EXHIBIT 10.5
SECURITY AGREEMENT
SECURITY AGREEMENT, dated as of April 26, 2006 (this "AGREEMENT"),
among Armor Electric Inc., a Florida corporation (the "COMPANY") and all of the
Subsidiaries of the Company (such subsidiaries, the "Guarantors") (the Company
and Guarantors are collectively referred to as the "DEBTORS") and the holder or
holders of the Company's [___% Secured Convertible Debentures (the
"DEBENTURES"), signatory hereto, their endorsees, transferees and assigns
(collectively referred to as, the "SECURED PARTIES").
W I T N E S S E T H:
WHEREAS, pursuant to the Purchase Agreement (as defined in the
Debentures), the Secured Parties have severally agreed to extend the loans to
the Company evidenced by the Debentures;
WHEREAS, pursuant to a certain Subsidiary Guarantee dated as of the
date hereof (the "GUARANTY"), the Guarantors have jointly and severally agreed
to guaranty and act as surety for payment of such loans; and
WHEREAS, in order to induce the Secured Parties to extend the loans
evidenced by the Debentures, each Debtor has agreed to execute and deliver to
the Secured Parties this Agreement and to grant the Secured Parties, PARI PASSU
with each other Secured Party, a perfected security interest in certain property
of such Debtor to secure the prompt payment, performance and discharge in full
of all of the Company's obligations under the Debentures and the other Debtor's
obligations under the Guaranty.
NOW, THEREFORE, in consideration of the agreements herein contained and
for other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, the parties hereto hereby agree as follows:
1. CERTAIN DEFINITIONS. As used in this Agreement, the following terms
shall have the meanings set forth in this Section 1. Terms used but not
otherwise defined in this Agreement that are defined in Article 9 of the UCC
(such as "account", "chattel paper", "commercial tort claim", "deposit account",
"document", "equipment", "fixtures", "general intangibles", "goods",
"instruments", "inventory", "investment property", "letter-of-credit rights",
"proceeds" and "supporting obligations") shall have the respective meanings
given such terms in Article 9 of the UCC.
(a) "COLLATERAL" means the collateral in which the Secured
Parties are granted a security interest by this Agreement and which
shall include the following personal property of the Debtors, whether
presently owned or existing or hereafter acquired or coming into
existence, wherever situated, and all additions and accessions thereto
and all substitutions and replacements thereof, and all proceeds,
products and accounts thereof, including, without limitation, all
proceeds from the sale or transfer of the Collateral and of insurance
covering the same and of any tort claims in connection therewith, and
all dividends, interest, cash, notes, securities, equity interest or
other property at any time and from time to time acquired, receivable
or otherwise distributed in respect of, or in exchange for, any or all
of the Pledged Securities (as defined below):
1
(i) All goods, including, without limitations, (A)
all machinery, equipment, computers, motor vehicles, trucks,
tanks, boats, ships, appliances, furniture, special and
general tools, fixtures, test and quality control devices and
other equipment of every kind and nature and wherever
situated, together with all documents of title and documents
representing the same, all additions and accessions thereto,
replacements therefor, all parts therefor, and all substitutes
for any of the foregoing and all other items used and useful
in connection with any Debtor's businesses and all
improvements thereto; and (B) all inventory;
(ii) All contract rights and other general
intangibles, including, without limitation, all partnership
interests, membership interests, stock or other securities,
rights under any of the Organizational Documents, agreements
related to the Pledged Securities, licenses, distribution and
other agreements, computer software (whether "off-the-shelf",
licensed from any third party or developed by any Debtor),
computer software development rights, leases, franchises,
customer lists, quality control procedures, grants and rights,
goodwill, trademarks, service marks, trade styles, trade
names, patents, patent applications, copyrights, and income
tax refunds;
(iii) All accounts, together with all instruments,
all documents of title representing any of the foregoing, all
rights in any merchandising, goods, equipment, motor vehicles
and trucks which any of the same may represent, and all right,
title, security and guaranties with respect to each account,
including any right of stoppage in transit;
(iv) All documents, letter-of-credit rights,
instruments and chattel paper;
(v) All commercial tort claims;
(vi) All deposit accounts and all cash (whether or
not deposited in such deposit accounts);
(vii) All investment property;
(viii) All supporting obligations; and
(ix) All files, records, books of account, business
papers, and computer programs; and
(x) the products and proceeds of all of the foregoing
Collateral set forth in clauses (i)-(ix) above.
2
Without limiting the generality of the foregoing, the
"COLLATERAL" shall include all investment property and general
intangibles respecting ownership and/or other equity interests
in each Guarantor, including, without limitation, the shares
of capital stock and the other equity interests listed on
SCHEDULE H hereto (as the same may be modified from time to
time pursuant to the terms hereof), and any other shares of
capital stock and/or other equity interests of any other
direct or indirect subsidiary of any Debtor obtained in the
future, and, in each case, all certificates representing such
shares and/or equity interests and, in each case, all rights,
options, warrants, stock, other securities and/or equity
interests that may hereafter be received, receivable or
distributed in respect of, or exchanged for, any of the
foregoing (all of the foregoing being referred to herein as
the "PLEDGED SECURITIES") and all rights arising under or in
connection with the Pledged Securities, including, but not
limited to, all dividends, interest and cash.
Notwithstanding the foregoing, nothing herein shall
be deemed to constitute an assignment of any asset which, in
the event of an assignment, becomes void by operation of
applicable law or the assignment of which is otherwise
prohibited by applicable law (in each case to the extent that
such applicable law is not overridden by Sections 9-406, 9-407
and/or 9-408 of the UCC or other similar applicable law);
provided, however, that to the extent permitted by applicable
law, this Agreement shall create a valid security interest in
such asset and, to the extent permitted by applicable law,
this Agreement shall create a valid security interest in the
proceeds of such asset.
(b) "INTELLECTUAL PROPERTY" means the collective reference to
all rights, priorities and privileges relating to intellectual
property, whether arising under United States, multinational or foreign
laws or otherwise, including, without limitation, (i) all copyrights
arising under the laws of the United States, any other country or any
political subdivision thereof, whether registered or unregistered and
whether published or unpublished, all registrations and recordings
thereof, and all applications in connection therewith, including,
without limitation, all registrations, recordings and applications in
the United States Copyright Office, (ii) all letters patent of the
United States, any other country or any political subdivision thereof,
all reissues and extensions thereof, and all applications for letters
patent of the United States or any other country and all divisions,
continuations and continuations-in-part thereof, (iii) all trademarks,
trade names, corporate names, company names, business names, fictitious
business names, trade dress, service marks, logos, domain names and
other source or business identifiers, and all goodwill associated
therewith, now existing or hereafter adopted or acquired, all
registrations and recordings thereof, and all applications in
connection therewith, whether in the United States Patent and Trademark
Office or in any similar office or agency of the United States, any
State thereof or any other country or any political subdivision
thereof, or otherwise, and all common law rights related thereto, (iv)
all trade secrets arising under the laws of the United States, any
other country or any political subdivision thereof, (v) all rights to
obtain any reissues, renewals or extensions of the foregoing, (vi) all
licenses for any of the foregoing, and (vii) all causes of action for
infringement of the foregoing.
3
(c) "MAJORITY IN INTEREST" shall mean, at any time of
determination, the majority in interest (based on then-outstanding
principal amounts of Debentures at the time of such determination) of
the Secured Parties.
(d) "NECESSARY ENDORSEMENT" shall mean undated stock powers
endorsed in blank or other proper instruments of assignment duly
executed and such other instruments or documents as the Agent (as that
term is defined below) may reasonably request.
(e) "OBLIGATIONS" means all of the liabilities and obligations
(primary, secondary, direct, contingent, sole, joint or several) due or
to become due, or that are now or may be hereafter contracted or
acquired, or owing to, of any Debtor to the Secured Parties, including,
without limitation, all obligations under this Agreement, the
Debentures, the Guaranty and any other instruments, agreements or other
documents executed and/or delivered in connection herewith or
therewith, 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, and whether
or not from time to time decreased or extinguished and later increased,
created or incurred, and all or any portion of such obligations or
liabilities that are paid, to the extent all or any part of such
payment is avoided or recovered directly or indirectly from any of the
Secured Parties as a preference, fraudulent transfer or otherwise as
such obligations may be amended, supplemented, converted, extended or
modified from time to time. Without limiting the generality of the
foregoing, the term "Obligations" shall include, without limitation:
(i) principal of, and interest on the Debentures and the loans extended
pursuant thereto; (ii) any and all other fees, indemnities, costs,
obligations and liabilities of the Debtors from time to time under or
in connection with this Agreement, the Debentures, the Guaranty and any
other instruments, agreements or other documents executed and/or
delivered in connection herewith or therewith; and (iii) all amounts
(including but not limited to post-petition interest) in respect of the
foregoing that would be payable but for the fact that the obligations
to pay such amounts are unenforceable or not allowable due to the
existence of a bankruptcy, reorganization or similar proceeding
involving any Debtor.
