Exhibit 10.4
SECURITY AGREEMENT
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1. IDENTIFICATION.
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This Security Agreement (the "Agreement"), dated as of February 16,
2006, is entered into by and between One Voice Technologies, Inc., a Nevada
corporation ("Debtor"), and Xxxx Xxxxxxxx, as collateral agent acting in the
manner and to the extent described in the Collateral Agent Agreement defined
below (the "Collateral Agent"), for the benefit of the parties identified on
Schedule A hereto (collectively, the "Lenders").
2. RECITALS.
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2.1 The Lenders have made and will be making loans to Debtor (the
"Loans"). It is beneficial to Debtor that the Loans were made and will be made.
2.2 The Loans are and will be evidenced by certain convertible
promissory notes (each a "Convertible Note") issued by Debtor on or about March
18, 2005 and July 13, 2005 and after the date of this Agreement pursuant to
subscription agreements (each a "Subscription Agreement") to which Debtor and
Lenders are parties. The Convertible Notes are further identified on Schedule A
hereto and were and will be executed by Debtor as "Borrower" or "Debtor" for the
benefit of each Lender as the "Holder" or "Lender" thereof. Subject to the
approval of the Collateral Agent, Schedule A hereto may be amended to include
such other Lenders who become parties hereto and sign this Agreement, the
Collateral Agent Agreement and any other agreement reasonably requested by the
Collateral Agent.
2.3 In consideration of the Loans made and to be made by Lenders to
Debtor and for other good and valuable consideration, and as security for the
performance by Debtor of its obligations under the Convertible Notes and as
security for the repayment of the Loans and all other sums due from Debtor to
Lenders arising under the Transaction Documents (as defined in the Subscription
Agreement), and any other agreement between or among them (collectively, the
"Obligations"), Debtor, for good and valuable consideration, receipt of which is
acknowledged, has agreed to grant to the Collateral Agent, for the benefit of
the Lenders, a security interest in the Collateral (as such term is hereinafter
defined), on the terms and conditions hereinafter set forth.
2.4 The Lenders have appointed Xxxx Xxxxxxxx as Collateral Agent
pursuant to that certain Collateral Agent Agreement dated at or about February
16, 2006 ("Collateral Agent Agreement"), among the Lenders and Collateral Agent.
2.5 The Debtor and the Lenders agree to expeditiously negotiate in good
faith the investment by Lenders in additional convertible notes of Debtor, which
such notes will become part of the Obligations.
2.6 The following defined terms which are defined in the Uniform
Commercial Code in effect in the State of New York on the date hereof are used
herein as so defined: Accounts, Chattel Paper, Documents, Equipment, General
Intangibles, Instruments, Inventory and Proceeds.
3. GRANT OF GENERAL SECURITY INTEREST IN COLLATERAL.
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3.1 As security for the Obligations of Debtor, Debtor hereby grants the
Collateral Agent, for the benefit of the Lenders, a security interest in the
Collateral.
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3.2 "Collateral" shall mean all of the following property of Debtor:
(A) All now owned and hereafter acquired right, title and
interest of Debtor in, to and in respect of all Accounts, Goods, real or
personal property, all present and future books and records relating to the
foregoing and all products and Proceeds of the foregoing, and as set forth
below:
(i) ACCOUNTS: All now owned and hereafter acquired
right, title and interest of Debtor in, to and in respect of all: Accounts,
interests in goods represented by Accounts, returned, reclaimed or repossessed
goods with respect thereto and rights as an unpaid vendor; contract rights;
Chattel Paper; investment property; General Intangibles (including but not
limited to, tax and duty claims and refunds, registered and unregistered
patents, trademarks, service marks, certificates, copyrights trade names,
applications for the foregoing, trade secrets, goodwill, processes, drawings,
blueprints, customer lists, licenses, whether as licensor or licensee, chooses
in action and other claims, and existing and future leasehold interests in
equipment, real estate and fixtures); Documents; Instruments; letters of credit,
bankers' acceptances or guaranties; cash moneys, deposits; securities, bank
accounts, deposit accounts, credits and other property now or hereafter owned or
held in any capacity by Debtor, as well as its affiliates, agreements or
property securing or relating to any of the items referred to above;
(ii) GOODS: All now owned and hereafter acquired
right, title and interest of Debtor in, to and in respect of goods, including,
but not limited to:
(a) All Inventory, wherever located, whether
now owned or hereafter acquired, of whatever kind, nature or description,
including all raw materials, work-in-process, finished goods, and materials to
be used or consumed in Debtor' business; finished goods, timber cut or to be
cut, oil, gas, hydrocarbons, and minerals extracted or to be extracted, and all
names or marks affixed to or to be affixed thereto for purposes of selling same
by the seller, manufacturer, lessor or licensor thereof and all Inventory which
may be returned to Debtor by its customers or repossessed by Debtor and all of
Debtor' right, title and interest in and to the foregoing (including all of
Debtor' rights as a seller of goods);
(b) All Equipment and fixtures, wherever
located, whether now owned or hereafter acquired, including, without limitation,
all machinery, motor vehicles, furniture and fixtures, and any and all
additions, substitutions, replacements (including spare parts), and accessions
thereof and thereto (including, but not limited to Debtor' rights to acquire any
of the foregoing, whether by exercise of a purchase option or otherwise);
(iii) PROPERTY: All now owned and hereafter acquired
right, title and interests of Debtor in, to and in respect of any real or other
personal property in or upon which Debtor has or may hereafter have a security
interest, lien or right of setoff;
(iv) BOOKS AND RECORDS: All present and future books
and records relating to any of the above including, without limitation, all
computer programs, printed output and computer readable data in the possession
or control of the Debtor, any computer service bureau or other third party;
(v) Patents: Without limiting the foregoing, all
right, title, and interest in, and to and under Xxxxxx Xxxxxx Xxxxxx Xx.
