EXECUTION COPY
SECURITY AGREEMENT
SECURITY AGREEMENT (this "Agreement"), dated April 2, 2004 made by CADENCE
RESOURCES Corporation, a Utah corporation (the "GRANTOR"), in favor of
SMITHFIELD FIDUCIARY LLC, a Cayman Islands limited liability company, in its
capacity as collateral agent (in such capacity, the "COLLATERAL AGENT") for the
"Purchasers" (as defined below) party to the Securities Purchase Agreement,
dated as of even date herewith (such agreement, as amended, restated or
otherwise modified from time to time, being hereinafter referred to as the
"SECURITIES PURCHASE AGREEMENT").
W I T N E S S ET H:
WHEREAS, the Grantor and each party listed as a "Purchaser" on the
signature pages to the Securities Purchase Agreement (collectively, the
"PURCHASERS") are parties to the Securities Purchase Agreement, pursuant to
which the Grantor shall be required to sell, and the Purchasers shall purchase
or have the right to purchase, the "Securities", including (without limitation)
the "Senior Secured Notes" (as defined therein);
WHEREAS, it is a condition precedent to the Purchasers entering into the
Securities Purchase Agreement that the Grantor shall have executed and delivered
to the Collateral Agent this Security Agreement providing for the grant to the
Collateral Agent for the benefit of the Purchasers of a security interest in all
personal property of the Grantor to secure all of the Grantor's obligations
under the Securities Purchase Agreement and the "Senior Secured Notes" (as
defined therein) issued pursuant thereto (as such Senior Secured Notes may be
amended, restated or otherwise modified from time to time, collectively, the
"NOTES"); and
NOW, THEREFORE, in consideration of the premises and the agreements herein
and in order to induce the Purchasers to perform under the Securities Purchase
Agreement, the Grantor agrees with the Collateral Agent, for the benefit of the
Purchasers, as follows:
SECTION 1. Definitions.
(a) Reference is hereby made to the Securities Purchase Agreement
and the Notes for a statement of the terms thereof. All terms used in this
Agreement and the recitals hereto which are defined in the Securities Purchase
Agreement, the Notes or in Article 9 of the Uniform Commercial Code (the "CODE")
as in effect from time to time in the State of New York and which are not
otherwise defined herein shall have the same meanings herein as set forth
therein; provided that terms used herein which are defined in the Code as in
effect in the State of New York on the date hereof shall continue to have the
same meaning notwithstanding any replacement or amendment of such statute except
as the Collateral Agent may otherwise determine.
(b) The following terms shall have the respective meanings provided
for in the Code: "Accounts", "Cash Proceeds", "Chattel Paper", "Commercial Tort
Claim", "Commodity Account", "Commodity Contracts", "Deposit Account",
"Documents", "Equipment", "Fixtures", "General Intangibles", "Goods",
"Instruments", "Inventory", "Investment Property", "Letter-of-Credit Rights",
"Noncash Proceeds", "Payment Intangibles", "Proceeds", "Promissory Notes",
"Record", "Security Account", "Software", and "Supporting Obligations".
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(c) As used in this Agreement, the following terms shall have the
respective meanings indicated below, such meanings to be applicable equally to
both the singular and plural forms of such terms:
"COPYRIGHT LICENSES" means all licenses, contracts or other agreements,
whether written or oral, naming the Grantor as licensee or licensor and
providing for the grant of any right to use or sell any works covered by any
copyright (including, without limitation, all Copyright Licenses set forth in
Schedule II hereto).
"COPYRIGHTS" means all domestic and foreign copyrights, whether registered
or not, including, without limitation, all copyright rights throughout the
universe (whether now or hereafter arising) in any and all media (whether now or
hereafter developed), in and to all original works of authorship fixed in any
tangible medium of expression, acquired or used by the Grantor (including,
without limitation, all copyrights described in Schedule II hereto), all
applications, registrations and recordings thereof (including, without
limitation, applications, registrations and recordings in the United States
Copyright Office or in any similar office or agency of the United States or any
other country or any political subdivision thereof), and all reissues,
divisions, continuations, continuations in part and extensions or renewals
thereof.
"DEFAULT" shall have the meaning set forth in the Notes.
"INSOLVENCY PROCEEDING" means any proceeding commenced by or against any
Person under any provision of the Bankruptcy Code (Chapter 11 of Title 11 of the
United States Code) or under any other bankruptcy or insolvency law, assignments
for the benefit of creditors, formal or informal moratoria, compositions, or
extensions generally with creditors, or proceedings seeking reorganization,
arrangement, or other similar relief.
"INTELLECTUAL PROPERTY" means the Copyrights, Trademarks and Patents.
"LICENSES" means the Copyright Licenses, the Trademark Licenses and the
Patent Licenses.
"LIEN" means any mortgage, deed of trust, pledge, lien (statutory or
otherwise), security interest, charge or other encumbrance or security or
preferential arrangement of any nature, including, without limitation, any
conditional sale or title retention arrangement, any capitalized lease and any
assignment, deposit arrangement or financing lease intended as, or having the
effect of, security.
"PATENT LICENSES" means all licenses, contracts or other agreements,
whether written or oral, naming the Grantor as licensee or licensor and
providing for the grant of any right to manufacture, use or sell any invention
covered by any Patent (including, without limitation, all Patent Licenses set
forth in Schedule II hereto).
"PATENTS" means all domestic and foreign letters patent, design patents,
utility patents, industrial designs, inventions, trade secrets, ideas, concepts,
methods, techniques, processes, proprietary information, technology, know-how,
formulae, rights of publicity and other general intangibles of like nature, now
existing or hereafter acquired (including, without limitation, all domestic and
foreign letters patent, design patents, utility patents, industrial designs,
inventions, trade secrets, ideas, concepts, methods, techniques, processes,
proprietary information, technology, know-how and formulae described in Schedule
II hereto), all applications, registrations and recordings thereof (including,
without limitation, applications, registrations and recordings in the United
States Patent and Trademark Office, or in any similar office or agency of the
United States or any other country or any political subdivision thereof), and
all reissues, divisions, continuations, continuations in part and extensions or
renewals thereof.
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"TRADEMARK LICENSES" means all licenses, contracts or other agreements,
whether written or oral, naming the Grantor as licensor or licensee and
providing for the grant of any right concerning any Trademark, together with any
goodwill connected with and symbolized by any such trademark licenses, contracts
or agreements and the right to prepare for sale or lease and sell or lease any
and all Inventory now or hereafter owned by the Grantor and now or hereafter
covered by such licenses (including, without limitation, all Trademark Licenses
described in Schedule II hereto).
"TRADEMARKS" means all domestic and foreign trademarks, service marks,
collective marks, certification marks, trade names, business names, d/b/a's,
Internet domain names, trade styles, designs, logos and other source or business
identifiers and all general intangibles of like nature, now or hereafter owned,
adopted, acquired or used by the Grantor (including, without limitation, all
domestic and foreign trademarks, service marks, collective marks, certification
marks, trade names, business names, d/b/a's, Internet domain names, trade
styles, designs, logos and other source or business identifiers described in
Schedule II hereto), all applications, registrations and recordings thereof
(including, without limitation, applications, registrations and recordings 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), and all reissues, extensions or renewals thereof, together
with all goodwill of the business symbolized by such marks and all customer
lists, formulae and other Records of the Grantor relating to the distribution of
products and services in connection with which any of such marks are used.
