EXHIBIT E
CUSTODIAL AND SECURITY AGREEMENT
THIS CUSTODIAL AND SECURITY AGREEMENT (this "AGREEMENT") is made as of
June 13, 2005, by and among Secured Services, Inc., a Delaware corporation with
an address at 000 Xxxxxxxx Xxxxxx, 00xx Xxxxx, Xxx Xxxx, XX 00000 (the
"COMPANY"), the purchasers signatory hereto (each individually, a "PURCHASER,"
and collectively, the "PURCHASERS"), and Xxxxxxx Xxxxxxxxx LLP, with an address
at 000 Xxxxxxxxx Xxxxxx, Xxxxx 0000, Xxx Xxxx, Xxx Xxxx 00000 (the "CUSTODIAN").
CAPITALIZED TERMS USED BUT NOT DEFINED HEREIN SHALL HAVE THE MEANINGS SET FORTH
IN THE SECURITIES PURCHASE AGREEMENT REFERRED TO IN THE FIRST RECITAL.
W I T N E S S E T H:
WHEREAS, the Company and each Purchaser has entered into the Securities
Purchase Agreement of even date herewith (the "PURCHASE AGREEMENT"), pursuant to
which the Purchasers are purchasing the Company's 7.5% Convertible Debentures
due three years after their date of issuance (collectively, the "SECURED
DEBENTURES") and Warrants; and
WHEREAS, in order to induce the Purchasers to enter into the Purchase
Agreement and to purchase the Debentures, and as a condition precedent thereto,
the Company has agreed to secure the payment and performance of its obligations
under the Purchase Agreement, the Debentures, this Agreement and the other
Transaction Documents by granting to the Purchasers a first priority security
interest in certain of the cash proceeds from the sale of the Debentures; and
WHEREAS, the Company and the Purchasers have requested that the
Custodian hold $3,000,000 of the gross cash proceeds from the sale of the
Debentures for the benefit of the Purchasers, as secured parties, in accordance
with the terms hereof;
WHEREAS, the Purchasers wish to initially appoint Midsummer Capital LLC
as a representative of the Purchasers (the "PURCHASER REPRESENTATIVE") to act on
behalf of all of the Purchasers solely with respect to the release of funds
pursuant to this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants hereinafter contained, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. CLOSING.
(a) Upon the Custodian's receipt from the Purchasers of, in the
aggregate, $7,000,000 into its escrow account (the "ESCROW ACCOUNT"),
together with each Purchaser's executed counterparts of this
Agreement, the Purchase Agreement and the Registration Rights
Agreement, the Custodian shall telephonically advise the Company,
or the Company's designated attorney or agent, of its receipt of such
funds and such documents.
(b) Wire transfers to the Custodian shall be made as follows:
STERLING NATIONAL BANK
000 0XX XXXXXX
XXX XXXX, XX 00000
ACCOUNT NAME: XXXXXXX XXXXXXXXX LLP
ABA ROUTING NO: 000000000
ACCT NO: 0000000000
REMARK: SSVC/[FUND NAME]
(c) The Company, upon receipt of the telephonic notice described in
Section 1(a) above, shall deliver to the Custodian the certificates
representing the Debentures and the Warrants to be issued to each
Purchaser at the Closing together with:
(i) a counterpart of the Registration Rights Agreement, duly
executed by the Company;
(ii) the executed legal opinion of Company Counsel;
(iii) a counterpart of the Purchase Agreement, duly executed by
the Company; and
(iv) a counterpart of this Agreement, duly executed by the
Company.
(d) In the event that the foregoing items have not been delivered
to the Custodian by the Company within five (5) Trading Days after the
Custodian has received all of the Subscription Amounts (net of any
permitted deductions pursuant to the Purchase Agreement), then each
Purchaser shall have an independent and separate right to demand and
receive the return of its Subscription Amount.
