EXECUTION VERSION
SECURITY AGREEMENT
SECURITY AGREEMENT, dated as of June 14, 2006 (this "AGREEMENT") made by
AMERICAN UNITED GLOBAL, INC., a Delaware corporation (the "COMPANY") and the
undersigned subsidiaries of the Company (each a "GUARANTOR" and collectively,
the "GUARANTORS" and together with the Company, each a "Grantor" and
collectively, the "GRANTORS"), in favor of Smithfield Fiduciary LLC, in its
capacity as collateral agent (in such capacity, the "COLLATERAL AGENT") for the
Buyers referred to below.
W I T N E S S E T H:
WHEREAS, the Company and each party listed as a "Buyer" on the Schedule of
Buyers attached to the Securities Purchase Agreement referred to below
(collectively, the "BUYERS") are parties to that certain Securities Purchase
Agreement, dated as of even date herewith (as amended, restated or otherwise
modified from time to time, the "SECURITIES PURCHASE AGREEMENT"), pursuant to
which the Company shall sell, and the Buyers shall purchase or have the right to
purchase, the Notes referred to below;
WHEREAS, each of the Guarantors has executed and delivered a Guaranty
dated the date hereof (the "GUARANTY") in favor of the Collateral Agent for the
benefit of itself and the Buyers, with respect to the Company's obligations
under the Securities Purchase Agreement, the Notes referred to below and the
Transaction Documents (as defined below); and
WHEREAS, it is a condition precedent to the Buyers entering into the
Securities Purchase Agreement that the Grantors shall have executed and
delivered to the Collateral Agent this Agreement providing for the grant to the
Collateral Agent for the benefit of the Buyers of a security interest in all
personal property of each Grantor to secure all of the Company's obligations
under the Securities Purchase Agreement, the "Notes" issued pursuant thereto (as
such Notes may be amended, restated, replaced or otherwise modified from time to
time in accordance with the terms thereof, collectively, the "NOTES"), the
"Transaction Documents" (as defined in the Securities Purchase Agreement, the
"TRANSACTION DOCUMENTS") and the Guarantors obligations under the Guaranty.
NOW, THEREFORE, in consideration of the premises and the agreements herein
and in order to induce the Buyers to perform under the Securities Purchase
Agreement, each Grantor agrees with the Collateral Agent, for the benefit of the
Buyers, as follows:
SECTION 1. Definitions.
(a) Reference is hereby made to the Securities Purchase Agreement and the
Notes for a statement of the terms thereof. All terms used in this Agreement and
the recitals hereto which are defined in the Securities Purchase Agreement, the
Notes, or in Articles 8 or 9 of the Uniform Commercial Code as in effect from
time to time in the State of New York (the "CODE"), and which are not otherwise
defined herein shall have the same meanings herein as set forth therein;
provided that terms used herein which are defined in the Code as in effect in
the State of New York on the date hereof shall continue to have the same meaning
notwithstanding any replacement or amendment of such statute except as the
Collateral Agent may otherwise determine.
-10-
(b) The following terms shall have the respective meanings provided for in
the Code: "Accounts", "Cash Proceeds", "Chattel Paper", "Commercial Tort Claim",
"Commodity Account", "Commodity Contracts", "Deposit Account", "Documents",
"Equipment", "Fixtures", "General Intangibles", "Goods", "Instruments",
"Inventory", "Investment Property", "Letter-of-Credit Rights", "Noncash
Proceeds", "Payment Intangibles", "Proceeds", "Promissory Notes", "Security",
"Record", "Security Account", "Software", and "Supporting Obligations".
(c) As used in this Agreement, the following terms shall have the
respective meanings indicated below, such meanings to be applicable equally to
both the singular and plural forms of such terms:
"COPYRIGHT LICENSES" means all licenses, contracts or other agreements,
whether written or oral, naming any Grantor as licensee or licensor and
providing for the grant of any right to use or sell any works covered by any
copyright (including, without limitation, all Copyright Licenses set forth in
Schedule II hereto).
"COPYRIGHTS" means all domestic and foreign copyrights, whether registered
or not, including, without limitation, all copyright rights throughout the
universe (whether now or hereafter arising) in any and all media (whether now or
hereafter developed), in and to all original works of authorship fixed in any
tangible medium of expression, acquired or used by any Grantor (including,
without limitation, all copyrights described in Schedule II hereto), all
applications, registrations and recordings thereof (including, without
limitation, applications, registrations and recordings in the United States
Copyright Office or in any similar office or agency of the United States or any
other country or any political subdivision thereof), and all reissues,
divisions, continuations, continuations in part and extensions or renewals
thereof.
"EVENT OF DEFAULT" shall have the meaning set forth in the Notes.
"INSOLVENCY PROCEEDING" means any proceeding commenced by or against any
Person under any provision of the Bankruptcy Code (Chapter 11 of Title 11 of the
United States Code) or under any other bankruptcy or insolvency law, assignments
for the benefit of creditors, formal or informal moratoria, compositions, or
extensions generally with creditors, or proceedings seeking reorganization,
arrangement, or other similar relief.
"INTELLECTUAL PROPERTY" means the Copyrights, Trademarks and Patents.
"LICENSES" means the Copyright Licenses, the Trademark Licenses and the
Patent Licenses.
"LIEN" means any mortgage, deed of trust, pledge, lien (statutory or
otherwise), security interest, charge or other encumbrance or security or
preferential arrangement of any nature, including, without limitation, any
conditional sale or title retention arrangement, any capitalized lease and any
assignment, deposit arrangement or financing lease intended as, or having the
effect of, security.
"PATENT LICENSES" means all licenses, contracts or other agreements,
whether written or oral, naming any Grantor as licensee or licensor and
providing for the grant of any right to manufacture, use or sell any invention
covered by any Patent (including, without limitation, all Patent Licenses set
forth in Schedule II hereto).
-2-
"PATENTS" means all domestic and foreign letters patent, design patents,
utility patents, industrial designs, inventions, trade secrets, ideas, concepts,
methods, techniques, processes, proprietary information, technology, know-how,
formulae, rights of publicity and other general intangibles of like nature, now
existing or hereafter acquired (including, without limitation, all domestic and
foreign letters patent, design patents, utility patents, industrial designs,
inventions, trade secrets, ideas, concepts, methods, techniques, processes,
proprietary information, technology, know-how and formulae described in Schedule
II hereto), all applications, registrations and recordings thereof (including,
without limitation, applications, registrations and recordings in the United
States Patent and Trademark Office, or in any similar office or agency of the
United States or any other country or any political subdivision thereof), and
all reissues, divisions, continuations, continuations in part and extensions or
renewals thereof.
"TRADEMARK LICENSES" means all licenses, contracts or other agreements,
whether written or oral, naming any Grantor as licensor or licensee and
providing for the grant of any right concerning any Trademark, together with any
goodwill connected with and symbolized by any such trademark licenses, contracts
or agreements and the right to prepare for sale or lease and sell or lease any
and all Inventory now or hereafter owned by any Grantor and now or hereafter
covered by such licenses (including, without limitation, all Trademark Licenses
described in Schedule II hereto).
"TRADEMARKS" means all domestic and foreign trademarks, service marks,
collective marks, certification marks, trade names, business names, d/b/a's,
Internet domain names, trade styles, designs, logos and other source or business
identifiers and all general intangibles of like nature, now or hereafter owned,
adopted, acquired or used by any Grantor (including, without limitation, all
domestic and foreign trademarks, service marks, collective marks, certification
marks, trade names, business names, d/b/a's, Internet domain names, trade
styles, designs, logos and other source or business identifiers described in
Schedule II hereto), all applications, registrations and recordings thereof
(including, without limitation, applications, registrations and recordings in
the United States Patent and Trademark Office or in any similar office or agency
of the United States, any state thereof or any other country or any political
subdivision thereof), and all reissues, extensions or renewals thereof, together
with all goodwill of the business symbolized by such marks and all customer
lists, formulae and other Records of any Grantor relating to the distribution of
products and services in connection with which any of such marks are used.
