AMENDED AND RESTATED SUBSIDIARY SECURITY AGREEMENT
THIS AMENDED AND RESTATED SUBSIDIARY SECURITY AGREEMENT (the "Agreement"),
is entered into and made effective as of October 27, 2005, by and between UCA
SERVICES, INC, a New Jersey corporation with its principal place of business at
0 Xxxxxxx Xxxxx, Xxxxxxxx, XX 00000 (the "Company"), and Cornell Capital
Partners, LP (the "Secured Party").
WHEREAS, the Company is a wholly owned subsidiary of NetFabric Holdings,
Inc. (the "Parent");
WHEREAS, the Parent issued to the Secured Party, as provided in the
Securities Purchase Agreement dated July 1, 2005, and as amended pursuant to the
letter agreement dated September 1, 2005 between the Parent and the Secured
Party, and the Secured Party purchased One Million Dollars ($1,000,000) of
secured convertible debentures (the "Prior Convertible Debentures"). The Company
entered into a Security Agreement with the Secured Party to secure the
obligations of the Parent under the Prior Debentures. This Agreement shall amend
and restate the Security Agreement between the Parent and the Secured Party
dated July 1, 2005;
WHEREAS, the Parent has requested the Secured Party to make additional
financing available to the Company;
WHEREAS, the Secured Party is willing to provide such additional financing
on the condition that such additional financing is secured hereunder and under
the UCC-1 filed on ____________, 2005 (#__________) filed in connection with the
Security Agreement between the Company and the Secured Party dated July 1, 2004;
WHEREAS, on the date hereof, the Parent shall issue and sell to the
Secured Party, as provided in the Securities Purchase Agreement dated the date
hereof, and the Secured Party shall purchase an Amended and Restated Secured
Convertible Debenture in the original principal amount of One Million Six
Hundred Fifty Thousand Dollars ($1,650,000), plus accrued and unpaid interest
for the Prior Convertible Debentures through the date hereof in the amount of
Eight Thousand One Hundred Sixty Dollars ($8,160) (the "Convertible Debenture"),
which shall be convertible into shares of common stock of the Parent, par value
$0.001 (the "Common Stock") (as converted, the "Conversion Shares"), in the
respective amounts set forth opposite each Buyer(s) name on Schedule I attached
to the Securities Purchase Agreement;
WHEREAS, the Company shall benefit from the sale of the Convertible
Debenture by the Parent to the Secured Party;
WHEREAS, to induce the Secured Party to enter into the transaction
contemplated by the Securities Purchase Agreement, the Secured Convertible
Debenture, the Investor Registration Rights Agreement, the Irrevocable Transfer
Agent Instructions, the Warrant and the Escrow Agreement (collectively referred
to as the "Transaction Documents"), the Company hereby grants to the Secured
Party a security interest in and to the Pledged Property (as defined below)
until the satisfaction of the Obligations, as defined herein below.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, and for other good and valuable consideration, the adequacy
and receipt of which are hereby acknowledged, the parties hereto hereby agree as
follows:
ARTICLE 1.
DEFINITIONS AND INTERPRETATIONS
Section 1.1. Recitals.
The above recitals are true and correct and are incorporated herein, in
their entirety, by this reference.
Section 1.2. Interpretations.
Nothing herein expressed or implied is intended or shall be construed to
confer upon any person other than the Secured Party any right, remedy or claim
under or by reason hereof.
Section 1.3. Obligations Secured.
The obligations secured hereby are any and all obligations of the Company
or the Parent now existing or hereinafter incurred to the Secured Party, whether
oral or written and whether arising before, on or after the date hereof
including, without limitation, those obligations of the Parent to the Secured
Party under the Prior Convertible Debentures and the Transaction Documents, and
any other amounts now or hereafter owed to the Secured Party by the Parent
thereunder or hereunder (collectively, the "Obligations").
ARTICLE 2.
PLEDGED PROPERTY, ADMINISTRATION OF COLLATERAL AND
TERMINATION OF SECURITY INTEREST
Section 2.1. Pledged Property.