(f) "ORGANIZATIONAL DOCUMENTS" means with respect to any
Debtor, the documents by which such Debtor was organized (such as a
certificate of incorporation, certificate of limited partnership or
articles of organization, and including, without limitation, any
certificates of designation for preferred stock or other forms of
preferred equity) and which relate to the internal governance of such
Debtor (such as bylaws, a partnership agreement or an operating,
limited liability or members agreement).
(g) "UCC" means the Uniform Commercial Code of the State of
New York and or any other applicable law of any state or states which
has jurisdiction with respect to all, or any portion of, the Collateral
or this Agreement, from time to time. It is the intent of the parties
that defined terms in the UCC should be construed in their broadest
sense so that the term "Collateral" will be construed in its broadest
sense. Accordingly if there are, from time to time, changes to defined
terms in the UCC that broaden the definitions, they are incorporated
herein and if existing definitions in the UCC are broader than the
amended definitions, the existing ones shall be controlling.
4
2. GRANT OF PERFECTED FIRST PRIORITY SECURITY INTEREST. As an
inducement for the Secured Parties to extend the loans as evidenced by the
Debentures and to secure the complete and timely payment, performance and
discharge in full, as the case may be, of all of the Obligations, each Debtor
hereby unconditionally and irrevocably pledges, grants and hypothecates to the
Secured Parties a continuing and perfected security interest in and to, a lien
upon and a right of set-off against all of their respective right, title and
interest of whatsoever kind and nature in and to, the Collateral (the "SECURITY
INTEREST").
3. DELIVERY OF CERTAIN COLLATERAL. Contemporaneously or prior to the
execution of this Agreement, each Debtor shall deliver or cause to be delivered
to the Agent (a) any and all certificates and other instruments representing or
evidencing the Pledged Securities, and (b) any and all certificates and other
instruments or documents representing any of the other Collateral, in each case,
together with all Necessary Endorsements. The Debtors are, contemporaneously
with the execution hereof, delivering to Agent, or have previously delivered to
Agent, a true and correct copy of each Organizational Document governing any of
the Pledged Securities.
4. REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS OF THE
DEBTORS. Each Debtor represents and warrants to, and covenants and agrees with,
the Secured Parties as follows:
(a) Each Debtor has the requisite corporate, partnership,
limited liability company or other power and authority to enter into
this Agreement and otherwise to carry out its obligations hereunder.
The execution, delivery and performance by each Debtor of this
Agreement and the filings contemplated therein have been duly
authorized by all necessary action on the part of such Debtor and no
further action is required by such Debtor. This Agreement has been duly
executed by each Debtor. This Agreement constitutes the legal, valid
and binding obligation of each Debtor, enforceable against each Debtor
in accordance with its terms except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization and
similar laws of general application relating to or affecting the rights
and remedies of creditors and by general principles of equity.
(b) The Debtors have no place of business or offices where
their respective books of account and records are kept (other than
temporarily at the offices of its attorneys or accountants) or places
where Collateral is stored or located, except as set forth on SCHEDULE
A attached hereto. Except as specifically set forth on SCHEDULE A, each
Debtor is the record owner of the real property where such Collateral
is located, and there exist no mortgages or other liens on any such
real property except for Permitted Liens (as defined in the
Debentures). Except as disclosed on SCHEDULE A, none of such Collateral
is in the possession of any consignee, bailee, warehouseman, agent or
processor.
5
(c) Except for Permitted Liens (as defined in the Debentures)
and except as set forth on SCHEDULE B attached hereto, the Debtors are
the sole owner of the Collateral (except for non-exclusive licenses
granted by any Debtor in the ordinary course of business), free and
clear of any liens, security interests, encumbrances, rights or claims,
and are fully authorized to grant the Security Interest. There is not
on file in any governmental or regulatory authority, agency or
recording office an effective financing statement, security agreement,
license or transfer or any notice of any of the foregoing (other than
those that will be filed in favor of the Secured Parties pursuant to
this Agreement) covering or affecting any of the Collateral. So long as
this Agreement shall be in effect, the Debtors shall not execute and
shall not knowingly permit to be on file in any such office or agency
any such financing statement or other document or instrument (except to
the extent filed or recorded in favor of the Secured Parties pursuant
to the terms of this Agreement).
(d) No written claim has been received that any Collateral or
Debtor's use of any Collateral violates the rights of any third party.
There has been no adverse decision to any Debtor's claim of ownership
rights in or exclusive rights to use the Collateral in any jurisdiction
or to any Debtor's right to keep and maintain such Collateral in full
force and effect, and there is no proceeding involving said rights
pending or, to the best knowledge of any Debtor, threatened before any
court, judicial body, administrative or regulatory agency, arbitrator
or other governmental authority.
(e) Each Debtor shall at all times maintain its books of
account and records relating to the Collateral at its principal place
of business and its Collateral at the locations set forth on SCHEDULE A
attached hereto and may not relocate such books of account and records
or tangible Collateral unless it delivers to the Secured Parties at
least 30 days prior to such relocation (i) written notice of such
relocation and the new location thereof (which must be within the
United States) and (ii) evidence that appropriate financing statements
under the UCC and other necessary documents have been filed and
recorded and other steps have been taken to perfect the Security
Interest to create in favor of the Secured Parties a valid, perfected
and continuing perfected first priority lien in the Collateral.
(f) This Agreement creates in favor of the Secured Parties a
valid, security interest in the Collateral, subject only to Permitted
Liens (as defined in the Debentures) securing the payment and
performance of the Obligations. Upon making the filings described in
the immediately following paragraph, all security interests created
hereunder in any Collateral which may be perfected by filing Uniform
Commercial Code financing statements shall have been duly perfected.
Except for the filing of the Uniform Commercial Code financing
statements referred to in the immediately following paragraph, the
recordation of the Intellectual Property Security Agreement (as defined
below) with respect to copyrights and copyright applications in the
United States Copyright Office referred to in paragraph (m), the
execution and delivery of deposit account control agreements satisfying
the requirements of Section 9-104(a)(2) of the UCC with respect to each
deposit account of the Debtors, and the delivery of the certificates
6
and other instruments provided in Section 3, no action is necessary to
create, perfect or protect the security interests created hereunder.
Without limiting the generality of the foregoing, except for the filing
of said financing statements, the recordation of said Intellectual
Property Security Agreement, and the execution and delivery of said
deposit account control agreements, no consent of any third parties and
no authorization, approval or other action by, and no notice to or
filing with, any governmental authority or regulatory body is required
for (i) the execution, delivery and performance of this Agreement, (ii)
the creation or perfection of the Security Interests created hereunder
in the Collateral or (iii) the enforcement of the rights of the Secured
Parties hereunder.
(g) Each Debtor hereby authorizes the Secured Parties, or any
of them, to file one or more financing statements under the UCC, with
respect to the Security Interest with the proper filing and recording
agencies in any jurisdiction deemed proper by them.
(h) The execution, delivery and performance of this Agreement
by the Debtors does not (i) violate any of the provisions of any
Organizational Documents of any Debtor or any judgment, decree, order
or award of any court, governmental body or arbitrator or any
applicable law, rule or regulation applicable to any Debtor or (ii)
conflict with, or constitute a default (or an event that with notice or
lapse of time or both would become a default) under, or give to others
any rights of termination, amendment, acceleration or cancellation
(with or without notice, lapse of time or both) of, any agreement,
credit facility, debt or other instrument (evidencing any Debtor's debt
or otherwise) or other understanding to which any Debtor is a party or
by which any property or asset of any Debtor is bound or affected. No
consent (including, without limitation, from stockholders or creditors
of any Debtor) is required for any Debtor to enter into and perform its
obligations hereunder.
(i) The capital stock and other equity interests listed on
SCHEDULE H hereto represent all of the capital stock and other equity
interests of the Guarantors, and represent all capital stock and other
equity interests owned, directly or indirectly, by the Company. All of
the Pledged Securities are validly issued, fully paid and
nonassessable, and the Company is the legal and beneficial owner of the
Pledged Securities, free and clear of any lien, security interest or
other encumbrance except for the security interests created by this
Agreement and other Permitted Liens (as defined in the Debenture).
