SECURITY AGREEMENT
This Security Agreement (as amended, supplemented or otherwise modified
from time to time, this "Agreement"), dated as of March 14, 2007, is by and
between SiriCOMM, Inc., a Delaware corporation with its chief executive office
and principal place of business located at 0000 Xxxx 00xx Xxxxxx, Xxxxxx,
Xxxxxxxx 00000 ("Debtor"), and Sunflower Capital, LLC, a Missouri limited
liability company with an office at 10801 Xxxxxx, Xxxxx 000, Xxxxxxxx Xxxx,
Xxxxxx 00000 ("Secured Party").
WHEREAS, Secured Party has agreed to make a loan (the "Loan") to
Debtor, pursuant to that certain Loan Agreement, dated as of the date hereof, by
and between Debtor and Secured Party (the "Loan Agreement"); and
WHEREAS, in order to induce Secured Party to enter into the Loan
Agreement and to make the Loan, Debtor agreed to grant a continuing Lien in the
Collateral (as defined below) to secure the Obligations;
NOW, THEREFORE, in consideration of the above recitals and for other
good and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties hereto agree as follows:
1. Defined Terms. All capitalized terms used but not defined herein
(including the recitals hereto) have the meanings ascribed to them in the Loan
Agreement. All other terms, unless the context otherwise requires, have the
meanings provided by the Uniform Commercial Code to the extent the same are used
or defined therein.
2. Grant of Security Interest. To secure Debtor's full and timely
payment and performance of the Obligations to Secured Party pursuant to the Loan
Documents, Debtor hereby grants, assigns, conveys, mortgages, pledges,
hypothecates and transfers to Secured Party a continuing first-priority security
interest (the "Security Interest") in and to all of the property described on
Exhibit "A" to this Agreement (the "Collateral").
3. Representations and Covenants.
(a) Other Liens. Except for liens in favor of Secured Party
(the "Permitted Liens"), Debtor owns all right, title and interest in
the Collateral (or has appropriate rights to use in the case of
property subject to leases, licenses or similar arrangements in which
Debtor is the licensee or lessee) and will not permit the Collateral to
be subject to any adverse lien, security interest or encumbrance (other
than Permitted Liens), and Debtor will defend the Collateral against
the claims and demands of all persons at any time claiming the same or
any interest therein. No financing statements covering any Collateral
or any proceeds thereof are on file in any public office except for
financing statements filed by Secured Party.
(b) Further Documentation. At any time and from time to time,
at the sole expense of Debtor, Debtor will promptly and duly execute
and deliver such further instruments and documents and take such
further action as Secured Party may reasonably request for the purpose
of obtaining or preserving the full benefits of this Agreement and of
the rights and powers herein granted. Debtor hereby authorizes Secured
Party to file with the appropriate filing office, now or hereafter from
time to time, financing statements, continuation statements and
amendments thereto, naming the undersigned as debtor and covering all
assets of the undersigned, including but not limited to any specific
listing, identification or type of all or any portion of the assets of
the undersigned. The undersigned acknowledges and agrees, by evidence
of its signature below, that this authorization is sufficient to
satisfy the requirements of Revised Article 9 of the Uniform Commercial
Code, July 1, 2001 revisions.
(c) Indemnification. Debtor agrees to defend, indemnify and
hold harmless Secured Party against any and all liabilities, costs and
expenses (including, without limitation, all reasonable legal fees and
expenses): (i) with respect to, or resulting from, any delay in paying
any and all excise, sales or other taxes which may be payable or are
determined to be payable with respect to any of the Collateral; (ii)
with respect to, or resulting from, any delay in complying with any
law, rule, regulation or order of any governmental authority applicable
to any of the Collateral or (iii) in connection with any of the
transactions contemplated by this Agreement; provided, however, that
this indemnification shall not extend to any damages caused by the
gross negligence or willful misconduct of Secured Party.
(d) Change of Jurisdiction of Organization; Relocation of
Business or Collateral. Debtor shall not change its jurisdiction of
organization, relocate its chief executive office, principal place of
business or its records or allow the relocation of any Collateral
(unless such relocation is in the ordinary course of business) without
thirty days' prior written notice to Secured Party.
(e) Limitations on Modifications of Accounts, Etc. Upon the
occurrence and during the continuance of any Event of Default, without
Secured Party's prior written consent, Debtor shall not grant any
extension of the time of payment of any of the accounts, chattel paper,
instruments or amounts due under any contract or document, compromise,
compound or settle the same for less than the full amount thereof,
release, wholly or partly, any person liable for the payment thereof,
or allow any credit or discount whatsoever thereon other than trade
discounts and rebates granted in the ordinary course of Debtor's
business.
