debtor shall, upon receipt of any revenue,
income, dividend, interest or other sums subject to the Security
Interest, whether payable pursuant to the Debenture or otherwise, or of
any check, draft, note, trade acceptance or other instrument evidencing
an obligation
14
to pay any such sum, hold the same in trust for the Secured Parties and
shall forthwith endorse and transfer any such sums or instruments, or
both, to the Secured Parties, pro-rata in proportion to their initial
purchases of Debentures for application to the satisfaction of the
Obligations (and if any Debenture is not outstanding, pro-rata in
proportion to the initial purchases of the remaining Debentures).
(b) If any Debtor shall become entitled to receive or
shall receive any securities or other property (including, without
limitation, shares of Pledged Securities or instruments representing
Pledged Securities acquired after the date hereof, or any options,
warrants, rights or other similar property or certificates representing
a dividend, or any distribution in connection with any
recapitalization, reclassification or increase or reduction of capital,
or issued in connection with any reorganization of such Debtor or any
of its direct or indirect subsidiaries) in respect of the Pledged
Securities (whether as an addition to, in substitution of, or in
exchange for, such Pledged Securities or otherwise), such Debtor agrees
to (i) accept the same as the agent of the Secured Parties; (ii) hold
the same in trust on behalf of and for the benefit of the Secured
Parties; and (iii) to deliver any and all certificates or instruments
evidencing the same to Agent on or before the close of business on the
fifth business day following the receipt thereof by such Debtor, in the
exact form received together with the Necessary Endorsements, to be
held by Agent subject to the terms of this Agreement as Collateral.
8. RIGHTS AND REMEDIES UPON DEFAULT.
(a) Upon the occurrence of any Event of Default and at
any time thereafter, the Secured Parties, acting through any agent
appointed by them for such purpose, shall have the right to exercise
all of the remedies conferred hereunder and under the Debentures, and
the Secured Parties shall have all the rights and remedies of a secured
party under the UCC. Without limitation, the Secured Parties shall have
the following rights and powers:
(i) The Secured Parties shall have the right to
take possession of the Collateral and, for that purpose,
enter, with the aid and assistance of any person, any premises
where the Collateral, or any part thereof, is or may be placed
and remove the same, and each Debtor shall assemble the
Collateral and make it available to the Secured Parties at
places which the Secured Parties shall reasonably select,
whether at such Debtor's premises or elsewhere, and make
available to the Secured Parties, without rent, all of such
Debtor's respective premises and facilities for the purpose of
the Secured Parties taking possession of, removing or putting
the Collateral in saleable or disposable form.
(ii) Upon notice to the Debtors by Agent, all
rights of each Debtor to exercise the voting and other
consensual rights which it would otherwise be entitled to
exercise and all rights of each Debtor to receive the
dividends and interest which it would otherwise be authorized
to receive and retain, shall cease. Upon such notice, Agent
shall have the right to receive any interest, cash
15
dividends or other payments on the Collateral and, at the
option of Agent, to exercise in such Agent's discretion all
voting rights pertaining thereto. Without limiting the
generality of the foregoing, Agent shall have the right (but
not the obligation) to exercise all rights with respect to the
Collateral as it were the sole and absolute owners thereof,
including, without limitation, to vote and/or to exchange, at
its sole discretion, any or all of the Collateral in
connection with a merger, reorganization, consolidation,
recapitalization or other readjustment concerning or involving
the Collateral or any Debtor or any of its direct or indirect
subsidiaries.
(iii) The Secured Parties shall have the right to
operate the business of each Debtor using the Collateral and
shall have the right to assign, sell, lease or otherwise
dispose of and deliver all or any part of the Collateral, at
public or private sale or otherwise, either with or without
special conditions or stipulations, for cash or on credit or
for future delivery, in such parcel or parcels and at such
time or times and at such place or places, and upon such terms
and conditions as the Secured Parties may deem commercially
reasonable, all without (except as shall be required by
applicable statute and cannot be waived) advertisement or
demand upon or notice to any Debtor or right of redemption of
a Debtor, which are hereby expressly waived. Upon each such
sale, lease, assignment or other transfer of Collateral, the
Secured Parties may, unless prohibited by applicable law which
cannot be waived, purchase all or any part of the Collateral
being sold, free from and discharged of all trusts, claims,
right of redemption and equities of any Debtor, which are
hereby waived and released.
(iv) The Secured Parties shall have the right
(but not the obligation) to notify any account debtors and any
obligors under instruments or accounts to make payments
directly to the Secured Parties and to enforce the Debtors'
rights against such account debtors and obligors.