SECTION 2. Grant of Security Interest. As collateral security for all of
the "Obligations" (as defined in Section 3 hereof), the Grantor hereby pledges
and assigns to the Collateral Agent for the benefit of the Purchasers, and
grants to the Collateral Agent for the benefit of the Purchasers a continuing
security interest in, all personal property of the Grantor, wherever located and
whether now or hereafter existing and whether now owned or hereafter acquired,
of every kind and description, tangible or intangible (collectively, the
"COLLATERAL"), including, without limitation, the following:
(a) all Accounts;
(b) all Chattel Paper (whether tangible or electronic);
(c) the Commercial Tort Claims specified on Schedule VI hereto;
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(d) all Deposit Accounts, all cash, and all other property from time to
time deposited therein and the monies and property in the possession or under
the control of any Agent or Purchaser or any affiliate, representative, agent or
correspondent of such Agent or Purchaser;
(e) all Documents;
(f) all Equipment;
(g) all Fixtures;
(h) all General Intangibles (including, without limitation, all Payment
Intangibles);
(i) all Goods;
(j) all Instruments (including, without limitation, Promissory Notes);
(k) all Inventory;
(l) all Investment Property;
(m) all Copyrights, Patents and Trademarks, and all Licenses;
(n) all Letter-of-Credit Rights;
(o) all Supporting Obligations;
(p) all other tangible and intangible personal property of the Grantor
(whether or not subject to the Code), including, without limitation, all bank
and other accounts and all cash and all investments therein, all proceeds,
products, offspring, accessions, rents, profits, income, benefits, substitutions
and replacements of and to any of the property of the Grantor described in the
preceding clauses of this Section 2 (including, without limitation, any proceeds
of insurance thereon and all causes of action, claims and warranties now or
hereafter held by the Grantor in respect of any of the items listed above), and
all books, correspondence, files and other Records, including, without
limitation, all tapes, desks, cards, Software, data and computer programs in the
possession or under the control of the Grantor or any other Person from time to
time acting for the Grantor that at any time evidence or contain information
relating to any of the property described in the preceding clauses of this
Section 2 or are otherwise necessary or helpful in the collection or realization
thereof; and
(q) all Proceeds, including all Cash Proceeds and Noncash Proceeds, and
products of any and all of the foregoing Collateral;
in each case howsoever the Grantor's interest therein may arise or appear
(whether by ownership, security interest, claim or otherwise).
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SECTION 3. Security for Obligations. The security interest created hereby
in the Collateral constitutes continuing collateral security for all of the
following obligations, whether now existing or hereafter incurred (collectively,
the "OBLIGATIONS"):
(a) the payment by the Grantor, as and when due and payable (by scheduled
maturity, required prepayment, acceleration, demand or otherwise), of all
amounts from time to time owing by it in respect of the Securities Purchase
Agreement, the Notes and the other "TRANSACTION DOCUMENTS" (as defined in the
Securities Purchase Agreement), including, without limitation, (i) all principal
of and interest on the Notes (including, without limitation, all interest that
accrues after the commencement of any Insolvency Proceeding of the Grantor,
whether or not the payment of such interest is unenforceable or is not allowable
due to the existence of such Insolvency Proceeding), and (i) all fees,
commissions, expense reimbursements, indemnifications and all other amounts due
or to become due under any of the Transaction Documents; and
(b) the due performance and observance by the Grantor of all of its other
obligations from time to time existing in respect of any of the Transaction
Documents for so long as the Notes are outstanding.
SECTION 4. Representations and Warranties. The Grantor represents and
warrants as follows:
(a) Schedule I hereto sets forth (i) the exact legal name of the Grantor,
and (ii) the organizational identification number of the Grantor or states that
no such organizational identification number exists.
(b) There is no pending or written notice threatening any action, suit,
proceeding or claim affecting the Grantor before any governmental authority or
any arbitrator, or any order, judgment or award by any governmental authority or
arbitrator, that may adversely affect the grant by the Grantor, or the
perfection, of the security interest purported to be created hereby in the
Collateral, or the exercise by the Collateral Agent of any of its rights or
remedies hereunder.
(c) All Federal, state and local tax returns and other reports required by
applicable law to be filed by the Grantor have been filed, or extensions have
been obtained, and all taxes, assessments and other governmental charges imposed
upon the Grantor or any property of the Grantor (including, without limitation,
all federal income and social security taxes on employees' wages) and which have
become due and payable on or prior to the date hereof have been paid, except to
the extent contested in good faith by proper proceedings which stay the
imposition of any penalty, fine or Lien resulting from the non-payment thereof
and with respect to which adequate reserves have been set aside for the payment
thereof in accordance with generally accepted accounting principles consistently
applied ("GAAP").
(d) All Equipment, Fixtures, Goods and Inventory now existing are, and all
Equipment, Fixtures, Goods and Inventory hereafter existing will be, located
and/or based at the addresses specified therefor in Schedule III hereto, except
that the Grantor will give the
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Collateral Agent not less than 30 days' prior written notice of any change of
the location of any such Collateral, other than to locations set forth on
Schedule III and with respect to which the Collateral Agent has filed financing
statements and otherwise fully perfected its Liens thereon. The Grantor's chief
place of business and chief executive office, the place where the Grantor keeps
its Records concerning Accounts and all originals of all Chattel Paper are
located at the addresses specified therefor in Schedule III hereto. None of the
Accounts is evidenced by Promissory Notes or other Instruments. Set forth in
Schedule IV hereto is a complete and accurate list, as of the date of this
Agreement, of each Deposit Account, Securities Account and Commodities Account
of the Grantor, together with the name and address of each institution at which
each such Account is maintained, the account number for each such Account and a
description of the purpose of each such Account. Set forth in Schedule II hereto
is a complete and correct list of each trade name used by the Grantor and the
name of, and each trade name used by, each person from which the Grantor has
acquired any substantial part of the Collateral.
(e) The Grantor has delivered to the Collateral Agent complete and correct
copies of each License described in Schedule II hereto, including all schedules
and exhibits thereto, which represents all of the Licenses existing on the date
of this Agreement. Each such License sets forth the entire agreement and
understanding of the parties thereto relating to the subject matter thereof, and
there are no other agreements, arrangements or understandings, written or oral,
relating to the matters covered thereby or the rights of the Grantor or any of
its affiliates in respect thereof. Each material License now existing is, and
any material License entered into in the future will be, the legal, valid and
binding obligation of the parties thereto, enforceable against such parties in
accordance with its terms. No default under any material License by any such
party has occurred, nor does any defense, offset, deduction or counterclaim
exist thereunder in favor of any such party.
(f) The Grantor owns and controls, or otherwise possesses adequate rights
to use, all Trademarks, Patents and Copyrights, which are the only trademarks,
patents, copyrights, inventions, trade secrets, proprietary information and
technology, know-how, formulae, rights of publicity necessary to conduct its
business in substantially the same manner as conducted as of the date hereof.
Schedule II hereto sets forth a true and complete list of all registered
copyrights, issued patents, Trademarks, and Licenses annually owned or used by
the Grantor as of the date hereof. To the best knowledge of Grantor, all such
Intellectual Property is subsisting and in full force and effect, has not been
adjudged invalid or unenforceable, is valid and enforceable and has not been
abandoned in whole or in part. Except as set forth in Schedule II, no such
Intellectual Property is the subject of any licensing or franchising agreement.
The Grantor has no knowledge of any conflict with the rights of others to any
Intellectual Property and, to the best knowledge of the Grantor, the Grantor is
not now infringing or in conflict with any such rights of others in any material
respect, and to the best knowledge of the Grantor, no other Person is now
infringing or in conflict in any material respect with any such properties,
assets and rights owned or used by the Grantor. The Grantor has not received any
notice that it is violating or has violated the trademarks, patents, copyrights,
inventions, trade secrets, proprietary information and technology, know-how,
formulae, rights of publicity or other intellectual property rights of any third
party.
(g) The Grantor is and will be at all times the sole and exclusive owner
of, or otherwise has and will have adequate rights in, the Collateral free and
clear of any Lien except for (i) the Lien created by this Agreement, and (ii)
purchase money Liens on Collateral acquired with the proceeds of and securing
purchase money obligations in an aggregate amount not exceeding $250,000 at any
time outstanding (collectively, the "PERMITTED LIENS"). No effective financing
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statement or other instrument similar in effect covering all or any part of the
Collateral is on file in any recording or filing office except (A) such as may
have been filed in favor of the Collateral Agent relating to this Agreement and
(B) such as may have been filed to perfect or protect any security interests or
Liens permitted by the Securities Purchase Agreement.
(h) The exercise by the Collateral Agent of any of its rights and remedies
hereunder will not contravene any law or any contractual restriction binding on
or otherwise affecting the Grantor or any of its properties and will not result
in or require the creation of any Lien, upon or with respect to any of its
properties.