(f) Insurance. Debtor shall maintain insurance policies
insuring the Collateral against loss or damage from such risks and in
such amounts and forms and with such companies as required by the Loan
Agreement.
(g) Authority. Debtor has all requisite power and authority to
execute this Agreement and to perform all of its obligations hereunder,
and this Agreement has been duly executed and delivered by Debtor and
constitutes the legal, valid and binding obligation of Debtor,
enforceable in accordance with its terms. The execution, delivery and
performance by Debtor of this Agreement have been duly authorized by
all necessary corporate action and do not (i) require any
authorization, consent or approval by any governmental department,
commission, board, bureau, agency or instrumentality, domestic or
foreign, (ii) violate any provision of any law, rule or regulation or
of any order, writ, injunction or decree presently in effect, having
applicability to Debtor or the articles of incorporation or by-laws of
Debtor, or (iii) result in a breach of or constitute a default under
any indenture, loan or credit agreement or any other agreement, lease
or instrument to which Debtor is a party or by which it or its
properties may be bound or affected.
(h) Defense of Intellectual Property. Debtor shall (i) use
commercially reasonable efforts to protect, defend and maintain the
validity and enforceability of its material copyrights, patents,
trademarks and trade secrets, (ii) use commercially reasonable efforts
to detect infringements of its copyrights, patents, trademarks and
trade secrets and promptly advise Secured Party in writing of material
infringements detected and (iii) not allow any copyrights, patents,
trademarks or trade secrets material to Debtor's business to be
abandoned, forfeited or dedicated to the public without the written
consent of Secured Party.
(i) Maintenance of Records. Debtor will keep and maintain at
its own cost and expense satisfactory and complete records of the
Collateral.
(j) Inspection Rights. Secured Party will have full access
during normal business hours, and upon reasonable prior notice, to all
of the books, correspondence and other records of Debtor relating to
the Collateral, and Secured Party or its representatives may examine
such records and make photocopies or otherwise take extracts from such
records, subject to Debtor's reasonable confidentiality requirements.
Debtor agrees to render to Secured Party, at Debtor's expense, such
clerical and other assistance as may be reasonably requested with
regard to the exercise of its rights pursuant to this paragraph.
(k) Compliance with Laws, Etc. Debtor shall comply in all
material respects with all laws, rules, regulations and orders of any
governmental authority applicable to any part of the Collateral or to
the operation of Debtor's business; provided, however, that Debtor may
contest any such law, rule, regulation or order in any reasonable
manner which does not, in the reasonable opinion of Debtor, adversely
affect Secured Party's rights or the priority of its liens on the
Collateral.
(l) Payment of Obligations. Debtor shall pay before
delinquency all obligations associated with the Collateral, including
license fees, taxes, assessments and governmental charges or levies
imposed upon the Collateral or with respect to any of its income or
profits derived from the Collateral; as well as all claims of any kind
(including, without limitation, claims for labor, materials and
supplies) against or with respect to the Collateral, except that no
such charge need be paid if (i) the validity or amount of such charge
is being contested in good faith by appropriate proceedings, (ii) such
proceedings do not involve any material danger of the sale, forfeiture
or loss of any of the Collateral or any interest in the Collateral and
(iii) such charge is adequately reserved against on Debtor's books in
accordance with generally accepted accounting principles. The
obligation of Debtor to repay the Loan, together with all interest
accrued thereon, is absolute and unconditional, and there exists no
right of set off or recoupment, counterclaim or defense of any nature
whatsoever to payment of the Loans.
(m) Limitations on Liens on Collateral. Debtor shall not
create, incur or permit to exist, shall defend the Collateral against
and shall take such other action as is necessary to remove, any lien or
claim on or to the Collateral, other than the Permitted Liens, and,
except with respect to the Permitted Liens, shall defend the right,
title and interest of Secured Party in and to any of the Collateral
against the claims and demands of all other Persons. Any prior security
interest and lien granted by Debtor to Secured Party in connection with
the Collateral shall remain in full force and effect, and Secured Party
shall continue to have a first-priority, perfected security interest in
and lien upon the collateral described therein
(n) Limitations on Dispositions of Collateral. Debtor shall
not sell, transfer, lease or otherwise dispose of a material portion of
the Collateral, or offer or contract to do so without the written
consent of Secured Party; provided, however, that Debtor will be
allowed to (1) sell its inventory in the ordinary course of business
and (2) sell and grant non-exclusive licenses to its products,
intellectual property and related documentation in the ordinary course
of business.