(j) The ownership and other equity interests in partnerships
and limited liability companies (if any) included in the Collateral
(the "PLEDGED INTERESTS") by their express terms do not provide that
they are securities governed by Article 8 of the UCC and are not held
in a securities account or by any financial intermediary.
(k) Each Debtor shall at all times maintain the liens and
Security Interest provided for hereunder as valid and perfected first
priority liens and security interests in the Collateral in favor of the
Secured Parties until this Agreement and the Security Interest
hereunder shall be terminated pursuant to Section 11 hereof. Each
Debtor hereby agrees to defend the same against the claims of any and
all persons and entities. Each Debtor shall safeguard and protect all
Collateral for the account of the Secured Parties. At the request of
the Secured Parties, each Debtor will sign and deliver to the Secured
Parties at any time or from time to time one or more financing
statements pursuant to the UCC in form reasonably satisfactory to the
7
Secured Parties and will pay the cost of filing the same in all public
offices wherever filing is, or is deemed by the Secured Parties to be,
necessary or desirable to effect the rights and obligations provided
for herein. Without limiting the generality of the foregoing, each
Debtor shall pay all fees, taxes and other amounts necessary to
maintain the Collateral and the Security Interest hereunder, and each
Debtor shall obtain and furnish to the Secured Parties from time to
time, upon demand, such releases and/or subordinations of claims and
liens which may be required to maintain the priority of the Security
Interest hereunder.
(l) No Debtor will transfer, pledge, hypothecate, encumber,
license, sell or otherwise dispose of any of the Collateral (except for
non-exclusive licenses granted by a Debtor in its ordinary course of
business and sales of inventory by a Debtor in its ordinary course of
business) without the prior written consent of a Majority in Interest.
(m) Each Debtor shall keep and preserve its equipment,
inventory and other tangible Collateral in good condition, repair and
order and shall not operate or locate any such Collateral (or cause to
be operated or located) in any area excluded from insurance coverage.
(n) Each Debtor shall maintain with financially sound and
reputable insurers, insurance with respect to the Collateral against
loss or damage of the kinds and in the amounts customarily insured
against by entities of established reputation having similar properties
similarly situated and in such amounts as are customarily carried under
similar circumstances by other such entities and otherwise as is
prudent for entities engaged in similar businesses but in any event
sufficient to cover the full replacement cost thereof. Each Debtor
shall cause each insurance policy issued in connection herewith to
provide, and the insurer issuing such policy to certify to the Agent
that (a) the Agent will be named as lender loss payee and additional
insured under each such insurance policy; (b) if such insurance be
proposed to be cancelled or materially changed for any reason
whatsoever, such insurer will promptly notify the Agent and such
cancellation or change shall not be effective as to the Agent for at
least thirty (30) days after receipt by the Agent of such notice,
unless the effect of such change is to extend or increase coverage
under the policy; and (c) the Agent will have the right (but no
obligation) at its election to remedy any default in the payment of
premiums within thirty (30) days of notice from the insurer of such
default. If no Event of Default (as defined in the Debenture) exists
and if the proceeds arising out of any claim or series of related
claims do not exceed $100,000, loss payments in each instance will be
applied by the applicable Debtor to the repair and/or replacement of
property with respect to which the loss was incurred to the extent
reasonably feasible, and any loss payments or the balance thereof
remaining, to the extent not so applied, shall be payable to the
applicable Debtor, provided, however, that payments received by any
Debtor after an Event of Default occurs and is continuing or in excess
of $100,000 for any occurrence or series of related occurrences shall
be paid to the Agent and, if received by such Debtor, shall be held in
trust for and immediately paid over to the Agent unless otherwise
directed in writing by the Agent. Copies of such policies or the
related certificates, in each case, naming the Agent as lender loss
payee and additional insured shall be delivered to the Agent at least
annually and at the time any new policy of insurance is issued.
8
(o) Each Debtor shall, within ten (10) days of obtaining
knowledge thereof, advise the Secured Parties promptly, in sufficient
detail, of any substantial change in the Collateral, and of the
occurrence of any event which would have a material adverse effect on
the value of the Collateral or on the Secured Parties' security
interest therein.
(p) Each Debtor shall promptly execute and deliver to the
Secured Parties such further deeds, mortgages, assignments, security
agreements, financing statements or other instruments, documents,
certificates and assurances and take such further action as the Secured
Parties may from time to time request and may in its sole discretion
deem necessary to perfect, protect or enforce its security interest in
the Collateral including, without limitation, if applicable, the
execution and delivery of a separate security agreement with respect to
each Debtor's Intellectual Property ("INTELLECTUAL PROPERTY SECURITY
AGREEMENT") in which the Secured Parties have been granted a security
interest hereunder, substantially in a form acceptable to the Secured
Parties, which Intellectual Property Security Agreement, other than as
stated therein, shall be subject to all of the terms and conditions
hereof.
(q) Each Debtor shall permit the Secured Parties and their
representatives and agents to inspect the Collateral at any time, and
to make copies of records pertaining to the Collateral as may be
requested by a Secured Party from time to time.
(r) Each Debtor shall take all steps reasonably necessary to
diligently pursue and seek to preserve, enforce and collect any rights,
claims, causes of action and accounts receivable in respect of the
Collateral.
(s) Each Debtor shall promptly notify the Secured Parties in
sufficient detail upon becoming aware of any attachment, garnishment,
execution or other legal process levied against any Collateral and of
any other information received by such Debtor that may materially
affect the value of the Collateral, the Security Interest or the rights
and remedies of the Secured Parties hereunder.
(t) All information heretofore, herein or hereafter supplied
to the Secured Parties by or on behalf of any Debtor with respect to
the Collateral is accurate and complete in all material respects as of
the date furnished.
(u) The Debtors shall at all times preserve and keep in full
force and effect their respective valid existence and good standing and
any rights and franchises material to its business.
(v) No Debtor will change its name, type of organization,
jurisdiction of organization, organizational identification number (if
it has one), legal or corporate structure, or identity, or add any new
fictitious name unless it provides at least 30 days prior written
notice to the Secured Parties of such change and, at the time of such
written notification, such Debtor provides any financing statements or
fixture filings necessary to perfect and continue perfected the
perfected security Interest granted and evidenced by this Agreement.
9
(w) No Debtor may consign any of its Inventory or sell any of
its Inventory on ▇▇▇▇ and hold, sale or return, sale on approval, or
other conditional terms of sale without the consent of a Majority in
Interest which shall not be unreasonably withheld, except to the extent
such consignment or sale does not exceed 15% of the total value of all
of the Company's finished goods in Inventory.
(x) No Debtor may relocate its chief executive office to a new
location without providing 30 days prior written notification thereof
to the Secured Parties and so long as, at the time of such written
notification, such Debtor provides any financing statements or fixture
filings necessary to perfect and continue perfected the perfected
security Interest granted and evidenced by this Agreement.
(y) Each Debtor was organized and remains organized solely
under the laws of the state set forth next to such Debtor's name in the
first paragraph of this Agreement. SCHEDULE D attached hereto sets
forth each Debtor's organizational identification number or, if any
Debtor does not have one, states that one does not exist.
(z) (i) The actual name of each Debtor is the name set forth
in the preamble above; (ii) no Debtor has any trade names except as set
forth on SCHEDULE E attached hereto; (iii) no Debtor has used any name
other than that stated in the preamble hereto or as set forth on
SCHEDULE E for the preceding five years; and (iv) no entity has merged
into any Debtor or been acquired by any Debtor within the past five
years except as set forth on SCHEDULE E.
(aa) At any time and from time to time that any Collateral
consists of instruments, certificated securities or other items that
require or permit possession by the secured party to perfect the
security interest created hereby, the applicable Debtor shall deliver
such Collateral to the Agent.
(bb) Each Debtor, in its capacity as issuer, hereby agrees to
comply with any and all orders and instructions of Agent regarding the
Pledged Interests consistent with the terms of this Agreement without
the further consent of any Debtor as contemplated by Section 8-106 (or
any successor section) of the UCC. Further, each Debtor agrees that it
shall not enter into a similar agreement (or one that would confer
"control" within the meaning of Article 8 of the UCC) with any other
person or entity.