(e) Once the Custodian receives all of the items required to be
delivered hereunder, it shall wire the gross proceeds raised pursuant
to the Purchase Agreement per the written instructions of the Company
less the balance of $3,000,000 (the "SECURED PROCEEDS") which shall be
initially transferred into a separate non-interest bearing custodian
deposit account of the Custodian (the "CUSTODIAN ACCOUNT").
Thereafter, the Custodian Account shall be maintained by the Custodian
in accordance with the terms of this Agreement and may be invested, if
possible, in an interest-bearing government securities or commercial
money market fund made available by the Custodian's bank or as
otherwise directed in a writing executed by the Company and the
Purchaser Representative. The Custodian, by its execution and delivery
of this Agreement, hereby agrees to accept receipt of the Secured
Proceeds and to hold such proceeds for the benefit of the Purchasers,
as secured parties.
(f) After transferring the Secured Proceeds into the Custodian
Account, the Custodian shall then arrange to have originals or
counterpart originals of the Purchase
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Agreement, the Warrants, the Debentures, the Registration Rights
Agreement, this Agreement and the opinion of counsel delivered to the
appropriate parties.
(g) The Custodian shall hold the Secured Proceeds in the Custodian
Account, for the benefit of each Purchaser, and not release such
proceeds except as provided herein. NOTWITHSTANDING ANYTHING IN THIS
AGREEMENT TO THE CONTRARY, AS TO ANY PURCHASER, THE CUSTODIAN SHALL
ONLY RELEASE FUNDS TO THE COMPANY OR A PURCHASER UNDER THIS AGREEMENT
TO THE EXTENT ALL SUCH RELEASES ON ACCOUNT OF SUCH PURCHASER, IN THE
AGGREGATE, DO NOT EXCEED 42.8% OF THE ORIGINAL PRINCIPAL AMOUNT OF
DEBENTURES PURCHASED BY SUCH PURCHASER PURSUANT TO THE PURCHASE
AGREEMENT PLUS ACCRUED INTEREST.
(h) The Purchasers hereby appoint the Purchaser Representative as
the representative of the Purchasers to act on behalf of all of the
Purchasers with respect to the release of funds pursuant to this
Agreement.
2. RELEASE OF SECURED PROCEEDS.
(a) RELEASE UPON VOLUNTARY CONVERSION OF DEBENTURES. Upon the
conversion by a Purchaser of all or part of the principal amount of
the Debenture(s) held by such Purchaser in excess of such Purchaser's
Pro Rata Amount of the sum of $4,000,000 ("PRO RATA AMOUNT" as defined
in the Debenture), (the "CONVERTED PRINCIPAL AMOUNT"), such Purchaser
and the Company shall promptly thereafter execute a joint certificate
to the Custodian certifying that such Converted Principal Amount has
been converted by the Purchaser (a "CONVERSION CERTIFICATE", such
release upon Conversion shall be a "CONVERSION RELEASE" and such date
of a Conversion Release shall be the "CONVERSION RELEASE DATE").
Promptly after its receipt of a Conversion Certificate, the Custodian
shall release out of the Secured Proceeds, subject to the limitation
set forth in Section 1(g), to the account specified in the written
instructions of the Company, an amount equal to the Converted
Principal Amount.
(b) RELEASE UPON THE ENGAGEMENT OF A CHIEF EXECUTIVE OFFICER OF THE
COMPANY. Upon the Company engaging a Chief Executive Officer, who may
be an existing officer or employee of the Company, acceptable to
[Xxxxxx Xxxx], the Company and each Purchaser shall promptly
thereafter execute a joint certificate to the Custodian certifying
that the Secured Proceeds are to be released to the Company
("EMPLOYMENT CERTIFICATE"). Promptly after its receipt of an
Employment Certificate, the Custodian shall release the Secured
Proceeds to the account specified in the written instructions of the
Company.