(a) The Company hereby pledges to the Secured Party, and creates in the
Secured Party for its benefit, a security interest for such time until the
Obligations are paid in full, in and to all of the property of the Company as
set forth in Exhibit "A" attached hereto and the products thereof and the
proceeds of all such items (collectively, the "Pledged Property"):
(b) Simultaneously with the execution and delivery of this Agreement, the
Company shall make, execute, acknowledge, file, record and deliver to the
Secured Party any documents reasonably requested by the Secured Party to perfect
its security interest in the Pledged Property. Simultaneously with the execution
and delivery of this Agreement, the Company shall make, execute, acknowledge and
deliver to the Secured Party such documents and instruments, including, without
limitation, financing statements, certificates, affidavits and forms as may, in
the Secured Party's reasonable judgment, be necessary to effectuate, complete or
perfect, or to continue and preserve, the security interest of the Secured Party
in the Pledged Property, and the Secured Party shall hold such documents and
instruments as secured party, subject to the terms and conditions contained
herein.
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Section 2.2. Rights; Interests; Etc.
(a) So long as no Event of Default (as hereinafter defined) shall have
occurred and be continuing:
(i) the Company shall be entitled to exercise any and all rights
pertaining to the Pledged Property or any part thereof for any purpose not
inconsistent with the terms hereof; and
(ii) the Company shall be entitled to receive and retain any and all
payments paid or made in respect of the Pledged Property.
(b) Upon the occurrence and during the continuance of an Event of Default:
(i) All rights of the Company to exercise the rights which it would
otherwise be entitled to exercise pursuant to Section 2.2(a)(i) hereof and to
receive payments which it would otherwise be authorized to receive and retain
pursuant to Section 2.2(a)(ii) hereof shall be suspended, and all such rights
shall thereupon become vested in the Secured Party who shall thereupon have the
sole right to exercise such rights and to receive and hold as Pledged Property
such payments; provided, however, that if the Secured Party shall become
entitled and shall elect to exercise its right to realize on the Pledged
Property pursuant to Article 5 hereof, then all cash sums received by the
Secured Party, or held by Company for the benefit of the Secured Party and paid
over pursuant to Section 2.2(b)(ii) hereof, shall be applied against any
outstanding Obligations; and
(ii) All interest, dividends, income and other payments and distributions
which are received by the Company contrary to the provisions of Section
2.2(b)(i) hereof shall be received in trust for the benefit of the Secured
Party, shall be segregated from other property of the Company and shall be
forthwith paid over to the Secured Party; or
(iii) The Secured Party in its sole discretion shall be authorized to sell
any or all of the Pledged Property at public or private sale in order to recoup
all of the outstanding principal plus accrued interest owed pursuant to the
Convertible Debenture as described herein
(c) An "Event of Default" shall be deemed to have occurred under this
Agreement upon an Event of Default under the Convertible Debenture.
ARTICLE 3.
ATTORNEY-IN-FACT; PERFORMANCE
Section 3.1. Secured Party Appointed Attorney-In-Fact.
Upon the occurrence of an Event of Default, the Company hereby appoints
the Secured Party as its attorney-in-fact, with full authority in the place and
stead of the Company and in the name of the Company or otherwise, from time to
time in the Secured Party's discretion to take any action and to execute any
instrument which the Secured Party may reasonably deem
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necessary to accomplish the purposes of this Agreement, including, without
limitation, to receive and collect all instruments made payable to the Company
representing any payments in respect of the Pledged Property or any part thereof
and to give full discharge for the same. The Secured Party may demand, collect,
receipt for, settle, compromise, adjust, xxx for, foreclose, or realize on the
Pledged Property as and when the Secured Party may determine. To facilitate
collection, the Secured Party may notify account debtors and obligors on any
Pledged Property to make payments directly to the Secured Party.
Section 3.2. Secured Party May Perform.
If the Company fails to perform any agreement contained herein, the
Secured Party, at its option, may itself perform, or cause performance of, such
agreement, and the expenses of the Secured Party incurred in connection
therewith shall be included in the Obligations secured hereby and payable by the
Company under Section 8.3.
ARTICLE 4.
REPRESENTATIONS AND WARRANTIES
Section 4.1. Authorization; Enforceability.
Each of the parties hereto represents and warrants that it has taken all
action necessary to authorize the execution, delivery and performance of this
Agreement and the transactions contemplated hereby; and upon execution and
delivery, this Agreement shall constitute a valid and binding obligation of the
respective party, subject to applicable bankruptcy, insolvency, reorganization,
moratorium and similar laws affecting creditors' rights or by the principles
governing the availability of equitable remedies.
Section 4.2. Ownership of Pledged Property.