(i) No authorization or approval or other action by, and no notice to or
filing with, any governmental authority or other regulatory body, or any other
Person, is required for (i) the grant by the Grantor, or the perfection, of the
security interest purported to be created hereby in the Collateral, or (ii) the
exercise by the Collateral Agent of any of its rights and remedies hereunder,
except (A) for the filing under the Uniform Commercial Code as in effect in the
applicable jurisdiction of the financing statements, all of which financing
statements, have been duly filed and are in full force and effect, (B) with
respect to the perfection of the security interest created hereby in the
Intellectual Property, for the recording of the appropriate Assignment for
Security, substantially in the form of Exhibit A hereto, as applicable, in the
United States Patent and Trademark Office or the United States Copyright Office,
as applicable, and (C) with respect to the perfection of the security interest
created hereby in foreign Intellectual Property and Licenses, for registrations
and filings in jurisdictions located outside of the United States and covering
rights in such jurisdictions relating to the Intellectual Property and Licenses.
(j) This Agreement creates in favor of the Collateral Agent a legal, valid
and enforceable security interest in the Collateral, as security for the
Obligations. The Collateral Agent's having possession of all Instruments and
cash constituting Collateral from time to time, the recording of the appropriate
Assignment for Security executed pursuant hereto in the United States Patent and
Trademark Office and the United States Copyright Office, as applicable, and the
filing of the financing statements and the other filings and recordings, as
applicable, described in Schedule V hereto and, with respect to the Intellectual
Property hereafter existing and not covered by an appropriate Assignment for
Security, the recording in the United States Patent and Trademark Office or the
United States Copyright Office, as applicable, of appropriate instruments of
assignment, result in the perfection of such security interests. Such security
interests are, or in the case of Collateral in which the Grantor obtains rights
after the date hereof, will be, perfected, first priority security interests,
subject only to the Permitted Liens and the recording of such instruments of
assignment. Such recordings and filings and all other action necessary or
desirable to perfect and protect such security interest have been duly taken,
except for the Collateral Agent's having possession of Instruments and cash
constituting Collateral after the date hereof and the other filings and
recordations described in Section 4(l) hereof.
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(k) As of the date hereof, the Grantor does not hold any Commercial Tort
Claims nor is aware of any such pending claims, except for such claims described
in Schedule VI.
SECTION 5. Covenants as to the Collateral. So long as any of the
Obligations shall remain outstanding, unless the Collateral Agent shall
otherwise consent in writing:
(a) Further Assurances. The Grantor will at its expense, at any time and
from time to time, promptly execute and deliver all further instruments and
documents and take all further action that the Collateral Agent may reasonably
request in order to: (i) perfect and protect the security interest purported to
be created hereby; (ii) enable the Collateral Agent to exercise and enforce its
rights and remedies hereunder in respect of the Collateral; or (iii) otherwise
effect the purposes of this Agreement, including, without limitation: (A)
marking conspicuously all Chattel Paper and each License and, at the request of
the Collateral Agent, each of its Records pertaining to the Collateral with a
legend, in form and substance satisfactory to the Collateral Agent, indicating
that such Chattel Paper, License or Collateral is subject to the security
interest created hereby, (B) if any Account shall be evidenced by Promissory
Notes or other Instruments or Chattel Paper, delivering and pledging to the
Collateral Agent hereunder such Promissory Notes, Instruments or Chattel Paper,
duly endorsed and accompanied by executed instruments of transfer or assignment,
all in form and substance satisfactory to the Collateral Agent, (C) executing
and filing (to the extent, if any, that the Grantor's signature is required
thereon) or authenticating the filing of, such financing or continuation
statements, or amendments thereto, as may be necessary or desirable or that the
Collateral Agent may request in order to perfect and preserve the security
interest purported to be created hereby, (D) furnishing to the Collateral Agent
from time to time statements and schedules further identifying and describing
the Collateral and such other reports in connection with the Collateral in each
case as the Collateral Agent may reasonably request, all in reasonable detail,
(E) if any Collateral shall be in the possession of a third party, notifying
such Person of the Collateral Agent's security interest created hereby and
obtaining a written acknowledgment from such Person that such Person holds
possession of the Collateral for the benefit of the Collateral Agent, which such
written acknowledgement shall be in form and substance satisfactory to the
Collateral Agent, (F) if at any time after the date hereof, the Grantor acquires
or holds any Commercial Tort Claim, promptly notifying the Collateral Agent in a
writing signed by the Grantor setting forth a brief description of such
Commercial Tort Claim and granting to the Collateral Agent a security interest
therein and in the proceeds thereof, which writing shall incorporate the
provisions hereof and shall be in form and substance satisfactory to the
Collateral Agent, (G) upon the acquisition after the date hereof by the Grantor
of any motor vehicle or other Equipment subject to a certificate of title or
ownership (other than a Motor Vehicle or Equipment that is subject to a purchase
money security interest), causing the Collateral Agent to be listed as the
lienholder on such certificate of title or ownership and delivering evidence of
the same to the Collateral Agent in accordance with the Securities Purchase
Agreement; and (H) taking all actions required by any earlier versions of the
Uniform Commercial Code or by other law, as applicable, in any relevant Uniform
Commercial Code jurisdiction, or by other law as applicable in any foreign
jurisdiction.
(b) Location of Equipment and Inventory. The Grantor will keep the
Equipment and Inventory at the locations specified therefor in Section 4(g)
hereof or, upon not less than thirty (30) days' prior written notice to the
Collateral Agent accompanied by a new Schedule V hereto indicating each new
location of the Equipment and Inventory, at such other locations in the United
States.
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(c) Condition of Equipment. The Grantor will maintain or cause the
Equipment (necessary or useful to its business) to be maintained and preserved
in good condition, repair and working order, ordinary wear and tear excepted,
and will forthwith, or in the case of any loss or damage to any Equipment within
a commercially reasonable time after the occurrence thereof, make or cause to be
made all repairs, replacements and other improvements in connection therewith
which are necessary or desirable, consistent with past practice, or which the
Collateral Agent may request to such end. The Grantor will promptly furnish to
the Collateral Agent a statement describing in reasonable detail any loss or
damage in excess of $250,000 to any Equipment.
(d) Taxes, Etc. The Grantor agrees to pay promptly when due all property
and other taxes, assessments and governmental charges or levies imposed upon,
and all claims (including claims for labor, materials and supplies) against, the
Equipment and Inventory, except to the extent the validity thereof is being
contested in good faith by proper proceedings which stay the imposition of any
penalty, fine or Lien resulting from the non-payment thereof and with respect to
which adequate reserves in accordance with GAAP have been set aside for the
payment thereof.
(e) Insurance.
(i) The Grantor will, at its own expense, maintain insurance
(including, without limitation, commercial general liability and property
insurance) with respect to the Equipment and Inventory in such amounts, against
such risks, in such form and with responsible and reputable insurance companies
or associations as is required by any governmental authority having jurisdiction
with respect thereto or as is carried generally in accordance with sound
business practice by companies in similar businesses similarly situated and in
any event, in amount, adequacy and scope reasonably satisfactory to the
Collateral Agent. Each policy for liability insurance shall provide for all
losses to be paid on behalf of the Collateral Agent and the Grantor as their
respective interests may appear, and each policy for property damage insurance
shall provide for all losses to be adjusted with, and paid directly to, the
Collateral Agent. Each such policy shall in addition (A) name the Collateral
Agent as an additional insured party thereunder (without any representation or
warranty by or obligation upon the Collateral Agent) as their interests may
appear, (B) contain an agreement by the insurer that any loss thereunder shall
be payable to the Collateral Agent on its own account notwithstanding any
action, inaction or breach of representation or warranty by the Grantor, (C)
provide that there shall be no recourse against the Collateral Agent for payment
of premiums or other amounts with respect thereto, and (D) provide that at least
30 days' prior written notice of cancellation, lapse, expiration or other
adverse change shall be given to the Collateral Agent by the insurer. The
Grantor will, if so requested by the Collateral Agent, deliver to the Collateral
Agent original or duplicate policies of such insurance and, as often as the
Collateral Agent may reasonably request, a report of a reputable insurance
broker with respect to such insurance. The Grantor will also, at the request of
the Collateral Agent, execute and deliver instruments of assignment of such
insurance policies and cause the respective insurers to acknowledge notice of
such assignment.
