BONDS.COM GROUP, INC. AMENDED AND RESTATED SECURITY AGREEMENT
Exhibit
10.4
▇▇▇▇▇.▇▇▇
GROUP, INC.
AMENDED AND RESTATED
SECURITY AGREEMENT
This
Amended and Restated Security Agreement (the “Agreement”) is made
as of April 30, 2009, by and between ▇▇▇▇▇.▇▇▇ Group, Inc. (the “Company”), ▇▇▇▇▇.▇▇▇
Holdings, Inc., and Insight Capital Management, LLC (collectively, the “Debtor”), in favor of
each of the parties listed on and attached hereto as Exhibit A (each a
“Secured
Party,” and collectively, the “Secured
Parties”).
RECITALS
WHEREAS,
pursuant to the Secured Convertible Note and Warrant Purchase Agreement dated as
of September 24, 2008 (the “2008 Purchase
Agreement”), entered into between the Company and the parties (the “Initial Secured
Parties”) listed on Exhibit A thereto,
the Initial Secured Parties purchased certain promissory notes (the “2008 Notes”) from the
Company.
WHEREAS,
the Debtor and the Initial Secured Parties entered into a Security Agreement
dated as of September 24, 2008 (the “Security Agreement”),
in order that the Debtor’s obligations to repay the Note be secured by all of
the assets of the Debtor.
WHEREAS,
the Debtor and the Initial Secured Parties to the Security Agreement entered
into an amendment dated February 3, 2009, to, among other things, remove
▇▇▇▇▇.▇▇▇, Inc. as a “Debtor” under the Security Agreement.
WHEREAS,
on or about the date hereof and continuing up to and through June 30, 2009, the
Company intends offer to certain additional investors (the “Additional Secured
Parties”) secured convertible notes of the Company, in the aggregate
principal amount of up to $2,500,000 (the “2009 Notes” and
together with the 2008 Notes, the “Notes”), due on April
30, 2011, with 25% warrant coverage, pursuant to the terms of a Secured
Convertible Note and Warrant Purchase Agreement on or about the date hereof (the
“2009 Purchase
Agreement” and together with the 2008 Purchase Agreement, the “Purchase
Agreements”).
WHEREAS,
the Debtor and the Initial Secured Parties would like to amend the Security
Agreement to, among other things, incorporate the Additional Secured Parties as
Secured Parties under the Security Agreement.
WHEREAS,
the Company issued a Grid Secured Promissory Note to Valhalla Investment
Partners (“Valhalla”), dated as
of April 24, 2008, and amended on July 8, 2008 (the “Valhalla Note”),
pursuant to which the Company granted Valhalla a security interest (the “First Priority Domain Name
Security Interest”) in all of the Company’s right, title and interest in
and to the domain name “▇▇▇▇▇.▇▇▇” (the “Domain
Name”).
WHEREAS, the
Debtor and the Secured Parties would further like to amend the terms of the
Security Agreement to, among other things, clarify that Valhalla shall have a
first priority security interest in the Domain Name with respect to the
indebtedness owed by the Company under the Valhalla Note, and the Secured
Parties under the Security Agreement with respect to the indebtedness acquired
pursuant to the 2008 Purchase Agreement and the 2009 Purchase Agreement
(on a pari passu basis) shall have a subordinated security interest in the
Domain Name.
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AGREEMENT
In
consideration of the purchase of the Notes by the Secured Parties and for other
good and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the Debtor hereby agrees with the Secured Parties as
follows:
1. Grant of
Security Interest.
(a) To
secure the Debtor’s full and timely performance of the Obligations, the Debtor
hereby grants to the Secured Parties a continuing Lien on and security interest
(the “Security
Interest”) in, all of the Debtor’s right, title and interest in and to
all of its personal property and assets (both tangible and intangible),
including, without limitation, the following, whether now owned or hereafter
acquired and wherever located: (a) all Receivables; (b) all Equipment; (c) all
Fixtures; (d) all General Intangibles; (e) all Inventory; (f) all Investment
Property; (g) all Deposit Accounts; (h) all Cash; (i) all other Goods of the
Debtor; (j) all Intellectual Property; and (k) all Proceeds of each of the
foregoing and all accessions to, and replacements for, each of the foregoing
(collectively, the “Collateral”). The
Security Interest shall be a first and prior interest in all of the Collateral
other than with respect to (i) the First Priority Domain Name Security Interest,
(ii) Permitted Bank Loans, and (iii) those given higher priority by valid
operation of relevant law.