-3-
SECTION 2. Grant of Security Interest. As collateral security for all of
the "Obligations" (as defined in Section 3 hereof), each Grantor hereby pledges
and assigns to the Collateral Agent for the benefit of the Buyers, and grants to
the Collateral Agent for the benefit of the Buyers a continuing security
interest in, all personal property of each Grantor, wherever located and whether
now or hereafter existing and whether now owned or hereafter acquired, of every
kind and description, tangible or intangible (collectively, the "COLLATERAL"),
including, without limitation, the following:
(a) all Accounts;
(b) all Chattel Paper (whether tangible or electronic);
(c) the Commercial Tort Claims specified on Schedule VI hereto;
(d) all Deposit Accounts, all cash, and all other property from time to
time deposited therein and the monies and property in the possession or under
the control of the Collateral Agent or Buyer or any affiliate, representative,
agent or correspondent of the Collateral Agent or Buyer;
(e) all Documents;
(f) all Equipment;
(g) all Fixtures;
(h) all General Intangibles (including, without limitation, all Payment
Intangibles);
(i) all Goods;
(j) all Instruments (including, without limitation, Promissory Notes and
each certificated Security);
(k) all Inventory;
(l) all Investment Property;
(m) all Copyrights, Patents and Trademarks, and all Licenses; (n) all
Letter-of-Credit Rights;
(o) all Supporting Obligations;
(p) all other tangible and intangible personal property of each Grantor
(whether or not subject to the Code), including, without limitation, all bank
and other accounts and all cash and all investments therein, all proceeds,
products, offspring, accessions, rents, profits, income, benefits, substitutions
and replacements of and to any of the property of any Grantor described in the
preceding clauses of this Section 2 (including, without limitation, any proceeds
of insurance thereon and all causes of action, claims and warranties now or
hereafter held by each Grantor in respect of any of the items listed above), and
all books, correspondence, files and other Records, including, without
limitation, all tapes, desks, cards, Software, data and computer programs in the
possession or under the control of any Grantor or any other Person from time to
time acting for any Grantor that at any time evidence or contain information
relating to any of the property described in the preceding clauses of this
Section 2 or are otherwise necessary or helpful in the collection or realization
thereof; and
-4-
(q) all Proceeds, including all Cash Proceeds and Noncash Proceeds, and products
of any and all of the foregoing Collateral;
in each case howsoever any Grantor's interest therein may arise or appear
(whether by ownership, security interest, claim or otherwise).
SECTION 3. Security for Obligations. The security interest created hereby
in the Collateral constitutes continuing collateral security for all of the
following obligations, whether now existing or hereafter incurred (collectively,
the "OBLIGATIONS"):
(a) (i) the payment by the Company, as and when due and payable (by
scheduled maturity, required prepayment, acceleration, demand or otherwise), of
all amounts from time to time owing by it in respect of the Securities Purchase
Agreement, the Notes, and the other "TRANSACTION DOCUMENTS" (as defined in the
Securities Purchase Agreement), including, without limitation, (A) all principal
of and interest on the Notes (including, without limitation, all interest that
accrues after the commencement of any Insolvency Proceeding of any Grantor,
whether or not the payment of such interest is unenforceable or is not allowable
due to the existence of such Insolvency Proceeding), and (B) all fees,
commissions, expense reimbursements, indemnifications and all other amounts due
or to become due under any of the Transaction Documents; and
(b) the due performance and observance by each Grantor of all of its other
obligations from time to time existing in respect of any of the Transaction
Documents, including without limitation, with respect to any conversion or
redemption rights of the Buyers under the Notes, for so long as they are
outstanding.
SECTION 4. Representations and Warranties. Each Grantor represents and
warrants as follows:
(a) Schedule I hereto sets forth (i) the exact legal name of each of the
Grantors, and (ii) the organizational identification number of each Grantor or
states that no such organizational identification number exists.
(b) There is no pending or written notice threatening any action, suit,
proceeding or claim affecting any Grantor before any governmental authority or
any arbitrator, or any order, judgment or award by any governmental authority or
arbitrator, that may adversely affect the grant by any Grantor, or the
perfection, of the security interest purported to be created hereby in the
Collateral, or the exercise by the Collateral Agent of any of its rights or
remedies hereunder.
(c) All Federal, state and local tax returns and other reports required by
applicable law to be filed by any Grantor have been filed, or extensions have
been obtained, and all taxes, assessments and other governmental charges imposed
upon any Grantor or any property of any Grantor (including, without limitation,
all federal income and social security taxes on employees' wages) and which have
become due and payable on or prior to the date hereof have been paid, except to
the extent contested in good faith by proper proceedings which stay the
imposition of any penalty, fine or Lien resulting from the non-payment thereof
and with respect to which adequate reserves have been set aside for the payment
thereof in accordance with generally accepted accounting principles consistently
applied ("GAAP").
-5-
(d) All Equipment, Fixtures, Goods and Inventory of each Grantor now
existing are, and all Equipment, Fixtures, Goods and Inventory of each Grantor
hereafter existing will be, located and/or based at the addresses specified
therefor in Schedule III hereto, except that each Grantor will give the
Collateral Agent not less than 30 days' prior written notice of any change of
the location of any such Collateral, other than to locations set forth on
Schedule III and with respect to which the Collateral Agent has filed financing
statements and otherwise fully perfected its Liens thereon. Each Grantor's chief
place of business and chief executive office, the place where each Grantor keeps
its Records concerning Accounts and all originals of all Chattel Paper are
located at the addresses specified therefor in Schedule III hereto. None of the
Accounts is evidenced by Promissory Notes or other Instruments. Set forth in
Schedule IV hereto is a complete and accurate list, as of the date of this
Agreement, of (i) each Promissory Note, Security and other Instrument owned by
each Grantor and (ii) each Deposit Account, Securities Account and Commodities
Account of each Grantor, together with the name and address of each institution
at which each such Account is maintained, the account number for each such
Account and a description of the purpose of each such Account. Set forth in
Schedule I hereto is a complete and correct list of each trade name used by each
Grantor and the name of, and each trade name used by, each person from which
each Grantor has acquired any substantial part of the Collateral.
(e) Each Grantor has delivered to the Collateral Agent complete and
correct copies of each License described in Schedule II hereto, including all
schedules and exhibits thereto, which represents all of the Licenses existing on
the date of this Agreement. Each such License sets forth the entire agreement
and understanding of the parties thereto relating to the subject matter thereof,
and there are no other agreements, arrangements or understandings, written or
oral, relating to the matters covered thereby or the rights of each Grantor or
any of its affiliates in respect thereof. Each material License now existing is,
and any material License entered into in the future will be, the legal, valid
and binding obligation of the parties thereto, enforceable against such parties
in accordance with its terms. No default under any material License by any such
party has occurred, nor does any defense, offset, deduction or counterclaim
exist thereunder in favor of any such party.
(f) Each Grantor owns and controls, or otherwise possesses adequate rights
to use, all Trademarks, Patents and Copyrights, which are the only trademarks,
patents, copyrights, inventions, trade secrets, proprietary information and
technology, know-how, formulae, rights of publicity necessary to conduct its
business in substantially the same manner as conducted as of the date hereof.
Schedule II hereto sets forth a true and complete list of all registered
copyrights, issued Patents, Trademarks, and Licenses annually owned or used by
each Grantor as of the date hereof. To the best knowledge of the Grantors, all
such Intellectual Property of each Grantor is subsisting and in full force and
effect, has not been adjudged invalid or unenforceable, is valid and enforceable
and has not been abandoned in whole or in part. Except as set forth in Schedule
II, no such Intellectual Property is the subject of any licensing or franchising
agreement. Each Grantor has no knowledge of any conflict with the rights of
others to any Intellectual Property and, to the best knowledge of the Grantors,
each Grantor is not now infringing or in conflict with any such rights of others
in any material respect, and to the best knowledge of the Grantors, no other
Person is now infringing or in conflict in any material respect with any such
properties, assets and rights owned or used by each Grantor. No Grantor has
received any notice that it is violating or has violated the trademarks,
patents, copyrights, inventions, trade secrets, proprietary information and
technology, know-how, formulae, rights of publicity or other intellectual
property rights of any third party.
-6-
(g) Each Grantor is and will be at all times the sole and exclusive owner
of, or otherwise has and will have adequate rights in, the Collateral free and
clear of any Liens, except for Permitted Liens on any Collateral. No effective
financing statement or other instrument similar in effect covering all or any
part of the Collateral is on file in any recording or filing office except such
as may have been filed in favor of the Collateral Agent relating to this
Agreement.
(h) The exercise by the Collateral Agent of any of its rights and remedies
hereunder will not contravene any law or any contractual restriction binding on
or otherwise affecting each Grantor or any of its properties and will not result
in or require the creation of any Lien, upon or with respect to any of its
properties.