(c) RELEASE UPON CONSENT OF PURCHASERS. Upon receipt by the Company
of a written consent of a Purchaser to release any portion of the
Secured Proceeds, the Company and such Purchaser shall execute and
deliver to the Custodian a joint certificate (each, a "CONSENT
CERTIFICATE") certifying that consent to release such Secured Proceeds
has been obtained, which Consent Certificate shall include the amount
of the Secured
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Proceeds to be released, representations from such Purchaser as to the
outstanding principal amount of the Debentures held by it at the time
such consent was obtained, and a representation by the Company's chief
executive officer as to the aggregate principal amount of the
Debentures outstanding at the time consent was obtained. Any Purchaser
may consent or withhold consent to any such release of any of the
Secured Proceeds in its sole and absolute discretion. Upon receipt of
the Consent Certificate, the Custodian shall release, to the account
of the Company designated in the Consent Certificate, that Purchaser's
Pro Rata Portion of the Secured Proceeds specified in the Consent
Certificate. If less than all of the Secured Proceeds are released,
the remaining amount, for purposes of calculating each Purchaser's
rights hereunder, shall be re-allocated according to such Purchaser's
Pro Rata Portion.
(d) RELEASE UPON AN EVENT OF DEFAULT.
(i) If, on the maturity date of the Debentures, or on the
120th calendar day following the date hereof the Secured
Proceeds have not been released to the Company, any
Debentures shall remain unpaid, then upon receipt by the
Custodian of a written notice from a Purchaser holding such
Debentures certifying that such Debentures remain unpaid,
the Custodian shall release to such Purchaser its Pro Rata
Portion of the Secured Proceeds remaining in the Custodian
Account relating to such Purchaser (but not more than the
amount due under such Debentures then held by such Purchaser
and amounts due under the Purchase Agreement to such
Purchaser), and such Secured Proceeds shall be applied to
reduce amounts due and owing to such Purchaser with respect
to the Debentures and the Purchase Agreement as follows:
first, to the payment of fees and expenses including
liquidated damages; second, to interest payable in cash with
respect to the Debentures; and third, to the outstanding
principal under the Debentures.
(ii) At any time after the occurrence of an Event of
Default, any Purchaser may, at its option, deliver a
certificate to the Custodian and the Company specifying the
nature of the Event of Default. If, within ten days after
its receipt of such certificate, the Custodian shall not
have received written notice from the Company that it
disputes the occurrence of such Event of Default, then the
Custodian shall release to such Purchaser such Purchaser's
Pro Rata Portion of the Secured Proceeds remaining in the
Custodian Account. In the event that the Company does
deliver a timely notice to the Custodian and the Purchaser
that it disputes such determination, then such dispute shall
be resolved between the Company and the Purchaser by
arbitration conducted as follows: the arbitration shall be
conducted in New York, New York, before an arbitration panel
of three arbitrators, one of whom shall be selected by the
Purchaser, one of whom shall be selected by the Company,
with the remaining arbitrator to be agreed upon by the first
two. The arbitration shall be conducted in accordance with
the commercial arbitration rules of the American Arbitration
Association then in effect. Any arbitration
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decision or award shall be final and conclusive as to the
parties to this Agreement and their successors and assigns;
judgment upon such decision or award may be entered in any
competent court. In the event that the arbitration shall be
decided in favor of the applicable Purchaser, then upon
delivery of a written copy of such decision by the Purchaser
to the Custodian, the Custodian shall promptly release the
Purchaser's Pro Rata Portion of the remaining Secured
Proceeds to the Purchaser. A release of the Secured Proceeds
after 120 days from the date hereof shall be immediate upon
receipt by the Custodian of notice.
3. SECURITY AGREEMENT.
(a) GRANT. The Company hereby unconditionally and irrevocably
grants to the Purchasers, to secure the payment and performance in
full when due of all of the Obligations (as said term is defined
below), a continuing first priority security interest in, and so
pledges and assigns to the Purchasers all of, the Secured Proceeds and
any interest that accrues thereon ("COLLATERAL"). "Obligations" means
all present and future indebtedness, obligations, covenants, duties
and liabilities of any kind or nature of the Company to the Purchasers
(or any of them) under this Agreement, the Debentures and the other
Transaction Documents, in each case whether now or hereafter existing,
voluntary or involuntary, direct or indirect, absolute or contingent,
liquidated or unliquidated, whether or not jointly owed with others.