(o) Further Identification of Collateral. The Collateral
identified on Exhibit "A" includes all of the intellectual property and
equipment currently owned by Debtor or in which Debtor has any rights.
Debtor has full right, title and interest in and to all such property.
Debtor shall furnish to Secured Party from time to time statements and
schedules further identifying and describing the Collateral and such
other reports in connection with the Collateral as Secured Party may
reasonably request, all in reasonable detail.
4. Secured Party's Appointment as Attorney-in-Fact.
(a) Powers. Debtor hereby appoints Secured Party and any
officers or agents of Secured Party, with full power of substitution,
as its attorney-in-fact with full irrevocable power and authority in
the place of Debtor and in the name of Debtor or in its own name, so
long as an Event of Default has occurred and is continuing, for the
purpose of carrying out the terms of this Agreement, to take any and
all appropriate action and to execute any instrument which may be
necessary or desirable to accomplish the purposes of this Agreement.
Without limiting the foregoing, so long as an Event of Default has
occurred and is continuing, Secured Party, in its discretion, will have
the right, without notice to, or the consent of, Debtor, to do any of
the following on Debtor's behalf:
(i) to pay or discharge any obligations in connection
with the Collateral, including license fees and taxes or liens
levied or placed on or threatened against the Collateral;
(ii) to direct any party liable for any payment under
any of the Collateral to make payment of any and all amounts
due or to become due thereunder directly to Secured Party or
as Secured Party directs;
(iii) to ask for or demand, collect and receive
payment of and receipt for any payments due or to become due
at any time in respect of or arising out of any Collateral;
(iv) to commence and prosecute any suits, actions or
proceedings at law or in equity in any court of competent
jurisdiction to enforce any right in respect of any
Collateral;
(v) to defend any suit, action or proceeding brought
against Debtor with respect to any Collateral;
(vi) to settle, compromise or adjust any suit, action
or proceeding described in subsection (v) above and, to give
such discharges or releases in connection therewith as Secured
Party may deem appropriate;
(vii) to assign any license or patent right included
in the Collateral of Debtor (along with the goodwill of the
business to which any such license or patent right pertains),
throughout the world for such term or terms, on such
conditions and in such manner as Secured Party in its sole
discretion determines; and
(viii) to sell, transfer, pledge and make any
agreement with respect to or otherwise deal with any of the
Collateral and to take, at Secured Party's option and Debtor's
expense, any actions which Secured Party deems necessary to
protect, preserve or realize upon the Collateral and Secured
Party's Liens on the Collateral and to carry out the intent of
this Agreement, in each case to the same extent as if Secured
Party were the absolute owner of the Collateral for all
purposes.
Debtor hereby ratifies whatever actions Secured Party lawfully does or
causes to be done in accordance with this Section 4. This power of
attorney will be a power coupled with an interest and will be
irrevocable.
(b) No Duty on Secured Party's Part. The powers conferred on
Secured Party by this Section 4 are solely to protect Secured Party's
interest in the Collateral and do not impose any duty upon it to
exercise any such powers. Secured Party will be accountable only for
amounts that it actually receives as a result of the exercise of such
powers, and neither Secured Party nor any of its officers, directors,
employees or agents will, in the absence of willful misconduct or gross
negligence, be responsible to Debtor for any act or failure to act
pursuant to this Section 4.
5. Expenses Incurred by Secured Party. If Debtor fails to perform or
comply with any of its agreements or covenants contained in this Agreement, and
Secured Party performs or complies, or otherwise causes performance or
compliance, with such agreement or covenant in accordance with the terms of this
Agreement, then the reasonable expenses of Secured Party incurred in connection
with such performance or compliance will be payable by Debtor to Secured Party
on demand and will constitute obligations secured by this Agreement.