(cc) Each Debtor shall cause all tangible chattel paper
constituting Collateral to be delivered to the Agent, or, if such
delivery is not possible, then to cause such tangible chattel paper to
contain a legend noting that it is subject to the security interest
created by this Agreement. To the extent that any Collateral consists
of electronic chattel paper, the applicable Debtor shall cause the
underlying chattel paper to be "marked" within the meaning of Section
9-105 of the UCC (or successor section thereto).
10
(dd) If there is any investment property or deposit account
included as Collateral that can be perfected by "control" through an
account control agreement, the applicable Debtor shall cause such an
account control agreement, in form and substance in each case
satisfactory to the Secured Parties, to be entered into and delivered
to the Secured Parties.
(ee) To the extent that any Collateral consists of
letter-of-credit rights, the applicable Debtor shall cause the issuer
of each underlying letter of credit to consent to an assignment of the
proceeds thereof to the Secured Parties.
(ff) To the extent that any Collateral is in the possession of
any third party, the applicable Debtor shall join with the Secured
Parties in notifying such third party of the Secured Parties' security
interest in such Collateral and shall use its best efforts to obtain an
acknowledgement and agreement from such third party with respect to the
Collateral, in form and substance satisfactory to the Secured Parties.
(gg) If any Debtor shall at any time hold or acquire a
commercial tort claim, such Debtor shall promptly notify the Secured
Parties in a writing signed by such Debtor of the particulars thereof
and grant to the Secured Parties in such writing a security interest
therein and in the proceeds thereof, all upon the terms of this
Agreement, with such writing to be in form and substance satisfactory
to the Secured Parties.
(hh) Each Debtor shall immediately provide written notice to
the Secured Parties of any and all accounts which arise out of
contracts with any governmental authority and, to the extent necessary
to perfect or continue the perfected status of the Security Interest in
such accounts and proceeds thereof, shall execute and deliver to the
Secured Parties an assignment of claims for such accounts and cooperate
with the Secured Parties in taking any other steps required, in their
judgment, under the Federal Assignment of Claims Act or any similar
federal, state or local statute or rule to perfect or continue the
perfected status of the Security Interest in such accounts and proceeds
thereof.
(ii) Each Debtor shall cause each subsidiary of such Debtor
to immediately become a party hereto (an "ADDITIONAL DEBTOR"), by
executing and delivering an Additional Debtor Joinder in substantially
the form of Annex A attached hereto and comply with the provisions
hereof applicable to the Debtors. Concurrent therewith, the Additional
Debtor shall deliver replacement schedules for, or supplements to all
other Schedules to (or referred to in) this Agreement, as applicable,
which replacement schedules shall supersede, or supplements shall
modify, the Schedules then in effect. The Additional Debtor shall also
deliver such opinions of counsel, authorizing resolutions, good
standing certificates, incumbency certificates, organizational
documents, financing statements and other information and documentation
as the Secured Parties may reasonably request. Upon delivery of the
foregoing to the Secured Parties, the Additional Debtor shall be and
11
become a party to this Agreement with the same rights and obligations
as the Debtors, for all purposes hereof as fully and to the same extent
as if it were an original signatory hereto and shall be deemed to have
made the representations, warranties and covenants set forth herein as
of the date of execution and delivery of such Additional Debtor
Joinder, and all references herein to the "Debtors" shall be deemed to
include each Additional Debtor.
(jj) Each Debtor shall vote the Pledged Securities to comply
with the covenants and agreements set forth herein and in the
Debentures.
(kk) Each Debtor shall register the pledge of the applicable
Pledged Securities on the books of such Debtor. Each Debtor shall
notify each issuer of Pledged Securities to register the pledge of the
applicable Pledged Securities in the name of the Secured Parties on the
books of such issuer. Further, except with respect to certificated
securities delivered to the Agent, the applicable Debtor shall deliver
to Agent an acknowledgement of pledge (which, where appropriate, shall
comply with the requirements of the relevant UCC with respect to
perfection by registration) signed by the issuer of the applicable
Pledged Securities, which acknowledgement shall confirm that: (a) it
has registered the pledge on its books and records; and (b) at any time
directed by Agent during the continuation of an Event of Default, such
issuer will transfer the record ownership of such Pledged Securities
into the name of any designee of Agent, will take such steps as may be
necessary to effect the transfer, and will comply with all other
instructions of Agent regarding such Pledged Securities without the
further consent of the applicable Debtor.
(ll) In the event that, upon an occurrence of an Event of
Default, Agent shall sell all or any of the Pledged Securities to
another party or parties (herein called the "TRANSFEREE") or shall
purchase or retain all or any of the Pledged Securities, each Debtor
shall, to the extent applicable: (i) deliver to Agent or the
Transferee, as the case may be, the articles of incorporation, bylaws,
minute books, stock certificate books, corporate seals, deeds, leases,
indentures, agreements, evidences of indebtedness, books of account,
financial records and all other Organizational Documents and records of
the Debtors and their direct and indirect subsidiaries; (ii) use its
best efforts to obtain resignations of the persons then serving as
officers and directors of the Debtors and their direct and indirect
subsidiaries, if so requested; and (iii) use its best efforts to obtain
any approvals that are required by any governmental or regulatory body
in order to permit the sale of the Pledged Securities to the Transferee
or the purchase or retention of the Pledged Securities by Agent and
allow the Transferee or Agent to continue the business of the Debtors
and their direct and indirect subsidiaries.
(mm) Without limiting the generality of the other obligations
of the Debtors hereunder, each Debtor shall promptly (i) cause to be
registered at the United States Copyright Office all of its material
copyrights, (ii) cause the security interest contemplated hereby with
respect to all Intellectual Property registered at the United States
Copyright Office or United States Patent and Trademark Office to be
duly recorded at the applicable office, and (iii) give the Agent notice
whenever it acquires (whether absolutely or by license) or creates any
additional material Intellectual Property.
12
(nn) Each Debtor will from time to time, at the joint and
several expense of the Debtors, promptly execute and deliver all such
further instruments and documents, and take all such further action as
may be necessary or desirable, or as the Secured Parties may reasonably
request, in order to perfect and protect any security interest granted
or purported to be granted hereby or to enable the Secured Parties to
exercise and enforce their rights and remedies hereunder and with
respect to any Collateral or to otherwise carry out the purposes of
this Agreement.
(oo) SCHEDULE F attached hereto lists all of the patents,
patent applications, trademarks, trademark applications, registered
copyrights, and domain names owned by any of the Debtors as of the date
hereof. SCHEDULE F lists all material licenses in favor of any Debtor
for the use of any patents, trademarks, copyrights and domain names as
of the date hereof. All material patents and trademarks of the Debtors
have been duly recorded at the United States Patent and Trademark
Office and all material copyrights of the Debtors have been duly
recorded at the United States Copyright Office.
(pp) Except as set forth on SCHEDULE G attached hereto, none
of the account debtors or other persons or entities obligated on any of
the Collateral is a governmental authority covered by the Federal
Assignment of Claims Act or any similar federal, state or local statute
or rule in respect of such Collateral.
5. EFFECT OF PLEDGE ON CERTAIN RIGHTS. If any of the Collateral subject
to this Agreement consists of nonvoting equity or ownership interests
(regardless of class, designation, preference or rights) that may be converted
into voting equity or ownership interests upon the occurrence of certain events
(including, without limitation, upon the transfer of all or any of the other
stock or assets of the issuer), it is agreed that the pledge of such equity or
ownership interests pursuant to this Agreement or the enforcement of any of
Agent's rights hereunder shall not be deemed to be the type of event which would
trigger such conversion rights notwithstanding any provisions in the
Organizational Documents or agreements to which any Debtor is subject or to
which any Debtor is party.
6. DEFAULTS. The following events shall be "EVENTS OF DEFAULT":
(a) The occurrence of an Event of Default (as defined in the
Debenture) under the Debenture;
(b) Any representation or warranty of any Debtor in this
Agreement shall prove to have been incorrect in any material respect
when made;
(c) The failure by any Debtor to observe or perform any of its
obligations hereunder for five (5) days after delivery to such Debtor
of notice of such failure by or on behalf of a Secured Party unless
such default is capable of cure but cannot be cured within such time
frame and such Debtor is using best efforts to cure same in a timely
fashion; or
(d) If any provision of this Agreement shall at any time for
any reason be declared to be null and void, or the validity or
enforceability thereof shall be contested by any Debtor, or a
proceeding shall be commenced by any Debtor, or by any governmental
authority having jurisdiction over any Debtor, seeking to establish the
invalidity or unenforceability thereof, or any Debtor shall deny that
any Debtor has any liability or obligation purported to be created
under this Agreement.