Without limiting the generality of the foregoing, this Agreement
secures the payment of all amounts that constitute part of the
Obligations and would be owed by the Company to the Purchasers under
the Transaction Documents but for the fact that they are unenforceable
or not allowable due to the existence of a bankruptcy, reorganization
or similar proceeding involving the Company or any of the Company's
Subsidiaries.
(b) FURTHER ASSURANCES. The Company agrees that at any time and
from time to time, at the expense of the Company, the Company shall
promptly execute and deliver all further instruments, documents and/or
control agreements and take all further action, that may be necessary
or desirable, or that the Purchasers may reasonably request, in order
to perfect and protect any security interest granted or purported to
be granted hereby or to enable any Purchaser to exercise and enforce
its rights and remedies hereunder with respect to any of the
Collateral.
(c) RIGHTS AND REMEDIES. At any time after the occurrence of an
Event of Default, and without any other notice to or demand upon the
Company, the Purchasers shall have, in any jurisdiction in which
enforcement hereof is sought, in addition to all other rights and
remedies, the rights and remedies of a secured party under the Uniform
Commercial Code in effect from time to time in the State of New York
(the "UCC") and any additional rights and remedies which may be
provided to a secured party in any applicable jurisdiction.
(d) POWER OF ATTORNEY. The Company hereby irrevocably constitutes
and appoints the Purchasers, and each of them, and any officer,
partner, member or agent thereof, with full power of substitution, as
its true and lawful attorneys-in-fact with full
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irrevocable power and authority in the name, place and stead of the
Company or in their own names, for the purpose of carrying out the
terms of this Agreement, to take any and all appropriate action and to
execute any and all documents and instruments that may be necessary or
useful to accomplish the purposes of this Agreement and, without
limiting the generality of the foregoing, hereby gives said attorneys
the power and right, on behalf of the Company, without notice to or
assent by the Company, at any time after the occurrence of an Event of
Default, to sell, transfer, pledge, make any agreement with respect to
or otherwise dispose of or deal with any of the Collateral in such
manner as is consistent with the UCC and as fully and completely as
though the Purchasers were the absolute owners thereof for all
purposes, and to do, at the Company's expense, at any time or from
time to time, all acts and things which the Purchasers deem necessary
or useful to protect, preserve or realize upon the Collateral and the
security interest of the Purchasers therein, in order to effect the
intent of this Agreement, all at least as fully and effectively as the
Company might do.
(e) Intentionally Omitted.
(f) MARSHALLING. All rights and remedies of the Purchasers
hereunder and in respect of the Collateral and other assurances of
payment shall be cumulative and in addition to all other rights and
remedies, however existing or arising. To the extent that it lawfully
may, the Company hereby agrees that it will not invoke any law
relating to the marshalling of assets which might cause a delay in or
impede the enforcement of the rights and remedies of the Purchasers
under this Agreement, the Debentures, the other Transaction Documents
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 Company
hereby irrevocably waives the benefits of all such law.
(g) NO WAIVER, ETC. The Purchasers shall not be deemed to have
waived any of their rights or remedies in respect of the Obligations
or the Collateral unless such waiver shall be in writing and signed by
the Purchasers. No delay or omission on the part of the Purchasers in
exercising any right or remedy shall operate as a waiver of such right
or remedy or any other right or remedy. A waiver on any one occasion
shall not be construed as a bar to or waiver of any right or remedy on
any future occasion. All rights and remedies of the Purchasers with
respect to the Obligations or the Collateral, whether evidenced hereby
or by any other document or instrument, shall be cumulative and may be
exercised singularly, alternatively, successively or concurrently at
such time or at such times as the Purchasers deem expedient.