(b) The
following terms shall have the following meanings for purposes of this
Agreement:
“Account” means any “Account,”
as such term is defined in the UCC now owned or hereafter acquired by the Debtor
or in which the Debtor now holds or hereafter acquires any interest and, in any
event, shall include, without limitation, all accounts receivable, book debts,
rights to payment and other forms of obligations (other than forms of
obligations evidenced by Chattel Paper, Documents or Instruments) now owned or
hereafter received or acquired by or belonging or owing to the Debtor whether or
not arising out of goods or software sold or services rendered by the Debtor or
from any other transaction, whether or not the same involves the sale of goods
or services by the Debtor and all of the Debtor’s rights in, to and under all
purchase orders or receipts now owned or hereafter acquired by it for goods or
services, and all of the Debtor’s rights to any goods represented by any of the
foregoing, and all monies due or to become due to the Debtor under all purchase
orders and contracts for the sale of goods or the performance of services or
both by the Debtor or in connection with any other transaction (whether or not
yet earned by performance on the part of the Debtor), now in existence or
hereafter occurring, including, without limitation, the right to receive the
proceeds of said purchase orders and contracts, and all collateral security and
guarantees of any kind given by any Person with respect to any of the
foregoing.
“Cash” means all cash, money,
currency, and liquid funds, wherever held, in which the Debtor now or hereafter
acquires any right, title, or interest.
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“Chattel Paper” means any
“Chattel paper,” as such term is defined in the UCC, now owned or hereafter
acquired by the Debtor or in which the Debtor now holds or hereafter acquires
any interest.
“Commercial Tort Claim” shall
have the meaning given to that term in Section 4(l) of this
Agreement.
“Deposit Accounts” means any
“Deposit accounts,” as such term is defined in the UCC, and includes any
checking account, savings account, or certificate of deposit, now owned or
hereafter acquired by the Debtor or in which the Debtor now holds or hereafter
acquires any interest.
“Documents” means any
“Documents,” as such term is defined in the UCC, now owned or hereafter acquired
by the Debtor or in which the Debtor now holds or hereafter acquires any
interest.
“Electronic Chattel Paper”
means any “Electronic chattel paper,” as such term is defined in the UCC,
now owned or hereafter acquired by the Debtor or in which the Debtor now holds
or hereafter acquires any interest.
“Equipment” means any
“Equipment,” as such term is defined in the UCC, now owned or hereafter acquired
by the Debtor or in which the Debtor now holds or hereafter acquires any
interest and any and all additions, upgrades, substitutions and replacements of
any of the foregoing, together with all attachments, components, parts,
equipment and accessories installed thereon or affixed thereto, now owned or
hereafter acquired by the Debtor or in which the Debtor now holds or hereafter
acquires interest.
“Fixtures” means any
“Fixtures,” as such term is defined in the UCC, together with all right, title
and interest of the Debtor in and to all extensions, improvements, betterments,
accessions, renewals, substitutes, and replacements of, and all additions and
appurtenances to any of the foregoing property, and all conversions of the
security constituted thereby, immediately upon any acquisition or release
thereof or any such conversion, as the case may be, now owned or hereafter
acquired by the Debtor or in which the Debtor now holds or hereafter acquires
any interest.
“General Intangible” means any
“General intangible,” as such term is defined in the UCC, now owned or hereafter
acquired by the Debtor or in which the Debtor now holds or hereafter acquires
any interest and, in any event, shall include, without limitation, all right,
title and interest that the Debtor may now or hereafter have in or under any
contracts, rights to payment, payment intangibles, confidential information,
interests in partnerships, limited liability companies, corporations, joint
ventures and other business associations, permits, goodwill, claims in or under
insurance policies, including unearned premiums and premium adjustments,
uncertificated securities, deposit, checking and other bank accounts, but shall
not include any Intellectual Property (including the right to receive all
proceeds and damages therefrom), rights to receive tax refunds and other
payments and rights of indemnification.
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“Goods” means any “Goods,” as
such term is defined in the UCC, now owned or hereafter acquired by the Debtor
or in which the Debtor now holds or hereafter acquires any
interest.
“Instruments” means any
“Instrument,” as such term is defined in the UCC, now owned or hereafter
acquired by the Debtor or in which the Debtor now holds or hereafter acquires
any interest.
“Intellectual Property” means,
collectively, all rights, priorities and privileges of the Debtor relating to
intellectual property, whether arising under United States, multinational or
foreign laws or otherwise, including copyrights, copyright licenses, inventions,
patents, patent licenses, trademarks, trademark licenses and trade secrets
(including customer lists), domain names, Web sites, domain names (including
without limitation ▇▇▇.▇▇▇▇▇.▇▇▇) and know-how.
“Inventory” means any
“Inventory,” as such term is defined in the UCC, now owned or hereafter acquired
by the Debtor or in which the Debtor now holds or hereafter acquires any
interest, and, in any event, shall include, without limitation, all inventory,
goods and other personal property that are held by or on behalf of the Debtor
for sale or lease or are furnished or are to be furnished under a contract of
service or that constitute raw materials, work in process or materials used or
consumed or to be used or consumed in the Debtor’s business, or the processing,
packaging, promotion, delivery or shipping of the same, and all finished goods,
whether or not the same is in transit or in the constructive, actual or
exclusive possession of the Debtor or is held by others for the Debtor’s
account, including, without limitation, all goods covered by purchase orders and
contracts with suppliers and all goods billed and held by suppliers and all such
property that may be in the possession or custody of any carriers, forwarding
agents, truckers, warehousemen, vendors, selling agents or other
Persons.