13
7. DUTY TO HOLD IN TRUST.
(a) Upon the occurrence of any Event of Default and at any
time thereafter, each Debtor shall, upon receipt of any revenue,
income, dividend, interest or other sums subject to the Security
Interest, whether payable pursuant to the Debenture or otherwise, or of
any check, draft, note, trade acceptance or other instrument evidencing
an obligation to pay any such sum, hold the same in trust for the
Secured Parties and shall forthwith endorse and transfer any such sums
or instruments, or both, to the Secured Parties, pro-rata in proportion
to their initial purchases of Debentures for application to the
satisfaction of the Obligations (and if any Debenture is not
outstanding, pro-rata in proportion to the initial purchases of the
remaining Debentures).
(b) If any Debtor shall become entitled to receive or shall
receive any securities or other property (including, without
limitation, shares of Pledged Securities or instruments representing
Pledged Securities acquired after the date hereof, or any options,
warrants, rights or other similar property or certificates representing
a dividend, or any distribution in connection with any
recapitalization, reclassification or increase or reduction of capital,
or issued in connection with any reorganization of such Debtor or any
of its direct or indirect subsidiaries) in respect of the Pledged
Securities (whether as an addition to, in substitution of, or in
exchange for, such Pledged Securities or otherwise), such Debtor agrees
to (i) accept the same as the agent of the Secured Parties; (ii) hold
the same in trust on behalf of and for the benefit of the Secured
Parties; and (iii) to deliver any and all certificates or instruments
evidencing the same to Agent on or before the close of business on the
fifth business day following the receipt thereof by such Debtor, in the
exact form received together with the Necessary Endorsements, to be
held by Agent subject to the terms of this Agreement as Collateral.
8. RIGHTS AND REMEDIES UPON DEFAULT.
(a) Upon the occurrence of any Event of Default and at any
time thereafter, the Secured Parties, acting through any agent
appointed by them for such purpose, shall have the right to exercise
all of the remedies conferred hereunder and under the Debentures, and
the Secured Parties shall have all the rights and remedies of a secured
party under the UCC. Without limitation, the Secured Parties shall have
the following rights and powers:
(i) The Secured Parties shall have the right to take
possession of the Collateral and, for that purpose, enter,
with the aid and assistance of any person, any premises where
the Collateral, or any part thereof, is or may be placed and
remove the same, and each Debtor shall assemble the Collateral
and make it available to the Secured Parties at places which
the Secured Parties shall reasonably select, whether at such
Debtor's premises or elsewhere, and make available to the
Secured Parties, without rent, all of such Debtor's respective
premises and facilities for the purpose of the Secured Parties
taking possession of, removing or putting the Collateral in
saleable or disposable form.
14
(ii) Upon notice to the Debtors by Agent, all rights
of each Debtor to exercise the voting and other consensual
rights which it would otherwise be entitled to exercise and
all rights of each Debtor to receive the dividends and
interest which it would otherwise be authorized to receive and
retain, shall cease. Upon such notice, Agent shall have the
right to receive any interest, cash dividends or other
payments on the Collateral and, at the option of Agent, to
exercise in such Agent's discretion all voting rights
pertaining thereto. Without limiting the generality of the
foregoing, Agent shall have the right (but not the obligation)
to exercise all rights with respect to the Collateral as it
were the sole and absolute owners thereof, including, without
limitation, to vote and/or to exchange, at its sole
discretion, any or all of the Collateral in connection with a
merger, reorganization, consolidation, recapitalization or
other readjustment concerning or involving the Collateral or
any Debtor or any of its direct or indirect subsidiaries.
(iii) The Secured Parties shall have the right to
operate the business of each Debtor using the Collateral and
shall have the right to assign, sell, lease or otherwise
dispose of and deliver all or any part of the Collateral, at
public or private sale or otherwise, either with or without
special conditions or stipulations, for cash or on credit or
for future delivery, in such parcel or parcels and at such
time or times and at such place or places, and upon such terms
and conditions as the Secured Parties may deem commercially
reasonable, all without (except as shall be required by
applicable statute and cannot be waived) advertisement or
demand upon or notice to any Debtor or right of redemption of
a Debtor, which are hereby expressly waived. Upon each such
sale, lease, assignment or other transfer of Collateral, the
Secured Parties may, unless prohibited by applicable law which
cannot be waived, purchase all or any part of the Collateral
being sold, free from and discharged of all trusts, claims,
right of redemption and equities of any Debtor, which are
hereby waived and released.
(iv) The Secured Parties shall have the right (but
not the obligation) to notify any account debtors and any
obligors under instruments or accounts to make payments
directly to the Secured Parties and to enforce the Debtors'
rights against such account debtors and obligors.
(v) The Secured Parties may (but are not obligated
to) direct any financial intermediary or any other person or
entity holding any investment property to transfer the same to
the Secured Parties or their designee.
(vi) The Secured Parties may (but are not obligated
to) transfer any or all Intellectual Property registered in
the name of any Debtor at the United States Patent and
Trademark Office and/or Copyright Office into the name of the
Secured Parties or any designee or any purchaser of any
Collateral.
15
(b) The Agent may comply with any applicable law in connection
with a disposition of Collateral and such compliance will not be
considered adversely to affect the commercial reasonableness of any
sale of the Collateral. The Agent may sell the Collateral without
giving any warranties and may specifically disclaim such warranties. If
the Agent sells any of the Collateral on credit, the Debtors will only
be credited with payments actually made by the purchaser. In addition,
each Debtor waives any and all rights that it may have to a judicial
hearing in advance of the enforcement of any of the Agent's rights and
remedies hereunder, including, without limitation, its right following
an Event of Default to take immediate possession of the Collateral and
to exercise its rights and remedies with respect thereto.
(c) For the purpose of enabling the Agent to further exercise
rights and remedies under this Section 8 or elsewhere provided by
agreement or applicable law, each Debtor hereby grants to the Agent,
for the benefit of the Agent and the Secured Parties, an irrevocable,
nonexclusive license (exercisable without payment of royalty or other
compensation to such Debtor) to use, license or sublicense following an
Event of Default, any Intellectual Property now owned or hereafter
acquired by such Debtor, and wherever the same may be located, and
including in such license access to all media in which any of the
licensed items may be recorded or stored and to all computer software
and programs used for the compilation or printout thereof.
9. APPLICATIONS OF PROCEEDS. The proceeds of any such sale, lease or
other disposition of the Collateral hereunder shall be applied first, to the
expenses of retaking, holding, storing, processing and preparing for sale,
selling, and the like (including, without limitation, any taxes, fees and other
costs incurred in connection therewith) of the Collateral, to the reasonable
attorneys' fees and expenses incurred by the Secured Parties in enforcing their
rights hereunder and in connection with collecting, storing and disposing of the
Collateral, and then to satisfaction of the Obligations pro rata among the
Secured Parties (based on then-outstanding principal amounts of Debentures at
the time of any such determination), and to the payment of any other amounts
required by applicable law, after which the Secured Parties shall pay to the
applicable Debtor any surplus proceeds. If, upon the sale, license or other
disposition of the Collateral, the proceeds thereof are insufficient to pay all
amounts to which the Secured Parties are legally entitled, the Debtors will be
liable for the deficiency, together with interest thereon, at the rate of 10%
per annum or the lesser amount permitted by applicable law (the "Default Rate"),
and the reasonable fees of any attorneys employed by the Secured Parties to
collect such deficiency. To the extent permitted by applicable law, each Debtor
waives all claims, damages and demands against the Secured Parties arising out
of the repossession, removal, retention or sale of the Collateral, unless due
solely to the gross negligence or willful misconduct of the Secured Parties as
determined by a final judgment (not subject to further appeal) of a court of
competent jurisdiction.
10. SECURITIES LAW PROVISION. Each Debtor recognizes that Agent may be
limited in its ability to effect a sale to the public of all or part of the
Pledged Securities by reason of certain prohibitions in the Securities Act of
1933, as amended, or other federal or state securities laws (collectively, the
"SECURITIES Laws"), and may be compelled to resort to one or more sales to a
16
restricted group of purchasers who may be required to agree to acquire the
Pledged Securities for their own account, for investment and not with a view to
the distribution or resale thereof. Each Debtor agrees that sales so made may be
at prices and on terms less favorable than if the Pledged Securities were sold
to the public, and that Agent has no obligation to delay the sale of any Pledged
Securities for the period of time necessary to register the Pledged Securities
for sale to the public under the Securities Laws. Each Debtor shall cooperate
with Agent in its attempt to satisfy any requirements under the Securities Laws
(including, without limitation, registration thereunder if requested by Agent)
applicable to the sale of the Pledged Securities by Agent.