(i) No authorization or approval or other action by, and no notice to or
filing with, any governmental authority or other regulatory body, or any other
Person, is required for (i) the grant by each Grantor, or the perfection, of the
security interest purported to be created hereby in the Collateral, or (ii) the
exercise by the Collateral Agent of any of its rights and remedies hereunder,
except (A) for the filing under the Uniform Commercial Code as in effect in the
applicable jurisdiction of the financing statements, all of which financing
statements, have been duly filed and are in full force and effect, (B) with
respect to the perfection of the security interest created hereby in the
Intellectual Property, for the recording of the appropriate Assignment for
Security, substantially in the form of Exhibit A hereto, as applicable, in the
United States Patent and Trademark Office or the United States Copyright Office,
as applicable, and (C) with respect to the perfection of the security interest
created hereby in foreign Intellectual Property and Licenses, for registrations
and filings in jurisdictions located outside of the United States and covering
rights in such jurisdictions relating to the Intellectual Property and Licenses.
(j) This Agreement creates in favor of the Collateral Agent a legal, valid
and enforceable security interest in the Collateral, as security for the
Obligations. The Collateral Agent's having possession of all Instruments and
cash constituting Collateral from time to time, (or with respect to deposit
accounts, entry into appropriate control agreements) the recording of the
appropriate Assignment for Security executed pursuant hereto in the United
States Patent and Trademark Office and the United States Copyright Office, the
execution of appropriate assignments of Letter of Credit Rights, as applicable,
and the filing of the financing statements and the other filings and recordings,
as applicable, described in Schedule V hereto and, with respect to the
Intellectual Property hereafter existing and not covered by an appropriate
Assignment for Security, the recording in the United States Patent and Trademark
Office or the United States Copyright Office, as applicable, of appropriate
instruments of assignment, result in the perfection of such security interests.
Such security interests are, or in the case of Collateral in which each Grantor
obtains rights after the date hereof, will be, perfected, first priority
security interests, subject only to Permitted Liens and the recording of such
instruments of assignment. Such recordings and filings and all other action
necessary or desirable to perfect and protect such security interest have been
duly taken, except for the Collateral Agent's having possession of Instruments
and cash constituting Collateral after the date hereof and the other filings and
recordations described in Section 4(l) hereof.
-7-
(k) As of the date hereof, no Grantor holds any Commercial Tort Claims nor
is aware of any such pending claims, except for such claims described in
Schedule VI.
SECTION 5. Covenants as to the Collateral. So long as any of the
Obligations shall remain outstanding, unless the Collateral Agent shall
otherwise consent in writing:
(a) Further Assurances. Each Grantor will at its expense, at any time and
from time to time, promptly execute and deliver all further instruments and
documents and take all further action that the Collateral Agent may reasonably
request in order to: (i) perfect and protect the security interest purported to
be created hereby; (ii) enable the Collateral Agent to exercise and enforce its
rights and remedies hereunder in respect of the Collateral; or (iii) otherwise
effect the purposes of this Agreement, including, without limitation: (A)
marking conspicuously all Chattel Paper and each License and, at the request of
the Collateral Agent, each of its Records pertaining to the Collateral with a
legend, in form and substance satisfactory to the Collateral Agent, indicating
that such Chattel Paper, License or Collateral is subject to the security
interest created hereby (B) delivering and pledging to the Collateral Agent
hereunder each Promissory Note, Security, Chattel Paper or other Instrument, now
or hereafter owned by any Grantor, duly endorsed and accompanied by executed
instruments of transfer or assignment, all in form and substance satisfactory to
the Collateral Agent, (C) executing and filing (to the extent, if any, that any
Grantor's signature is required thereon) or authenticating the filing of, such
financing or continuation statements, or amendments thereto, as may be necessary
or desirable or that the Collateral Agent may request in order to perfect and
preserve the security interest purported to be created hereby, (D) furnishing to
the Collateral Agent from time to time statements and schedules further
identifying and describing the Collateral and such other reports in connection
with the Collateral in each case as the Collateral Agent may reasonably request,
all in reasonable detail, (E) if any Collateral shall be in the possession of a
third party, notifying such Person of the Collateral Agent's security interest
created hereby and obtaining a written acknowledgment from such Person that such
Person holds possession of the Collateral for the benefit of the Collateral
Agent, which such written acknowledgement shall be in form and substance
satisfactory to the Collateral Agent, (F) if at any time after the date hereof,
any Grantor acquires or holds any Commercial Tort Claim, promptly notifying the
Collateral Agent in a writing signed by such Grantor setting forth a brief
description of such Commercial Tort Claim and granting to the Collateral Agent a
security interest therein and in the proceeds thereof, which writing shall
incorporate the provisions hereof and shall be in form and substance
satisfactory to the Collateral Agent, (G) upon the acquisition after the date
hereof by any Grantor of any motor vehicle or other Equipment subject to a
certificate of title or ownership (other than a Motor Vehicle or Equipment that
is subject to a purchase money security interest), causing the Collateral Agent
to be listed as the lienholder on such certificate of title or ownership and
delivering evidence of the same to the Collateral Agent in accordance with the
Securities Purchase Agreement; and (H) taking all actions required by any
earlier versions of the Uniform Commercial Code or by other law, as applicable,
in any relevant Uniform Commercial Code jurisdiction, or by other law as
applicable in any foreign jurisdiction.
-8-
(b) Location of Equipment and Inventory. Each Grantor will keep the
Equipment and Inventory at the locations specified therefor on Schedule II
hereto or, at such other locations in the United States, provided that within 10
days following the relocation of Equipment or Inventory to such other location,
Grantor shall deliver to the Collateral Agent a new Schedule II indicating each
such new location.
(c) Condition of Equipment. Each Grantor will maintain or cause the
Equipment (necessary or useful to its business) to be maintained and preserved
in good condition, repair and working order, ordinary wear and tear excepted,
and will forthwith, or in the case of any loss or damage to any Equipment of any
Grantor within a commercially reasonable time after the occurrence thereof, make
or cause to be made all repairs, replacements and other improvements in
connection therewith which are necessary or desirable, consistent with past
practice, or which the Collateral Agent may request to such end. Any Grantor
will promptly furnish to the Collateral Agent a statement describing in
reasonable detail any such loss or damage in excess of $250,000 per occurrence
to any Equipment.
(d) Taxes, Etc. Each Grantor agrees to pay promptly when due all property
and other taxes, assessments and governmental charges or levies imposed upon,
and all claims (including claims for labor, materials and supplies) against, the
Equipment and Inventory, except to the extent the validity thereof is being
contested in good faith by proper proceedings which stay the imposition of any
penalty, fine or Lien resulting from the non-payment thereof and with respect to
which adequate reserves in accordance with GAAP have been set aside for the
payment thereof.
(e) Insurance.
(i) Each Grantor will, at its own expense, maintain insurance
(including, without limitation, commercial general liability and property
insurance) with respect to the Equipment and Inventory in such amounts, against
such risks, in such form and with responsible and reputable insurance companies
or associations as is required by any governmental authority having jurisdiction
with respect thereto or as is carried generally in accordance with sound
business practice by companies in similar businesses similarly situated and in
any event, in amount, adequacy and scope reasonably satisfactory to the
Collateral Agent. To the extent requested by the Collateral Agent at any time
and from time to time, each such policy for liability insurance shall provide
for all losses to be paid on behalf of the Collateral Agent and any Grantor as
their respective interests may appear, and each policy for property damage
insurance shall provide for all losses to be adjusted with, and paid directly
to, the Collateral Agent. To the extent requested by the Collateral Agent at any
time and from time to time, each such policy shall in addition (A) name the
Collateral Agent as an additional insured party thereunder (without any
representation or warranty by or obligation upon the Collateral Agent) as their
interests may appear, (B) contain an agreement by the insurer that any loss
thereunder shall be payable to the Collateral Agent on its own account
notwithstanding any action, inaction or breach of representation or warranty by
any Grantor, (C) provide that there shall be no recourse against the Collateral
Agent for payment of premiums or other amounts with respect thereto, and (D)
provide that at least 30 days' prior written notice of cancellation, lapse,
expiration or other adverse change shall be given to the Collateral Agent by the
insurer. Any Grantor will, if so requested by the Collateral Agent, deliver to
the Collateral Agent original or duplicate policies of such insurance and, as
often as the Collateral Agent may reasonably request, a report of a reputable
insurance broker with respect to such insurance. Any Grantor will also, at the
request of the Collateral Agent, execute and deliver instruments of assignment
of such insurance policies and cause the respective insurers to acknowledge
notice of such assignment.