(h) CERTAIN DEFINED TERMS. Terms used in this Section 3 but not
otherwise defined in this Agreement that are defined in the UCC (as
such term is hereinafter defined) shall have the respective meanings
given such terms therein; PROVIDED, HOWEVER, that if a term is defined
in Article 9 of the UCC differently than in another Article of the
UCC, then such term shall have the meaning specified in Article 9.
"UCC" means the Uniform Commercial Code in effect from time to time in
the State of New York.
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4. CONDITIONS TO CUSTODIAN'S DUTIES. The acceptance by the Custodian of
its duties as such under this Agreement is subject to the following terms and
conditions, which all of the parties to this Agreement hereby agree shall govern
and control with respect to the rights, duties, liabilities and immunities of
the Custodian:
(a) The Custodian is not a party to, nor is it bound by, any other
agreement by which the other parties hereto may be bound (whether or
not it has knowledge of such), other than as expressly herein set
forth.
(b) The Custodian shall be protected in acting upon any written
notice, request, waiver, consent, receipt or other document which the
Custodian, in good faith, believes to be genuine and what it purports
to be. No waiver or any breach of any covenant or provision herein
contained shall be deemed a waiver of any preceding or succeeding
breach thereof, or of any other covenant or provision herein
contained. No extension of time for performance of any obligation or
act shall be deemed an extension of the time for performance of any
other obligation or act. If the Custodian reasonably requires other or
further instruments in connection with this Agreement or obligations
in respect hereto, the necessary parties hereto shall join in
furnishing such instruments.
(c) The Custodian shall be indemnified and held harmless by the
Company and the Purchasers, jointly and severally, from and against
any and all loss, expense, fees (including attorneys' fees) and
damages that may be incurred by the Custodian as a result of its
agreeing to act in such capacity and its performance of this
Agreement. The Custodian shall not be obligated to any party for any
error in judgment or for any act done or steps taken or omitted by it
in good faith, or for any mistake of fact or law, or for anything
which it may do or refrain from doing in connection therewith, except
as a result of its own gross negligence or willful misconduct. This
indemnity includes the costs of enforcing the indemnification
(including attorneys' fees).
(d) The Custodian may consult with or retain legal counsel in
connection with any dispute or question as to the construction of any
of the provisions hereof or with regard to its duties and shall be
held harmless and protected by the Company and the Purchasers in
acting in good faith in accordance with the instructions of such
counsel. Such counsel's fees and expenses shall be paid as set forth
in Section 4(f) hereof. The Custodian may represent itself at its
usual rates.
(e) The Custodian shall not be responsible or liable for the
default or misconduct of its agents, attorneys or employees, if they
are selected with reasonable care.
(f) The Company will pay the Custodian's fees (at the Custodian's
customary hourly rate for legal services) and out-of-pocket
disbursements for time spent in performing its duties under this
Agreement, and if any of Custodian's invoices are not paid in full
within 30 days, the Custodian is directed to pay itself directly from
the Custodian Account; provided that if fees are taken directly from
the Custodian Account by the Custodian, the Purchasers shall have no
claim against the Custodian for such funds but shall have a claim
against the Company for reimbursement. The Company shall
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promptly replenish any funds that are disbursed to the Custodian from
the Custodian Account.
(g) The Custodian shall have no obligation to seek to maximize the
rate of interest on the Secured Proceeds, and shall be without
liability to any person in respect thereof.
(h) No modification of this Agreement shall, without the consent of
the Custodian and all other parties hereto, modify the provisions of
this Agreement relating to the duties, obligations or rights of the
Custodian. This Agreement is the final expression of, and contains the
entire agreement between, the parties with respect to the subject
matter hereof and supersedes all prior understandings with respect
thereto.
5. CONFLICT WITH RESPECT TO COLLATERAL.
(a) In the event that the Custodian at any time receives or becomes
aware of conflicting demands or claims with respect to the Collateral,
this Agreement or its duties hereunder, the Custodian shall have the
right to discontinue and refrain from any and all activities on its
part under this Agreement or in connection herewith until such
conflict is resolved to its satisfaction.