“Investment Property” means
any “Investment property,” as such term is defined in the UCC, and includes
certificated securities, uncertificated securities, money market funds and U.S.
Treasury bills or notes, now owned or hereafter acquired by the Debtor or in
which the Debtor now holds or hereafter acquires any interest.
“Letter of Credit Right” means
any “Letter of credit right,” as such term is defined in the UCC, now owned or
hereafter acquired by the Debtor or in which the Debtor now holds or hereafter
acquires any interest, including any right to payment or performance under any
letter of credit.
“Lien” means any mortgage,
deed of trust, pledge, hypothecation, assignment for security, security
interest, encumbrance, ▇▇▇▇, ▇▇▇▇ or charge of any kind, whether voluntarily
incurred or arising by operation of law or otherwise, against any property, any
conditional sale or other title retention agreement, any lease in the nature of
a security interest, and the filing of any financing statement (other than a
precautionary financing statement with respect to a lease that is not in the
nature of a security interest) under the UCC or comparable law of any
jurisdiction.
“Obligations” shall mean and
include all loans, advances, debts, liabilities and obligations, howsoever
arising, owed by the Debtor to the Secured Parties of every kind and description
(whether or not evidenced by any note or instrument and whether or not for the
payment
of money), direct or indirect, absolute or contingent, due or to become due, now
existing or hereafter arising pursuant to the terms of the Purchase Agreements
and the Notes including without limitation all interest, fees, charges,
expenses, attorneys’ fees and accountants’ fees chargeable to the Debtor or
payable by the Debtor thereunder.
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“Permitted Bank Loans” shall
mean debt issued to commercial banks and other similar financial institutions;
provided the principal amount of such debt does not exceed five hundred thousand
dollars ($500,000); provided, further that such debt is: (i) not issued in
connection with the issuance of any equity securities (including warrants and
other convertible securities) other than Permitted Warrants or (ii) otherwise
convertible into or exercisable for equity.
“Permitted Liens” shall mean
(i) Liens created by operation of law such as materialmen’s liens, mechanic’s
liens and other similar liens; (ii) deposits, pledges or Liens securing
obligations incurred in respect of workers’ compensation, unemployment insurance
or other forms of governmental insurance or benefits; (iii) Liens
imposed by any governmental authority for taxes, assessments or charges not yet
due or that are being contested in good faith by appropriate proceedings with
the establishment of adequate reserves on the balance sheet of Debtor; (iv)
Liens securing Permitted Bank Loans; (v) Liens that are subordinate in all
respects to the Liens held by the Secured Parties, and (vi) Liens deemed
“Permitted Liens” under the Purchase Agreements.
“Permitted Warrants” shall
mean warrants to purchase Common Stock of the Debtor that are issued to the
commercial bank or other similar financial institution issuing a Permitted Bank
Loan to the Debtor, provided that such warrants are: (i) exercisable for a price
no less than the then current fair market value of the Debtor’s Common Stock and
(ii) are exercisable for no greater number of shares of Common Stock of the
Debtor than ten percent (10%) of the quotient obtained by dividing: (A) the
principal amount of such Permitted Bank Loan by (B) the exercise price of such
Permitted Warrant.
“Person” means any individual,
sole proprietorship, partnership, joint venture, trust, unincorporated
organization, association, corporation, limited liability company, institution,
public benefit corporation, other entity or government (whether federal, state,
county, city, municipal, local, foreign, or otherwise, including any
instrumentality, division, agency, body or department thereof).
“Proceeds” means “Proceeds,”
as such term is defined in the UCC and, in any event, shall include, without
limitation, (a) any and all Accounts, Chattel Paper, Instruments, cash or other
forms of money or currency or other proceeds payable to the Debtor from time to
time in respect of the Collateral, (b) any and all proceeds of any insurance,
indemnity, warranty or guaranty payable to the Debtor from time to time with
respect to any of the Collateral, (c) any and all payments (in any form
whatsoever) made or due and payable to the Debtor from time to time in
connection with any requisition, confiscation, condemnation, seizure or
forfeiture of all or any part of the Collateral by any governmental authority
(or any Person acting under color of governmental authority), (d) the proceeds,
damages, or recovery based on any claim of the Debtor against third parties
(i) for past,
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present
or future infringement of any copyright, patent or patent license or (ii) for
past, present or future infringement or dilution of any trademark or trademark
license or for injury to the goodwill associated with any trademark, trademark
registration or trademark licensed under any trademark license and (e) any and
all other amounts from time to time paid or payable under or in connection with
any of the Collateral.