11. COSTS AND EXPENSES. Each Debtor agrees to pay all reasonable
out-of-pocket fees, costs and expenses incurred in connection with any filing
required hereunder, including without limitation, any financing statements
pursuant to the UCC, continuation statements, partial releases and/or
termination statements related thereto or any expenses of any searches
reasonably required by the Secured Parties. The Debtors shall also pay all other
claims and charges which in the reasonable opinion of the Secured Parties might
prejudice, imperil or otherwise affect the Collateral or the Security Interest
therein. The Debtors will also, upon demand, pay to the Secured Parties the
amount of any and all reasonable expenses, including the reasonable fees and
expenses of its counsel and of any experts and agents, which the Secured Parties
may incur in connection with (i) the enforcement of this Agreement, (ii) the
custody or preservation of, or the sale of, collection from, or other
realization upon, any of the Collateral, or (iii) the exercise or enforcement of
any of the rights of the Secured Parties under the Debentures. Until so paid,
any fees payable hereunder shall be added to the principal amount of the
Debentures and shall bear interest at the Default Rate.
12. RESPONSIBILITY FOR COLLATERAL. The Debtors assume all liabilities
and responsibility in connection with all Collateral, and the Obligations shall
in no way be affected or diminished by reason of the loss, destruction, damage
or theft of any of the Collateral or its unavailability for any reason. Without
limiting the generality of the foregoing, (a) neither the Agent nor any Secured
Party (i) has any duty (either before or after an Event of Default) to collect
any amounts in respect of the Collateral or to preserve any rights relating to
the Collateral, or (ii) has any obligation to clean-up or otherwise prepare the
Collateral for sale, and (b) each Debtor shall remain obligated and liable under
each contract or agreement included in the Collateral to be observed or
performed by such Debtor thereunder. Neither the Agent nor any Secured Party
shall have any obligation or liability under any such contract or agreement by
reason of or arising out of this Agreement or the receipt by the Agent or any
Secured Party of any payment relating to any of the Collateral, nor shall the
Agent or any Secured Party be obligated in any manner to perform any of the
obligations of any Debtor under or pursuant to any such contract or agreement,
to make inquiry as to the nature or sufficiency of any payment received by the
Agent or any Secured Party in respect of the Collateral or as to the sufficiency
of any performance by any party under any such contract or agreement, to present
or file any claim, to take any action to enforce any performance or to collect
the payment of any amounts which may have been assigned to the Agent or to which
the Agent or any Secured Party may be entitled at any time or times.
17
13. SECURITY INTEREST ABSOLUTE. All rights of the Secured Parties and
all obligations of the Debtors hereunder, shall be absolute and unconditional,
irrespective of: (a) any lack of validity or enforceability of this Agreement,
the Debentures or any agreement entered into in connection with the foregoing,
or any portion hereof or thereof; (b) any change in the time, manner or place of
payment or performance of, or in any other term of, all or any of the
Obligations, or any other amendment or waiver of or any consent to any departure
from the Debentures or any other agreement entered into in connection with the
foregoing; (c) any exchange, release or nonperfection of any of the Collateral,
or any release or amendment or waiver of or consent to departure from any other
collateral for, or any guaranty, or any other security, for all or any of the
Obligations; (d) any action by the Secured Parties to obtain, adjust, settle and
cancel in its sole discretion any insurance claims or matters made or arising in
connection with the Collateral; or (e) any other circumstance which might
otherwise constitute any legal or equitable defense available to a Debtor, or a
discharge of all or any part of the Security Interest granted hereby. Until the
Obligations shall have been paid and performed in full, the rights of the
Secured Parties shall continue even if the Obligations are barred for any
reason, including, without limitation, the running of the statute of limitations
or bankruptcy. Each Debtor expressly waives presentment, protest, notice of
protest, demand, notice of nonpayment and demand for performance. In the event
that at any time any transfer of any Collateral or any payment received by the
Secured Parties hereunder shall be deemed by final order of a court of competent
jurisdiction to have been a voidable preference or fraudulent conveyance under
the bankruptcy or insolvency laws of the United States, or shall be deemed to be
otherwise due to any party other than the Secured Parties, then, in any such
event, each Debtor's obligations hereunder shall survive cancellation of this
Agreement, and shall not be discharged or satisfied by any prior payment thereof
and/or cancellation of this Agreement, but shall remain a valid and binding
obligation enforceable in accordance with the terms and provisions hereof. Each
Debtor waives all right to require the Secured Parties to proceed against any
other person or entity or to apply any Collateral which the Secured Parties may
hold at any time, or to marshal assets, or to pursue any other remedy. Each
Debtor waives any defense arising by reason of the application of the statute of
limitations to any obligation secured hereby.
14. TERM OF AGREEMENT. This Agreement and the Security Interest shall
terminate on the date on which all payments under the Debentures have been
indefeasibly paid in full and all other Obligations have been paid or
discharged; provided, however, that all indemnities of the Debtors contained in
this Agreement (including, without limitation, Annex B hereto) shall survive and
remain operative and in full force and effect regardless of the termination of
this Agreement.
15. POWER OF ATTORNEY; FURTHER ASSURANCES.
(a) Each Debtor authorizes the Secured Parties, and does
hereby make, constitute and appoint the Secured Parties and their
respective officers, agents, successors or assigns with full power of
substitution, as such Debtor's true and lawful attorney-in-fact, with
power, in the name of the various Secured Parties or such Debtor, to,
after the occurrence and during the continuance of an Event of Default,
(i) endorse any note, checks, drafts, money orders or other instruments
of payment (including payments payable under or in respect of any
policy of insurance) in respect of the Collateral that may come into
18
possession of the Secured Parties; (ii) to sign and endorse any
financing statement pursuant to the UCC or any invoice, freight or
express ▇▇▇▇, ▇▇▇▇ of lading, storage or warehouse receipts, drafts
against debtors, assignments, verifications and notices in connection
with accounts, and other documents relating to the Collateral; (iii) to
pay or discharge taxes, liens, security interests or other encumbrances
at any time levied or placed on or threatened against the Collateral;
(iv) to demand, collect, receipt for, compromise, settle and ▇▇▇ for
monies due in respect of the Collateral; (v) to transfer any
Intellectual Property or provide licenses respecting any Intellectual
Property; and (vi) generally, at the option of the Secured Parties, and
at the expense of the Debtors, at any time, or from time to time, to
execute and deliver any and all documents and instruments and to do all
acts and things which the Secured Parties deem necessary to protect,
preserve and realize upon the Collateral and the Security Interest
granted therein in order to effect the intent of this Agreement and the
Debentures all as fully and effectually as the Debtors might or could
do; and each Debtor hereby ratifies all that said attorney shall
lawfully do or cause to be done by virtue hereof. This power of
attorney is coupled with an interest and shall be irrevocable for the
term of this Agreement and thereafter as long as any of the Obligations
shall be outstanding. The designation set forth herein shall be deemed
to amend and supersede any inconsistent provision in the Organizational
Documents or other documents or agreements to which any Debtor is
subject or to which any Debtor is a party. Without limiting the
generality of the foregoing, after the occurrence and during the
continuance of an Event of Default, each Secured Party is specifically
authorized to execute and file any applications for or instruments of
transfer and assignment of any patents, trademarks, copyrights or other
Intellectual Property with the United States Patent and Trademark
Office and the United States Copyright Office.
(b) On a continuing basis, each Debtor will make, execute,
acknowledge, deliver, file and record, as the case may be, with the
proper filing and recording agencies in any jurisdiction, including,
without limitation, the jurisdictions indicated on SCHEDULE C attached
hereto, all such instruments, and take all such action as may
reasonably be deemed necessary or advisable, or as reasonably requested
by the Secured Parties, to perfect the Security Interest granted
hereunder and otherwise to carry out the intent and purposes of this
Agreement, or for assuring and confirming to the Secured Parties the
grant or perfection of a perfected security interest in all the
Collateral under the UCC.