The Company warrants and represents that it is the legal and beneficial
owner of the Pledged Property free and clear of any lien, security interest,
option or other charge or encumbrance except for the security interest created
by this Agreement.
ARTICLE 5.
DEFAULT; REMEDIES; SUBSTITUTE COLLATERAL
Section 5.1. Default and Remedies.
(a) If an Event of Default occurs, then in each such case the Secured
Party may declare the Obligations to be due and payable immediately, by a notice
in writing to the Company, and upon any such declaration, the Obligations shall
become immediately due and payable.
(b) Upon the occurrence of an Event of Default, the Secured Party shall:
(i) be entitled to receive all distributions with respect to the Pledged
Property, (ii) to cause the Pledged Property to be transferred into the name of
the Secured Party or its nominee, (iii) to dispose of the Pledged Property, and
(iv) to realize upon any and all rights in the Pledged Property then held by the
Secured Party.
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Section 5.2. Method of Realizing Upon the Pledged Property; Other
Remedies.
Upon the occurrence of an Event of Default, in addition to any rights and
remedies available at law or in equity, the following provisions shall govern
the Secured Party's right to realize upon the Pledged Property:
(a) Any item of the Pledged Property may be sold for cash or other value
in any number of lots at brokers board, public auction or private sale and may
be sold without demand, advertisement or notice (except that the Secured Party
shall give the Company ten (10) days' prior written notice of the time and place
or of the time after which a private sale may be made (the "Sale Notice")),
which notice period shall in any event is hereby agreed to be commercially
reasonable. At any sale or sales of the Pledged Property, the Company may bid
for and purchase the whole or any part of the Pledged Property and, upon
compliance with the terms of such sale, may hold, exploit and dispose of the
same without further accountability to the Secured Party. The Company will
execute and deliver, or cause to be executed and delivered, such instruments,
documents, assignments, waivers, certificates, and affidavits and supply or
cause to be supplied such further information and take such further action as
the Secured Party reasonably shall require in connection with any such sale.
(b) Any cash being held by the Secured Party as Pledged Property and all
cash proceeds received by the Secured Party in respect of, sale of, collection
from, or other realization upon all or any part of the Pledged Property shall be
applied as follows:
(i) to the payment of all amounts due the Secured Party for the expenses
reimbursable to it hereunder or owed to it pursuant to Section 8.3 hereof;
(ii) to the payment of the Obligations then due and unpaid.
(iii) the balance, if any, to the person or persons entitled thereto,
including, without limitation, the Company.
(c) In addition to all of the rights and remedies which the Secured Party
may have pursuant to this Agreement, the Secured Party shall have all of the
rights and remedies provided by law, including, without limitation, those under
the Uniform Commercial Code.
(i) If the Company fails to pay such amounts due upon the occurrence of an
Event of Default which is continuing, then the Secured Party may institute a
judicial proceeding for the collection of the sums so due and unpaid, may
prosecute such proceeding to judgment or final decree and may enforce the same
against the Company and collect the monies adjudged or decreed to be payable in
the manner provided by law out of the property of Company, wherever situated.
The Secured Party may proceed against the Company without proceeding first
against any other party, including, without limitation, the Parent.
(ii) The Company agrees that it shall be liable for any reasonable fees,
expenses and costs incurred by the Secured Party in connection with enforcement,
collection and
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preservation of the Transaction Documents, including, without limitation,
reasonable legal fees and expenses, and such amounts shall be deemed included as
Obligations secured hereby and payable as set forth in Section 8.3 hereof.
Section 5.3. Proofs of Claim.
In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, adjustment, composition or other
judicial proceeding relating to the Company or the property of the Company or of
such other obligor or its creditors, the Secured Party (irrespective of whether
the Obligations shall then be due and payable as therein expressed or by
declaration or otherwise and irrespective of whether the Secured Party shall
have made any demand on the Company for the payment of the Obligations), subject
to the rights of Previous Security Holders, shall be entitled and empowered, by
intervention in such proceeding or otherwise:
(i) to file and prove a claim for the whole amount of the Obligations and
to file such other papers or documents as may be necessary or advisable in order
to have the claims of the Secured Party (including any claim for the reasonable
legal fees and expenses and other expenses paid or incurred by the Secured Party
permitted hereunder and of the Secured Party allowed in such judicial
proceeding), and
(ii) to collect and receive any monies or other property payable or
deliverable on any such claims and to distribute the same; and any custodian,
receiver, assignee, trustee, liquidator, sequestrator or other similar official
in any such judicial proceeding is hereby authorized by the Secured Party to
make such payments to the Secured Party and, in the event that the Secured Party
shall consent to the making of such payments directed to the Secured Party, to
pay to the Secured Party any amounts for expenses due it hereunder.