“Receivables” means all of the
Debtor’s Accounts, Instruments, Documents, Chattel Paper, Supporting
Obligations, and letters of credit and Letter of Credit Rights.
“Supporting Obligation” means
any “Supporting obligation,” as such term is defined in the UCC, now owned or
hereafter acquired by the Debtor or in which the Debtor now holds or hereafter
acquires any interest.
“UCC” means the Uniform
Commercial Code as the same may, from time to time, be in effect in the State of
New York; provided, that in the
event that, by reason of mandatory provisions of law, any or all of the
attachment, perfection or priority of, or remedies with respect to, Secured
Parties’ Lien on any Collateral is governed by the Uniform Commercial Code as
enacted and in effect in a jurisdiction other than the State of New York, the
term “UCC” shall mean the Uniform Commercial Code as enacted and in effect, from
time to time, in such other jurisdiction solely for purposes of the provisions
thereof relating to such attachment, perfection, priority or remedies and for
purposes of definitions related to such provisions.
Unless
otherwise defined herein, all capitalized terms used herein and defined in the
Purchase Agreements shall have the respective meaning given to those terms in
the Purchase Agreements, and terms that are defined in the UCC and used herein
shall have the meanings given to them in the UCC.
2. Agreement
Among the Secured Parties.
(a) Payment
Pro Rata. Payment to the
Secured Parties under the Notes shall be made in proportion to the principal and
accrued interest then outstanding on any such date of payment to each, until
such obligations are paid or retired in full.
(b) Sharing
of Payments. If any Secured
Party shall at any time receive any payment of principal, interest or other
charge arising under the Notes, or upon any other obligation of Debtor arising
from or in connection with the Purchase Agreements or any sums by virtue of
counterclaim, offset, or other lien that may be exercised, or from any security,
other than payments made on the same date to all Secured Parties, such Secured
Party shall share such payment or payments ratably with the other Secured
Parties as to maintain as near as possible the unpaid balance of the loans pro
rata according to the Secured Parties’ aggregate proportionate
interests.
(c) Sharing
of Collateral.
Subject to the First Priority Domain Name Security Interest, upon the occurrence
of any Event of Default, as defined in Section 5, and if the Secured Parties
proceed to exercise any rights with respect to the Collateral, the Secured
Parties shall share the Collateral and the proceeds of such Collateral
ratably.
(d) Appointment
of Agent. The Secured
Parties agree that Secured Parties holding a majority in interest of the
principal amount of the Notes, in the aggregate, outstanding may act
together as the agent of all Secured Parties to execute and deliver in their
names such instruments, documents, statements and amendments thereto as may be
necessary or appropriate to perfect or continue the perfection of the security
interest granted in this Agreement.
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(e) Enforcement. Enforcement of
the Secured Parties’ rights hereunder shall be taken by Secured Parties holding
a majority in interest of the principal amount of the Notes, in the aggregate,
outstanding acting together as the agent for all of the Secured
Parties. The action of such percentage taken in accordance with the
preceding sentence, shall in each case bind all the Secured
Parties. Each of the Secured Parties agrees that any Secured Party
acting under Sections 2(d) and 2(e) shall not be liable for any acts taken in
good faith in enforcing the rights of the Secured Parties
hereunder.
(f)
First
Priority Domain Name Security Interest. For the avoidance of
doubt, Valhalla (or its successor) has been given a first priority security
interest in and to the Domain Name with respect to any amounts owing or due
under the Valhalla Note, prior to the other Secured Parties, and all of the
Secured Parties rights’ shall be subrogated to the rights of Valhalla to receive
any payments or distributions resulting from or in connection with the Domain
Name for any and all amounts owing or due under the Valhalla
Note. The rights in this section shall exist until such time that the
Valhalla Note has been fully paid and satisfied. In addition, the
Debtor shall take any and all action or omit any action, as Valhalla may
reasonably direct in writing, at Debtor’s sole cost and expense, cause Valhalla
to have perfected first priority security interest in the ▇▇▇▇▇ Name, and
promptly execute, acknowledge and deliver, or cause to be executed, acknowledged
and delivered, to Valhalla from time to time such supplements hereto and such
other instruments and documents as may be reasonably requested by Valhalla to
protect and preserve the Domain Name, Valhalla’s first priority security
interest therein, and/or Valhalla’s rights and remedies thereunder.
3. Representations
and Warranties. The Debtor hereby
represents and warrants to the Secured Parties that:
(a) Ownership
of Collateral. The Debtor is the
legal and beneficial owner of the Collateral (or, in the case of after-acquired
Collateral, at the time the Debtor acquires rights in the Collateral, will be
the legal and beneficial owner thereof). Except for the Security
Interest granted to the Secured Parties pursuant to this Agreement, the Debtor
has rights in or the power to transfer the Collateral free and clear of any
adverse Lien, security interest or encumbrance except as created by this
Security Interest, except for Permitted Liens and the First Priority Domain Name
Security Interest.