(v) The Secured Parties may (but are not
obligated to) direct any financial intermediary or any other
person or entity holding any investment property to transfer
the same to the Secured Parties or their designee.
(vi) The Secured Parties may (but are not
obligated to) transfer any or all Intellectual Property
registered in the name of any Debtor at the United States
Patent and Trademark Office and/or Copyright Office into the
name of the Secured Parties or any designee or any purchaser
of any Collateral.
(b) The Agent may comply with any applicable law in
connection with a disposition of Collateral and such compliance will
not be considered adversely to affect the commercial reasonableness of
any sale of the Collateral. The Agent may sell the Collateral without
giving any warranties and may specifically disclaim such warranties. If
the Agent sells any of the Collateral on credit, the Debtors will only
be credited with payments actually made by the purchaser. In addition,
each Debtor waives any and all
16
rights that it may have to a judicial hearing in advance of the
enforcement of any of the Agent's rights and remedies hereunder,
including, without limitation, its right following an Event of Default
to take immediate possession of the Collateral and to exercise its
rights and remedies with respect thereto.
(c) For the purpose of enabling the Agent to further
exercise rights and remedies under this Section 8 or elsewhere provided
by agreement or applicable law, each Debtor hereby grants to the Agent,
for the benefit of the Agent and the Secured Parties, an irrevocable,
nonexclusive license (exercisable without payment of royalty or other
compensation to such Debtor) to use, license or sublicense following an
Event of Default, any Intellectual Property now owned or hereafter
acquired by such Debtor, and wherever the same may be located, and
including in such license access to all media in which any of the
licensed items may be recorded or stored and to all computer software
and programs used for the compilation or printout thereof.
9. APPLICATIONS OF PROCEEDS. The proceeds of any such sale, lease
or other disposition of the Collateral hereunder shall be applied first, to the
expenses of retaking, holding, storing, processing and preparing for sale,
selling, and the like (including, without limitation, any taxes, fees and other
costs incurred in connection therewith) of the Collateral, to the reasonable
attorneys' fees and expenses incurred by the Secured Parties in enforcing their
rights hereunder and in connection with collecting, storing and disposing of the
Collateral, and then to satisfaction of the Obligations pro rata among the
Secured Parties (based on then-outstanding principal amounts of Debentures at
the time of any such determination), and to the payment of any other amounts
required by applicable law, after which the Secured Parties shall pay to the
applicable Debtor any surplus proceeds. If, upon the sale, license or other
disposition of the Collateral, the proceeds thereof are insufficient to pay all
amounts to which the Secured Parties are legally entitled, the Debtors will be
liable for the deficiency, together with interest thereon, at the rate of 10%
per annum or the lesser amount permitted by applicable law (the "Default Rate"),
and the reasonable fees of any attorneys employed by the Secured Parties to
collect such deficiency. To the extent permitted by applicable law, each Debtor
waives all claims, damages and demands against the Secured Parties arising out
of the repossession, removal, retention or sale of the Collateral, unless due
solely to the gross negligence or willful misconduct of the Secured Parties as
determined by a final judgment (not subject to further appeal) of a court of
competent jurisdiction.
10. SECURITIES LAW PROVISION. Each Debtor recognizes that Agent
may be limited in its ability to effect a sale to the public of all or part of
the Pledged Securities by reason of certain prohibitions in the Securities Act
of 1933, as amended, or other federal or state securities laws (collectively,
the "SECURITIES Laws"), and may be compelled to resort to one or more sales to a
restricted group of purchasers who may be required to agree to acquire the
Pledged Securities for their own account, for investment and not with a view to
the distribution or resale thereof. Each Debtor agrees that sales so made may be
at prices and on terms less favorable than if the Pledged Securities were sold
to the public, and that Agent has no obligation to delay the sale of any Pledged
Securities for the period of time necessary to register the Pledged Securities
for sale to the public under the Securities Laws. Each Debtor shall cooperate
with Agent in its attempt to
17
satisfy any requirements under the Securities Laws (including, without
limitation, registration thereunder if requested by Agent) applicable to the
sale of the Pledged Securities by Agent.