-9-
(ii) Reimbursement under any liability insurance maintained by any
Grantor pursuant to this Section 5(e) may be paid directly to the Person who
shall have incurred liability covered by such insurance. In the case of any loss
involving damage to Equipment or Inventory, any proceeds of insurance maintained
by any Grantor pursuant to this Section 5(e) shall be paid to the Collateral
Agent (except as to which paragraph (iii) of this Section 5(e) is not
applicable), any Grantor will make or cause to be made the necessary repairs to
or replacements of such Equipment or Inventory, and any proceeds of insurance
maintained by any Grantor pursuant to this Section 5(e) shall be paid by the
Collateral Agent to any Grantor as reimbursement for the costs of such repairs
or replacements.
(iii) All insurance payments in respect of such Equipment or
Inventory shall be paid to the Collateral Agent and applied as specified in
Section 7(b) hereof.
(f) Provisions Concerning the Accounts and the Licenses.
(i) Any Grantor will (A) give the Collateral Agent at least 30 days'
prior written notice of any change in such Grantor's name, identity or
organizational structure, (B) maintain its jurisdiction of incorporation as set
forth in Section 4(b) hereto, (C) immediately notify the Collateral Agent upon
obtaining an organizational identification number, if on the date hereof such
Grantor did not have such identification number, and (D) keep adequate records
concerning the Accounts and Chattel Paper and permit representatives of the
Collateral Agent during normal business hours on reasonable notice to such
Grantor, to inspect and make abstracts from such Records and Chattel Paper.
(ii) Each Grantor will, except as otherwise provided in this
subsection (f), continue to collect, at its own expense, all amounts due or to
become due under the Accounts. In connection with such collections, any Grantor
may (and, at the Collateral Agent's direction, will) take such action as any
Grantor or the Collateral Agent may deem necessary or advisable to enforce
collection or performance of the Accounts; provided, however, that the
Collateral Agent shall have the right at any time, upon the occurrence and
during the continuance of an Event of Default, to notify the account debtors or
obligors under any Accounts of the assignment of such Accounts to the Collateral
Agent and to direct such account debtors or obligors to make payment of all
amounts due or to become due to any Grantor thereunder directly to the
Collateral Agent or its designated agent and, upon such notification and at the
expense of any Grantor and to the extent permitted by law, to enforce collection
of any such Accounts and to adjust, settle or compromise the amount or payment
thereof, in the same manner and to the same extent as may Grantor might have
done. After receipt by any Grantor of a notice from the Collateral Agent that
the Collateral Agent has notified, intends to notify, or has enforced or intends
to enforce any Grantor's rights against the account debtors or obligors under
any Accounts as referred to in the proviso to the immediately preceding
sentence, (A) all amounts and proceeds (including Instruments) received by any
Grantor in respect of the Accounts shall be received in trust for the benefit of
the Collateral Agent hereunder, shall be segregated from other funds of any
Grantor and shall be forthwith paid over to the Collateral Agent in the same
form as so received (with any necessary endorsement) to be held as cash
collateral and either (i) credited to the outstanding obligations so long as no
Event of Default shall have occurred and be continuing or (ii) if an Event of
Default shall have occurred and be continuing, applied as specified in Section
7(b) hereof, and (B) no Grantor will adjust, settle or compromise the amount or
payment of any Account or release wholly or partly any account debtor or obligor
thereof or allow any credit or discount thereon. In addition, upon the
occurrence and during the continuance of an Event of Default, the Collateral
Agent may (in its sole and absolute discretion) direct any or all of the banks
and financial institutions with which any Grantor either maintains a Deposit
Account or a lockbox or deposits the proceeds of any Accounts to send
immediately to the Collateral Agent by wire transfer (to such account as the
Collateral Agent shall specify, or in such other manner as the Collateral Agent
shall direct) all or a portion of such securities, cash, investments and other
items held by such institution. Any such securities, cash, investments and other
items so received by the Collateral Agent shall (in the sole and absolute
discretion of the Collateral Agent) be held as additional Collateral for the
Obligations or distributed in accordance with Section 7 hereof.
-10-
(iii) Upon the occurrence and during the continuance of any breach
or default under any material License referred to in Schedule II hereto by any
party thereto other than any Grantor, each Grantor party thereto will, promptly
after obtaining knowledge thereof, give the Collateral Agent written notice of
the nature and duration thereof, specifying what action, if any, it has taken
and proposes to take with respect thereto and thereafter will take reasonable
steps to protect and preserve its rights and remedies in respect of such breach
or default, or will obtain or acquire an appropriate substitute License.
(iv) Each Grantor will, at its expense, promptly deliver to the
Collateral Agent a copy of each notice or other communication received by it by
which any other party to any material License referred to in Schedule II hereto
purports to exercise any of its rights or affect any of its obligations
thereunder, together with a copy of any reply by such Grantor thereto.
(v) Each Grantor will exercise promptly and diligently each and
every right which it may have under each material License (other than any right
of termination) and will duly perform and observe in all respects all of its
obligations under each material License and will take all action reasonably
necessary to maintain such Licenses in full force and effect. No Grantor will,
without the prior written consent of the Collateral Agent, cancel, terminate,
amend or otherwise modify in any respect, or waive any provision of, any
material License referred to in Schedule II hereto.
-11-
(g) Transfers and Other Liens.
(i) No Grantor will sell, assign (by operation of law or otherwise),
lease, license, exchange or otherwise transfer or dispose of any of the
Collateral, except (A) Inventory in the ordinary course of business, and (B)
worn-out or obsolete assets not necessary to the business.
(ii) No Grantor will create, suffer to exist or grant any Lien upon
or with respect to any Collateral other than a Permitted Lien.
(h) Intellectual Property.
(i) If applicable, any Grantor shall, upon the Collateral Agent's
written request, duly execute and deliver the applicable Assignment for Security
in the form attached hereto as Exhibit A. Each Grantor (either itself or through
licensees) will, and will cause each licensee thereof to, take all action
necessary to maintain all of the Intellectual Property in full force and effect,
including, without limitation, using the proper statutory notices and markings
and using the Trademarks on each applicable trademark class of goods in order to
so maintain the Trademarks in full force and free from any claim of abandonment
for non-use, and each Grantor will not (nor permit any licensee thereof to) do
any act or knowingly omit to do any act whereby any Intellectual Property may
become invalidated; provided, however, that so long as no Event of Default has
occurred and is continuing, no Grantor shall have an obligation to use or to
maintain any Intellectual Property (A) that relates solely to any product or
work, that has been, or is in the process of being, discontinued, abandoned or
terminated, (B) that is being replaced with Intellectual Property substantially
similar to the Intellectual Property that may be abandoned or otherwise become
invalid, so long as the failure to use or maintain such Intellectual Property
does not materially adversely affect the validity of such replacement
Intellectual Property and so long as such replacement Intellectual Property is
subject to the Lien created by this Agreement or (C) that is substantially the
same as another Intellectual Property that is in full force, so long the failure
to use or maintain such Intellectual Property does not materially adversely
affect the validity of such replacement Intellectual Property and so long as
such other Intellectual Property is subject to the Lien and security interest
created by this Agreement. Each Grantor will cause to be taken all necessary
steps in any proceeding before the United States Patent and Trademark Office and
the United States Copyright Office or any similar office or agency in any other
country or political subdivision thereof to maintain each registration of the
Intellectual Property (other than the Intellectual Property described in the
proviso to the immediately preceding sentence), including, without limitation,
filing of renewals, affidavits of use, affidavits of incontestability and
opposition, interference and cancellation proceedings and payment of maintenance
fees, filing fees, taxes or other governmental fees. If any Intellectual
Property (other than Intellectual Property described in the proviso to the first
sentence of subsection (i) of this clause (h)) is infringed, misappropriated,
diluted or otherwise violated in any material respect by a third party, each
Grantor shall (x) upon learning of such infringement, misappropriation, dilution
or other violation, promptly notify the Collateral Agent and (y) to the extent
any Grantor shall deem appropriate under the circumstances, promptly xxx for
infringement, misappropriation, dilution or other violation, seek injunctive
relief where appropriate and recover any and all damages for such infringement,
misappropriation, dilution or other violation, or take such other actions as
such Grantor shall deem appropriate under the circumstances to protect such
Intellectual Property. Each Grantor shall furnish to the Collateral Agent from
time to time upon its request statements and schedules further identifying and
describing the Intellectual Property and Licenses and such other reports in
connection with the Intellectual Property and Licenses as the Collateral Agent
may reasonably request, all in reasonable detail and promptly upon request of
the Collateral Agent, following receipt by the Collateral Agent of any such
statements, schedules or reports, each Grantor shall modify this Agreement by
amending Schedule II hereto, as the case may be, to include any Intellectual
Property and License, as the case may be, which becomes part of the Collateral
under this Agreement and shall execute and authenticate such documents and do
such acts as shall be necessary or, in the judgment of the Collateral Agent,
desirable to subject such Intellectual Property and Licenses to the Lien and
security interest created by this Agreement. Notwithstanding anything herein to
the contrary, upon the occurrence and during the continuance of an Event of
Default, no Grantor may abandon or otherwise permit any Intellectual Property to
become invalid without the prior written consent of the Collateral Agent, and if
any Intellectual Property is infringed, misappropriated, diluted or otherwise
violated in any material respect by a third party, each Grantor will take such
action as the Collateral Agent shall deem appropriate under the circumstances to
protect such Intellectual Property.