(b) Valid
Security Interest. Subject to the
First Priority Domain Name Security Interest, the Security Interest granted
pursuant to this Agreement will constitute a valid and continuing first priority
security interest in favor of the Secured Parties in the Collateral for which
perfection is governed by the UCC or filing with the United States Copyright
Office or United States Patent and Trademark Office. Such Security
Interest will be prior to all other Liens on the Collateral other then the First
Priority Domain Name Security Interest.
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(c) Organization
and Good Standing. The Debtor has
been duly incorporated, and is validly existing and in good standing, under the
laws of the State of Delaware.
(d) Location,
State of Organization and Name of the Debtor. The Debtor’s
state of organization is Delaware and the Debtor’s exact legal name as it
appears in the official filings in the State of Delaware is as set forth in the
first paragraph of this Agreement. The Debtor has only one
jurisdiction of organization.
(e) Location
of Equipment and Inventory. All Equipment and
Inventory are (i) located at ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇, (ii) in transit to such
locations or (iii) in transit to a third party purchaser which will become
obligated on a Receivable to the Debtor upon receipt. Except for
Equipment and Inventory referred to in clauses (ii) and (iii) of the preceding
sentence, the Debtor has exclusive possession and control of the Inventory and
Equipment in each case having a value in excess of $20,000.
(f) Delivery
of Items. The Company has
no (other than checks received in the ordinary course of business),
letter-of-credit rights, Electronic Chattel paper and Chattel Paper of the
Debtor as of the date hereof.
(g) Receivables. To
the best of the Debtor’s knowledge, each Receivable is genuine and enforceable
against the party obligated to pay the same (an “Account Debtor”) free
from any right of rescission, defense, setoff or discount.
(h)
Insurance. Each insurance
policy maintained by the Debtor is validly existing and is in full force and
effect. The Debtor is not in default in any material respect under
the provisions of any insurance policy, and there are no facts which, with the
giving of notice or passage of time (or both), would result in such a default
under any material provision of any such insurance policy.
(i)
This Agreement is effective to create a valid and continuing Lien upon the
Collateral. All action by the Debtor necessary or desirable to
protect and perfect such Lien on each item of the Collateral has been duly
taken.
4. Covenants. The Debtor
covenants and agrees with the Secured Parties that, from and after the date of
this Agreement until the Obligations are paid in full:
(a) Other
Liens. Except for the
Security Interest, the First Priority Domain Name Security Interest and the
Permitted Liens, the Debtor has rights in or the power to transfer the
Collateral and its title and will be able to do so hereafter free from any
adverse Lien, security interest or encumbrance, and the Debtor will defend the
Collateral against the claims and demands of all persons at any time claiming
the same or any interest therein, except as otherwise approved by the Requisite
Holders (as defined in subsection (h) below).
(b) Further
Documentation. At any time and
from time to time, upon the written request of the Secured Parties, and at
the sole expense of the Debtor, the Debtor will promptly and duly authenticate
and deliver such further instruments and documents and take such further action
as the Secured Parties may reasonably request for the
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purpose
of obtaining or preserving the full benefits of this Agreement and of the
rights and powers herein granted including, without limitation, filing any
financing or continuation statements under the UCC in effect with respect to the
Liens created hereby. The Debtor also hereby authorizes the Secured
Parties to file any such financing, amendment or continuation statement without
the authentication of the Debtor to the extent permitted by applicable
law. A reproduction of this Agreement shall be sufficient as a
financing statement (or as an exhibit to a financing statement on form UCC-1)
for filing in any jurisdiction.
(c) Indemnification. The Debtor agrees
to defend, indemnify and hold harmless the Secured Parties against any and all
liabilities, costs and expenses (including, without limitation, legal fees and
expenses) (“Liabilities”):
(i) with respect to, or resulting from, any delay in paying, any and all
excise, sales or other taxes which may be payable or determined to be payable
with respect to any of the Collateral, and (ii) with respect to, or
resulting from, any delay in complying with any law, rule, regulation or
order of any governmental authority applicable to any of the
Collateral.
(d) Maintenance
of Records. The Debtor will
keep and maintain at its own expense complete and satisfactory, in all material
respects, records
of the Collateral.
(e) Inspection
Rights. The Secured
Parties shall have full access during normal business hours, and upon reasonable
prior notice, to all the books, correspondence and other records of the
Debtor relating to its ownership of the Collateral. The Secured
Parties or their respective representatives may examine such records and
make photocopies or otherwise take extracts from such records.
(f) Compliance
with Laws, etc. The Debtor (i) will comply with all laws,
rules, regulations and orders of any governmental authority applicable to
any part of the
Collateral or to the operation of the Debtor’s business, the failure of which to
comply with will have a Material Adverse Effect on the Debtor, and (ii) shall
not use or permit any Collateral to be used in material violation of any
provision of the Purchase Agreements or the Notes, any law, rule or obligation
or order of any governmental authority, or any policy of insurance covering the
Collateral.