11. COSTS AND EXPENSES. Each Debtor agrees to pay all reasonable
out-of-pocket fees, costs and expenses incurred in connection with any filing
required hereunder, including without limitation, any financing statements
pursuant to the UCC, continuation statements, partial releases and/or
termination statements related thereto or any expenses of any searches
reasonably required by the Secured Parties. The Debtors shall also pay all other
claims and charges which in the reasonable opinion of the Secured Parties might
prejudice, imperil or otherwise affect the Collateral or the Security Interest
therein. The Debtors will also, upon demand, pay to the Secured Parties the
amount of any and all reasonable expenses, including the reasonable fees and
expenses of its counsel and of any experts and agents, which the Secured Parties
may incur in connection with (i) the enforcement of this Agreement, (ii) the
custody or preservation of, or the sale of, collection from, or other
realization upon, any of the Collateral, or (iii) the exercise or enforcement of
any of the rights of the Secured Parties under the Debentures. Until so paid,
any fees payable hereunder shall be added to the principal amount of the
Debentures and shall bear interest at the Default Rate.
12. RESPONSIBILITY FOR COLLATERAL. The Debtors assume all
liabilities and responsibility in connection with all Collateral, and the
Obligations shall in no way be affected or diminished by reason of the loss,
destruction, damage or theft of any of the Collateral or its unavailability for
any reason. Without limiting the generality of the foregoing, (a) neither the
Agent nor any Secured Party (i) has any duty (either before or after an Event of
Default) to collect any amounts in respect of the Collateral or to preserve any
rights relating to the Collateral, or (ii) has any obligation to clean-up or
otherwise prepare the Collateral for sale, and (b) each Debtor shall remain
obligated and liable under each contract or agreement included in the Collateral
to be observed or performed by such Debtor thereunder. Neither the Agent nor any
Secured Party shall have any obligation or liability under any such contract or
agreement by reason of or arising out of this Agreement or the receipt by the
Agent or any Secured Party of any payment relating to any of the Collateral, nor
shall the Agent or any Secured Party be obligated in any manner to perform any
of the obligations of any Debtor under or pursuant to any such contract or
agreement, to make inquiry as to the nature or sufficiency of any payment
received by the Agent or any Secured Party in respect of the Collateral or as to
the sufficiency of any performance by any party under any such contract or
agreement, to present or file any claim, to take any action to enforce any
performance or to collect the payment of any amounts which may have been
assigned to the Agent or to which the Agent or any Secured Party may be entitled
at any time or times.
13. SECURITY INTEREST ABSOLUTE. All rights of the Secured Parties
and all obligations of the Debtors hereunder, shall be absolute and
unconditional, irrespective of: (a) any lack of validity or enforceability of
this Agreement, the Debentures or any agreement entered into in connection with
the foregoing, or any portion hereof or thereof; (b) any change in the time,
manner or place of payment or performance 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 Debentures or any other agreement entered into in
connection with the foregoing; (c) any exchange, release or nonperfection of any
of the Collateral, or any release or amendment or
18
waiver of or consent to departure from any other collateral for, or any
guaranty, or any other security, for all or any of the Obligations; (d) any
action by the Secured Parties to obtain, adjust, settle and cancel in its sole
discretion any insurance claims or matters made or arising in connection with
the Collateral; or (e) any other circumstance which might otherwise constitute
any legal or equitable defense available to a Debtor, or a discharge of all or
any part of the Security Interest granted hereby. Until the Obligations shall
have been paid and performed in full, the rights of the Secured Parties shall
continue even if the Obligations are barred for any reason, including, without
limitation, the running of the statute of limitations or bankruptcy. Each Debtor
expressly waives presentment, protest, notice of protest, demand, notice of
nonpayment and demand for performance. In the event that at any time any
transfer of any Collateral or any payment received by the Secured Parties
hereunder shall be deemed by final order of a court of competent jurisdiction to
have been a voidable preference or fraudulent conveyance under the bankruptcy or
insolvency laws of the United States, or shall be deemed to be otherwise due to
any party other than the Secured Parties, then, in any such event, each Debtor's
obligations hereunder shall survive cancellation of this Agreement, and shall
not be discharged or satisfied by any prior payment thereof and/or cancellation
of this Agreement, but shall remain a valid and binding obligation enforceable
in accordance with the terms and provisions hereof. Each Debtor waives all right
to require the Secured Parties to proceed against any other person or entity or
to apply any Collateral which the Secured Parties may hold at any time, or to
marshal assets, or to pursue any other remedy. Each Debtor waives any defense
arising by reason of the application of the statute of limitations to any
obligation secured hereby.
14. TERM OF AGREEMENT. This Agreement and the Security Interest
shall terminate on the date on which all payments under the Debentures have been
indefeasibly paid in full and all other Obligations have been paid or
discharged; provided, however, that all indemnities of the Debtors contained in
this Agreement (including, without limitation, Annex B hereto) shall survive and
remain operative and in full force and effect regardless of the termination of
this Agreement.
