EXHIBIT 4.3
SECURITY AGREEMENT
SECURITY AGREEMENT, dated as of February 8, 2005 (this "Agreement"), among
RCG Companies Incorporated, 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 Secured Convertible Debenture due February 8,
2007 in the original aggregate principal amount of $7,000,000 (the "Debenture")
and Warrants, 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 Debenture, the Secured Parties have severally
agreed to extend the loans to the Company evidenced by the Debenture;
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.
NOW, THEREFORE, in consideration of the agreements herein contained fand
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 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, instruments and chattel paper;
(v) All commercial tort claims;
(vi) All deposit accounts (other than deposit accounts held by
FS SunTours d/b/a Suntrips, Inc.) 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.
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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 (except for, with respect to RCG Companies
Incorporated, capital stock of a subsidiary to be formed in
connection with such acquisitions as set forth on Schedule 2),
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.
(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.
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(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 Debtors' obligations under this
Agreement, the Debentures, the Guaranty and any other written instruments,
agreements or other written 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 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.
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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").
Notwithstanding anything herein to the contrary, this Agreement shall be second
in priority and subordinate to the security interest and rights previously
granted to CSDH, LLC and the other entities or person set forth on Schedule 2.
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.
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.
No Debtor holds any real property. 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.
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(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. Except as set forth on Schedule
B attached hereto, 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 (x) to the extent filed or recorded in favor of the
Secured Parties pursuant to the terms of this Agreement and (y) to the
extent set forth on Schedule B).
(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 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 and, except as forth
on Schedule A attached hereto, 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) 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 and the recordation of said Intellectual Property
Security Agreement, 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.
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(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 except where the violation of any law,
rule or regulation would not have a material adverse effect on any Debts
or the Secured Parties. or (ii) conflict with, or constitute a default (or
an event that with notice or lapse of time or both would 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 11 hereof. Each Debtor hereby agrees to
defend the same against the claims of any and all persons and entities.
Each Debtor shall use its reasonable best efforts to 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.
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(l) No Debtor will transfer, pledge, hypothecate, encumber, license,
sell or otherwise dispose of any of the Collateral (except for a sale or
transfer 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 use its reasonable best efforts to keep and
preserve its equipment, inventory and other tangible Collateral in good
condition, repair and order (with the exception of reasonable wear and
tear) and shall not operate or locate any 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.
(o) Each Debtor shall, within ten (10) business days of obtaining
actual 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.
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(p) Each Debtor shall promptly execute and deliver to the Agent such
further deeds, mortgages, assignments, security agreements, financing
statements or other instruments, documents, certificates and assurances
and take such further action as the Agent 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 hereunder, substantially in a form
acceptable to the Agent, 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 from time to time
during normal business, 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 material attachment,
garnishment, execution or other legal process levied against any
Collateral.
(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 use its reasonable best efforts to 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.
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(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.
(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 in the
preamble above; (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 reasonable orders and instructions of Agent in accordance
with the terms hereto 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) Intentionally Omitted.
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(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 reasonble best efforts to obtain 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 promptly provide written notice to the Agent
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 Agent an assignment of claims
for such accounts and cooperate with the Agent in taking any other steps
required, in its 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. Promptly thereafter, 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 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.
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(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, 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 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) Intentionally Omitted.
(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 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.
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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) The failure by any Debtor to observe or perform any of its
obligations hereunder for ten (10) 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
(c) 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 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.
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8. RIGHTS AND REMEDIES UPON DEFAULT.
(a) Upon the occurrence of any Event of Default and during the
continuing threat, 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.
(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 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, 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.
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(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 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.
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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 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 promptly 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.
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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 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.
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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 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.
18
(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).
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 Palisades
Master Fund LP to act as their agent (the "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
the Agent may not be removed as Agent unless __________________ shall then hold
less than $____________ 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 $______________ 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.
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(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 a majority in
interest of 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 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.
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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.
(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.
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(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]
22
IN WITNESS WHEREOF, the parties hereto have caused this Security Agreement
to be duly executed on the day and year first above written.
RCG COMPANIES INCORPORATED
By: __________________________________________
Name:
Title:
[SUBSIDIARY]
By: __________________________________________
Name:
Title:
[SIGNATURE PAGE OF HOLDERS FOLLOWS]
23
[SIGNATURE PAGE OF HOLDERS TO RCG 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]
24
SCHEDULE A
Principal Place of Business of Debtors:
Locations Where Collateral is Located or Stored:
SCHEDULE B
25
SCHEDULE C
26
SCHEDULE D
Organizational Identification Numbers
27
SCHEDULE E
Names; Mergers and Acquisitions
28
SCHEDULE F
Intellectual Property
29
SCHEDULE G
Account Debtors
30
SCHEDULE H
Pledged Securities
31
ANNEX A
TO
SECURITY
AGREEMENT
FORM OF ADDITIONAL DEBTOR JOINDER
Security Agreement dated as of February
8, 2005 made by RCG Companies 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 Palisades
Master Fund LP (the "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 conduct 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.