Section 5.4. Duties Regarding Pledged Property.
The Secured Party shall have no duty as to the collection or protection of
the Pledged Property or any income thereon or as to the preservation of any
rights pertaining thereto, beyond the safe custody and reasonable care of any of
the Pledged Property actually in the Secured Party's possession.
ARTICLE 6.
AFFIRMATIVE COVENANTS
The Company covenants and agrees that, from the date hereof and until the
Obligations have been fully paid and satisfied, unless the Secured Party shall
consent otherwise in writing (as provided in Section 8.4 hereof):
Section 6.1. Existence, Properties, Etc.
(a) The Company shall do, or cause to be done, all things, or proceed with
due diligence with any actions or courses of action, that may be reasonably
necessary (i) to maintain Company's due organization, valid existence and good
standing under the laws of its state of
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incorporation, and (ii) to preserve and keep in full force and effect all
qualifications, licenses and registrations in those jurisdictions in which the
failure to do so could have a Material Adverse Effect (as defined below); and
(b) the Company shall not do, or cause to be done, any act impairing the
Company's corporate power or authority (i) to carry on the Company's business as
now conducted, and (ii) to execute or deliver this Agreement or any other
document delivered in connection herewith, including, without limitation, any
UCC-1 Financing Statements required by the Secured Party (which other loan
instruments collectively shall be referred to as the "Loan Instruments") to
which it is or will be a party, or perform any of its obligations hereunder or
thereunder. For purpose of this Agreement, the term "Material Adverse Effect"
shall mean any material and adverse affect as determined by Secured Party in its
reasonable discretion, whether individually or in the aggregate, upon (a) the
Company's assets, business, operations, properties or condition, financial or
otherwise; (b) the Company's to make payment as and when due of all or any part
of the Obligations; or (c) the Pledged Property.
Section 6.2. Financial Statements and Reports.
The Company shall provide the Security Party with such financial data as
the Secured Party may reasonably request, within a reasonable time after any
such request, including, without limitation the following financial data:
(a) The balance sheet of the Company as of the close of each fiscal year,
the statement of earnings and retained earnings of the Company as of the close
of such fiscal year, and statement of cash flows for the Company for such fiscal
year, all in reasonable detail, prepared in accordance with generally accepted
accounting principles consistently applied, certified by the chief executive and
chief financial officers of the Company as being true and correct and
accompanied by a certificate of the chief executive and chief financial officers
of the Company, stating that the Company has kept, observed, performed and
fulfilled each covenant, term and condition of this Agreement and the other Loan
Instruments during such fiscal year and that no Event of Default hereunder has
occurred and is continuing, or if an Event of Default has occurred and is
continuing, specifying the nature of same, the period of existence of same and
the action the Company proposes to take in connection therewith;
(b) A balance sheet of the Company as of the close of each month, and
statement of earnings and retained earnings of the Company as of the close of
such month, all in reasonable detail, and prepared substantially in accordance
with generally accepted accounting principles consistently applied, certified by
the chief executive and chief financial officers of the Company as being true
and correct; and
(c) Copies of all accountants' reports and accompanying financial reports
submitted to the Company by independent accountants in connection with each
annual examination of the Company.
Section 6.3. Accounts and Reports.
The Company shall maintain a standard system of accounting in accordance
with generally accepted accounting principles consistently applied and provide,
at its sole expense, to the Secured Party the following:
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(a) as soon as available, a copy of any notice or other communication
alleging any nonpayment or other material breach or default, or any foreclosure
or other action respecting any material portion of its assets and properties,
received respecting any of the indebtedness of the Company in excess of $50,000
(other than the Obligations), or any demand or other request for payment under
any guaranty, assumption, purchase agreement or similar agreement or arrangement
respecting the indebtedness or obligations of others in excess of $50,000,
including any received from any person acting on behalf of the Secured Party or
beneficiary thereof; and
(b) within fifteen (15) days after the making of each submission or
filing, a copy of any report, financial statement, notice or other document,
whether periodic or otherwise, submitted to the shareholders of the Company, or
submitted to or filed by the Company with any governmental authority involving
or affecting (i) the Company that could have a Material Adverse Effect; (ii) the
Obligations; (iii) any part of the Pledged Property; or (iv) any of the
transactions contemplated in this Agreement or the Loan Instruments.