0000000; Xxxxxx Xxxxxx Patent Xx. 0000000; xxx Xxxxxx Xxxxxx Patent No.:
6532444, inclusive of all rights and letters of the patent and all other patent
registrations and recordings in the U.S. Patent and Trademark Office; and
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(vi) PRODUCTS AND PROCEEDS: All products and Proceeds
of the foregoing in whatever form and wherever located, including, without
limitation, all insurance proceeds and all claims against third parties for loss
or destruction of or damage to any of the foregoing.
(B) All now owned and hereafter acquired right, title and
interest of Debtor in, to and in respect of the following:
(i) the shares of stock, partnership interests,
member interests or other equity interests at any time and from time to time
acquired by Debtor of any and all entities now or hereafter existing, all or a
portion of such stock or other equity interests which are acquired by such
entities at any time (such entities, together with the existing issuers, being
hereinafter referred to collectively as the "Pledged Issuers" and individually
as a "Pledged Issuer"), the certificates representing such shares, partnership
interests, member interests or other interests all options and other rights,
contractual or otherwise, in respect thereof and all dividends, distributions,
cash, instruments, investment property and other property from time to time
received, receivable or otherwise distributed in respect of or in exchange for
any or all of such shares, partnership interests, member interests or other
interests;
(ii) all additional shares of stock, partnership
interests, member interests or other equity interests from time to time acquired
by Debtor, of any Pledged Issuer, the certificates representing such additional
shares, all options and other rights, contractual or otherwise, in respect
thereof and all dividends, distributions, cash, instruments, investment property
and other property from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of such additional
shares, interests or equity; and
(iii) all security entitlements of Debtor in, and all
Proceeds of any and all of the foregoing in each case, whether now owned or
hereafter acquired by Debtor and howsoever its interest therein may arise or
appear (whether by ownership, security interest, lien, claim or otherwise).
3.3 The Collateral Agent is hereby specifically authorized after the
occurrence of in an Event of Default (as defined herein), to transfer any
Collateral into the name of the Collateral Agent and to take any and all action
deemed advisable to the Collateral Agent to remove any transfer restrictions
affecting the Collateral.
3.4 It is a precondition to the granting of the security interest
described herein that within two business days after the receipt by Alpha
Capital Aktiengesellschaft of proof of filing of an amendment to the SB-2
Registration Statement filed by the Debtor on April 18, 2005 (as amended)
relating to the reduction of the Purchase Price of 14,300,000 Class A Warrants
issued on July 13, 2005 (as described in the Transaction Documents) to $0.014,
that Alpha Capital Aktiengesellschaft exercise such 14,300,000 Class A Warrants
at a Purchase Price of $0.014 per share of Common Stock.
4. PERFECTION OF SECURITY INTEREST.
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4.1 Debtor shall prepare, execute and deliver to the Collateral Agent
UCC-1 Financing Statements. The Collateral Agent is instructed to prepare and
file at Debtor's cost and expense, financing statements in such jurisdictions
deemed advisable to the Collateral Agent, including but not limited to the State
of Nevada. The Financing Statements are deemed to have been filed for the
benefit of the Collateral Agent and Lenders identified on Schedule A hereto.