15. POWER OF ATTORNEY; FURTHER ASSURANCES.
(a) Each Debtor authorizes the Secured Parties, and does
hereby make, constitute and appoint the Secured Parties and their
respective officers, agents, successors or assigns with full power of
substitution, as such Debtor's true and lawful attorney-in-fact, with
power, in the name of the various Secured Parties or such Debtor, to,
after the occurrence and during the continuance of an Event of Default,
(i) endorse any note, checks, drafts, money orders or other instruments
of payment (including payments payable under or in respect of any
policy of insurance) in respect of the Collateral that may come into
possession of the Secured Parties; (ii) to sign and endorse any
financing statement pursuant to the UCC or any invoice, freight or
express ▇▇▇▇, ▇▇▇▇ of lading, storage or warehouse receipts, drafts
against debtors, assignments, verifications and notices in connection
with accounts, and other documents relating to the Collateral; (iii) to
pay or discharge taxes, liens, security interests or other encumbrances
at any time levied or placed on or threatened against the Collateral;
(iv) to demand, collect, receipt for, compromise, settle and ▇▇▇ for
monies due in respect of the Collateral; (v) to transfer
19
any Intellectual Property or provide licenses respecting any
Intellectual Property; and (vi) generally, at the option of the Secured
Parties, and at the expense of the Debtors, at any time, or from time
to time, to execute and deliver any and all documents and instruments
and to do all acts and things which the Secured Parties deem necessary
to protect, preserve and realize upon the Collateral and the Security
Interest granted therein in order to effect the intent of this
Agreement and the Debentures all as fully and effectually as the
Debtors might or could do; and each Debtor hereby ratifies all that
said attorney shall lawfully do or cause to be done by virtue hereof.
This power of attorney is coupled with an interest and shall be
irrevocable for the term of this Agreement and thereafter as long as
any of the Obligations shall be outstanding. The designation set forth
herein shall be deemed to amend and supersede any inconsistent
provision in the Organizational Documents or other documents or
agreements to which any Debtor is subject or to which any Debtor is a
party. Without limiting the generality of the foregoing, after the
occurrence and during the continuance of an Event of Default, each
Secured Party is specifically authorized to execute and file any
applications for or instruments of transfer and assignment of any
patents, trademarks, copyrights or other Intellectual Property with the
United States Patent and Trademark Office and the United States
Copyright Office.
(b) On a continuing basis, each Debtor will make,
execute, acknowledge, deliver, file and record, as the case may be,
with the proper filing and recording agencies in any jurisdiction,
including, without limitation, the jurisdictions indicated on SCHEDULE
C attached hereto, all such instruments, and take all such action as
may reasonably be deemed necessary or advisable, or as reasonably
requested by the Secured Parties, to perfect the Security Interest
granted hereunder and otherwise to carry out the intent and purposes of
this Agreement, or for assuring and confirming to the Secured Parties
the grant or perfection of a perfected security interest in all the
Collateral under the UCC.
(c) Each Debtor hereby irrevocably appoints the Secured
Parties as such Debtor's attorney-in-fact, with full authority in the
place and instead of such Debtor and in the name of such Debtor, from
time to time in the Secured Parties' discretion, to take any action and
to execute any instrument which the Secured Parties may deem necessary
or advisable to accomplish the purposes of this Agreement, including
the filing, in its sole discretion, of one or more financing or
continuation statements and amendments thereto, relative to any of the
Collateral without the signature of such Debtor where permitted by law,
which financing statements may (but need not) describe the Collateral
as "all assets" or "all personal property" or words of like import, and
ratifies all such actions taken by the Secured Parties. This power of
attorney is coupled with an interest and shall be irrevocable for the
term of this Agreement and thereafter as long as any of the Obligations
shall be outstanding.
16. NOTICES. All notices, requests, demands and other
communications hereunder shall be subject to the notice provision of the
Purchase Agreement (as such term is defined in the Debentures).
20
17. OTHER SECURITY. To the extent that the Obligations are now or
hereafter secured by property other than the Collateral or by the guarantee,
endorsement or property of any other person, firm, corporation or other entity,
then the Secured Parties shall have the right, in its sole discretion, to
pursue, relinquish, subordinate, modify or take any other action with respect
thereto, without in any way modifying or affecting any of the Secured Parties'
rights and remedies hereunder.