-12-
(ii) In no event shall any Grantor, either itself or through any
agent, employee, licensee or designee, file an application for the registration
of any Trademark or Copyright or the issuance of any Patent with the United
States Patent and Trademark Office or the United States Copyright Office, as
applicable, or in any similar office or agency of the United States or any
country or any political subdivision thereof unless it gives the Collateral
Agent prior written notice thereof. Upon request of the Collateral Agent, any
Grantor shall execute, authenticate and deliver any and all assignments,
agreements, instruments, documents and papers as the Collateral Agent may
reasonably request to evidence the Collateral Agent's security interest
hereunder in such Intellectual Property and the General Intangibles of any
Grantor relating thereto or represented thereby, and each Grantor hereby
appoints the Collateral Agent its attorney-in-fact to execute and/or
authenticate and file all such writings for the foregoing purposes, all acts of
such attorney being hereby ratified and confirmed, and such power (being coupled
with an interest) shall be irrevocable until the indefeasible payment in full in
cash of all of the Obligations in full and the termination of each of the
Transaction Documents.
(i) Deposit, Commodities and Securities Accounts. Upon the Collateral
Agent's written request, each Grantor shall cause each bank and other financial
institution with an account referred to in Schedule IV hereto to execute and
deliver to the Collateral Agent a control agreement, in form and substance
reasonably satisfactory to the Collateral Agent, duly executed by each Grantor
and such bank or financial institution, or enter into other arrangements in form
and substance satisfactory to the Collateral Agent, pursuant to which such
institution shall irrevocably agree, inter alia, that (i) it will comply at any
time with the instructions originated by the Collateral Agent to such bank or
financial institution directing the disposition of cash, Commodity Contracts,
securities, Investment Property and other items from time to time credited to
such account, without further consent of each Grantor, which instructions the
Collateral Agent will not give to such bank or other financial institution in
the absence of a continuing Event of Default, (ii) all cash, Commodity
Contracts, securities, Investment Property and other items of each Grantor
deposited with such institution shall be subject to a perfected, first priority
security interest in favor of the Collateral Agent, (iii) any right of set off
(other than recoupment of standard fees), banker's Lien or other similar Lien,
security interest or encumbrance shall be fully waived as against the Collateral
Agent, and (iv) upon receipt of written notice from the Collateral Agent during
the continuance of an Event of Default, such bank or financial institution shall
immediately send to the Collateral Agent by wire transfer (to such account as
the Collateral Agent shall specify, or in such other manner as the Collateral
Agent shall direct) all such cash, the value of any Commodity Contracts,
securities, Investment Property and other items held by it. Without the prior
written consent of the Collateral Agent, each Grantor shall not make or maintain
any Deposit Account, Commodity Account or Securities Account except for the
accounts set forth in Schedule IV hereto. The provisions of this paragraph 5(i)
shall not apply to (i) Deposit Accounts for which the Collateral Agent is the
depositary and (ii) Deposit Accounts specially and exclusively used for payroll,
payroll taxes and other employee wage and benefit payments to or for the benefit
of each Grantor's salaried employees.
-13-
(j) Motor Vehicles.
(i) Upon the Collateral Agent's written request, each Grantor shall
deliver to the Collateral Agent originals of the certificates of title or
ownership for all motor vehicles with a value in excess of $50,000, owned by it
with the Collateral Agent listed as lienholder, for the benefit of the Buyers.
(ii) Each Grantor hereby appoints the Collateral Agent as its
attorney-in-fact, effective the date hereof and terminating upon the termination
of this Agreement, for the purpose of (A) executing on behalf of each Grantor
title or ownership applications for filing with appropriate state agencies to
enable motor vehicles now owned or hereafter acquired by each Grantor to be
retitled and the Collateral Agent listed as lienholder thereof, (B) filing such
applications with such state agencies, and (C) executing such other documents
and instruments on behalf of, and taking such other action in the name of, each
Grantor as the Collateral Agent may deem necessary or advisable to accomplish
the purposes hereof (including, without limitation, for the purpose of creating
in favor of the Collateral Agent a perfected Lien on the motor vehicles and
exercising the rights and remedies of the Collateral Agent hereunder). This
appointment as attorney-in-fact is coupled with an interest and is irrevocable
until all of the Obligations are indefeasibly paid in full in cash and after all
Transaction Documents have been terminated.
(iii) Any certificates of title or ownership delivered pursuant to
the terms hereof shall be accompanied by odometer statements for each motor
vehicle covered thereby.
(iv) So long as no Event of Default shall have occurred and be
continuing, upon the request of any Grantor, the Collateral Agent shall execute
and deliver to any Grantor such instruments as any Grantor shall reasonably
request to remove the notation of the Collateral Agent as lienholder on any
certificate of title for any motor vehicle; provided, however, that any such
instruments shall be delivered, and the release effective, only upon receipt by
the Collateral Agent of a certificate from any Grantor stating that such motor
vehicle is to be sold or has suffered a casualty loss (with title thereto
passing to the casualty insurance company therefor in settlement of the claim
for such loss) and the amount that any Grantor will receive as sale proceeds or
insurance proceeds. Any proceeds of such sale or casualty loss shall be paid to
the Collateral Agent hereunder immediately upon receipt, to be applied to the
Obligations then outstanding.
-14-
(k) Control. Each Grantor hereby agrees to take any or all action that may
be necessary or desirable or that the Collateral Agent may request in order for
the Collateral Agent to obtain control in accordance with Sections 9-105 - 9-107
of the Code with respect to the following Collateral: (i) Electronic Chattel
Paper, (ii) Investment Property, and (iii) Letter-of-Credit Rights.
(l) Inspection and Reporting. Each Grantor shall permit the Collateral
Agent, or any agent or representatives thereof or such professionals or other
Persons as the Collateral Agent may designate, not more than once a year in the
absence of an Event of Default, (i) to examine and make copies of and abstracts
from any Grantor's records and books of account, (ii) to visit and inspect its
properties, (iii) to verify materials, leases, Instruments, Accounts, Inventory
and other assets of any Grantor from time to time, (iii) to conduct audits,
physical counts, appraisals and/or valuations, examinations at the locations of
any Grantor. Each Grantor shall also permit the Collateral Agent, or any agent
or representatives thereof or such professionals or other Persons as the
Collateral Agent may designate to discuss any Grantor's affairs, finances and
accounts with any of its directors, officers, managerial employees, independent
accountants or any of its other representatives.
(m) Future Subsidiaries. If any Grantor shall hereafter create or acquire
any Subsidiary, simultaneously with the creation of acquisition of such
Subsidiary, such Grantor shall cause such Subsidiary to become a party to this
Agreement as an additional "Grantor" hereunder, and to duly execute and deliver
a guaranty of the Obligations in favor of the Collateral Agent in form and
substance reasonably acceptable to the Collateral Agent, and to duly execute
and/or deliver such opinions of counsel and other documents, in form and
substance reasonably acceptable to the Collateral Agent, as the Collateral Agent
shall reasonably request with respect thereto.
SECTION 6. Additional Provisions Concerning the Collateral.
(a) Each Grantor hereby (i) authorizes the Collateral Agent to file one or
more Uniform Commercial Code financing or continuation statements, and
amendments thereto, relating to the Collateral and (ii) ratifies such
authorization to the extent that the Collateral Agent has filed any such
financing or continuation statements, or amendments thereto, prior to the date
hereof. A photocopy or other reproduction of this Agreement or any financing
statement covering the Collateral or any part thereof shall be sufficient as a
financing statement where permitted by law.