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4.2 In the event of Default, all other certificates and instruments
constituting Collateral from time to time required to be pledged to Collateral
Agent pursuant to the terms hereof (the "Additional Collateral") shall be
delivered to Collateral Agent promptly upon receipt thereof by or on behalf of
Debtor. All such certificates and instruments shall be held by or on behalf of
Collateral Agent pursuant hereto and shall be delivered in suitable form for
transfer by delivery, or shall be accompanied by duly executed instruments of
transfer or assignment or undated stock powers executed in blank, all in form
and substance satisfactory to Collateral Agent. If any Collateral consists of
uncertificated securities, unless the immediately following sentence is
applicable thereto, Debtor shall cause Collateral Agent (or its custodian,
nominee or other designee) to become the registered holder thereof, or cause
each issuer of such securities to agree that it will comply with instructions
originated by Collateral Agent with respect to such securities without further
consent by Debtor. If any Collateral consists of security entitlements, Debtor
shall transfer such security entitlements to Collateral Agent (or its custodian,
nominee or other designee) or cause the applicable securities intermediary to
agree that it will comply with entitlement orders by Collateral Agent without
further consent by Debtor.
4.3 Within five (5) days after the receipt by Debtor of any such
Additional Collateral, a Pledge Amendment, duly executed by Debtor, in
substantially the form of Annex I hereto (a "Pledge Amendment"), shall be
delivered to Collateral Agent in respect of the Additional Collateral to be
pledged pursuant to this Agreement. Debtor hereby authorizes Collateral Agent to
attach each Pledge Amendment to this Agreement and agrees that all certificates
or instruments listed on any Pledge Amendment delivered to Collateral Agent
shall for all purposes hereunder constitute Collateral.
4.4 If Debtor shall receive, by virtue of Debtor being or having been
an owner of any Collateral, any (i) stock certificate (including, without
limitation, any certificate representing a stock dividend or distribution in
connection with any increase or reduction of capital, reclassification, merger,
consolidation, sale of assets, combination of shares, stock split, spin-off or
split-off), promissory note or other instrument, (ii) option or right, whether
as an addition to, substitution for, or in exchange for, any Collateral, or
otherwise, (iii) dividends payable in cash (except such dividends permitted to
be retained by Debtor pursuant to Section 5.2 hereof) or in securities or other
property or (iv) dividends or other distributions in connection with a partial
or total liquidation or dissolution or in connection with a reduction of
capital, capital surplus or paid-in surplus, Debtor shall receive such stock
certificate, promissory note, instrument, option, right, payment or distribution
in trust for the benefit of Collateral Agent and, in the event of Default, shall
segregate it from Debtor's other property and shall deliver it forthwith to
Collateral Agent, in the exact form received, with any necessary endorsement
and/or appropriate stock powers duly executed in blank, to be held by Collateral
Agent as Collateral and as further collateral security for the Obligations.
5. DISTRIBUTION ON LIQUIDATION.
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5.1 If any sum is paid as a liquidating distribution on or with respect
to the Collateral, Debtor shall deliver same to the Collateral Agent to be
applied to the Obligations, then due, in accordance with the terms of the
Convertible Notes.
5.2 So long as no Event of Default exists, Debtor shall be entitled (i)
to exercise all voting power pertaining to any of the Collateral, provided such
exercise is not contrary to the interests of the Lenders and does not impair the
Collateral and (ii) may receive and retain any and all dividends, interest
payments or other distributions paid in respect of the Collateral.
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5.3. Upon the occurrence and during the continuation of an Event of
Default, all rights of Debtor, upon notice given by Collateral Agent, to
exercise the voting power and receive payments, which it would otherwise be
entitled to pursuant to Section 5.2, shall cease and all such rights shall
thereupon become vested in Collateral Agent, which shall thereupon have the sole
right to exercise such voting power and receive such payments.
5.4 Subject to Section 5.2, all dividends, distributions, interest and
other payments which are received by Debtor contrary to the provisions of
Section 5.3 shall be received in trust for the benefit of Collateral Agent,
shall be segregated from other funds of Debtor, and shall be forthwith paid over
to Collateral Agent as Collateral in the exact form received with any necessary
endorsement and/or appropriate stock powers duly executed in blank, to be held
by Collateral Agent as Collateral and as further collateral security for the
Obligations.
6. FURTHER ACTION BY DEBTOR; COVENANTS AND WARRANTIES.
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6.1 Collateral Agent at all times shall have a perfected security
interest in the Collateral. Debtor has and will continue to have full title to
the Collateral free from any liens, leases, encumbrances, judgments or other
claims. Collateral Agent's security interest in the Collateral constitutes and
will continue to constitute a first, prior and indefeasible security interest in
favor of Collateral Agent. Debtor will do all acts and things, and will execute
and file all instruments (including, but not limited to, security agreements,
financing statements, continuation statements, etc.) reasonably requested by
Collateral Agent to establish, maintain and continue the perfected security
interest of Collateral Agent in the Collateral, and will promptly on demand, pay
all costs and expenses of filing and recording, including the costs of any
searches reasonably deemed necessary by Collateral Agent from time to time to
establish and determine the validity and the continuing perfection of the
security interest of Collateral Agent, and also pay all other claims and charges
that, in the opinion of Collateral Agent, exercised in good faith, are
reasonably likely to materially prejudice, imperil or otherwise affect the
Collateral or Collateral Agent's or Lenders' security interests therein.