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(ii) Reimbursement under any liability insurance maintained by the
Grantor pursuant to this Section 5(e) may be paid directly to the Person who
shall have incurred liability covered by such insurance. In the case of any loss
involving damage to Equipment or Inventory, any proceeds of insurance maintained
by a Grantor pursuant to this Section 5(e) shall be paid to the Collateral Agent
(except as to which paragraph (iii) of this Section 5(e) is not applicable), the
Grantor will make or cause to be made the necessary repairs to or replacements
of such Equipment or Inventory, and any proceeds of insurance maintained by the
Grantor pursuant to this Section 5(e) shall be paid by the Collateral Agent to
the Grantor as reimbursement for the costs of such repairs or replacements.
(iii) All insurance payments in respect of such Equipment or
Inventory shall be paid to the Collateral Agent and applied as specified in
Section 7(b) hereof.
(f) Provisions Concerning the Accounts and the Licenses.
(i) The Grantor will (A) give the Collateral Agent at least 30 days'
prior written notice of any change in the Grantor's name, identity or
organizational structure, (B) maintain its jurisdiction of incorporation as set
forth in Section 4(b) hereto, (C) immediately notify the Collateral Agent upon
obtaining an organizational identification number, if on the date hereof the
Grantor did not have such identification number, and (D) keep adequate records
concerning the Accounts and Chattel Paper and permit representatives of the
Collateral Agent during normal business hours on reasonable notice to the
Grantor, to inspect and make abstracts from such Records and Chattel Paper.
(ii) The Grantor will, except as otherwise provided in this
subsection (f), continue to collect, at its own expense, all amounts due or to
become due under the Accounts. In connection with such collections, the Grantor
may (and, at the Collateral Agent's direction, will) take such action as the
Grantor or the Collateral Agent may deem necessary or advisable to enforce
collection or performance of the Accounts; provided, however, that the
Collateral Agent shall have the right at any time, upon the occurrence and
during the continuance of a Default, to notify the account debtors or obligors
under any Accounts of the assignment of such Accounts to the Collateral Agent
and to direct such account debtors or obligors to make payment of all amounts
due or to become due to the Grantor thereunder directly to the Collateral Agent
or its designated agent and, upon such notification and at the expense of the
Grantor and to the extent permitted by law, to enforce collection of any such
Accounts and to adjust, settle or compromise the amount or payment thereof, in
the same manner and to the same extent as the Grantor might have done. After
receipt by the Grantor of a notice from the Collateral Agent that the Collateral
Agent has notified, intends to notify, or has enforced or intends to enforce a
Grantor's rights against the account debtors or obligors under any Accounts as
referred to in the proviso to the immediately preceding sentence, (A) all
amounts and proceeds (including Instruments) received by the Grantor in respect
of the Accounts shall be received in trust for the benefit of the Collateral
Agent hereunder, shall be segregated from other funds of the Grantor and shall
be forthwith paid over to the Collateral Agent in the same form as so received
(with any necessary endorsement) to be held as cash collateral and either (i)
credited to the loan account so long as no Default shall have occurred and be
continuing or (ii) if a Default shall have occurred and be continuing, applied
as specified in Section 7(b) hereof, and (B) the Grantor will not adjust, settle
or compromise the amount or payment of any Account or release
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wholly or partly any account debtor or obligor thereof or allow any credit or
discount thereon. In addition, upon the occurrence and during the continuance of
a Default, the Collateral Agent may (in its sole and absolute discretion) direct
any or all of the banks and financial institutions with which the Grantor either
maintains a Deposit Account or a lockbox or deposits the proceeds of any
Accounts to send immediately to the Collateral Agent by wire transfer (to such
account as the Collateral Agent shall specify, or in such other manner as the
Collateral Agent shall direct) all or a portion of such securities, cash,
investments and other items held by such institution. Any such securities, cash,
investments and other items so received by the Collateral Agent shall (in the
sole and absolute discretion of the Collateral Agent) be held as additional
Collateral for the Obligations or distributed in accordance with Section 7
hereof.
(iii) Upon the occurrence and during the continuance of any breach
or default under any material License referred to in Schedule II hereto by any
party thereto other than the Grantor, the Grantor will, promptly after obtaining
knowledge thereof, give the Collateral Agent written notice of the nature and
duration thereof, specifying what action, if any, it has taken and proposes to
take with respect thereto and thereafter will take reasonable steps to protect
and preserve its rights and remedies in respect of such breach or default, or
will obtain or acquire an appropriate substitute License.
(iv) The Grantor will, at its expense, promptly deliver to the
Collateral Agent a copy of each notice or other communication received by it by
which any other party to any material License referred to in Schedule II hereto
purports to exercise any of its rights or affect any of its obligations
thereunder, together with a copy of any reply by the Grantor thereto.
(v) The Grantor will exercise promptly and diligently each and every
right which it may have under each material License (other than any right of
termination) and will duly perform and observe in all respects all of its
obligations under each material License and will take all action reasonably
necessary to maintain such Licenses in full force and effect. The Grantor will
not, without the prior written consent of the Collateral Agent, cancel,
terminate, amend or otherwise modify in any respect, or waive any provision of,
any material License referred to in Schedule II hereto.
(g) Transfers and Other Liens.
(i) The Grantor will not sell, assign (by operation of law or
otherwise), lease, license, exchange or otherwise transfer or dispose of any of
the Collateral, except (A) Inventory in the ordinary course of business, and (B)
worn-out or obsolete assets not necessary to the business.
(ii) The Grantor will not create, suffer to exist or grant any Lien
upon or with respect to any Collateral other than a Permitted Lien.
(h) Intellectual Property.
(i) If applicable, the Grantor has duly executed and delivered the
applicable Assignment for Security in the form attached hereto as Exhibit A. The
Grantor (either itself or through licensees) will, and will cause each licensee
thereof to, take all action necessary to maintain all of the Intellectual
Property in full force and effect, including, without limitation, using
11
the proper statutory notices and markings and using the Trademarks on each
applicable trademark class of goods in order to so maintain the Trademarks in
full force and free from any claim of abandonment for non-use, and the Grantor
will not (nor permit any licensee thereof to) do any act or knowingly omit to do
any act whereby any Intellectual Property may become invalidated; provided,
however, that so long as no Default has occurred and is continuing, the Grantor
shall not have an obligation to use or to maintain any Intellectual Property (A)
that relates solely to any product or work, that has been, or is in the process
of being, discontinued, abandoned or terminated, (B) that is being replaced with
Intellectual Property substantially similar to the Intellectual Property that
may be abandoned or otherwise become invalid, so long as the failure to use or
maintain such Intellectual Property does not materially adversely affect the
validity of such replacement Intellectual Property and so long as such
replacement Intellectual Property is subject to the Lien created by this
Agreement or (C) that is substantially the same as another Intellectual Property
that is in full force, so long the failure to use or maintain such Intellectual
Property does not materially adversely affect the validity of such replacement
Intellectual Property and so long as such other Intellectual Property is subject
to the Lien and security interest created by this Agreement. The Grantor will
cause to be taken all necessary steps in any proceeding before the United States
Patent and Trademark Office and the United States Copyright Office or any
similar office or agency in any other country or political subdivision thereof
to maintain each registration of the Intellectual Property (other than the
Intellectual Property described in the proviso to the immediately preceding
sentence), including, without limitation, filing of renewals, affidavits of use,
affidavits of incontestability and opposition, interference and cancellation
proceedings and payment of maintenance fees, filing fees, taxes or other
governmental fees. If any Intellectual Property (other than Intellectual
Property described in the proviso to the first sentence of subsection (i) of
this clause (h)) is infringed, misappropriated, diluted or otherwise violated in
any material respect by a third party, the Grantor shall (x) upon learning of
such infringement, misappropriation, dilution or other violation, promptly
notify the Collateral Agent and (y) to the extent the Grantor shall deem
appropriate under the circumstances, promptly ▇▇▇ for infringement,
misappropriation, dilution or other violation, seek injunctive relief where
appropriate and recover any and all damages for such infringement,
misappropriation, dilution or other violation, or take such other actions as the
Grantor shall deem appropriate under the circumstances to protect such
Intellectual Property. The Grantor shall furnish to the Collateral Agent from
time to time upon its request statements and schedules further identifying and
describing the Intellectual Property and Licenses and such other reports in
connection with the Intellectual Property and Licenses as the Collateral Agent
may reasonably request, all in reasonable detail and promptly upon request of
the Collateral Agent, following receipt by the Collateral Agent of any such
statements, schedules or reports, the Grantor shall modify this Agreement by
amending Schedule II hereto, as the case may be, to include any Intellectual
Property and License, as the case may be, which becomes part of the Collateral
under this Agreement and shall execute and authenticate such documents and do
such acts as shall be necessary or, in the judgment of the Collateral Agent,
desirable to subject such Intellectual Property and Licenses to the Lien and
security interest created by this Agreement. Notwithstanding anything herein to
the contrary, upon the occurrence and during the continuance of a Default, the
Grantor may not abandon or otherwise permit any Intellectual Property to become
invalid without the prior written consent of the Collateral Agent, and if any
Intellectual Property is infringed, misappropriated, diluted or otherwise
violated in any material respect by a third party, the Grantor will take such
action as the Collateral Agent shall deem appropriate under the circumstances to
protect such Intellectual Property.