(c) Each Debtor hereby irrevocably appoints the Secured
Parties as such Debtor's attorney-in-fact, with full authority in the
place and instead of such Debtor and in the name of such Debtor, from
time to time in the Secured Parties' discretion, to take any action and
to execute any instrument which the Secured Parties may deem necessary
or advisable to accomplish the purposes of this Agreement, including
the filing, in its sole discretion, of one or more financing or
continuation statements and amendments thereto, relative to any of the
Collateral without the signature of such Debtor where permitted by law,
which financing statements may (but need not) describe the Collateral
as "all assets" or "all personal property" or words of like import, and
ratifies all such actions taken by the Secured Parties. This power of
attorney is coupled with an interest and shall be irrevocable for the
term of this Agreement and thereafter as long as any of the Obligations
shall be outstanding.
19
16. NOTICES. All notices, requests, demands and other communications
hereunder shall be subject to the notice provision of the Purchase Agreement (as
such term is defined in the Debentures).
17. OTHER SECURITY. To the extent that the Obligations are now or
hereafter secured by property other than the Collateral or by the guarantee,
endorsement or property of any other person, firm, corporation or other entity,
then the Secured Parties shall have the right, in its sole discretion, to
pursue, relinquish, subordinate, modify or take any other action with respect
thereto, without in any way modifying or affecting any of the Secured Parties'
rights and remedies hereunder.
18. APPOINTMENT OF AGENT. The Secured Parties hereby appoint [_____ to
act as their agent ("[_____" or "AGENT") for purposes of exercising any and all
rights and remedies of the Secured Parties hereunder. Such appointment shall
continue until revoked in writing by a Majority in Interest, at which time a
Majority in Interest shall appoint a new Agent; provided, that [_____ may not be
removed as Agent unless __________________ shall then hold less than
$____________ principal amount of Debentures; provided further that such removal
may occur only if each of the other Secured Parties shall then hold not less
than $______________ principal amount of Debentures. The Agent shall have the
rights, responsibilities and immunities set forth in ANNEX B hereto.
19. MISCELLANEOUS.
(a) No course of dealing between the Debtors and the Secured
Parties, nor any failure to exercise, nor any delay in exercising, on
the part of the Secured Parties, any right, power or privilege
hereunder or under the Debentures shall operate as a waiver thereof;
nor shall any single or partial exercise of any right, power or
privilege hereunder or thereunder preclude any other or further
exercise thereof or the exercise of any other right, power or
privilege.
(b) All of the rights and remedies of the Secured Parties with
respect to the Collateral, whether established hereby or by the
Debentures or by any other agreements, instruments or documents or by
law shall be cumulative and may be exercised singly or concurrently.
(c) This Agreement constitutes the entire agreement of the
parties with respect to the subject matter hereof and is intended to
supersede all prior negotiations, understandings and agreements with
respect thereto. Except as specifically set forth in this Agreement, no
provision of this Agreement may be modified or amended except by a
written agreement specifically referring to this Agreement and signed
by the parties hereto.
(d) In the event any provision of this Agreement is held to be
invalid, prohibited or unenforceable in any jurisdiction for any
reason, unless such provision is narrowed by judicial construction,
this Agreement shall, as to such jurisdiction, be construed as if such
invalid, prohibited or unenforceable provision had been more narrowly
drawn so as not to be invalid, prohibited or unenforceable. If,
notwithstanding the foregoing, any provision of this Agreement is held
20
to be invalid, prohibited or unenforceable in any jurisdiction, such
provision, as to such jurisdiction, shall be ineffective to the extent
of such invalidity, prohibition or unenforceability without
invalidating the remaining portion of such provision or the other
provisions of this Agreement and without affecting the validity or
enforceability of such provision or the other provisions of this
Agreement in any other jurisdiction.
(e) No waiver of any breach or default or any right under this
Agreement shall be considered valid unless in writing and signed by the
party giving such waiver, and no such waiver shall be deemed a waiver
of any subsequent breach or default or right, whether of the same or
similar nature or otherwise.
(f) This Agreement shall be binding upon and inure to the
benefit of each party hereto and its successors and assigns.
(g) Each party shall take such further action and execute and
deliver such further documents as may be necessary or appropriate in
order to carry out the provisions and purposes of this Agreement.
(h) All questions concerning the construction, validity,
enforcement and interpretation of this Agreement shall be governed by
and construed and enforced in accordance with the internal laws of the
State of New York, without regard to the principles of conflicts of law
thereof. Each Debtor agrees that all proceedings concerning the
interpretations, enforcement and defense of the transactions
contemplated by this Agreement and the Debenture (whether brought
against a party hereto or its respective affiliates, directors,
officers, shareholders, partners, members, employees or agents) shall
be commenced exclusively in the state and federal courts sitting in the
City of New York, Borough of Manhattan. Each Debtor hereby irrevocably
submits to the exclusive jurisdiction of the state and federal courts
sitting in the City of New York, Borough of Manhattan for the
adjudication of any dispute hereunder or in connection herewith or with
any transaction contemplated hereby or discussed herein, and hereby
irrevocably waives, and agrees not to assert in any proceeding, any
claim that it is not personally subject to the jurisdiction of any such
court, that such proceeding is improper. Each party hereto hereby
irrevocably waives personal service of process and consents to process
being served in any such proceeding by mailing a copy thereof via
registered or certified mail or overnight delivery (with evidence of
delivery) to such party at the address in effect for notices to it
under this Agreement and agrees that such service shall constitute good
and sufficient service of process and notice thereof. Nothing contained
herein shall be deemed to limit in any way any right to serve process
in any manner permitted by law. Each party hereto hereby irrevocably
waives, 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 or the transactions contemplated hereby. If
any party shall commence a proceeding to enforce any provisions of this
Agreement, then the prevailing party in such proceeding shall be
reimbursed by the other party for its reasonable attorney's fees and
other costs and expenses incurred with the investigation, preparation
and prosecution of such proceeding.
21
(i) This Agreement may be executed in any number of
counterparts, each of which when so executed shall be deemed to be an
original and, all of which taken together shall constitute one and the
same Agreement. In the event that any signature is delivered by
facsimile transmission, such signature shall create a valid binding
obligation of the party executing (or on whose behalf such signature is
executed) the same with the same force and effect as if such facsimile
signature were the original thereof.
(j) All Debtors shall jointly and severally be liable for the
obligations of each Debtor to the Secured Parties hereunder.
(k) Each Debtor shall indemnify, reimburse and hold harmless
the Secured Parties and their respective partners, members,
shareholders, officers, directors, employees and agents (collectively,
"INDEMNITEES") from and against any and all losses, claims,
liabilities, damages, penalties, suits, costs and expenses, of any kind
or nature, (including fees relating to the cost of investigating and
defending any of the foregoing) imposed on, incurred by or asserted
against such Indemnitee in any way related to or arising from or
alleged to arise from this Agreement or the Collateral, except any such
losses, claims, liabilities, damages, penalties, suits, costs and
expenses which result from the gross negligence or willful misconduct
of the Indemnitee as determined by a final, nonappealable decision of a
court of competent jurisdiction. This indemnification provision is in
addition to, and not in limitation of, any other indemnification
provision in the Debentures, the Purchase Agreement (as such term is
defined in the Debentures) or any other agreement, instrument or other
document executed or delivered in connection herewith or therewith.
(l) Nothing in this Agreement shall be construed to subject
Agent or any Secured Party to liability as a partner in any Debtor or
any if its direct or indirect subsidiaries that is a partnership or as
a member in any Debtor or any of its direct or indirect subsidiaries
that is a limited liability company, nor shall Agent or any Secured
Party be deemed to have assumed any obligations under any partnership
agreement or limited liability company agreement, as applicable, of any
such Debtor or any if its direct or indirect subsidiaries or otherwise,
unless and until any such Secured Party exercises its right to be
substituted for such Debtor as a partner or member, as applicable,
pursuant hereto.
(m) To the extent that the grant of the security interest in
the Collateral and the enforcement of the terms hereof require the
consent, approval or action of any partner or member, as applicable, of
any Debtor or any direct or indirect subsidiary of any Debtor or
compliance with any provisions of any of the Organizational Documents,
the Debtors hereby grant such consent and approval and waive any such
noncompliance with the terms of said documents.
[SIGNATURE PAGES FOLLOW]
22
IN WITNESS WHEREOF, the parties hereto have caused this Security
Agreement to be duly executed on the day and year first above written.
ARMOR ELECTRIC INC.