6. Remedies. If an Event of Default has occurred and is continuing,
Secured Party may exercise, in addition to all other rights and remedies granted
to it in this Agreement and in any other instrument or agreement relating to the
Obligations, all rights and remedies of a Secured Party under the Uniform
Commercial Code, as amended from time to time (the "Code"). Without limiting the
foregoing, in such circumstances, without demand of performance or other demand,
presentment, protest, advertisement or notice of any kind (except any notice
required by law) to or upon Debtor or any other Person (all of which demands,
defenses, advertisements and notices are hereby waived), Secured Party may
collect, receive, appropriate and realize upon any or all of the Collateral
and/or may sell, lease, assign, give an option or options to purchase or
otherwise dispose of and deliver any or all of the Collateral (or contract to do
any of the foregoing), in one or more parcels at public or private sale or
sales, at any exchange, broker's board or office of Secured Party or elsewhere
upon such terms and conditions as Secured Party may deem advisable, for cash or
on credit or for future delivery without assumption of any credit risk. Secured
Party will have the right upon any such public sale or sales and, to the extent
permitted by law, upon any such private sale or sales, to purchase all or any
part of the Collateral so sold, free of any right or equity of redemption in
Debtor, which right or equity is hereby waived or released. Secured Party will
apply the net proceeds of any such collection, recovery, receipt, appropriation,
realization or sale, after deducting all reasonable expenses incurred therein or
in connection with the care or safekeeping of any of the Collateral or in any
way relating to the Collateral or the rights of Secured Party under this
Agreement (including, without limitation, reasonable attorneys' fees and
expenses) to the payment in whole or in part of the Obligations, in such order
as Secured Party may elect, and only after such application and after the
payment by Secured Party of any other amount required by any provision of law,
need Secured Party account for the surplus, if any, to Debtor. To the extent
permitted by applicable law, Debtor waives all claims, damages and demands it
may acquire against Secured Party arising out of the exercise by Secured Party
of any of its rights hereunder. If any notice of a proposed sale or other
disposition of Collateral is required by law, such notice will be deemed
reasonable and proper if given at least ten days before such sale or other
disposition. Debtor will remain liable for any deficiency if the proceeds of any
sale or other disposition of the Collateral are insufficient to pay the
Obligations and the reasonable fees and disbursements of any attorneys employed
by Secured Party to collect such deficiency.
7. Limitation on Duties Regarding Preservation of Collateral. The sole
duty of Secured Party with respect to the custody, safekeeping and preservation
of the Collateral, under the appropriate Code section or otherwise, will be to
deal with it in the same manner as Secured Party deals with similar property for
its own account. Neither Secured Party nor any of its employees, affiliates or
agents will be liable for failure to demand, collect or realize upon all or any
part of the Collateral or for any delay in doing so or will be under any
obligation to sell or otherwise dispose of any Collateral upon the request of
Debtor or otherwise.
8. Powers Coupled with an Interest. All authorizations and agencies
contained in this Agreement with respect the Collateral are irrevocable and
powers coupled with an interest.
9. No Waiver; Cumulative Remedies. Secured Party will not by any act
(except by a written instrument pursuant to Section 10(a) hereof) of delay,
indulgence, omission or otherwise be deemed to have waived any right or remedy
hereunder or to have acquiesced in any Event of Default under the Note or in any
breach of any of the terms and conditions of this Agreement. No failure to
exercise, nor any delay in exercising, on the part of Secured Party, any right,
power or privilege hereunder will operate as a waiver thereof. No single or
partial exercise of any right, power or privilege hereunder will preclude any
other or further exercise thereof or the exercise of any other right, power or
privilege. A waiver by Secured Party of any right or remedy under this Agreement
on any one occasion will not be construed as a bar to any right or remedy that
Secured Party would otherwise have on any subsequent occasion. The rights and
remedies provided in this Agreement are cumulative, may be exercised singly or
concurrently and are not exclusive of any rights or remedies provided by law.
10. Miscellaneous.
(a) Amendments and Waivers. Any term of this Agreement may
only be amended by prior written consent of Debtor and Secured Party. Any
amendment or waiver effected in accordance with this Section 10(a) will be
binding upon all of the parties hereto and their respective successors and
assigns.
(b) Transfer; Successors and Assigns. This Agreement will be
binding upon and inure to the benefit of Debtor and Secured Party, and their
respective successors or assigns. Debtor may not assign any of its rights or
delegate any of its duties under this Agreement.
(c) Governing Law. This Agreement will be governed by and
construed in accordance with the laws of the State of Missouri without regard to
the laws that might be applicable under conflicts of laws principles.
(d) Counterparts. This Agreement may be executed in any number
of counterparts (including by facsimile), each of which will be an original, but
all of which together will constitute one instrument.