(b) The Custodian shall have the further right to commence or
defend any action or proceedings for the determination of such
conflict. The Company and the Purchasers jointly and severally agree
to pay all costs, damages, judgments and expenses, including
reasonable attorneys' fees, suffered or incurred by the Custodian in
connection with or arising out of this Agreement and the transactions
described herein in the event of bona fide conflicting claims or
demands, including, but without limiting the generality of the
foregoing, a suit in interpleader brought by the Custodian. In the
event that the Custodian files a suit in interpleader, it shall
thereupon be fully released and discharged from all further
obligations to perform any and all duties or obligations imposed upon
it by this Agreement (except it may not release the Collateral except
as designated by the court).
6. ACKNOWLEDGEMENT. ALL PARTIES HERETO AGREE THAT THE CUSTODIAN IS
COUNSEL FOR MIDSUMMER CAPITAL, LLC ("MIDSUMMER") AND SHALL BE ENTITLED TO
REPRESENT MIDSUMMER WITH RESPECT TO THE PURCHASE AGREEMENT AND THE TRANSACTIONS
CONTEMPLATED THEREUNDER; AND THE COMPANY AND EACH OTHER PURCHASER HEREBY WAIVES
ANY RIGHT OR CLAIM TO OBJECT TO SUCH LEGAL REPRESENTATION BY CUSTODIAN OF
MIDSUMMER IN CONNECTION WITH THIS TRANSACTION.
7. RESIGNATION OF CUSTODIAN. The Custodian may at any time resign
hereunder by giving written notice of its resignation to the Company and the
Purchasers, at least ten (10) days prior to the date specified for such
resignation to take effect, and upon the effective date of such resignation, all
property then held by the Custodian hereunder shall be delivered by it to such
Person as may be designated by the Company and the Purchasers, in writing,
whereupon all the Custodian's obligations hereunder shall cease and terminate.
If no such Person shall have been designated by such date, all obligations of
the Custodian hereunder shall, nevertheless, cease and terminate. The
Custodian's sole responsibility thereafter shall be to keep safely all property
then
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held by it and to deliver the same to a Person designated by the parties hereto
or in accordance with the directions of a final order or judgment of a court of
competent jurisdiction, or to file a suit in interpleader as provided in Section
5 above.
8. INTEREST ON SECURED PROCEEDS. The Custodian shall have no obligation
to any party to maintain any level of interest on the Secured Proceeds. In the
absence of an Event of Default, all accrued interest, if any, shall be payable
to the Company or its assignees at the direction of the Company when actual
paid.
9. SUCCESSORS AND ASSIGNS. The Purchasers may assign their rights
hereunder in connection with the transfer of Debentures. The Company may not
assign its rights under this Agreement. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective heirs,
administrators, successors and permitted assigns.
10. GOVERNING LAW; JURISDICTION. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK, AND
THE PARTIES AGREE AND CONSENT TO THE EXCLUSIVE JURISDICTION OF THE FEDERAL AND
STATE COURTS LOCATED IN NEW YORK COUNTY, NEW YORK IN ANY ACTION OR PROCEEDING
HEREUNDER, AND TO SERVICE OF PROCESS BY CERTIFIED MAIL, RETURN RECEIPT REQUESTED
(WHICH SHALL CONSTITUTE "PERSONAL SERVICE"). THE PARTIES HERETO HEREBY
IRREVOCABLY WAIVE, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND
ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO
THIS AGREEMENT.
11. AMENDMENT. No provision of this Agreement may be amended or waived
without the prior written consent of the Company and all the Purchasers;
PROVIDED, HOWEVER, that any provision relating to the duties, obligations and
rights of the Custodian shall in addition require the approval of the Custodian,
as provided in Section 4 above.
12. NOTICES. All notices or other communications between the parties
contemplated under, or relating to, this Agreement shall be in writing, shall be
signed by each person giving such notice or communication, and shall be
delivered by hand, reputable overnight courier or by certified mail, return
receipt requested, to the parties at their respective addresses set forth above
or to such other address as to which the sending party has received written
notice in accordance with this Section 12.