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(ii) In no event shall the Grantor, either itself or through any
agent, employee, licensee or designee, file an application for the registration
of any Trademark or Copyright or the issuance of any Patent with the United
States Patent and Trademark Office or the United States Copyright Office, as
applicable, or in any similar office or agency of the United States or any
country or any political subdivision thereof unless it gives the Collateral
Agent prior written notice thereof. Upon request of the Collateral Agent, the
Grantor shall execute, authenticate and deliver any and all assignments,
agreements, instruments, documents and papers as the Collateral Agent may
reasonably request to evidence the Collateral Agent's security interest
hereunder in such Intellectual Property and the General Intangibles of the
Grantor relating thereto or represented thereby, and the Grantor hereby appoints
the Collateral Agent its attorney-in-fact to execute and/or authenticate and
file all such writings for the foregoing purposes, all acts of such attorney
being hereby ratified and confirmed, and such power (being coupled with an
interest) shall be irrevocable until the indefeasible payment in full in cash of
all of the Obligations in full and the termination of each of the Transaction
Documents.
(i) Deposit, Commodities and Securities Accounts. Prior to the issuance of
any Note, the Grantor shall cause each bank and other financial institution with
an account referred to in Schedule IV hereto to execute and deliver to the
Collateral Agent a control agreement, in form and substance reasonably
satisfactory to the Collateral Agent, duly executed by the Grantor and such bank
or financial institution, or enter into other arrangements in form and substance
satisfactory to the Collateral Agent, pursuant to which such institution shall
irrevocably agree, inter alia, that (i) it will comply at any time with the
instructions originated by the Collateral Agent to such bank or financial
institution directing the disposition of cash, Commodity Contracts, securities,
Investment Property and other items from time to time credited to such account,
without further consent of the Grantor, which instructions the Collateral Agent
will not give to such bank or other financial institution in the absence of a
continuing Default, (ii) all cash, Commodity Contracts, securities, Investment
Property and other items of the Grantor deposited with such institution shall be
subject to a perfected, first priority security interest in favor of the
Collateral Agent, (iii) any right of set off, banker's Lien or other similar
Lien, security interest or encumbrance shall be fully waived as against the
Collateral Agent, and (iv) upon receipt of written notice from the Collateral
Agent during the continuance of a Default, such bank or financial institution
shall immediately send to the Collateral Agent by wire transfer (to such account
as the Collateral Agent shall specify, or in such other manner as the Collateral
Agent shall direct) all such cash, the value of any Commodity Contracts,
securities, Investment Property and other items held by it. Without the prior
written consent of the Collateral Agent, the Grantor shall not make or maintain
any Deposit Account, Commodity Account or Securities Account except for the
accounts set forth in Schedule IV hereto. The provisions of this paragraph 5(i)
shall not apply to (i) Deposit Accounts for which the Collateral Agent is the
depositary and (ii) Deposit Accounts specially and exclusively used for payroll,
payroll taxes and other employee wage and benefit payments to or for the benefit
of a Grantor's salaried employees.
(j) Motor Vehicles.
(i) The Grantor shall deliver to the Collateral Agent originals of
the certificates of title or ownership for all motor vehicles owned by it with
the Collateral Agent listed as lienholder, for the benefit of the Purchasers.
(ii) The Grantor hereby appoints the Collateral Agent as its attorney-in-fact,
effective the date hereof and terminating upon the termination of this
Agreement, for the purpose of (A) executing on behalf of the Grantor title or
ownership applications for filing with appropriate state agencies to enable
motor vehicles now owned or hereafter acquired by the Grantor to be retitled and
the Collateral Agent listed as lienholder thereof, (B) filing such applications
with such state agencies, and (C) executing such other documents and instruments
on behalf of, and taking such other action in the name of, the Grantor as the
Collateral Agent may deem necessary or advisable to accomplish the purposes
hereof (including, without limitation, for the purpose of creating in favor of
the Collateral Agent a perfected Lien on the motor vehicles and exercising the
rights and remedies of the Collateral Agent hereunder). This appointment as
attorney-in-fact is coupled with an interest and is irrevocable until all of the
Obligations are indefeasibly paid in full in cash and after all Transaction
Documents have been terminated.
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(iii) Any certificates of title or ownership delivered pursuant to
the terms hereof shall be accompanied by odometer statements for each motor
vehicle covered thereby.
(iv) So long as no Default shall have occurred and be continuing,
upon the request of the Grantor, the Collateral Agent shall execute and deliver
to the Grantor such instruments as the Grantor shall reasonably request to
remove the notation of the Collateral Agent as lienholder on any certificate of
title for any motor vehicle; provided, however, that any such instruments shall
be delivered, and the release effective, only upon receipt by the Collateral
Agent of a certificate from the Grantor stating that such motor vehicle is to be
sold or has suffered a casualty loss (with title thereto passing to the casualty
insurance company therefor in settlement of the claim for such loss) and the
amount that the Grantor will receive as sale proceeds or insurance proceeds. Any
proceeds of such sale or casualty loss shall be paid to the Collateral Agent
hereunder immediately upon receipt, to be applied to the Obligations then
outstanding.
(k) Control. The Grantor hereby agrees to take any or all action that
may be necessary or desirable or that the Collateral Agent may request in order
for the Collateral Agent to obtain control in accordance with Sections 9-105 -
9-107 of the Code with respect to the following Collateral: (i) Electronic
Chattel Paper, (ii) Investment Property, and (iii) Letter-of-Credit Rights.
(l) Inspection and Reporting. The Grantor shall permit the Collateral
Agent, or any agent or representatives thereof or such professionals or other
Persons as the Collateral Agent may designate, not more than once a year in the
absence of a Default, (i) to examine and make copies of and abstracts from the
Grantor's records and books of account, (ii) to visit and inspect its
properties, (iii) to verify materials, leases, Instruments, Accounts, Inventory
and other assets of the Grantor from time to time, (iii) to conduct audits,
physical counts, appraisals and/or valuations, examinations at the locations of
the Grantor. The Grantor shall also permit the Collateral Agent, or any agent or
representatives thereof or such professionals or other Persons as the Collateral
Agent may designate to discuss the Grantor's affairs, finances and accounts with
any of its directors, officers, managerial employees, independent accountants or
any of its other representatives.
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SECTION 6. Additional Provisions Concerning the Collateral.
(a) The Grantor hereby (i) authorizes the Collateral Agent to file one or
more financing or continuation statements, and amendments thereto, relating to
the Collateral and (ii) ratifies such authorization to the extent that the
Collateral Agent has filed any such financing or continuation statements, or
amendments thereto, prior to the date hereof. A photocopy or other reproduction
of this Agreement or any financing statement covering the Collateral or any part
thereof shall be sufficient as a financing statement where permitted by law.