18. APPOINTMENT OF AGENT. The Secured Parties hereby appoint
Midsummer Investment, Ltd. to act as their agent ("MIDSUMMER" or "AGENT") for
purposes of exercising any and all rights and remedies of the Secured Parties
hereunder. Such appointment shall continue until revoked in writing by a
Majority in Interest, at which time a Majority in Interest shall appoint a new
Agent; provided, that Midsummer may not be removed as Agent unless Midsummer
shall then hold less than $10,000 principal amount of Debentures; PROVIDED,
FURTHER, that such removal may occur only if each of the other Secured Parties
shall then hold not less than $1,000 principal amount of Debentures. The Agent
shall have the rights, responsibilities and immunities set forth in ANNEX B
hereto.
19. MISCELLANEOUS.
(a) No course of dealing between the Debtors and the
Secured Parties, nor any failure to exercise, nor any delay in
exercising, on the part of the Secured Parties, any right, power or
privilege hereunder or under the Debentures shall operate as a waiver
thereof; nor shall any single or partial exercise of any right, power
or privilege hereunder or thereunder preclude any other or further
exercise thereof or the exercise of any other right, power or
privilege.
(b) All of the rights and remedies of the Secured Parties
with respect to the Collateral, whether established hereby or by the
Debentures or by any other agreements, instruments or documents or by
law shall be cumulative and may be exercised singly or concurrently.
(c) This Agreement constitutes the entire agreement of
the parties with respect to the subject matter hereof and is intended
to supersede all prior negotiations, understandings and agreements with
respect thereto. Except as specifically set forth in this Agreement, no
provision of this Agreement may be modified or amended except by a
written agreement specifically referring to this Agreement and signed
by the parties hereto.
(d) In the event any provision of this Agreement is held
to be invalid, prohibited or unenforceable in any jurisdiction for any
reason, unless such provision is narrowed by judicial construction,
this Agreement shall, as to such jurisdiction, be construed as if such
invalid, prohibited or unenforceable provision had been more narrowly
drawn so as not to be invalid, prohibited or unenforceable. If,
notwithstanding the foregoing, any provision of this Agreement is held
to be invalid, prohibited or unenforceable in any jurisdiction, such
provision, as to such jurisdiction, shall be
21
ineffective to the extent of such invalidity, prohibition or
unenforceability without invalidating the remaining portion of such
provision or the other provisions of this Agreement and without
affecting the validity or enforceability of such provision or the other
provisions of this Agreement in any other jurisdiction.
(e) No waiver of any breach or default or any right under
this Agreement shall be considered valid unless in writing and signed
by the party giving such waiver, and no such waiver shall be deemed a
waiver of any subsequent breach or default or right, whether of the
same or similar nature or otherwise.
(f) This Agreement shall be binding upon and inure to the
benefit of each party hereto and its successors and assigns.
(g) Each party shall take such further action and execute
and deliver such further documents as may be necessary or appropriate
in order to carry out the provisions and purposes of this Agreement.
(h) All questions concerning the construction, validity,
enforcement and interpretation of this Agreement shall be governed by
and construed and enforced in accordance with the internal laws of the
State of New York, without regard to the principles of conflicts of law
thereof. Each Debtor agrees that all proceedings concerning the
interpretations, enforcement and defense of the transactions
contemplated by this Agreement and the Debenture (whether brought
against a party hereto or its respective affiliates, directors,
officers, shareholders, partners, members, employees or agents) shall
be commenced exclusively in the state and federal courts sitting in the
City of New York, Borough of Manhattan. Each Debtor hereby irrevocably
submits to the exclusive jurisdiction of the state and federal courts
sitting in the City of New York, Borough of Manhattan for the
adjudication of any dispute hereunder or in connection herewith or with
any transaction contemplated hereby or discussed herein, and hereby
irrevocably waives, and agrees not to assert in any proceeding, any
claim that it is not personally subject to the jurisdiction of any such
court, that such proceeding is improper. Each party hereto hereby
irrevocably waives personal service of process and consents to process
being served in any such proceeding by mailing a copy thereof via
registered or certified mail or overnight delivery (with evidence of
delivery) to such party at the address in effect for notices to it
under this Agreement and agrees that such service shall constitute good
and sufficient service of process and notice thereof. Nothing contained
herein shall be deemed to limit in any way any right to serve process
in any manner permitted by law. Each party hereto hereby irrevocably
waives, to the fullest extent permitted by applicable law, any and all
right to trial by jury in any legal proceeding arising out of or
relating to this Agreement or the transactions contemplated hereby. If
any party shall commence a proceeding to enforce any provisions of this
Agreement, then the prevailing party in such proceeding shall be
reimbursed by the other party for its reasonable attorney's fees and
other costs and expenses incurred with the investigation, preparation
and prosecution of such proceeding.