(e) Titles and Subtitles. The titles and subtitles used in
this Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
(f) Notices. All notices and other communications required or
permitted hereunder shall be delivered (i) in person, (ii) by way of recognized
national overnight delivery service or (iii) by way of first class mail postage
prepaid to the following addresses (or to such other address as may be
designated in a properly delivered notice): Secured Party: Sunflower Capital,
LLC, c/o Continental Coal, Inc., 10801 Xxxxxx, Xxxxx 000, Xxxxxxxx Xxxx, Xxxxxx
00000, with a copy to C. Xxxxxxxxx Xxxxxx, Husch & Eppenberger, LLC, 0000 Xxxx,
Xxxxx 0000, Xxxxxx Xxxx, Xxxxxxxx 00000, and Debtor: SiriCOMM, Inc., 0000 Xxxx
00xx Xxxxxx, Xxxxxx, Xxxxxxxx 00000, with a copy to Xxxx X. Xxxxxxxxx, Esq.,
Xxxxxx & Xxxxxxxxx LLP, 000 Xxxxxxx Xxxxxx, Xxxxx 000, Xxxxxx Xxxx, Xxx Xxxx
00000. All notices shall be deemed given when received.
(g) Severability. In the event that any provision contained in
this Agreement shall for any reason be held to be invalid, illegal or
unenforceable in any respect, such provision shall be ineffective only to the
extent of such invalidity, illegality or unenforceability without invalidating
the remainder of such provision or the remaining provisions of this Agreement
and such invalidity, illegality or unenforceability shall not affect any other
provision of this Agreement, which shall remain in full force and effect.
(h) Release of Certain Collateral Upon Funding of Quest Loan.
Upon satisfaction of the conditions precedent set forth in Section 11 of the
Loan Agreement, Secured Party agrees to subordinate certain of its security
interests as set forth in Section 11 of the Loan Agreement.
(i) Entire Agreement. This Agreement and the other Loan
Documents constitute the entire understanding and agreement between the parties
with regard to the subject matter hereof and thereof and supersede all prior
agreements, representations and undertakings of the parties, whether oral or
written, with respect to such subject matter.
IN WITNESS WHEREOF, Debtor and Secured Party have caused this Agreement
to be duly executed and delivered as of the date first above written.
SIRICOMM, INC.
By: /s/ Xxxx X. Xxxxxxxx
Xxxx X. Xxxxxxxx, President
SUNFLOWER CAPITAL, LLC
By: /s/ Xxxxxxx X. Xxxxx
Xxxxxxx X. Xxxxx, III, not individually,
but in his capacity as Trustee of the
Xxxxxxx X. Xxxxx III Revocable Trust Dated
October 9, 2001, Member
EXHIBIT "A"
DESCRIPTION OF COLLATERAL
"Collateral" consists of all of Debtor's right, title and interest in
and to the following, whether now owned or hereafter acquired and wherever
located:
(i) all goods and equipment, including, without limitation, all
machinery, fixtures, vehicles (including motor vehicles and trailers), any
interest in any of the foregoing, and all attachments, accessories, accessions,
replacements, substitutions, additions and improvements to any of the foregoing;
(ii) all inventory, including, without limitation, all merchandise, raw
materials, parts, supplies, packing and shipping materials, work in process and
finished products including such inventory as is temporarily out of Debtor's
custody or possession or in transit and including any returns upon any accounts
or other proceeds, including insurance proceeds, resulting from the sale or
disposition of any of the foregoing and any documents of title representing any
of the above;
(iii) all contract rights (including license rights and option rights)
and general intangibles (including payment intangibles);
(iv) all intellectual property rights, accounts, contract rights,
royalties, license rights and all other forms of obligations owing to Debtor and
arising out of the sale or lease of goods, the licensing of technology or other
intellectual property rights or the rendering of services by Debtor, whether or
not earned by performance, and any and all credit insurance, guaranties, and
other security therefor, as well as all merchandise returned to or reclaimed by
Debtor;
(v) all documents, cash, deposit accounts, securities, securities
entitlements, securities accounts, investment property, financial assets,
letters of credit, certificates of deposit, instruments and chattel paper and
Debtor's books relating to the foregoing;
(vi) all of Debtor's books, records and data relating to any of the
foregoing in any form whatsoever and any and all claims, rights and interests in
any of the above and all substitutions therefor, additions and accessions
thereto and proceeds thereof;
(vii) all rights, remedies, powers and/or privileges of Debtor with
respect to any of the foregoing; and
(viii) any and all proceeds and products of the foregoing, including,
all money, accounts, general intangibles, deposit accounts, documents,
instruments, letter-of-credit rights, investment property, chattel paper, goods,
insurance proceeds and any other tangible or intangible property received upon
the sale or disposition of any of the foregoing; provided that, to the extent
that the provisions of any contract, license or agreement expressly prohibit
(which prohibition is enforceable under applicable law) the assignment thereof
and the grant of a security interest therein, Debtor's rights in such contract,
license or agreement shall be excluded from the foregoing assignment and grant
for so long as such prohibition continues, it being understood that upon request
of Secured Party, Debtor shall in good faith use commercially reasonable efforts
to obtain consent for the creation of a security interest in favor of Secured
Party in Debtor's rights under such contract, license or agreement.