(b) The Grantor hereby irrevocably appoints the Collateral Agent as its
attorney-in-fact and proxy, with full authority in the place and stead of the
Grantor and in the name of the Grantor or otherwise, from time to time in the
Collateral Agent's discretion, so long as a Default shall have occurred and is
continuing,to take any action and to execute any instrument which the Collateral
Agent may deem necessary or advisable to accomplish the purposes of this
Agreement (subject to the rights of the Grantor under Section 5 hereof),
including, without limitation, (i) to obtain and adjust insurance required to be
paid to the Collateral Agent pursuant to Section 5(e) hereof, (ii) to ask,
demand, collect, ▇▇▇ for, recover, compound, receive and give acquittance and
receipts for moneys due and to become due under or in respect of any Collateral,
(iii) to receive, endorse, and collect any drafts or other instruments,
documents and chattel paper in connection with clause (i) or (ii) above, (iv) to
file any claims or take any action or institute any proceedings which the
Collateral Agent may deem necessary or desirable for the collection of any
Collateral or otherwise to enforce the rights of the Collateral Agent and the
Purchasers with respect to any Collateral, and (v) to execute assignments,
licenses and other documents to enforce the rights of the Collateral Agent and
the Purchasers with respect to any Collateral. This power is coupled with an
interest and is irrevocable until all of the Obligations are indefeasibly paid
in full in cash.
(c) For the purpose of enabling the Collateral Agent to exercise rights
and remedies hereunder, at such time as the Collateral Agent shall be lawfully
entitled to exercise such rights and remedies, and for no other purpose, the
Grantor hereby grants to the Collateral Agent, to the extent assignable, an
irrevocable, non-exclusive license (exercisable without payment of royalty or
other compensation to the Grantor) to use, assign, license or sublicense any
Intellectual Property now owned or hereafter acquired by the Grantor, wherever
the same may be located, including in such license reasonable access to all
media in which any of the licensed items may be recorded or stored and to all
computer programs used for the compilation or printout thereof. Notwithstanding
anything contained herein to the contrary, but subject to the provisions of the
Securities Purchase Agreement that limit the right of the Grantor to dispose of
its property and Section 5(h) hereof, so long as no Default shall have occurred
and be continuing, the Grantor may exploit, use, enjoy, protect, license,
sublicense, assign, sell, dispose of or take other actions with respect to the
Intellectual Property in the ordinary course of its business. In furtherance of
the foregoing, unless a Default shall have occurred and be continuing, the
Collateral Agent shall from time to time, upon the request of a Grantor, execute
and deliver any instruments, certificates or other documents, in the form so
requested, which the Grantor shall have certified are appropriate (in the
Grantor's judgment) to allow it to take any action permitted above (including
relinquishment of the license provided pursuant to this clause (c) as to any
Intellectual Property). Further, upon the indefeasible payment in full in cash
of all of the Obligations, the Collateral Agent (subject to Section 10(e)
hereof) shall release and reassign to
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the Grantor all of the Collateral Agent's right, title and interest in and to
the Intellectual Property, and the Licenses, all without recourse,
representation or warranty whatsoever. The exercise of rights and remedies
hereunder by the Collateral Agent shall not terminate the rights of the holders
of any licenses or sublicenses theretofore granted by the Grantor in accordance
with the second sentence of this clause (c). The Grantor hereby releases the
Collateral Agent from any claims, causes of action and demands at any time
arising out of or with respect to any actions taken or omitted to be taken by
the Collateral Agent under the powers of attorney granted herein other than
actions taken or omitted to be taken through the Collateral Agent's gross
negligence or willful misconduct, as determined by a final determination of a
court of competent jurisdiction.
(d) If the Grantor fails to perform any agreement contained herein, the
Collateral Agent may itself perform, or cause performance of, such agreement or
obligation, in the name of the Grantor or the Collateral Agent, and the expenses
of the Collateral Agent incurred in connection therewith shall be payable by the
Grantor pursuant to Section 8 hereof and shall be secured by the Collateral.
(e) The powers conferred on the Collateral Agent hereunder are solely to
protect its interest in the Collateral and shall not impose any duty upon it to
exercise any such powers. Except for the safe custody of any Collateral in its
possession and the accounting for moneys actually received by it hereunder, the
Collateral Agent shall have no duty as to any Collateral or as to the taking of
any necessary steps to preserve rights against prior parties or any other rights
pertaining to any Collateral.
(f) Anything herein to the contrary notwithstanding (i) the Grantor shall
remain liable under the Licenses and otherwise with respect to any of the
Collateral to the extent set forth therein to perform all of its obligations
thereunder to the same extent as if this Agreement had not been executed, (ii)
the exercise by the Collateral Agent of any of its rights hereunder shall not
release the Grantor from any of its obligations under the Licenses or otherwise
in respect of the Collateral, and (iii) the Collateral Agent shall not have any
obligation or liability by reason of this Agreement under the Licenses or with
respect to any of the other Collateral, nor shall the Collateral Agent be
obligated to perform any of the obligations or duties of the Grantor thereunder
or to take any action to collect or enforce any claim for payment assigned
hereunder.
SECTION 7. Remedies Upon Default. If any Default shall have occurred and
be continuing:
(a) The Collateral Agent may exercise in respect of the Collateral, in
addition to any other rights and remedies provided for herein or otherwise
available to it, all of the rights and remedies of a secured party upon default
under the Code (whether or not the Code applies to the affected Collateral), and
also may (i) take absolute control of the Collateral, including, without
limitation, transfer into the Collateral Agent's name or into the name of its
nominee or nominees (to the extent the Collateral Agent has not theretofore done
so) and thereafter receive, for the benefit of the Collateral Agent, all
payments made thereon, give all consents, waivers and ratifications in respect
thereof and otherwise act with respect thereto as though it were the outright
owner thereof, (ii) require the Grantor to, and the Grantor hereby agrees that
it will at its expense and upon request of the Collateral Agent forthwith,
assemble all or part of the Collateral as directed by the Collateral Agent and
16
make it available to the Collateral Agent at a place or places to be designated
by the Collateral Agent that is reasonably convenient to both parties, and the
Collateral Agent may enter into and occupy any premises owned or leased by the
Grantor where the Collateral or any part thereof is located or assembled for a
reasonable period in order to effectuate the Collateral Agent's rights and
remedies hereunder or under law, without obligation to the Grantor in respect of
such occupation, and (iii) without notice except as specified below and without
any obligation to prepare or process the Collateral for sale, (A) sell the
Collateral or any part thereof in one or more parcels at public or private sale,
at any of the Collateral Agent's offices or elsewhere, for cash, on credit or
for future delivery, and at such price or prices and upon such other terms as
the Collateral Agent may deem commercially reasonable and/or (B) lease, license
or dispose of the Collateral or any part thereof upon such terms as the
Collateral Agent may deem commercially reasonable. The Grantor agrees that, to
the extent notice of sale or any other disposition of the Collateral shall be
required by law, at least ten (10) days' notice to the Grantor of the time and
place of any public sale or the time after which any private sale or other
disposition of the Collateral is to be made shall constitute reasonable
notification. The Collateral Agent shall not be obligated to make any sale or
other disposition of Collateral regardless of notice of sale having been given.