By:__________________________________________
Name:
Title:
[SUBSIDIARY]
By:__________________________________________
Name:
Title:
[SIGNATURE PAGE OF HOLDERS FOLLOWS]
23
[SIGNATURE PAGE OF HOLDERS TO ARME SA]
Name of Investing Entity: __________________________
SIGNATURE OF AUTHORIZED SIGNATORY OF INVESTING ENTITY: _________________________
Name of Authorized Signatory: _________________________
Title of Authorized Signatory: __________________________
[SIGNATURE PAGE OF HOLDERS FOLLOWS]
24
SCHEDULE A
Principal Place of Business of Debtors:
Locations Where Collateral is Located or Stored:
25
SCHEDULE B
26
SCHEDULE C
27
SCHEDULE D
Organizational Identification Numbers
28
SCHEDULE E
Names; Mergers and Acquisitions
29
SCHEDULE F
Intellectual Property
30
SCHEDULE G
Account Debtors
31
SCHEDULE H
Pledged Securities
32
ANNEX A
TO
SECURITY
AGREEMENT
FORM OF ADDITIONAL DEBTOR JOINDER
Security Agreement dated as of April ___, 2006 made by
Armor Electric Inc.
and its subsidiaries party thereto from time to time, as Debtors
to and in favor of
the Secured Parties identified therein (the "SECURITY AGREEMENT")
Reference is made to the Security Agreement as defined above;
capitalized terms used herein and not otherwise defined herein shall have the
meanings given to such terms in, or by reference in, the Security Agreement.
The undersigned hereby agrees that upon delivery of this Additional
Debtor Joinder to the Secured Parties referred to above, the undersigned shall
(a) be an Additional Debtor under the Security Agreement, (b) have all the
rights and obligations of the Debtors under the Security Agreement as fully and
to the same extent as if the undersigned was an original signatory thereto and
(c) be deemed to have made the representations and warranties set forth therein
as of the date of execution and delivery of this Additional Debtor Joinder.
WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, THE UNDERSIGNED SPECIFICALLY
GRANTS TO THE SECURED PARTIES A SECURITY INTEREST IN THE COLLATERAL AS MORE
FULLY SET FORTH IN THE SECURITY AGREEMENT AND ACKNOWLEDGES AND AGREES TO THE
WAIVER OF JURY TRIAL PROVISIONS SET FORTH THEREIN.
Attached hereto are supplemental and/or replacement Schedules to the
Security Agreement, as applicable.
An executed copy of this Joinder shall be delivered to the Secured
Parties, and the Secured Parties may rely on the matters set forth herein on or
after the date hereof. This Joinder shall not be modified, amended or terminated
without the prior written consent of the Secured Parties.
IN WITNESS WHEREOF, the undersigned has caused this Joinder to be
executed in the name and on behalf of the undersigned.
[Name of Additional Debtor]
By:
Name:
Title:
Address:
Dated:
ANNEX B
TO
SECURITY
AGREEMENT
THE AGENT
1. APPOINTMENT. The Secured Parties (all capitalized terms used herein
and not otherwise defined shall have the respective meanings provided in the
Security Agreement to which this Annex B is attached (the "AGREEMENT")), by
their acceptance of the benefits of the Agreement, hereby designate [_____
("[_____" or "AGENT") as the Agent to act as specified herein and in the
Agreement. Each Secured Party shall be deemed irrevocably to authorize the Agent
to take such action on its behalf under the provisions of the Agreement and any
other Transaction Document (as such term is defined in the Debentures) and to
exercise such powers and to perform such duties hereunder and thereunder as are
specifically delegated to or required of the Agent by the terms hereof and
thereof and such other powers as are reasonably incidental thereto. The Agent
may perform any of its duties hereunder by or through its agents or employees.
2. NATURE OF DUTIES. The Agent shall have no duties or responsibilities
except those expressly set forth in the Agreement. Neither the Agent 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, be responsible
for the consequence of any oversight or error of judgment or answerable for any
loss, unless caused solely by its or their gross negligence or willful
misconduct as determined by a final judgment (not subject to further appeal) of
a court of competent jurisdiction. The duties of the Agent shall be mechanical
and administrative in nature; the Agent shall not have by reason of the
Agreement or any other Transaction Document a fiduciary relationship in respect
of any Debtor or any Secured Party; and nothing in the Agreement or any other
Transaction Document, expressed or implied, is intended to or shall be so
construed as to impose upon the Agent any obligations in respect of the
Agreement or any other Transaction Document except as expressly set forth herein
and therein.
3. LACK OF RELIANCE ON THE AGENT. Independently and without reliance
upon the Agent, each Secured Party, 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 Secured Party's investment in the Debtors, 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
Agent shall have no duty or responsibility, either initially or on a continuing
basis, to provide any Secured Party 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 Agent shall not be
responsible to the Debtors or any Secured Party 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 the Agreement or any other
Transaction Document, or for the financial condition of the Debtors 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
the Agreement or any other Transaction Document, or the financial condition of
the Debtors, or the value of any of the Collateral, or the existence or possible
existence of any default or Event of Default under the Agreement, the Debentures
or any of the other Transaction Documents.
4. CERTAIN RIGHTS OF THE AGENT. The Agent shall have the right to take
any action with respect to the Collateral, on behalf of all of the Secured
Parties. To the extent practical, the Agent shall request instructions from the
Secured Parties with respect to any material act or action (including failure to
act) in connection with the Agreement or any other Transaction Document, and
shall be entitled to act or refrain from acting in accordance with the
instructions of Secured Parties holding a majority in principal amount of
Debentures (based on then-outstanding principal amounts of Debentures at the
time of any such determination); if such instructions are not provided despite
the Agent's request therefor, the Agent shall be entitled to refrain from such
act or taking such action, and if such action is taken, shall be entitled to
appropriate indemnification from the Secured Parties in respect of actions to be
taken by the Agent; and the Agent shall not incur liability to any person or
entity by reason of so refraining. Without limiting the foregoing, (a) no
Secured Party shall have any right of action whatsoever against the Agent as a
result of the Agent acting or refraining from acting hereunder in accordance
with the terms of the Agreement or any other Transaction Document, and the
Debtors shall have no right to question or challenge the authority of, or the
instructions given to, the Agent pursuant to the foregoing and (b) the Agent
shall not be required to take any action which the Agent believes (i) could
reasonably be expected to expose it to personal liability or (ii) is contrary to
this Agreement, the Transaction Documents or applicable law.
5. RELIANCE. The Agent 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 the Agreement
and the other Transaction Documents and its duties thereunder, upon advice of
counsel selected by it and upon all other matters pertaining to this Agreement
and the other Transaction Documents and its duties thereunder, upon advice of
other experts selected by it.
6. INDEMNIFICATION. To the extent that the Agent is not reimbursed and
indemnified by the Debtors, the Secured Parties will jointly and severally
reimburse and indemnify the Agent, 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 Agent in performing its duties
hereunder or under the Agreement or any other Transaction Document, or in any
way relating to or arising out of the Agreement or any other Transaction
Document 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
Agent's own gross negligence or willful misconduct. Prior to taking any action
hereunder as Agent, the Agent may require each Secured Party to deposit with it
sufficient sums as it determines in good faith is necessary to protect the Agent
for costs and expenses associated with taking such action.
7. RESIGNATION BY THE AGENT.
(a) The Agent may resign from the performance of all its
functions and duties under the Agreement and the other Transaction
Documents at any time by giving 30 days' prior written notice (as
provided in the Agreement) to the Debtors and the Secured Parties. Such
resignation shall take effect upon the appointment of a successor Agent
pursuant to clauses (b) and (c) below.
(b) Upon any such notice of resignation, the Secured Parties,
acting by a Majority in Interest, shall appoint a successor Agent
hereunder.
(c) If a successor Agent shall not have been so appointed
within said 30-day period, the Agent shall then appoint a successor
Agent who shall serve as Agent until such time, if any, as the Secured
Parties appoint a successor Agent as provided above. If a successor
Agent has not been appointed within such 30-day period, the Agent may
petition any court of competent jurisdiction or may interplead the
Debtors and the Secured Parties in a proceeding for the appointment of
a successor Agent, 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 Debtors on
demand.
8. RIGHTS WITH RESPECT TO COLLATERAL. Each Secured Party agrees with
all other Secured Parties and the Agent (i) that it shall not, and shall not
attempt to, exercise any rights with respect to its security interest in the
Collateral, whether pursuant to any other agreement or otherwise (other than
pursuant to this Agreement), or take or institute any action against the Agent
or any of the other Secured Parties in respect of the Collateral or its rights
hereunder (other than any such action arising from the breach of this Agreement)
and (ii) that such Secured Party has no other rights with respect to the
Collateral other than as set forth in this Agreement and the other Transaction
Documents.