6.2 Other than in the ordinary course of business, and except for
Collateral which is substituted by assets of identical or greater value or which
has become obsolete or is of inconsequential in value, Debtor will not sell,
transfer, assign or pledge those items of Collateral (or allow any such items to
be sold, transferred, assigned or pledged), without the prior written consent of
Collateral Agent other than a transfer of the Collateral to a wholly-owned
subsidiary on prior notice to Collateral Agent, and provided the Collateral
remains subject to the security interest herein described. Such consent will not
be unreasonably withheld. Although Proceeds of Collateral are covered by this
Agreement, this shall not be construed to mean that Collateral Agent consents to
any sale of the Collateral, except as provided herein. Sales of Collateral in
the ordinary course of business shall be free of the security interest of
Lenders and Collateral Agent and Lenders and Collateral Agent shall promptly
execute such documents (including without limitation releases and termination
statements) as may be required by Debtor to evidence or effectuate the same.
6.3 Debtor will, at all reasonable times and upon reasonable notice,
allow Collateral Agent or its representatives free and complete access to the
Collateral and all of Debtor's records which in any way relate to the
Collateral, for such inspection and examination as Collateral Agent reasonably
deems necessary.
6.4 Debtor, at its sole cost and expense, will protect and defend this
Agreement, all of the rights of Collateral Agent and Lenders hereunder, and the
Collateral against the claims and demands of all other persons.
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6.5 Debtor will promptly notify Collateral Agent of any levy, distraint
or other seizure by legal process or otherwise of any part of the Collateral,
and of any threatened or filed claims or proceedings that are reasonably likely
to affect or impair any of the rights of Collateral Agent under this Agreement
in any material respect.
6.6 Debtor, at its own expense, at the request of Collateral Agent,
will obtain and maintain in force insurance policies covering losses or damage
to those items of Collateral which constitute physical personal property. The
insurance policies to be obtained by Debtor shall be in form and amounts
reasonably acceptable to Collateral Agent. Debtor shall make the Collateral
Agent first a loss payee thereon to the extent of its interest in the
Collateral. Collateral Agent is hereby irrevocably (until the Obligations are
paid in full) appointed Debtor' attorney-in-fact to endorse any check or draft
that may be payable to Debtor so that Collateral Agent may collect the proceeds
payable for any loss under such insurance. The proceeds of such insurance
(subject to the rights of senior secured parties), less any costs and expenses
incurred or paid by Collateral Agent in the collection thereof, shall be applied
either toward the cost of the repair or replacement of the items damaged or
destroyed, or on account of any sums secured hereby, whether or not then due or
payable.
6.7 Collateral Agent may, at its option, and without any obligation to
do so, pay, perform and discharge any and all amounts, costs, expenses and
liabilities herein agreed to be paid or performed by Debtor. Upon Debtor's
failure to do so, all amounts expended by Collateral Agent in so doing shall
become part of the Obligations secured hereby, and shall be immediately due and
payable by Debtor to Collateral Agent upon demand and shall bear interest at the
lesser of 15% per annum or the highest legal amount from the dates of such
expenditures until paid.
6.8 Upon the request of Collateral Agent, Debtor will furnish to
Collateral Agent within five (5) business days thereafter, or to any proposed
assignee of this Agreement, a written statement in form reasonably satisfactory
to Collateral Agent, duly acknowledged, certifying the amount of the principal
and interest and any other sum then owing under the Obligations, whether to its
knowledge any claims, offsets or defenses exist against the Obligations or
against this Agreement, or any of the terms and provisions of any other
agreement of Debtor securing the Obligations. In connection with any assignment
by Collateral Agent of this Agreement, Debtor hereby agrees to cause the
insurance policies required hereby to be carried by Debtor, if any, to be
endorsed in form satisfactory to Collateral Agent or to such assignee, with loss
payable clauses in favor of such assignee, and to cause such endorsements to be
delivered to Collateral Agent within ten (10) calendar days after request
therefor by Collateral Agent.