The Collateral Agent may adjourn any public or private sale from time to time by
announcement at the time and place fixed therefor, and such sale may, without
further notice, be made at the time and place to which it was so adjourned. The
Grantor hereby waives any claims against the Collateral Agent and the Purchasers
arising by reason of the fact that the price at which the Collateral may have
been sold at a private sale was less than the price which might have been
obtained at a public sale or was less than the aggregate amount of the
Obligations, even if the Collateral Agent accepts the first offer received and
does not offer the Collateral to more than one offeree, and waives all rights
that the Grantor may have to require that all or any part of the Collateral be
marshalled upon any sale (public or private) thereof. The Grantor hereby
acknowledges that (i) any such sale of the Collateral by the Collateral Agent
shall be made without warranty, (ii) the Collateral Agent may specifically
disclaim any warranties of title, possession, quiet enjoyment or the like, and
(iii) such actions set forth in clauses (i) and (ii) above shall not adversely
effect the commercial reasonableness of any such sale of the Collateral. In
addition to the foregoing, (1) upon written notice to the Grantor from the
Collateral Agent, the Grantor shall cease any use of the Intellectual Property
or any trademark, patent or copyright similar thereto for any purpose described
in such notice; (2) the Collateral Agent may, at any time and from time to time,
upon 10 days' prior notice to the Grantor, license, whether general, special or
otherwise, and whether on an exclusive or non-exclusive basis, any of the
Intellectual Property, throughout the universe for such term or terms, on such
conditions, and in such manner, as the Collateral Agent shall in its sole
discretion determine; and (3) the Collateral Agent may, at any time, pursuant to
the authority granted in Section 6 hereof (such authority being effective upon
the occurrence and during the continuance of a Default), execute and deliver on
behalf of the Grantor, one or more instruments of assignment of the Intellectual
Property (or any application or registration thereof), in form suitable for
filing, recording or registration in any country.
(b) Any cash held by the Collateral Agent as Collateral and all Cash
Proceeds received by the Collateral Agent in respect of any sale of or
collection from, or other realization upon, all or any part of the Collateral
may, in the discretion of the Collateral Agent, be held by the Collateral Agent
as collateral for, and/or then or at any time thereafter applied (after payment
of any amounts payable to the Collateral Agent pursuant to Section 8 hereof) in
whole or in part
17
by the Collateral Agent against, all or any part of the Obligations in
such order as the Collateral Agent shall elect, consistent with the provisions
of the Securities Purchase Agreement. Any surplus of such cash or Cash Proceeds
held by the Collateral Agent and remaining after the indefeasible payment in
full in cash of all of the Obligations shall be paid over to whomsoever shall be
lawfully entitled to receive the same or as a court of competent jurisdiction
shall direct.
(c) In the event that the proceeds of any such sale, collection or
realization are insufficient to pay all amounts to which the Collateral Agent
and the Purchasers are legally entitled, the Grantor shall be liable for the
deficiency, together with interest thereon at the highest rate specified in any
of the applicable Transaction Documents for interest on overdue principal
thereof or such other rate as shall be fixed by applicable law, together with
the costs of collection and the reasonable fees, costs, expenses and other
client charges of any attorneys employed by the Collateral Agent to collect such
deficiency.
(d) The Grantor hereby acknowledges that if the Collateral Agent complies
with any applicable state, provincial, or federal law requirements in connection
with a disposition of the Collateral, such compliance will not adversely affect
the commercial reasonableness of any sale or other disposition of the
Collateral.
(e) The Collateral Agent shall not be required to marshal any present or
future collateral security (including, but not limited to, this Agreement and
the Collateral) for, or other assurances of payment of, the Obligations or any
of them or to resort to such collateral security or other assurances of payment
in any particular order, and all of the Collateral Agent's rights hereunder and
in respect of such collateral security and other assurances of payment shall be
cumulative and in addition to all other rights, however existing or arising. To
the extent that the Grantor lawfully may, the Grantor hereby agrees that it will
not invoke any law relating to the marshalling of collateral which might cause
delay in or impede the enforcement of the Collateral Agent's rights under this
Agreement or under any other instrument creating or evidencing any of the
Obligations or under which any of the Obligations is outstanding or by which any
of the Obligations is secured or payment thereof is otherwise assured, and, to
the extent that it lawfully may, the Grantor hereby irrevocably waives the
benefits of all such laws.
SECTION 8. Indemnity and Expenses.
(a) The Grantor agrees to defend, protect, indemnify and hold the
Collateral Agent and each of the Purchasers, jointly and severally, harmless
from and against any and all claims, damages, losses, liabilities, obligations,
penalties, fees, costs and expenses (including, without limitation, reasonable
legal fees, costs, expenses, and disbursements of such Person's counsel) to the
extent that they arise out of or otherwise result from this Agreement
(including, without limitation, enforcement of this Agreement), except claims,
losses or liabilities resulting solely and directly from such Person's gross
negligence or willful misconduct, as determined by a final judgment of a court
of competent jurisdiction.
(b) The Grantor will upon demand pay to the Collateral Agent the amount of
any and all costs and expenses, including the reasonable fees, costs, expenses
and disbursements of counsel for the Collateral Agent and of any experts and
agents (including, without limitation, any collateral trustee which may act as
agent of the Collateral Agent), which the Collateral Agent may incur in
18
connection with (i) the preparation, negotiation, execution, delivery,
recordation, administration, amendment, waiver or other modification or
termination of this Agreement, (ii) the custody, preservation, use or operation
of, or the sale of, collection from, or other realization upon, any Collateral,
(iii) the exercise or enforcement of any of the rights of the Collateral Agent
hereunder, or (iv) the failure by the Grantor to perform or observe any of the
provisions hereof.
SECTION 9. Notices, Etc. All notices and other communications provided for
hereunder shall be in writing and shall be mailed (by certified mail, postage
prepaid and return receipt requested), telecopied or delivered, if to the
Grantor at its address specified below and if to the Collateral Agent to it, at
its address specified below; or as to any such Person, at such other address as
shall be designated by such Person in a written notice to such other Person
complying as to delivery with the terms of this Section 9. All such notices and
other communications shall be effective (a) if sent by certified mail, return
receipt requested, when received or three days after deposited in the mails,
whichever occurs first, (b) if telecopied, when transmitted (during normal
business hours) and confirmation is received, otherwise, the day after the
notice was transmitted if confirmation is received, or (c) if delivered, upon
delivery.
SECTION 10. Miscellaneous.
(a) No amendment of any provision of this Agreement shall be effective
unless it is in writing and signed by the Grantor and the Collateral Agent, and
no waiver of any provision of this Agreement, and no consent to any departure by
the Grantor therefrom, shall be effective unless it is in writing and signed by
the Collateral Agent, and then such waiver or consent shall be effective only in
the specific instance and for the specific purpose for which given.
(b) No failure on the part of the Collateral Agent to exercise, and no
delay in exercising, any right hereunder or under any of the other Transaction
Documents shall operate as a waiver thereof; nor shall any single or partial
exercise of any such right preclude any other or further exercise thereof or the
exercise of any other right. The rights and remedies of the Collateral Agent or
any Purchaser provided herein and in the other Transaction Documents are
cumulative and are in addition to, and not exclusive of, any rights or remedies
provided by law. The rights of the Collateral Agent or any Purchaser under any
of the other Transaction Documents against any party thereto are not conditional
or contingent on any attempt by such Person to exercise any of its rights under
any of the other Transaction Documents against such party or against any other
Person, including but not limited to, the Grantor.
(c) Any provision of this Agreement that is prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining portions
hereof or thereof or affecting the validity or enforceability of such provision
in any other jurisdiction.
(d) This Agreement shall create a continuing security interest in the
Collateral and shall (i) remain in full force and effect until the indefeasible
payment in full in cash of the Obligations, and (ii) be binding on the Grantor
and all other Persons who become bound as debtor to this Agreement in accordance
with Section 9-203(d) of the Code and shall inure, together with all rights and
remedies of the Collateral Agent and the Purchasers hereunder, to the benefit of
the Collateral Agent and the Purchasers and their respective permitted
19
successors, transferees and assigns. Without limiting the generality of clause
(ii) of the immediately preceding sentence, without notice to the Grantor, the
Collateral Agent and the Purchasers may assign or otherwise transfer their
rights and obligations under this Agreement and any of the other Transaction
Documents, to any other Person and such other Person shall thereupon become
vested with all of the benefits in respect thereof granted to the Collateral
Agent and the Purchasers herein or otherwise. Upon any such assignment or
transfer, all references in this Agreement to the Collateral Agent or any such
Purchaser shall mean the assignee of the Collateral Agent or such Purchaser.
None of the rights or obligations of the Grantor hereunder may be assigned or
otherwise transferred without the prior written consent of the Collateral Agent,
and any such assignment or transfer without the consent of the Collateral Agent
shall be null and void.