13. THE PURCHASER REPRESENTATIVE.
(a) APPOINTMENT. The Purchasers, by their acceptance of the
benefits of the Agreement, hereby designate Midsummer Capital LLC as
the Purchaser Representative to act as specified herein. Each Purchaser
shall be deemed irrevocably to authorize the Purchaser Representative
to take such action on its behalf under the provisions of this
Agreement and any other instruments and agreements referred to herein
or therein and to exercise such powers and to perform such duties
hereunder and thereunder as are specifically delegated to or required
of the Purchaser Representative by the terms hereof and thereof and
such other powers as are reasonably incidental thereto. The Purchaser
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Representative may perform any of its duties hereunder by or through
its agents or employees.
(b) NATURE OF DUTIES. The Purchaser Representative shall have no
duties or responsibilities except those expressly set forth in this
Agreement. Neither the Purchaser Representative nor any of its
partners, members, shareholders, officers, directors, employees or
agents shall be liable for any action taken or omitted by it as such
under the Agreement or hereunder or in connection herewith or
therewith, unless caused by its or their gross negligence or willful
conduct. The duties of the Purchaser Representative shall be mechanical
and administrative in nature; the Purchaser Representative shall not
have by reason of this Agreement a fiduciary relationship in respect of
the Company or any Purchaser; and nothing in the Agreement, expressed
or implied, is intended to or shall be so construed as to impose upon
the Purchaser Representative any obligations in respect of this
Agreement except as expressly set forth herein and therein.
(c) LACK OF RELIANCE ON THE PURCHASER REPRESENTATIVE. Independently
and without reliance upon the Purchaser Representative, each Purchaser,
to the extent it deems appropriate, has made and shall continue to make
(i) its own independent investigation of the financial condition and
affairs of the Company and its subsidiaries in connection with such
Purchaser's investment in the Company, the creation and continuance of
the Obligations, the transactions contemplated by the Transaction
Documents, and the taking or not taking of any action in connection
therewith, and (ii) its own appraisal of the creditworthiness of the
Company and its subsidiaries, and of the value of the Collateral from
time to time, and the Purchaser Representative shall have no duty or
responsibility, either initially or on a continuing basis, to provide
any Purchaser with any credit, market or other information with respect
thereto, whether coming into its possession before any Obligations are
incurred or at any time or times thereafter. The Purchaser
Representative shall not be responsible to Company or any Purchaser for
any recitals, statements, information, representations or warranties
herein or in any document, certificate or other writing delivered in
connection herewith, or for the execution, effectiveness, genuineness,
validity, enforceability, perfection, collectibility, priority or
sufficiency of this Agreement, or for the financial condition of the
Company or the value of any of the Collateral, or be required to make
any inquiry concerning either the performance or observance of any of
the terms, provisions or conditions of this Agreement, or the financial
condition of the Company, or the value of any of the Collateral, or the
existence or possible existence of any default or Event of Default
under this Agreement, the Debentures or any of the other Transaction
Documents.
(d) CERTAIN RIGHTS OF THE PURCHASER REPRESENTATIVE. The Purchaser
Representative shall have the right to take any action with respect to
the Collateral, on behalf of all of the Purchasers. To the extent
practical, the Purchaser Representative shall request instructions from
the Purchasers with respect to any material act or action (including
failure to act) in connection with this Agreement, and shall be
entitled to act or refrain from acting in accordance with the
instructions of Purchasers holding a majority in principal amount of
Debentures; if such instructions are not provided despite the Purchaser
Representative's request therefor, the Purchaser Representative shall
be entitled to refrain from such act or taking such action, and if such
action is taken, shall be
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entitled to appropriate indemnification from the Purchasers in respect
of actions to be taken by the Purchaser Representative; and the
Purchaser Representative shall not incur liability to any Person by
reason of so refraining. Without limiting the foregoing, no Purchaser
shall have any right of action whatsoever against the Purchaser
Representative as a result of the Purchaser Representative acting or
refraining from acting hereunder in accordance with the terms of the
Agreement, and the Company shall have no right to question or challenge
the authority of, or the instructions given to, the Purchaser
Representative pursuant to the foregoing.