6.9 Debtor will, at its own expense, make, execute, endorse,
acknowledge, file and/or deliver to the Collateral Agent from time to time such
vouchers, invoices, schedules, confirmatory assignments, conveyances, financing
statements, transfer endorsements, powers of attorney, certificates, reports and
other reasonable assurances or instruments and take further steps relating to
the Collateral and other property or rights covered by the security interest
hereby granted, as the Collateral Agent may reasonably require to perfect its
security interest hereunder.
6.10 Debtor represents and warrants that it is the true and lawful
exclusive owner of the Collateral, free and clear of any liens and encumbrances.
6.11 Debtor hereby agrees not to divest itself of any right under the
Collateral except as permitted herein absent prior written approval of the
Collateral Agent, except to a subsidiary organized and located in the United
States on prior notice to Collateral Agent provided the Collateral remains
subject to the security interest herein described. Such consent will not be
unreasonably withheld. Moreover, Debtor does not need such consent to enter into
licensee agreements related to the collateral in the normal course of business.
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6.12 Debtor shall cause each Subsidiary of Debtor in existence on the
date hereof and each subsidiary that becomes a subsidiary after the date hereof
to execute and deliver to Collateral Agent promptly and in any event within 10
days after the formation, acquisition or change in status thereof (A) a guaranty
guaranteeing the Obligations and (B) if requested by Collateral Agent, a
security and pledge agreement substantially in the form of this Agreement
together with (x) certificates evidencing all of the capital stock of each
Subsidiary and any entity owned by such Subsidiary, (y) undated stock powers
executed in blank with signatures guaranteed, and (z) such opinion of counsel
and such approving certificate of such Subsidiary as Collateral Agent may
reasonably request in respect of complying with any legend on any such
certificate or any other matter relating to such shares and (E) such other
agreements, instruments, approvals, legal opinions or other documents reasonably
requested by Collateral Agent in order to create, perfect, establish the first
priority of or otherwise protect any lien purported to be covered by any such
pledge and security agreement or otherwise to effect the intent that all
property and assets of such Subsidiary shall become Collateral for the
Obligations. For purposes of this Agreement, "SUBSIDIARY" means, with respect to
any entity at any date, any corporation, limited or general partnership, limited
liability company, trust, estate, association, joint venture or other business
entity) of which more than 50% of (A) the outstanding capital stock having (in
the absence of contingencies) ordinary voting power to elect a majority of the
board of directors or other managing body of such entity, (B) in the case of a
partnership or limited liability company, the interest in the capital or profits
of such partnership or limited liability company or (C) in the case of a trust,
estate, association, joint venture or other entity, the beneficial interest in
such trust, estate, association or other entity business is, at the time of
determination, owned or controlled directly or indirectly through one or more
intermediaries, by such entity. Debtor has no Subsidiaries as of the date of
this Agreement.
7. POWER OF ATTORNEY.
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After the occurrence and during the uncured continuation of an Event of
Default as defined in Section 9 below, Debtor hereby irrevocably constitutes and
appoints the Collateral Agent as the true and lawful attorney of Debtor, with
full power of substitution, in the place and stead of Debtor and in the name of
Debtor or otherwise, at any time or times, in the discretion of the Collateral
Agent, to take any action and to execute any instrument or document which the
Collateral Agent may deem necessary or advisable to accomplish the purposes of
this Agreement. This power of attorney is coupled with an interest and is
irrevocable until the Obligations are satisfied.
8. PERFORMANCE BY THE COLLATERAL AGENT.
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If Debtor fails to perform any material covenant, agreement, duty or
obligation of Debtor under this Agreement, the Collateral Agent may, after any
applicable cure period, at any time or times in its discretion, take action to
effect performance of such obligation. All reasonable expenses of the Collateral
Agent incurred in connection with the foregoing authorization shall be payable
by Debtor as provided in Paragraph 12.1 hereof. No discretionary right, remedy
or power granted to the Collateral Agent under any part of this Agreement shall
be deemed to impose any obligation whatsoever on the Collateral Agent with
respect thereto, such rights, remedies and powers being solely for the
protection of the Collateral Agent.
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9. EVENT OF DEFAULT.
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An event of default ("Event of Default") shall be deemed to have
occurred hereunder upon the occurrence of any event of default as defined and
described in this Agreement, or Sections 3.1, 3.4, 3.7, 3.8, 3.9 or 3.10 of the
Notes, except that a default under Section 3.10 of the Note shall be deemed to
occur if the failure to deliver either Common Stock or a replacement Note
continues for ten days. Upon and after an Event of Default, after the applicable
cure period, if any, any or all of the Obligations shall become immediately due
and payable at the option of the Collateral Agent, for the benefit of the
Lenders, and the Collateral Agent may dispose of Collateral as provided below. A
default by Debtor of any of its material obligations pursuant to this Agreement
shall be an Event of Default hereunder and an "Event of Default" as defined in
the Convertible Notes.