(b) Each Grantor hereby irrevocably appoints the Collateral Agent as its
attorney-in-fact and proxy, with full authority in the place and stead of each
Grantor and in the name of each Grantor or otherwise, from time to time in the
Collateral Agent's discretion, so long as an Event of Default shall have
occurred and is continuing, to take any action and to execute any instrument
which the Collateral Agent may deem necessary or advisable to accomplish the
purposes of this Agreement (subject to the rights of each Grantor under Section
5 hereof), including, without limitation, (i) to obtain and adjust insurance
required to be paid to the Collateral Agent pursuant to Section 5(e) hereof,
(ii) to ask, demand, collect, xxx for, recover, compound, receive and give
acquittance and receipts for moneys due and to become due under or in respect of
any Collateral, (iii) to receive, endorse, and collect any drafts or other
instruments, documents and chattel paper in connection with clause (i) or (ii)
above, (iv) to file any claims or take any action or institute any proceedings
which the Collateral Agent may deem necessary or desirable for the collection of
any Collateral or otherwise to enforce the rights of the Collateral Agent and
the Buyers with respect to any Collateral, and (v) to execute assignments,
licenses and other documents to enforce the rights of the Collateral Agent and
the Buyers with respect to any Collateral. This power is coupled with an
interest and is irrevocable until all of the Obligations are indefeasibly paid
in full in cash.
-15-
(c) For the purpose of enabling the Collateral Agent to exercise rights
and remedies hereunder, at such time as the Collateral Agent shall be lawfully
entitled to exercise such rights and remedies, and for no other purpose, each
Grantor hereby grants to the Collateral Agent, to the extent assignable, an
irrevocable, non-exclusive license (exercisable without payment of royalty or
other compensation to any Grantor) to use, assign, license or sublicense any
Intellectual Property now owned or hereafter acquired by any Grantor, wherever
the same may be located, including in such license reasonable access to all
media in which any of the licensed items may be recorded or stored and to all
computer programs used for the compilation or printout thereof. Notwithstanding
anything contained herein to the contrary, but subject to the provisions of the
Securities Purchase Agreement that limit the right of any Grantor to dispose of
its property and Section 5(h) hereof, so long as no Event of Default shall have
occurred and be continuing, any Grantor may exploit, use, enjoy, protect,
license, sublicense, assign, sell, dispose of or take other actions with respect
to the Intellectual Property in the ordinary course of its business. In
furtherance of the foregoing, unless an Event of Default shall have occurred and
be continuing, the Collateral Agent shall from time to time, upon the request of
any Grantor, execute and deliver any instruments, certificates or other
documents, in the form so requested, which such Grantor shall have certified are
appropriate (in any Grantor's judgment) to allow it to take any action permitted
above (including relinquishment of the license provided pursuant to this clause
(c) as to any Intellectual Property). Further, upon the indefeasible payment in
full in cash of all of the Obligations, the Collateral Agent (subject to Section
10(e) hereof) shall release and reassign to any Grantor all of the Collateral
Agent's right, title and interest in and to the Intellectual Property, and the
Licenses, all without recourse, representation or warranty whatsoever. The
exercise of rights and remedies hereunder by the Collateral Agent shall not
terminate the rights of the holders of any licenses or sublicenses theretofore
granted by each Grantor in accordance with the second sentence of this clause
(c). Each Grantor hereby releases the Collateral Agent from any claims, causes
of action and demands at any time arising out of or with respect to any actions
taken or omitted to be taken by the Collateral Agent under the powers of
attorney granted herein other than actions taken or omitted to be taken through
the Collateral Agent's gross negligence or willful misconduct, as determined by
a final determination of a court of competent jurisdiction.
(d) If any Grantor fails to perform any agreement contained herein, the
Collateral Agent may itself perform, or cause performance of, such agreement or
obligation, in the name of any Grantor or the Collateral Agent, and the expenses
of the Collateral Agent incurred in connection therewith shall be payable by any
Grantor pursuant to Section 8 hereof and shall be secured by the Collateral.
(e) The powers conferred on the Collateral Agent hereunder are solely to
protect its interest in the Collateral and shall not impose any duty upon it to
exercise any such powers. Except for the safe custody of any Collateral in its
possession and the accounting for moneys actually received by it hereunder, the
Collateral Agent shall have no duty as to any Collateral or as to the taking of
any necessary steps to preserve rights against prior parties or any other rights
pertaining to any Collateral.
-16-
(f) Anything herein to the contrary notwithstanding (i) each Grantor shall
remain liable under the Licenses and otherwise with respect to any of the
Collateral to the extent set forth therein to perform all of its obligations
thereunder to the same extent as if this Agreement had not been executed, (ii)
the exercise by the Collateral Agent of any of its rights hereunder shall not
release any Grantor from any of its obligations under the Licenses or otherwise
in respect of the Collateral, and (iii) the Collateral Agent shall not have any
obligation or liability by reason of this Agreement under the Licenses or with
respect to any of the other Collateral, nor shall the Collateral Agent be
obligated to perform any of the obligations or duties of any Grantor thereunder
or to take any action to collect or enforce any claim for payment assigned
hereunder.
SECTION 7. Remedies Upon Event of Default. If any Event of Default shall
have occurred and be continuing:
(a) The Collateral Agent may exercise in respect of the Collateral, in
addition to any other rights and remedies provided for herein or otherwise
available to it, all of the rights and remedies of a secured party upon default
under the Code (whether or not the Code applies to the affected Collateral), and
also may (i) take absolute control of the Collateral, including, without
limitation, transfer into the Collateral Agent's name or into the name of its
nominee or nominees (to the extent the Collateral Agent has not theretofore done
so) and thereafter receive, for the benefit of the Collateral Agent, all
payments made thereon, give all consents, waivers and ratifications in respect
thereof and otherwise act with respect thereto as though it were the outright
owner thereof, (ii) require each Grantor to, and each Grantor hereby agrees that
it will at its expense and upon request of the Collateral Agent forthwith,
assemble all or part of its respective Collateral as directed by the Collateral
Agent and make it available to the Collateral Agent at a place or places to be
designated by the Collateral Agent that is reasonably convenient to both
parties, and the Collateral Agent may enter into and occupy any premises owned
or leased by any Grantor where the Collateral or any part thereof is located or
assembled for a reasonable period in order to effectuate the Collateral Agent's
rights and remedies hereunder or under law, without obligation to any Grantor in
respect of such occupation, and (iii) without notice except as specified below
and without any obligation to prepare or process the Collateral for sale, (A)
sell the Collateral or any part thereof in one or more parcels at public or
private sale, at any of the Collateral Agent's offices or elsewhere, for cash,
on credit or for future delivery, and at such price or prices and upon such
other terms as the Collateral Agent may deem commercially reasonable and/or (B)
lease, license or dispose of the Collateral or any part thereof upon such terms
as the Collateral Agent may deem commercially reasonable. Each Grantor agrees
that, to the extent notice of sale or any other disposition of its respective
Collateral shall be required by law, at least ten (10) days' notice to any
Grantor of the time and place of any public sale or the time after which any
private sale or other disposition of its respective Collateral is to be made
shall constitute reasonable notification. The Collateral Agent shall not be
obligated to make any sale or other disposition of any Collateral regardless of
notice of sale having been given. The Collateral Agent may adjourn any public or
private sale from time to time by announcement at the time and place fixed
therefor, and such sale may, without further notice, be made at the time and
place to which it was so adjourned. Each Grantor hereby waives any claims
against the Collateral Agent and the Buyers arising by reason of the fact that
the price at which its respective Collateral may have been sold at a private
sale was less than the price which might have been obtained at a public sale or
was less than the aggregate amount of the Obligations, even if the Collateral
Agent accepts the first offer received and does not offer such Collateral to
more than one offeree, and waives all rights that any Grantor may have to
require that all or any part of such Collateral be marshalled upon any sale
(public or private) thereof. Each Grantor hereby acknowledges that (i) any such
sale of its respective Collateral by the Collateral Agent shall be made without
warranty, (ii) the Collateral Agent may specifically disclaim any warranties of
title, possession, quiet enjoyment or the like, and (iii) such actions set forth
in clauses (i) and (ii) above shall not adversely effect the commercial
reasonableness of any such sale of Collateral. In addition to the foregoing, (1)
upon written notice to any Grantor from the Collateral Agent, such Grantor shall
cease any use of the Intellectual Property or any trademark, patent or copyright
similar thereto for any purpose described in such notice; (2) the Collateral
Agent may, at any time and from time to time, upon 10 days' prior notice to such
Grantor, license, whether general, special or otherwise, and whether on an
exclusive or non-exclusive basis, any of the Intellectual Property, throughout
the universe for such term or terms, on such conditions, and in such manner, as
the Collateral Agent shall in its sole discretion determine; and (3) the
Collateral Agent may, at any time, pursuant to the authority granted in Section
6 hereof (such authority being effective upon the occurrence and during the
continuance of an Event of Default), execute and deliver on behalf of such
Grantor, one or more instruments of assignment of the Intellectual Property (or
any application or registration thereof), in form suitable for filing, recording
or registration in any country.