(g) Payment
of Obligations. The Debtor will
pay promptly when due all taxes, assessments and governmental charges or levies
imposed upon the Collateral or with respect to any of its income or profits
derived from the Collateral, as well as all claims of any kind (including,
without limitation, claims for labor, materials and supplies) against or with
respect to the Collateral.
(h) Limitation
on Liens on Collateral. Without the prior
written consent of the holders of at least a majority of the principal amount of
the Notes, in the aggregate (the “Requisite Holders”),
the Debtor will not create, incur or permit to exist, will defend the Collateral
against, and will take such other action as is necessary to remove,
any Lien or claim on or to the Collateral, other than the Security Interest and
Permitted Liens, and will defend the right, title and interest of the Secured
Parties in and to any of the Collateral against the claims and demands of all
other persons.
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(i)
Limitations
on Dispositions of Collateral and Mergers. Without the prior
written consent of the Requisite Holders, the Debtor will not: (a) sell,
transfer, lease, or otherwise dispose of any material portion of the Collateral,
or attempt, offer or contract to do so other than dispositions of Inventory in
the ordinary course of the Debtor’s business; provided, however that the
Debtor will be allowed to grant licenses to its products and related
documentation in the ordinary course of business and to establish or provide for
escrows of related intellectual property in connection therewith or (b) merge
with or into or consolidate with any other corporation, person or entity (other
than a wholly-owned subsidiary corporation or a merger effected exclusively for
the purpose of changing the domicile of the Debtor).
(j)
Further
Identification of Collateral. The Debtor will
furnish to the Secured Parties from time to time statements and schedules
further identifying and describing the Collateral and such other reports in
connection with the Collateral as the Secured Parties may reasonably
request.
(k) Notice of
Change of State of Incorporation. Without 30 days’
prior written notice to the Secured Parties, the Debtor shall not
(i) change the Debtor’s name, state of incorporation or organization,
organizational identification number or place of business (or, if the Debtor has
more than one place of business, its chief executive office), or the office in
which the Debtor’s records relating to Receivables are kept, (ii) keep
Collateral consisting of Chattel Paper and documents at any location other than
listed in Section 2(e) above, or (iii) keep Collateral consisting of
Equipment, Inventory or other goods at any location other than the locations
listed in Section 2(e) above or any other premises owned or leased by Debtor,
provided, however, Debtor notifies Secured Parties at least twenty-one (21) days
prior to locating such equipment or inventory at such other premises owned or
leased by Debtor and with respect to any collateral with a fair market value
greater with an aggregate market value greater than $100,000, and (iv) file any
UCC financing statements necessary to perfect the Secured Parties interests in
such collateral.
(l)
[Intentionally
Omitted]
(m) Collection
of Receivables. The Debtor shall
collect, enforce and receive delivery of the Receivables in accordance with past
practice.
(n) Insurance.
The Debtor shall (i) maintain and keep in force insurance of the types and
in amounts customarily carried from time to time during the term of this
Agreement in its lines of business, and (ii) deliver to the Secured Parties
from time to time, as the Secured Parties may request, schedules setting forth
all insurance then in effect. All proceeds of any property insurance paid after
the occurrence and during the continuance of an Event of Default, as defined in
the Purchase Agreements, as the case may be, shall be paid to the Secured
Parties to be held as collateral and applied as provided herein or, at the
election of the Secured Parties, returned to the Debtor.
(o) Electronic
Chattel Paper. If requested in
writing by the Requisite Holders, the Debtor shall take all
steps necessary to grant the Secured Parties control of all
Electronic Chattel Paper in accordance with the UCC and all “transferable
records” as defined in each of
the Uniform Electronic Transactions Act and the Electronic Signatures in Global
and National Commerce Act.
10
(p) Intellectual
Property Matters. The Debtor shall notify the Secured Parties
immediately if it knows or has reason to know (i) that any application or
registration relating to any of its Intellectual Property that is material to
the operation of its business may become abandoned or dedicated, or (ii) of any
adverse determination or development (including the institution of, or any such
determination or development in, any proceeding in the United States Patent and
Trademark Office, the United States Copyright Office or any court) regarding the
Debtor’s ownership of any Intellectual Property that is material to the
operation of its business, its right to register the same, or to keep and
maintain the same.
(q) Intellectual
Property Applications. In no event shall
the Debtor, either itself or through any agent, employee, licensee or designee,
file an application for the registration of any patent, trademark or copyright
with the United States Patent and Trademark Office, the United States Copyright
Office or any similar office or agency without giving the Secured Parties
written notice thereof, and, upon request of the Secured Parties, the Debtor
shall execute and deliver any and all security documents as the Secured Parties
may reasonably request to evidence the Secured Parties’ Lien on such
Intellectual Property and the general intangibles of the Debtor relating thereto
or represented thereby. The Debtor hereby authorizes the Secured
Parties to amend this Agreement (without any further action or consent from the
Debtor) to include any such patent, trademark or copyright as Collateral
hereunder.