10. DISPOSITION OF COLLATERAL.
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Upon and after an Event of Default which is then continuing,
10.1 The Collateral Agent may exercise its rights with respect to each
and every component of the Collateral, without regard to the existence of any
other security or source of payment for the Obligations. In addition to other
rights and remedies provided for herein or otherwise available to it, the
Collateral Agent shall have all of the rights and remedies of a lender under the
Uniform Commercial Code then in effect in the State of New York.
10.2 If any notice to Debtor of the sale or other disposition of
Collateral is required by then applicable law, five business (5) days prior
written notice (which Debtor agrees is reasonable notice within the meaning of
Section 9.612(a) of the Uniform Commercial Code) shall be given to Debtor of the
time and place of any sale of Collateral which Debtor hereby agrees may be by
private sale. The rights granted in this Section are in addition to any and all
rights available to Collateral Agent under the Uniform Commercial Code.
10.3 The Collateral Agent is authorized, at any such sale, if the
Collateral Agent deems it advisable to do so, in order to comply with any
applicable securities laws, to restrict the prospective bidders or purchasers to
persons who will represent and agree, among other things, that they are
purchasing the Collateral for their own account for investment, and not with a
view to the distribution or resale thereof, or otherwise to restrict such sale
in such other manner as the Collateral Agent deems advisable to ensure such
compliance. Sales made subject to such restrictions shall be deemed to have been
made in a commercially reasonable manner.
10.4 All proceeds received by the Collateral Agent for the benefit of
the Lenders in respect of any sale, collection or other enforcement or
disposition of Collateral, shall be applied (after deduction of any amounts
payable to the Collateral Agent pursuant to Paragraph 12.1 hereof) against the
Obligations pro rata among the Lenders in proportion to their interests in the
Obligations. Upon payment in full of all Obligations, Debtor shall be entitled
to the return of all Collateral, including cash, which has not been used or
applied toward the payment of Obligations or used or applied to any and all
costs or expenses of the Collateral Agent incurred in connection with the
liquidation of the Collateral (unless another person is legally entitled
thereto). Any assignment of Collateral by the Collateral Agent to Debtor shall
be without representation or warranty of any nature whatsoever and wholly
without recourse. To the extent allowed by law, each Lender may purchase the
Collateral and pay for such purchase by offsetting up to such Lender's pro rata
portion of the purchase price with sums owed to such Lender by Debtor arising
under the Obligations or any other source.
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10.5 The security interest described herein will be released by the
Collateral Agent upon ten business days prior notice from the Debtor to the
Collateral Agent after the aggregate amount of the Obligations is less than
$500,000. At such time, this Agreement shall terminate and no longer be in force
or effect. Collateral Agent shall, at the Debtor's sole cost and expense, take
all steps reasonably necessary to effectuate the release of such interest.
11. WAIVER OF AUTOMATIC STAY. Debtor acknowledges and agrees that should a
proceeding under any bankruptcy or insolvency law be commenced by or against
Debtor, or if any of the Collateral should become the subject of any bankruptcy
or insolvency proceeding, then the Collateral Agent should be entitled to, among
other relief to which the Collateral Agent or Lenders may be entitled under the
Convertible Notes, Subscription Agreement and any other agreement to which the
Debtor, Lenders or Collateral Agent are parties (collectively "Loan Documents"),
and/or applicable law, an order from the court granting immediate relief from
the automatic stay pursuant to 11 U.S.C. Section 362 to permit the Collateral
Agent to exercise all of its rights and remedies pursuant to the Loan Documents
and/or applicable law. Debtor EXPRESSLY WAIVES THE BENEFIT OF THE AUTOMATIC STAY
IMPOSED BY 11 U.S.C. SECTION 362. FURTHERMORE, Debtor EXPRESSLY ACKNOWLEDGES AND
AGREES THAT NEITHER 11 U.S.C. SECTION 362 NOR ANY OTHER SECTION OF THE
BANKRUPTCY CODE OR OTHER STATUTE OR RULE (INCLUDING, WITHOUT LIMITATION, 11
U.S.C. SECTION 105) SHALL STAY, INTERDICT, CONDITION, REDUCE OR INHIBIT IN ANY
WAY THE ABILITY OF THE COLLATERAL AGENT TO ENFORCE ANY OF ITS RIGHTS AND
REMEDIES UNDER THE LOAN DOCUMENTS AND/OR APPLICABLE LAW. Debtor hereby consents
to any motion for relief from stay which may be filed by the Collateral Agent in
any bankruptcy or insolvency proceeding initiated by or against Debtor, and
further agrees not to file any opposition to any motion for relief from stay
filed by the Collateral Agent. Debtor represents, acknowledges and agrees that
this provision is a specific and material aspect of this Agreement, and that the
Collateral Agent would not agree to the terms of this Agreement if this waiver
were not a part of this Agreement. Debtor further represents, acknowledges and
agrees that this waiver is knowingly, intelligently and voluntarily made, that
neither the Collateral Agent nor any person acting on behalf of the Collateral
Agent has made any representations to induce this waiver, that Debtor has been
represented (or has had the opportunity to be represented) in the signing of
this Agreement and in the making of this waiver by independent legal counsel
selected by Debtor and that Debtor has had the opportunity to discuss this
waiver with counsel. Debtor further agrees that any bankruptcy or insolvency
proceeding initiated by Debtor will only be brought in the Federal Court within
the Southern District of New York.