(e) RELIANCE. The Purchaser Representative shall be entitled to
rely, and shall be fully protected in relying, upon any writing,
resolution, notice, statement, certificate, telex, teletype or
telecopier message, cablegram, radiogram, order or other document or
telephone message signed, sent or made by the proper person or entity,
and, with respect to all legal matters pertaining to this Agreement and
its duties thereunder, upon advice of counsel selected by it.
(f) INDEMNIFICATION. The Purchaser Representative shall be
indemnified and held harmless by the Company and the Purchasers,
jointly and severally, from and against any and all loss, expense, fees
(including attorneys' fees) and damages that may be incurred by the
Purchaser Representative as a result of its agreeing to act in such
capacity and its performance of this Agreement. The Purchaser
Representative shall not be obligated to any party for any error in
judgment or for any act done or steps taken or omitted by it in good
faith, or for any mistake of fact or law, or for anything which it may
do or refrain from doing in connection therewith, except as a result of
its own gross negligence or willful misconduct. This indemnity includes
the costs of enforcing the indemnification (including attorneys' fees).
To the extent that the Purchaser Representative is not reimbursed and
indemnified by the Company and/or its subsidiaries, the Purchasers will
jointly and severally reimburse and indemnify the Purchaser
Representative, in proportion to their initially purchased respective
principal amounts of Debentures, from and against any and all
liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or
nature whatsoever which may be imposed on, incurred by or asserted
against the Purchaser Representative in performing its duties hereunder
or under this Agreement, or in any way relating to or arising out of
this Agreement except for those determined by a final judgment (not
subject to further appeal) of a court of competent jurisdiction to have
resulted solely from the Purchaser Representative's own gross
negligence or willful misconduct.
(g) RESIGNATION BY THE PURCHASER REPRESENTATIVE.
(i) The Purchaser Representative may resign from the
performance of all its functions and duties under this
Agreement at any time by giving 30 days' prior written notice
(as provided in the Agreement) to the Company and the
Purchasers. Such resignation shall take effect upon the
appointment of a successor Purchaser Representative pursuant to
clauses (b) and (c) below.
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(ii) Upon any such notice of resignation, the Purchasers,
acting by a majority in interest, shall appoint a successor
Purchaser Representative hereunder.
(iii) If a successor Purchaser Representative shall not have
been so appointed within said 30-day period, the Purchaser
Representative shall then appoint a successor Purchaser
Representative who shall serve as Purchaser Representative
until such time, if any, as the Purchasers appoint a successor
Purchaser Representative as provided above. If a successor
Purchaser Representative has not been appointed within such
30-day period, the Purchaser Representative may petition any
court of competent jurisdiction or may interplead the Company
and the Purchasers in a proceeding for the appointment of a
successor Purchaser Representative, and all fees, including,
but not limited to, extraordinary fees associated with the
filing of interpleader and expenses associated therewith, shall
be payable by the Company on demand.
*******************
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IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of
the day and year first above written.
SECURED SERVICES, INC.
By:__________________________________________
Name:
Title:
CUSTODIAN:
XXXXXXX XXXXXXXXX LLP
By:__________________________________________
Name:
Title:
PURCHASER REPRESENTATIVE
MIDSUMMER CAPITAL LLC
By:___________________________________
Name:
Title:
[PURCHASERS' SIGNATURE PAGES TO FOLLOW]
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[PURCHASER'S SIGNATURE PAGE TO SSVC CUSTODIAL AGREEMENT]
Name of Investing Entity: __________________________
SIGNATURE OF AUTHORIZED SIGNATORY OF INVESTING ENTITY: _________________________
Name of Authorized Signatory: _________________________
Title of Authorized Signatory: __________________________
[ADDITIONAL PURCHASERS' SIGNATURE PAGES TO FOLLOW]
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