(r)
Intellectual
Property Abandonment. The Debtor shall
take all actions commercially reasonably necessary to obtain, maintain and
pursue each Intellectual Property application material to the operation of its
business.
(s) Protection
of Intellectual Property. Unless otherwise
determined by the Requisite Holders, in the event that any of the Debtor’s
Intellectual Property is materially infringed upon, or misappropriated or
diluted by a third party, the Debtor shall notify the Secured Parties promptly
after the Debtor learns thereof, unless the Board of Directors of the Company
reasonably determines that such infringement, misappropriation or dilution is in
no way material to the conduct of the Debtor’s business or
operations. The Debtor shall, unless it shall reasonably
determine that such Intellectual Property is in no way material to the conduct
of its business or operations, promptly ▇▇▇ for, and seek recovery of any and
all damages resulting from such infringement, misappropriation or dilution, and
shall take such other actions as reasonably appropriate or desirable under the
circumstances to protect such Intellectual Property.
(t)
Limitation
on Filing of Financing Statements. The Debtor
acknowledges that it is not authorized to file any financing statement or
amendment or termination statement with respect to any financing statement
without the prior written consent of the Requisite Holders and agrees that it
will not do so without the prior written consent of the Requisite Holders,
subject to the Debtor’s rights under Section 9509(d)(2) of the
UCC.
5. Intentionally
Omitted.
11
6. Performance
by the Secured Parties of the Debtor’s Obligations. If the Debtor
fails to perform or comply with any of its agreements or covenants
contained in this Agreement and the Secured Parties perform or comply, or
otherwise causes performance or compliance, with such agreement or covenant in
accordance with the terms of this Agreement, then the expenses of the Secured
Parties incurred in connection with such performance or compliance shall be
payable by the Debtor to the Secured Parties on demand and shall constitute
Obligations secured
by this Agreement.
7. Remedies. If an Event of
Default (as defined in the Purchase Agreements) has occurred and is continuing,
the Secured Parties may exercise, in addition to all other rights and remedies
granted to them in this Agreement and in any other instrument or agreement
relating to the Obligations, all rights and remedies of a secured party under
the UCC. Without limiting the foregoing, the Secured Parties, without
demand of performance or other demand, presentment, protest, advertisement
or notice of any kind (except any notice required by law) to or upon the Debtor
or any other person (all of which demands, defenses, advertisements and notices
are hereby waived), may in such circumstances collect, receive, appropriate and
realize upon any or all of the Collateral, and/or may sell, lease, assign, give
an option or options to purchase, or otherwise dispose of and deliver any or all
of the Collateral (or contract to do any of the foregoing), in one or more
parcels at a public or private sale or sales, at any exchange, broker’s board or
office of any Secured Party or elsewhere upon such terms and conditions as the
Secured Parties may deem advisable, for cash or on credit or for future delivery
without assumption of any credit risk. The Secured Parties shall have
the right upon any such public sale or sales and, to the extent permitted by
law, upon any such private sale or sales, to purchase all or any part of the
Collateral so sold, free of any right or equity of redemption in the Debtor,
which right or equity is hereby waived or released. Subject to
Section 2(f), the Secured Parties shall apply the net proceeds of any such
collection, recovery, receipt, appropriation, realization or sale, after
deducting all reasonable expenses incurred therein or in connection with the
care or safekeeping of any of the Collateral or in any way relating to the
Collateral or the rights of the Secured Parties under this Agreement (including,
without limitation, reasonable attorneys’ fees and expenses) to the payment in
whole or in part of the Obligations, in such order as the Secured Parties may
elect, and only after such application and after the payment by the Secured
Parties of any other amount required by any provision of law, need the Secured
Parties account for the surplus, if any, to the Debtor. To the extent
permitted by applicable law, the Debtor waives all claims, damages and demands
it may acquire against the Secured Parties arising out of the exercise by the
Secured Parties of any of their respective rights hereunder. If any
notice of a proposed sale or other disposition of Collateral shall be required
by law, such notice shall be deemed reasonable and proper if given at least ten
days before such sale or other disposition. The Debtor shall remain
liable for any deficiency if the proceeds of any sale or other disposition of
the Collateral are insufficient to pay the Obligations and the fees and
disbursements of any attorneys employed by the Secured Parties to collect such
deficiency.
8. Limitation
on Duties Regarding Preservation of Collateral. Each Secured
Party’s sole duty with respect to the custody, safekeeping and preservation of
the Collateral, under Section 9207 of the UCC or otherwise, shall be to
deal with it in the same manner as such Secured Party deals with similar
property for its own account. Neither the Secured Parties nor any of
their respective directors, officers, employees or agents shall be liable for
failure to demand, collect or realize upon all or any part of the Collateral or
for any delay in doing so other than as a result of the gross negligence or
willful misconduct of the same or shall be under any
obligation to sell or otherwise dispose of any Collateral upon the request of
the Debtor or otherwise.