-17-
(b) Any cash held by the Collateral Agent as Collateral and all Cash
Proceeds received by the Collateral Agent in respect of any sale of or
collection from, or other realization upon, all or any part of the Collateral
may, in the discretion of the Collateral Agent, be held by the Collateral Agent
as collateral for, and/or then or at any time thereafter applied (after payment
of any amounts payable to the Collateral Agent pursuant to Section 8 hereof) in
whole or in part by the Collateral Agent against, all or any part of the
Obligations in such order as the Collateral Agent shall elect, consistent with
the provisions of the Securities Purchase Agreement. Any surplus of such cash or
Cash Proceeds held by the Collateral Agent and remaining after the indefeasible
payment in full in cash of all of the Obligations shall be paid over to
whomsoever shall be lawfully entitled to receive the same or as a court of
competent jurisdiction shall direct.
(c) In the event that the proceeds of any such sale, collection or
realization are insufficient to pay all amounts to which the Collateral Agent
and the Buyers are legally entitled, such each shall be liable for the
deficiency, together with interest thereon at the highest rate specified in any
of the applicable Transaction Documents for interest on overdue principal
thereof or such other rate as shall be fixed by applicable law, together with
the costs of collection and the reasonable fees, costs, expenses and other
client charges of any attorneys employed by the Collateral Agent to collect such
deficiency.
(d) Each Grantor hereby acknowledges that if the Collateral Agent complies
with any applicable state, provincial, or federal law requirements in connection
with a disposition of the Collateral, such compliance will not adversely affect
the commercial reasonableness of any sale or other disposition of the
Collateral.
-18-
(e) The Collateral Agent shall not be required to marshal any present or
future collateral security (including, but not limited to, this Agreement and
the Collateral) for, or other assurances of payment of, the Obligations or any
of them or to resort to such collateral security or other assurances of payment
in any particular order, and all of the Collateral Agent's rights hereunder and
in respect of such collateral security and other assurances of payment shall be
cumulative and in addition to all other rights, however existing or arising. To
the extent that any Grantor lawfully may, each Grantor hereby agrees that it
will not invoke any law relating to the marshalling of collateral which might
cause delay in or impede the enforcement of the Collateral Agent's rights under
this Agreement or under any other instrument creating or evidencing any of the
Obligations or under which any of the Obligations is outstanding or by which any
of the Obligations is secured or payment thereof is otherwise assured, and, to
the extent that it lawfully may, each Grantor hereby irrevocably waives the
benefits of all such laws.
SECTION 8. Indemnity and Expenses.
(a) Each Grantor agrees, jointly and severally, to defend, protect,
indemnify and hold the Collateral Agent and each of the Buyers, jointly and
severally, harmless from and against any and all claims, damages, losses,
liabilities, obligations, penalties, fees, costs and expenses (including,
without limitation, reasonable legal fees, costs, expenses, and disbursements of
such Person's counsel) to the extent that they arise out of or otherwise result
from this Agreement (including, without limitation, enforcement of this
Agreement), except claims, losses or liabilities resulting solely and directly
from such Person's gross negligence or willful misconduct, as determined by a
final judgment of a court of competent jurisdiction.
(b) Each Grantor agrees, jointly and severally, to upon demand pay to the
Collateral Agent the amount of any and all costs and expenses, including the
reasonable fees, costs, expenses and disbursements of counsel for the Collateral
Agent and of any experts and agents (including, without limitation, any
collateral trustee which may act as agent of the Collateral Agent), which the
Collateral Agent may incur in connection with (i) the preparation, negotiation,
execution, delivery, recordation, administration, amendment, waiver or other
modification or termination of this Agreement, (ii) the custody, preservation,
use or operation of, or the sale of, collection from, or other realization upon,
any Collateral, (iii) the exercise or enforcement of any of the rights of the
Collateral Agent hereunder, or (iv) the failure by any Grantor to perform or
observe any of the provisions hereof.
-19-
SECTION 9. Notices, Etc. All notices and other communications provided for
hereunder shall be in writing and shall be mailed (by certified mail, postage
prepaid and return receipt requested), telecopied, e-mailed or delivered, if to
any Grantor at its address specified below and if to the Collateral Agent to it,
at its address specified below; or as to any such Person, at such other address
as shall be designated by such Person in a written notice to such other Person
complying as to delivery with the terms of this Section 9. All such notices and
other communications shall be effective (a) if sent by certified mail, return
receipt requested, when received or three days after deposited in the mails,
whichever occurs first, (b) if telecopied or e-mailed, when transmitted (during
normal business hours) and confirmation is received, otherwise, the day after
the notice was transmitted if confirmation is received, or (c) if delivered,
upon delivery.
SECTION 10. Miscellaneous.
(a) No amendment of any provision of this Agreement shall be effective
unless it is in writing and signed by each Grantor and the Collateral Agent, and
no waiver of any provision of this Agreement, and no consent to any departure by
each Grantor therefrom, shall be effective unless it is in writing and signed by
the Collateral Agent, and then such waiver or consent shall be effective only in
the specific instance and for the specific purpose for which given.
(b) No failure on the part of the Collateral Agent to exercise, and no
delay in exercising, any right hereunder or under any of the other Transaction
Documents shall operate as a waiver thereof; nor shall any single or partial
exercise of any such right preclude any other or further exercise thereof or the
exercise of any other right. The rights and remedies of the Collateral Agent or
any Buyer provided herein and in the other Transaction Documents are cumulative
and are in addition to, and not exclusive of, any rights or remedies provided by
law. The rights of the Collateral Agent or any Buyer under any of the other
Transaction Documents against any party thereto are not conditional or
contingent on any attempt by such Person to exercise any of its rights under any
of the other Transaction Documents against such party or against any other
Person, including but not limited to, any Grantor.
(c) Any provision of this Agreement that is prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining portions
hereof or thereof or affecting the validity or enforceability of such provision
in any other jurisdiction.
(d) This Agreement shall create a continuing security interest in the
Collateral and shall (i) remain in full force and effect until the indefeasible
payment in full in cash of the Obligations, and (ii) be binding on each Grantor
and all other Persons who become bound as debtor to this Agreement in accordance
with Section 9-203(d) of the Code and shall inure, together with all rights and
remedies of the Collateral Agent and the Buyers hereunder, to the benefit of the
Collateral Agent and the Buyers and their respective permitted successors,
transferees and assigns. Without limiting the generality of clause (ii) of the
immediately preceding sentence, without notice to any Grantor, the Collateral
Agent and the Buyers may assign or otherwise transfer their rights and
obligations under this Agreement and any of the other Transaction Documents, to
any other Person and such other Person shall thereupon become vested with all of
the benefits in respect thereof granted to the Collateral Agent and the Buyers
herein or otherwise. Upon any such assignment or transfer, all references in
this Agreement to the Collateral Agent or any such Buyer shall mean the assignee
of the Collateral Agent or such Buyer. None of the rights or obligations of any
Grantor hereunder may be assigned or otherwise transferred without the prior
written consent of the Collateral Agent, and any such assignment or transfer
without the consent of the Collateral Agent shall be null and void.
-20-
(e) Upon the indefeasible payment in full in cash of the Obligations, (i)
this Agreement and the security interests created hereby shall terminate and all
rights to the Collateral shall revert to the respective Grantor that granted
such security interests hereunder, and (ii) the Collateral Agent will promptly,
upon any Grantor's request and at such Grantor's expense, (A) return to such
Grantor such of the Collateral as shall not have been sold or otherwise disposed
of or applied pursuant to the terms hereof, and (B) execute and deliver to such
Grantor such documents as such Grantor shall reasonably request to evidence such
termination, all without any representation, warranty or recourse whatsoever.
(f) THIS AGREEMENT SHALL BE GOVERNED BY, CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, EXCEPT AS REQUIRED BY
MANDATORY PROVISIONS OF LAW AND EXCEPT TO THE EXTENT THAT THE VALIDITY AND
PERFECTION OR THE PERFECTION AND THE EFFECT OF PERFECTION OR NON-PERFECTION OF
THE SECURITY INTEREST CREATED HEREBY, OR REMEDIES HEREUNDER, IN RESPECT OF ANY
PARTICULAR COLLATERAL ARE GOVERNED BY THE LAW OF A JURISDICTION OTHER THAN THE
STATE OF NEW YORK.