22
(i) This Agreement may be executed in any number of
counterparts, each of which when so executed shall be deemed to be an
original and, all of which taken together shall constitute one and the
same Agreement. In the event that any signature is delivered by
facsimile transmission, such signature shall create a valid binding
obligation of the party executing (or on whose behalf such signature is
executed) the same with the same force and effect as if such facsimile
signature were the original thereof.
(j) All Debtors shall jointly and severally be liable for
the obligations of each Debtor to the Secured Parties hereunder.
(k) Each Debtor shall indemnify, reimburse and hold
harmless the Secured Parties and their respective partners, members,
shareholders, officers, directors, employees and agents (collectively,
"INDEMNITEES") from and against any and all losses, claims,
liabilities, damages, penalties, suits, costs and expenses, of any kind
or nature, (including fees relating to the cost of investigating and
defending any of the foregoing) imposed on, incurred by or asserted
against such Indemnitee in any way related to or arising from or
alleged to arise from this Agreement or the Collateral, except any such
losses, claims, liabilities, damages, penalties, suits, costs and
expenses which result from the gross negligence or willful misconduct
of the Indemnitee as determined by a final, nonappealable decision of a
court of competent jurisdiction. This indemnification provision is in
addition to, and not in limitation of, any other indemnification
provision in the Debentures, the Purchase Agreement (as such term is
defined in the Debentures) or any other agreement, instrument or other
document executed or delivered in connection herewith or therewith.
(l) Nothing in this Agreement shall be construed to
subject Agent or any Secured Party to liability as a partner in any
Debtor or any if its direct or indirect subsidiaries that is a
partnership or as a member in any Debtor or any of its direct or
indirect subsidiaries that is a limited liability company, nor shall
Agent or any Secured Party be deemed to have assumed any obligations
under any partnership agreement or limited liability company agreement,
as applicable, of any such Debtor or any if its direct or indirect
subsidiaries or otherwise, unless and until any such Secured Party
exercises its right to be substituted for such Debtor as a partner or
member, as applicable, pursuant hereto.
(m) To the extent that the grant of the security interest
in the Collateral and the enforcement of the terms hereof require the
consent, approval or action of any partner or member, as applicable, of
any Debtor or any direct or indirect subsidiary of any Debtor or
compliance with any provisions of any of the Organizational Documents,
the Debtors hereby grant such consent and approval and waive any such
noncompliance with the terms of said documents.
[SIGNATURE PAGES FOLLOW]
23
IN WITNESS WHEREOF, the parties hereto have caused this Security
Agreement to be duly executed on the day and year first above written.
SECURED SERVICES, INC.
By:__________________________________________
Name:
Title:
SSI OPERATING CORP.
By:__________________________________________
Name:
Title:
SECURED MOBILE, INC.
By:__________________________________________
Name:
Title:
SSI MINNESOTA CORP.
By:__________________________________________
Name:
Title:
SECURED SERVICES CANADA INC.
By:__________________________________________
Name:
Title:
[SIGNATURE PAGE OF HOLDERS FOLLOWS]
24
[SIGNATURE PAGE OF HOLDERS TO SSVC SA]
Name of Investing Entity: __________________________
SIGNATURE OF AUTHORIZED SIGNATORY OF INVESTING ENTITY: _______________________
Name of Authorized Signatory: _________________________
Title of Authorized Signatory: __________________________
[SIGNATURE PAGE OF HOLDERS FOLLOWS]
25
SCHEDULE A
Principal Place of Business of Debtors:
Locations Where Collateral is Located or Stored:
26
SCHEDULE B
27
SCHEDULE C
28
SCHEDULE D
Organizational Identification Numbers
29
SCHEDULE E
Names; Mergers and Acquisitions
30
SCHEDULE F
Intellectual Property
31
SCHEDULE G
Account Debtors
32
SCHEDULE H
Pledged Securities
33
ANNEX A
TO
SECURITY
AGREEMENT
FORM OF ADDITIONAL DEBTOR JOINDER
Security Agreement dated as of February ___, 2006 made by
Secured Services, Inc.
and its subsidiaries party thereto from time to time, as Debtors
to and in favor of
the Secured Parties identified therein (the "SECURITY AGREEMENT")
Reference is made to the Security Agreement as defined above;
capitalized terms used herein and not otherwise defined herein shall have the
meanings given to such terms in, or by reference in, the Security Agreement.