12. MISCELLANEOUS.
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12.1 EXPENSES. Debtor shall pay to the Collateral Agent, on demand, the
amount of any and all reasonable expenses, including, without limitation,
attorneys' fees, legal expenses and brokers' fees, which the Collateral Agent
may incur in connection with (a) sale, collection or other enforcement or
disposition of Collateral; (b) exercise or enforcement of any the rights,
remedies or powers of the Collateral Agent hereunder or with respect to any or
all of the Obligations upon breach or threatened breach; or (c) failure by
Debtor to perform and observe any agreements of Debtor contained herein which
are performed by the Collateral Agent.
12.2 WAIVERS, AMENDMENT AND REMEDIES. No course of dealing by the
Collateral Agent and no failure by the Collateral Agent to exercise, or delay by
the Collateral Agent in exercising, any right, remedy or power hereunder shall
operate as a waiver thereof, and no single or partial exercise thereof shall
preclude any other or further exercise thereof or the exercise of any other
right, remedy or power of the Collateral Agent. No amendment, modification or
waiver of any provision of this Agreement and no consent to any departure by
9
Debtor therefrom, shall, in any event, be effective unless contained in a
writing 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. The rights, remedies and powers of the Collateral Agent, not only
hereunder, but also under any instruments and agreements evidencing or securing
the Obligations and under applicable law are cumulative, and may be exercised by
the Collateral Agent from time to time in such order as the Collateral Agent may
elect.
12.3 NOTICES. All notices or other communications given or made
hereunder shall be in writing and shall be personally delivered or deemed
delivered the first business day after being faxed (provided that a copy is
delivered by first class mail) to the party to receive the same at its address
set forth below or to such other address as either party shall hereafter give to
the other by notice duly made under this Section:
To Debtor: One Voice Technologies, Inc.
0000 Xxxxxxxxx Xxxxxx, Xxxxx 000
Xxx Xxxxx, XX 00000
Fax: (000) 000-0000
To Lenders: To the addresses and telecopier
numbers set forth on Schedule A
To the Collateral Agent: Xxxx Xxxxxxxx
c/o Grushko & Xxxxxxx, P.C.
000 Xxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxx, Xxx Xxxx 00000
Fax: (000) 000-0000
Any party may change its address by written notice in accordance with this
paragraph.
12.4 TERM; BINDING EFFECT. This Agreement shall (a) remain in full
force and effect until payment and satisfaction of the Obligations as set forth
in Paragraph 10.5; (b) be binding upon Debtor, and its successors and permitted
assigns; and (c) inure to the benefit of the Collateral Agent, for the benefit
of the Lenders and their respective successors and assigns. All the rights and
benefits granted by Debtor to the Collateral Agent and Lenders in the Loan
Documents and other agreements and documents delivered in connection therewith
are deemed granted to both the Collateral Agent and Lenders.
12.5 CAPTIONS. The captions of Paragraphs, Articles and Sections in
this Agreement have been included for convenience of reference only, and shall
not define or limit the provisions hereof and have no legal or other
significance whatsoever.
12.6 GOVERNING LAW; VENUE; SEVERABILITY. This Agreement shall be
governed by and construed in accordance with the laws of the State of New York
without regard to conflicts of laws principles that would result in the
application of the substantive laws of another jurisdiction, except to the
extent that the perfection of the security interest granted hereby in respect of
any item of Collateral may be governed by the law of another jurisdiction. Any
legal action or proceeding against Debtor with respect to this Agreement may be
brought in the courts in the State of New York or of the United States for the
Southern District of New York, and, by execution and delivery of this Agreement,
Debtor hereby irrevocably accepts for itself and in respect of its property,
generally and unconditionally, the jurisdiction of the aforesaid courts. Debtor
hereby irrevocably waives any objection which they may now or hereafter have to
10
the laying of venue of any of the aforesaid actions or proceedings arising out
of or in connection with this Agreement brought in the aforesaid courts and
hereby further irrevocably waives and agrees not to plead or claim in any such
court that any such action or proceeding brought in any such court has been
brought in an inconvenient forum. If any provision of this Agreement, or the
application thereof to any person or circumstance, is held invalid, such
invalidity shall not affect any other provisions which can be given effect
without the invalid provision or application, and to this end the provisions
hereof shall be severable and the remaining, valid provisions shall remain of
full force and effect.