(e) Upon the indefeasible payment in full in cash of the Obligations, (i)
this Agreement and the security interests created hereby shall terminate and all
rights to the Collateral shall revert to the Grantor and (ii) the Collateral
Agent will, upon the Grantor's request and at the Grantor's expense, (A) return
to the Grantor such of the Collateral as shall not have been sold or otherwise
disposed of or applied pursuant to the terms hereof, and (B) execute and deliver
to the Grantor such documents as the Grantor shall reasonably request to
evidence such termination, all without any representation, warranty or recourse
whatsoever.
(f) THIS AGREEMENT SHALL BE GOVERNED BY, CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, EXCEPT AS REQUIRED BY
MANDATORY PROVISIONS OF LAW AND EXCEPT TO THE EXTENT THAT THE VALIDITY AND
PERFECTION OR THE PERFECTION AND THE EFFECT OF PERFECTION OR NON-PERFECTION OF
THE SECURITY INTEREST CREATED HEREBY, OR REMEDIES HEREUNDER, IN RESPECT OF ANY
PARTICULAR COLLATERAL ARE GOVERNED BY THE LAW OF A JURISDICTION OTHER THAN THE
STATE OF NEW YORK.
(g) ANY LEGAL ACTION, SUIT OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR
ANY DOCUMENT RELATED THERETO MAY BE BROUGHT IN ▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇ ▇▇▇
▇▇▇▇ IN THE COUNTY OF NEW YORK OR THE UNITED STATES OF AMERICA FOR THE SOUTHERN
DISTRICT OF NEW YORK, AND APPELLATE COURTS THEREOF, AND, BY EXECUTION AND
DELIVERY OF THIS AGREEMENT, THE GRANTOR HEREBY ACCEPTS FOR ITSELF AND IN RESPECT
OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE
AFORESAID COURTS. THE GRANTOR HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION, INCLUDING, WITHOUT LIMITATION,
ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON
CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY SUCH
ACTION, SUIT OR PROCEEDING IN SUCH RESPECTIVE JURISDICTIONS AND CONSENTS TO THE
GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY THE
COURT.
20
(h) EACH OF THE GRANTOR AND (BY ITS ACCEPTANCE OF THE BENEFITS OF THIS
AGREEMENT) THE COLLATERAL AGENT WAIVES ANY RIGHT IT MAY HAVE TO TRIAL BY JURY IN
RESPECT OF ANY LITIGATION BASED ON, ARISING OUT OF, UNDER OR IN CONNECTION WITH
THIS AGREEMENT OR ANY OF THE OTHER TRANSACTION DOCUMENTS, OR ANY COURSE OF
CONDUCT, COURSE OF DEALING, VERBAL OR WRITTEN STATEMENT OR OTHER ACTION OF THE
PARTIES HERETO.
(i) The Grantor irrevocably consents to the service of process of any of
the aforesaid courts in any such action, suit or proceeding by the mailing of
copies thereof by registered or certified mail (or any substantially similar
form of mail), postage prepaid, to the Grantor at its address provided herein,
such service to become effective 10 days after such mailing.
(j) Nothing contained herein shall affect the right of the Collateral
Agent to serve process in any other manner permitted by law or commence legal
proceedings or otherwise proceed against the Grantor or any property of the
Grantor in any other jurisdiction.
(k) The Grantor irrevocably and unconditionally waives any right it may
have to claim or recover in any legal action, suit or proceeding referred to in
this Section any special, exemplary, punitive or consequential damages.
(l) Section headings herein are included for convenience of reference only
and shall not constitute a part of this Agreement for any other purpose.
(m) This Agreement may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which shall be deemed
to be an original, but all of which taken together constitute one in the same
Agreement.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
21
IN WITNESS WHEREOF, the Grantor has caused this Agreement to be executed
and delivered by its officer thereunto duly authorized, as of the date first
above written.
CADENCE RESOURCES CORPORATION
By:__________________________
Name:
Title:
Address
ACCEPTED BY:
-----------
SMITHFIELD FIDUCIARY LLC,
as Collateral Agent
By:______________________________
Name: ▇▇▇▇ ▇. Chill
Title: Authorized Signatory
Address:
22
SCHEDULE I
LEGAL NAMES; ORGANIZATIONAL IDENTIFICATION NUMBERS; STATES OR
JURISDICTION OF ORGANIZATION
23
SCHEDULE II
INTELLECTUAL PROPERTY AND LICENSES
24
SCHEDULE III
LOCATIONS OF GRANTOR
LOCATION Description of Location (State if Location
(i) contains Rolling Stock, other Equipment,
Fixtures, Goods or Inventory,
(ii) is chief place of business and chief
executive office, or
(iii) contains Records concerning Accounts
and originals of Chattel Paper)
25
SCHEDULE IV
DEPOSIT ACCOUNTS, SECURITIES ACCOUNTS AND COMMODITIES ACCOUNTS
Name and Address
of Institution
Maintaining Account Account Number Type of Account
------------------- -------------- ---------------
26
SCHEDULE V
UCC-1 FINANCING STATEMENTS
27
SCHEDULE VI
COMMERCIAL TORT CLAIMS
28
EXHIBIT A
ASSIGNMENT FOR SECURITY
[TRADEMARKS] [PATENTS] [COPYRIGHTS]
WHEREAS, CADENCE RESOURCES CORPORATION (the "Assignor") [has adopted, used
and is using, and holds all right, title and interest in and to, the trademarks
and service marks listed on the annexed Schedule 1A, which trademarks and
service marks are registered or applied for in the United States Patent and
Trademark Office (the "Trademarks")] [holds all right, title and interest in the
letter patents, design patents and utility patents listed on the annexed
Schedule 1A, which patents are issued or applied for in the United States Patent
and Trademark Office (the "Patents")] [holds all right, title and interest in
the copyrights listed on the annexed Schedule 1A, which copyrights are
registered in the United States Copyright Office (the "Copyrights")];
WHEREAS, the Assignor has entered into a Security Agreement, dated as of
April 2, 2004 (the "Security Agreement"), in favor of SMITHFIELD FIDUCIARY LLC,
as collateral agent for certain purchasers (the "Assignee");
WHEREAS, pursuant to the Security Agreement, the Assignor has assigned to
the Assignee and granted to the Assignee for the benefit of the Purchasers (as
defined in the Security Agreement) a continuing security interest in all right,
title and interest of the Assignor in, to and under the [Trademarks, together
with, among other things, the good-will of the business symbolized by the
Trademarks] [Patents] [Copyrights] and the applications and registrations
thereof, and all proceeds thereof, including, without limitation, any and all
causes of action which may exist by reason of infringement thereof and any and
all damages arising from past, present and future violations thereof (the
"Collateral"), to secure the payment, performance and observance of the
Obligations (as defined in the Security Agreement);
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Assignor does hereby pledge,
convey, sell, assign, transfer and set over unto the Assignee and grants to the
Assignee for the benefit of the Purchasers a continuing security interest in the
Collateral to secure the prompt payment, performance and for the benefit of the
Purchasers observance of the Obligations.
The Assignor does hereby further acknowledge and affirm that the rights
and remedies of the Assignee with respect to the Collateral are more fully set
forth in the Security Agreement, the terms and provisions of which are hereby
incorporated herein by reference as if fully set forth herein.
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IN WITNESS WHEREOF, the Assignor has caused this Assignment to be duly
executed by its officer thereunto duly authorized as of April 2, 2004.
CADENCE RESOURCES CORPORATION.
By:____________________________
Name:
Title:
30
STATE OF __________
ss.:
COUNTY OF __________
On this ____ day of _______________, 20__, before me personally came
________________, to me known to be the person who executed the foregoing
instrument, and who, being duly sworn by me, did depose and say that s/he is the
________________ of _______________________________________, a
____________________, and that s/he executed the foregoing instrument in the
firm name of _______________________________________, and that s/he had
authority to sign the same, and s/he acknowledged to me that he executed the
same as the act and deed of said firm for the uses and purposes therein
mentioned.
________________________________
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SCHEDULE 1A TO ASSIGNMENT FOR SECURITY
[Trademarks and Trademark Applications]
[Patent and Patent Applications]
[Copyright and Copyright Applications]
Owned by ______________________________
32