The undersigned hereby agrees that upon delivery of this Additional
Debtor Joinder to the Secured Parties referred to above, the undersigned shall
(a) be an Additional Debtor under the Security Agreement, (b) have all the
rights and obligations of the Debtors under the Security Agreement as fully and
to the same extent as if the undersigned was an original signatory thereto and
(c) be deemed to have made the representations and warranties set forth in
Section ___ therein as of the date of execution and delivery of this Additional
Debtor Joinder. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, THE
UNDERSIGNED SPECIFICALLY GRANTS TO THE SECURED PARTIES A SECURITY INTEREST IN
THE COLLATERAL AS MORE FULLY SET FORTH IN THE SECURITY AGREEMENT AND
ACKNOWLEDGES AND AGREES TO THE WAIVER OF JURY TRIAL PROVISIONS SET FORTH
THEREIN.
Attached hereto are supplemental and/or replacement Schedules to the
Security Agreement, as applicable.
An executed copy of this Joinder shall be delivered to the Secured
Parties, and the Secured Parties may rely on the matters set forth herein on or
after the date hereof. This Joinder shall not be modified, amended or terminated
without the prior written consent of the Secured Parties.
IN WITNESS WHEREOF, the undersigned has caused this Joinder to be
executed in the name and on behalf of the undersigned.
[Name of Additional Debtor]
By:
Name:
Title:
Address:
Dated:
[ANNEX B
TO
SECURITY
AGREEMENT
THE AGENT
1. APPOINTMENT. The Secured Parties (all capitalized terms
used herein and not otherwise defined shall have the respective meanings
provided in the Security Agreement to which this Annex B is attached (the
"AGREEMENT")), by their acceptance of the benefits of the Agreement, hereby
designate [_____ ("[_____" or "AGENT") as the Agent to act as specified herein
and in the Agreement. Each Secured Party shall be deemed irrevocably to
authorize the Agent to take such action on its behalf under the provisions of
the Agreement and any other Transaction Document (as such term is defined in the
Debentures) and to exercise such powers and to perform such duties hereunder and
thereunder as are specifically delegated to or required of the Agent by the
terms hereof and thereof and such other powers as are reasonably incidental
thereto. The Agent may perform any of its duties hereunder by or through its
agents or employees.
2. NATURE OF DUTIES. The Agent shall have no duties or
responsibilities except those expressly set forth in the Agreement. Neither the
Agent nor any of its partners, members, shareholders, officers, directors,
employees or agents shall be liable for any action taken or omitted by it as
such under the Agreement or hereunder or in connection herewith or therewith, be
responsible for the consequence of any oversight or error of judgment or
answerable for any loss, unless caused solely by its or their gross negligence
or willful misconduct as determined by a final judgment (not subject to further
appeal) of a court of competent jurisdiction. The duties of the Agent shall be
mechanical and administrative in nature; the Agent shall not have by reason of
the Agreement or any other Transaction Document a fiduciary relationship in
respect of any Debtor or any Secured Party; and nothing in the Agreement or any
other Transaction Document, expressed or implied, is intended to or shall be so
construed as to impose upon the Agent any obligations in respect of the
Agreement or any other Transaction Document except as expressly set forth herein
and therein.
3. LACK OF RELIANCE ON THE AGENT. Independently and without
reliance upon the Agent, each Secured Party, to the extent it deems appropriate,
has made and shall continue to make (i) its own independent investigation of the
financial condition and affairs of the Company and its subsidiaries in
connection with such Secured Party's investment in the Debtors, the creation and
continuance of the Obligations, the transactions contemplated by the Transaction
Documents, and the taking or not taking of any action in connection therewith,
and (ii) its own appraisal of the creditworthiness of the Company and its
subsidiaries, and of the value of the Collateral from time to time, and the
Agent shall have no duty or responsibility, either initially or on a continuing
basis, to provide any Secured Party with any credit, market or other information
with respect thereto, whether coming into its possession before any Obligations
are incurred or at any time or times thereafter. The Agent shall not be
responsible to the Debtors or any
Secured Party for any recitals, statements, information, representations or
warranties herein or in any document, certificate or other writing delivered in
connection herewith, or for the execution, effectiveness, genuineness, validity,
enforceability, perfection, collectibility, priority or sufficiency of the
Agreement or any other Transaction Document, or for the financial condition of
the Debtors or the value of any of the Collateral, or be required to make any
inquiry concerning either the performance or observance of any of the terms,
provisions or conditions of the Agreement or any other Transaction Document, or
the financial condition of the Debtors, or the value of any of the Collateral,
or the existence or possible existence of any default or Event of Default under
the Agreement, the Debentures or any of the other Transaction Documents.