Section 6.4. Maintenance of Books and Records; Inspection.
The Company shall maintain its books, accounts and records in accordance
with generally accepted accounting principles consistently applied, and permit
the Secured Party, its officers and employees and any professionals designated
by the Secured Party in writing, at any time to visit and inspect any of its
properties (including but not limited to the collateral security described in
the Transaction Documents and/or the Loan Instruments), corporate books and
financial records, and to discuss its accounts, affairs and finances with any
employee, officer or director thereof.
Section 6.5. Maintenance and Insurance.
(a) The Company shall maintain or cause to be maintained, at its own
expense, all of its assets and properties in good working order and condition,
subject to ordinary wear and tear, making all necessary repairs thereto and
renewals and replacements thereof.
(b) The Company shall maintain or cause to be maintained, at its own
expense, insurance in form, substance and amounts (including deductibles), which
the Company deems reasonably necessary to the Company's business, (i) adequate
to insure all assets and properties of the Company, which assets and properties
are of a character usually insured by persons engaged in the same or similar
business against loss or damage resulting from fire or other risks included in
an extended coverage policy; (ii) against public liability and other tort claims
that may be incurred by the Company; (iii) as may be required by the Transaction
Documents and/or the Loan Instruments or applicable law and (iv) as may be
reasonably requested by Secured Party, all with adequate, financially sound and
reputable insurers.
Section 6.6. Contracts and Other Collateral.
The Company shall perform all of its obligations under or with respect to
each instrument, receivable, contract and other intangible included in the
Pledged Property to which the Company is now or hereafter will be party on a
timely basis and in the manner therein required, including, without limitation,
this Agreement.
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Section 6.7. Defense of Collateral, Etc.
The Company shall defend and enforce its right, title and interest in and
to any part of: (a) the Pledged Property; and (b) if not included within the
Pledged Property, those assets and properties whose loss could have a Material
Adverse Effect, the Company shall defend the Secured Party's right, title and
interest in and to each and every part of the Pledged Property, each against all
manner of claims and demands on a timely basis to the full extent permitted by
applicable law.
Section 6.8. Payment of Debts, Taxes, Etc.
The Company shall pay, or cause to be paid, all of its indebtedness and
other liabilities and perform, or cause to be performed, all of its obligations
in accordance with the respective terms thereof, and pay and discharge, or cause
to be paid or discharged, all taxes, assessments and other governmental charges
and levies imposed upon it, upon any of its assets and properties on or before
the last day on which the same may be paid without penalty, as well as pay all
other lawful claims (whether for services, labor, materials, supplies or
otherwise) as and when due.
Section 6.9. Taxes and Assessments; Tax Indemnity.
The Company shall (a) file all tax returns and appropriate schedules
thereto that are required to be filed under applicable law, prior to the date of
delinquency, (b) pay and discharge all taxes, assessments and governmental
charges or levies imposed upon the Company, upon its income and profits or upon
any properties belonging to it, prior to the date on which penalties attach
thereto, and (c) pay all taxes, assessments and governmental charges or levies
that, if unpaid, might become a lien or charge upon any of its properties;
provided, however, that the Company in good faith may contest any such tax,
assessment, governmental charge or levy described in the foregoing clauses (b)
and (c) so long as appropriate reserves are maintained with respect thereto.
Section 6.10. Compliance with Law and Other Agreements.
The Company shall maintain its business operations and property owned or
used in connection therewith in compliance with (a) all applicable federal,
state and local laws, regulations and ordinances governing such business
operations and the use and ownership of such property, and (b) all agreements,
licenses, franchises, indentures and mortgages to which the Company is a party
or by which the Company or any of its properties is bound. Without limiting the
foregoing, the Company shall pay all of its indebtedness promptly in accordance
with the terms thereof.
Section 6.11. Notice of Default.
The Company shall give written notice to the Secured Party of the
occurrence of any default or Event of Default under this Agreement, the
Transaction Documents or any other Loan Instrument or any other agreement of
Company for the payment of money, promptly upon the occurrence thereof.