9. Powers
Coupled with an Interest. All
authorizations and agencies contained in this Agreement with respect to the
Collateral are irrevocable and are powers coupled with an interest.
10. No
Waiver; Cumulative Remedies. The Secured
Parties shall not by any act (except by a written instrument pursuant to
Section 12(a) hereof or as otherwise provided herein), delay, indulgence,
omission or otherwise be deemed to have waived any right or remedy hereunder or
to have acquiesced in any default under the Notes, as the case may be, or in any
breach of any of the terms and conditions of this Agreement. No
failure to exercise, nor any delay in exercising, on the part of the
Secured Parties, any right, power or privilege hereunder shall operate as a
waiver thereof. No single or partial exercise of any right, power or
privilege hereunder shall preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. A waiver by the
Secured Parties of any right or remedy under this Agreement on any one occasion
shall not be construed as a bar to any right or remedy which the Secured Parties
would otherwise have on any subsequent occasion. The rights and
remedies provided in this Agreement are cumulative, may be exercised singly or
concurrently and are not exclusive of any rights or remedies provided by
law.
12
11. Termination
of Security Interest. Upon satisfaction
of the Debtor’s obligations pursuant to the Notes, as the case may be, or
conversion of all of the Notes, as the case may be, into shares of the Debtor’s
equity securities pursuant to the terms of the Notes, as the case may be, the
security interest granted herein shall terminate and all rights to the
Collateral shall revert to the Debtor. Upon any such termination, the
Secured Parties shall authenticate and deliver to the Debtor such documents as
the Debtor may reasonably request to evidence such termination.
12. Miscellaneous.
(a) Amendments
and Waivers. Any term of this
Agreement may be amended or waived with the written consent of the Debtor and
the Requisite Holders or their respective successors and assigns. Any
amendment or waiver effected in accordance with this Section 12(a) shall be
binding upon the Parties and their respective successors and
assigns.
(b) Transfer;
Successors and Assigns. The terms and conditions
of this Agreement shall be binding upon the Debtor and its successors and
assigns, as well as all persons who become bound as a debtor to this Agreement
and inure to the benefit of the Secured Parties and its successors and
assigns. Nothing in this Agreement, express or implied, is intended
to confer upon any party other than the Parties hereto or their respective
successors and assigns any rights, remedies, obligations or liabilities
under or by reason of this Agreement, except as expressly provided in this
Agreement.
(c) Governing
Law. This Agreement
and all acts and transactions pursuant hereto and the rights and obligations of
the Parties hereto shall be governed, construed and interpreted in accordance
with the laws of the State of Florida, without giving effect to principles of
conflicts of law.
(d) Counterparts. This Agreement
may be executed in two or more counterparts, each of which shall be deemed an
original and all of which together shall constitute one instrument.
(e) Titles
and Subtitles. The titles and
subtitles used in this Agreement are used for convenience only and are not
to be considered in construing or interpreting this Agreement.
(f) Notices. Any notice
required or permitted by this Agreement shall be to the addresses and pursuant
to the Procedure set forth in the Purchase Agreements, as the case may
be.
(g) Severability. If one or more
provisions of this Agreement are held to be unenforceable under applicable law,
the parties agree to renegotiate such provision in good faith, in order to
maintain the economic position enjoyed by each party as close as possible to
that under the provision rendered unenforceable. In the event that
the parties cannot reach a mutually agreeable and enforceable replacement for
such provision, then (i) such provision shall be excluded from this
Agreement, (ii) the balance of the Agreement shall be interpreted as if
such provision were so excluded and (iii) the balance of the Agreement
shall be enforceable in accordance with its terms.
(h)
Entire
Agreement. This Agreement,
and the documents referred to herein constitute the entire agreement between the
parties hereto pertaining to the subject matter hereof, and any and all other
written or oral agreements existing between the parties hereto concerning such
subject matter are expressly canceled.
(i)
Additional
Holders. In the event that after the date hereof Exhibit A of either
of the Purchase Agreements, as the case may be, is amended or modified to
include additional persons or entities thereon, the Debtor is hereby authorized
to amend Exhibit
A hereto to reflect such additional persons or entities without any
action of the Secured Parties.
[Signature
Page Follows]
13
The
Debtor and the Secured Parties have caused this Agreement to be duly executed
and delivered as of the date first above written.
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DEBTOR:
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▇▇▇▇▇.▇▇▇
GROUP, INC.
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By.
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Name:
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Title:
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Address:
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▇▇▇▇▇.▇▇▇
HOLDINGS, INC.
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By.
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Name:
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Title:
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Address:
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INSIGHT
CAPITAL MANAGEMENT, LLC
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By.
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Name:
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Title:
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Address:
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SECURED
PARTIES:
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By.
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Name:
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Title:
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Address:
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Facsimile
Number:
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