4. CERTAIN RIGHTS OF THE AGENT. The Agent shall have the right
to take any action with respect to the Collateral, on behalf of all of the
Secured Parties. To the extent practical, the Agent shall request instructions
from the Secured Parties with respect to any material act or action (including
failure to act) in connection with the Agreement or any other Transaction
Document, and shall be entitled to act or refrain from acting in accordance with
the instructions of Secured Parties holding a majority in principal amount of
Debentures (based on then-outstanding principal amounts of Debentures at the
time of any such determination); if such instructions are not provided despite
the Agent's request therefor, the Agent shall be entitled to refrain from such
act or taking such action, and if such action is taken, shall be entitled to
appropriate indemnification from the Secured Parties in respect of actions to be
taken by the Agent; and the Agent shall not incur liability to any person or
entity by reason of so refraining. Without limiting the foregoing, (a) no
Secured Party shall have any right of action whatsoever against the Agent as a
result of the Agent acting or refraining from acting hereunder in accordance
with the terms of the Agreement or any other Transaction Document, and the
Debtors shall have no right to question or challenge the authority of, or the
instructions given to, the Agent pursuant to the foregoing and (b) the Agent
shall not be required to take any action which the Agent believes (i) could
reasonably be expected to expose it to personal liability or (ii) is contrary to
this Agreement, the Transaction Documents or applicable law.
5. RELIANCE. The Agent shall be entitled to rely, and shall be
fully protected in relying, upon any writing, resolution, notice, statement,
certificate, telex, teletype or telecopier message, cablegram, radiogram, order
or other document or telephone message signed, sent or made by the proper person
or entity, and, with respect to all legal matters pertaining to the Agreement
and the other Transaction Documents and its duties thereunder, upon advice of
counsel selected by it and upon all other matters pertaining to this Agreement
and the other Transaction Documents and its duties thereunder, upon advice of
other experts selected by it.
6. INDEMNIFICATION. To the extent that the Agent is not
reimbursed and indemnified by the Debtors, the Secured Parties will jointly and
severally reimburse and indemnify the Agent, in proportion to their initially
purchased respective principal amounts of Debentures, from and against any and
all liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any
kind or nature whatsoever which may be imposed on, incurred by or asserted
against the Agent in performing its duties hereunder or under the Agreement or
any other Transaction Document, or in any way relating to or arising out of the
Agreement or any other Transaction Document except for those determined by a
final judgment (not subject to further appeal) of a court of competent
jurisdiction to have resulted solely from the Agent's own gross negligence or
willful misconduct. Prior to taking any action hereunder as Agent, the Agent may
require each Secured Party to deposit with it sufficient sums as it determines
in good faith is necessary to protect the Agent for costs and expenses
associated with taking such action.
7. RESIGNATION BY THE AGENT.
(a) The Agent may resign from the performance of all its
functions and duties under the Agreement and the other Transaction
Documents at any time by giving 30 days' prior written notice (as
provided in the Agreement) to the Debtors and the Secured Parties. Such
resignation shall take effect upon the appointment of a successor Agent
pursuant to clauses (b) and (c) below.
(b) Upon any such notice of resignation, the Secured Parties,
acting by a Majority in Interest, shall appoint a successor Agent
hereunder.
(c) If a successor Agent shall not have been so appointed
within said 30-day period, the Agent shall then appoint a successor
Agent who shall serve as Agent until such time, if any, as the Secured
Parties appoint a successor Agent as provided above. If a successor
Agent has not been appointed within such 30-day period, the Agent may
petition any court of competent jurisdiction or may interplead the
Debtors and the Secured Parties in a proceeding for the appointment of
a successor Agent, and all fees, including, but not limited to,
extraordinary fees associated with the filing of interpleader and
expenses associated therewith, shall be payable by the Debtors on
demand.
8. RIGHTS WITH RESPECT TO COLLATERAL. Each Secured Party
agrees with all other Secured Parties and the Agent (i) that it shall not, and
shall not attempt to, exercise any rights with respect to its security interest
in the Collateral, whether pursuant to any other agreement or otherwise (other
than pursuant to this Agreement), or take or institute any action against the
Agent or any of the other Secured Parties in respect of the Collateral or its
rights hereunder (other than any such action arising from the breach of this
Agreement) and (ii) that such Secured Party has no other rights with respect to
the Collateral other than as set forth in this Agreement and the other
Transaction Documents.