12.7 ENTIRE AGREEMENT. This Agreement contains the entire agreement of
the parties and supersedes all other agreements and understandings, oral or
written, with respect to the matters contained herein.
12.8 COUNTERPARTS/EXECUTION. This Agreement may be executed in any
number of counterparts and by the different signatories hereto on separate
counterparts, each of which, when so executed, shall be deemed an original, but
all such counterparts shall constitute but one and the same instrument. This
Agreement may be executed by facsimile signature and delivered by facsimile
transmission.
13. INTERCREDITOR TERMS. As between the Lenders, any distribution under
paragraph 5 shall be made proportionately based upon the remaining principal
amount (plus accrued and unpaid interest) to each as to the total amount then
owed to the Lenders as a whole. The rights of each Lender hereunder are PARI
PASSU to the rights of the other Lenders hereunder. Any recovery hereunder shall
be shared ratably among the Lenders according to the then remaining principal
amount owed to each (plus accrued and unpaid interest) as to the total amount
then owed to the Lenders as a whole.
14. NON-ASSIGNMENT. Neither this Agreement nor the Security Interest
granted herein is assignable without the express written consent of Debtor.
[THIS SPACE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the undersigned have executed and delivered this
Security Agreement, as of the date first written above.
"DEBTOR" "THE COLLATERAL AGENT"
ONE VOICE TECHNOLOGIES INC. XXXX XXXXXXXX
A Nevada corporation
By: /S/ Xxxx Xxxxx /S/ Xxxx Xxxxxxxx
------------------------- ---------------------------
Its: Chief Executive Officer
-----------------------
APPROVED BY "LENDERS":
----------------------
ALPHA CAPITAL AKTIENGESELLSCHAFT WHALEHAVEN CAPITAL FUND LIMITED
By: /S/ Xxxxxx Xxxxxxxxx By: /S/ Xxxx Xxxxxxxxxxx
------------------------ ------------------------
THIS SECURITY AGREEMENT MAY BE SIGNED BY FACSIMILE SIGNATURE AND
DELIVERED BY CONFIRMED FACSIMILE TRANSMISSION.
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SCHEDULE A TO SECURITY AGREEMENT
--------------------------------
--------------------------------------------------- ----------------------------
LENDER NOTE PRINCIPAL (BALANCE)
--------------------------------------------------- ----------------------------
ALPHA CAPITAL AKTIENGESELLSCHAFT $575,000.00
Xxxxxxxxx 0
0000 Xxxxxxxxxxx
Xxxxx, Xxxxxxxxxxxx
Fax: 000-00-00000000
--------------------------------------------------- ----------------------------
WHALEHAVEN CAPITAL FUND LIMITED $540,000.00
0xx Xxxxx, 00 Xxx-Xxxxxxx Xxxx
Xxxxxxxx, Xxxxxxx XX00
Fax: (000) 000-0000
--------------------------------------------------- ----------------------------
TOTAL $1,115,000.00
--------------------------------------------------- ----------------------------
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ANNEX I
TO
SECURITY AGREEMENT
PLEDGE AMENDMENT
----------------
This Pledge Amendment, dated _________ __ 200_, is delivered pursuant
to Section 4.3 of the Security Agreement referred to below. The undersigned
hereby agrees that this Pledge Amendment may be attached to the Security
Agreement, dated February 8, 2006, as it may heretofore have been or hereafter
may be amended, restated, supplemented or otherwise modified from time to time
and that the shares listed on this Pledge Amendment shall be hereby pledged and
assigned to Collateral Agent and become part of the Collateral referred to in
such Security Agreement and shall secure all of the Obligations referred to in
such Security Agreement.
------------------------ ----------------- ----------------------- -------------
Number Certificate
Name of Issuer of Shares Class Number(s)
-------------- --------- ----- ---------
------------------------ ----------------- ----------------------- -------------
------------------------ ----------------- ----------------------- -------------
------------------------ ----------------- ----------------------- -------------
------------------------ ----------------- ----------------------- -------------
------------------------ ----------------- ----------------------- -------------
ONE VOICE TECHNOLOGIES, INC.
By: _______________________
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