(g) ANY LEGAL ACTION, SUIT OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR
ANY DOCUMENT RELATED THERETO MAY BE BROUGHT IN XXX XXXXXX XX XXX XXXXX XX XXX
XXXX IN THE COUNTY OF NEW YORK OR THE UNITED STATES OF AMERICA FOR THE SOUTHERN
DISTRICT OF NEW YORK, AND APPELLATE COURTS THEREOF, AND, BY EXECUTION AND
DELIVERY OF THIS AGREEMENT, EACH GRANTOR HEREBY ACCEPTS FOR ITSELF AND IN
RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE
AFORESAID COURTS. EACH GRANTOR HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION, INCLUDING, WITHOUT LIMITATION,
ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON
CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY SUCH
ACTION, SUIT OR PROCEEDING IN SUCH RESPECTIVE JURISDICTIONS AND CONSENTS TO THE
GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY THE
COURT.
(h) EACH GRANTOR AND (BY ITS ACCEPTANCE OF THE BENEFITS OF THIS AGREEMENT)
THE COLLATERAL AGENT WAIVES ANY RIGHT IT MAY HAVE TO TRIAL BY JURY IN RESPECT OF
ANY LITIGATION BASED ON, ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS
AGREEMENT OR ANY OF THE OTHER TRANSACTION DOCUMENTS, OR ANY COURSE OF CONDUCT,
COURSE OF DEALING, VERBAL OR WRITTEN STATEMENT OR OTHER ACTION OF THE PARTIES
HERETO.
-21-
(i) Each Grantor irrevocably consents to the service of process of any of
the aforesaid courts in any such action, suit or proceeding by the mailing of
copies thereof by registered or certified mail (or any substantially similar
form of mail), postage prepaid, to any Grantor at its address provided herein,
such service to become effective 10 days after such mailing.
(j) Nothing contained herein shall affect the right of the Collateral
Agent to serve process in any other manner permitted by law or commence legal
proceedings or otherwise proceed against any Grantor or any property of any
Grantor in any other jurisdiction.
(k) Each Grantor irrevocably and unconditionally waives any right it may
have to claim or recover in any legal action, suit or proceeding referred to in
this Section any special, exemplary, punitive or consequential damages.
(l) Section headings herein are included for convenience of reference only
and shall not constitute a part of this Agreement for any other purpose.
(m) This Agreement may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which shall be deemed
to be an original, but all of which taken together constitute one in the same
Agreement.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
-22-
IN WITNESS WHEREOF, each Grantor has caused this Agreement to be
executed and delivered by its officer thereunto duly authorized, as of the date
first above written.
GRANTOR:
AMERICAN UNITED GLOBAL, INC.
By:
---------------------------------
Name:
Title:
Address: 000 Xxxxxxx Xxxxxx, #000
Xxxxxx, Xxx Xxxx 00000
KRAFT ELEKTRONIKAI ZARTKORUEN MUKODO
RESZVENYTARSASAG
By:
---------------------------------
Name:
Title:
Address: H-112 Budapest
Koerberki ut 36
Registration No.: 00-00-000000
Telecopy:
Jurisdiction of Formation: Republic of
Hungary
ACCEPTED BY:
-----------
SMITHFIELD FIDUCIARY LLC,
as Collateral Agent
By:
---------------------------------
Name:
Title:
Address: 0 Xxxx 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
SCHEDULE I
LEGAL NAMES; ORGANIZATIONAL IDENTIFICATION NUMBERS; STATES OR JURISDICTION OF
ORGANIZATION
LEGAL NAMES STATE OF FEDERAL EMPLOYER ORGANIZATIONAL
ORGANIZATION I.D. I.D.
American United Delaware 00-0000000 None.
Global, Inc.
Sched. I-1
SCHEDULE II
INTELLECTUAL PROPERTY AND LICENSES
None
Sched. II-1
SCHEDULE III
LOCATIONS
LOCATION
Description of Location (State if Location
(i) contains Rolling Stock, other Equipment,
Fixtures,
Goods or Inventory,
(ii) is chief place of business and chief
executive office, or (iii) contains Records
concerning Accounts and originals of Chattel
Paper)
000 Xxxxxxx Xxxxxx, #000
Xxxxxx, Xxx Xxxx 00000
Sched. III-1
Sched. IV-1
SCHEDULE IV
PROMISSORY NOTES, SECURITIES, DEPOSIT ACCOUNTS, SECURITIES ACCOUNTS AND
COMMODITIES ACCOUNTS
Promissory Notes:
American United Xxxxx Xx. $500,000 dated Promissory Note is
Global, Inc. September 2005 secured by shares
of Zoltan Kiss in
Xxxxx Xx.
American United Xxxxx Xx. $1,000,000 Promissory Note is
Global, Inc. dated March secured by shares
2006 of Zoltan Kiss in
Xxxxx Xx.
Securities and Other Instruments:
Name and Address
of Institution
Maintaining Account Account Number Type of Account
------------------- -------------- ---------------
TRANSACTION PARTY DEBTOR OR ISSUER AMOUNT SECURITY AGREEMENTS
American United Informedix, 104,000 shares None
Global, Inc. Inc.(1) of common
stock
options to
purchase
50,000 shares
of common
stock at $0.50
per share
American United Spongetech 716,667 shares None
Global, Inc. Delivery Systems, of common stock
Inc. (1)
American United ScanTeck Medical, 125,000 shares None
Global, Inc. Inc. (1) of common stock
(1) Securities will be disposed of by the Company in consideration for the
forgiveness of debt prior to closing.
Sched. III-1
SCHEDULE V
UCC-1 FINANCING STATEMENTS
Filing of UCC Financing Statements with the State of Delaware
Sched. V-1
SCHEDULE VI
COMMERCIAL TORT CLAIMS
None
Exh. A-1
EXHIBIT A
ASSIGNMENT FOR SECURITY
[TRADEMARKS] [PATENTS] [COPYRIGHTS]
WHEREAS, ______________________________ (the "Assignor") [has adopted,
used and is using, and holds all right, title and interest in and to, the
trademarks and service marks listed on the annexed Schedule 1A, which trademarks
and service marks are registered or applied for in the United States Patent and
Trademark Office (the "Trademarks")] [holds all right, title and interest in the
letter patents, design patents and utility patents listed on the annexed
Schedule 1A, which patents are issued or applied for in the United States Patent
and Trademark Office (the "Patents")] [holds all right, title and interest in
the copyrights listed on the annexed Schedule 1A, which copyrights are
registered in the United States Copyright Office (the "Copyrights")];
WHEREAS, the Assignor has entered into a Security Agreement, dated as of
May __, 2006 (as amended, restated or otherwise modified from time to time the
"Security Agreement"), in favor of Smithfield Fiduciary LLC, as collateral agent
for certain purchasers (the "Assignee");
WHEREAS, pursuant to the Security Agreement, the Assignor has assigned to
the Assignee and granted to the Assignee for the benefit of the Buyers (as
defined in the Security Agreement) a continuing security interest in all right,
title and interest of the Assignor in, to and under the [Trademarks, together
with, among other things, the good-will of the business symbolized by the
Trademarks] [Patents] [Copyrights] and the applications and registrations
thereof, and all proceeds thereof, including, without limitation, any and all
causes of action which may exist by reason of infringement thereof and any and
all damages arising from past, present and future violations thereof (the
"Collateral"), to secure the payment, performance and observance of the
"Obligations" (as defined in the Security Agreement);
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Assignor does hereby pledge,
convey, sell, assign, transfer and set over unto the Assignee and grants to the
Assignee for the benefit of the Buyers a continuing security interest in the
Collateral to secure the prompt payment, performance and for the benefit of the
Buyers observance of the Obligations.
The Assignor does hereby further acknowledge and affirm that the rights
and remedies of the Assignee with respect to the Collateral are more fully set
forth in the Security Agreement, the terms and provisions of which are hereby
incorporated herein by reference as if fully set forth herein.
IN WITNESS WHEREOF, the Assignor has caused this Assignment to be duly
executed by its officer thereunto duly authorized as of _____________, 20__
[GRANTORS]
By:____________________________
Name:
Title:
STATE OF ____________
ss.:
COUNTY OF __________
On this ____ day of _______________, 20__, before me personally came
________________, to me known to be the person who executed the foregoing
instrument, and who, being duly sworn by me, did depose and say that s/he is the
________________ of _______________________________________, a
____________________, and that s/he executed the foregoing instrument in the
firm name of _______________________________________, and that s/he had
authority to sign the same, and s/he acknowledged to me that he executed the
same as the act and deed of said firm for the uses and purposes therein
mentioned.
Exh. A-3
SCHEDULE 1A TO ASSIGNMENT FOR SECURITY
[Trademarks and Trademark Applications]
[Patent and Patent Applications]
[Copyright and Copyright Applications]
Owned by ______________________________