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Section 6.12. Notice of Litigation.
The Company shall give notice, in writing, to the Secured Party of (a) any
actions, suits or proceedings wherein the amount at issue is in excess of
$50,000, instituted by any persons against the Company, or affecting any of the
assets of the Company, and (b) any dispute, not resolved within fifteen (15)
days of the commencement thereof, between the Company on the one hand and any
governmental or regulatory body on the other hand, which might reasonably be
expected to have a Material Adverse Effect on the business operations or
financial condition of the Company.
ARTICLE 7.
NEGATIVE COVENANTS
The Company covenants and agrees that, from the date hereof until the
Obligations have been fully paid and satisfied, the Company shall not, unless
the Secured Party shall consent otherwise in writing:
Section 7.1. Liens and Encumbrances.
The Company shall not directly or indirectly make, create, incur, assume
or permit to exist any assignment, transfer, pledge, mortgage, security interest
or other lien or encumbrance of any nature in, to or against any part of the
Pledged Property or of the Company's capital stock, or offer or agree to do so,
or own or acquire or agree to acquire any asset or property of any character
subject to any of the foregoing encumbrances (including any conditional sale
contract or other title retention agreement), or assign, pledge or in any way
transfer or encumber its right to receive any income or other distribution or
proceeds from any part of the Pledged Property or the Company's capital stock;
or enter into any sale-leaseback financing respecting any part of the Pledged
Property as lessee, or cause or assist the inception or continuation of any of
the foregoing.
Section 7.2. Articles, By-Laws, Mergers, Consolidations, Acquisitions and
Sales.
Without the prior express written consent of the Secured Party, which
consent shall not be unreasonably withheld, the Company shall not: (a) Amend its
Articles of Incorporation or By-Laws; (b) be a party to any merger,
consolidation or corporate reorganization, (c) purchase or otherwise acquire all
or substantially all of the assets or stock of, or any partnership or joint
venture interest in, any other person, firm or entity, (d) sell, transfer,
convey, grant a security interest in or lease all or any substantial part of its
assets, nor (e) create any subsidiaries nor convey any of its assets to any
subsidiary in excess of $200,000 in the aggregate.
Section 7.3. Management, Ownership.
The Company shall not materially change its ownership, executive staff or
management without the prior written consent of the Secured Party. The
ownership, executive staff and management of the Company are material factors in
the Secured Party's willingness to institute and maintain a lending relationship
with the Company.
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Section 7.4. Dividends, Etc.
Except for dividends payable to the Parent, the Company shall not declare
or pay any dividend of any kind, in cash or in property, on any class of its
capital stock, nor purchase, redeem, retire or otherwise acquire for value any
shares of such stock, nor make any distribution of any kind in respect thereof,
nor make any return of capital to shareholders, nor make any payments in respect
of any pension, profit sharing, retirement, stock option, stock bonus, incentive
compensation or similar plan (except as required or permitted hereunder),
without the prior written consent of the Secured Party, which consent shall not
be unreasonably withheld.
Section 7.5. Conduct of Business.
The Company will continue to engage, in an efficient and economical
manner, in a business of the same general type as conducted by it on the date of
this Agreement.
Section 7.6. Places of Business.
The location of the Company's chief place of business is 0 Xxxxxxx Xxxxx,
Xxxxxxxx, XX 00000. The Company shall not change the location of its chief place
of business, chief executive office or any place of business disclosed to the
Secured Party or move any of the Pledged Property from its current location
without thirty (30) days prior written notice to the Secured Party in each
instance.
ARTICLE 8.
MISCELLANEOUS
Section 8.1. Notices.
All notices or other communications required or permitted to be given
pursuant to this Agreement shall be in writing and shall be considered as duly
given on: (a) the date of delivery, if delivered in person, by nationally
recognized overnight delivery service or (b) five (5) days after mailing if
mailed from within the continental United States by certified mail, return
receipt requested to the party entitled to receive the same:
If to the Secured Party: Cornell Capital Partners, LP
000 Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx Xxxx, Xxx Xxxxxx 00000
Attention: Xxxx Xxxxxx
Portfolio Manager
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
With copy to: Xxxx Xxxxx, Esq.
000 Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx Xxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
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And if to the Company: UCA Services, Inc.
0 Xxxxxxx Xxxxx
Xxxxxxxx, XX 00000
Attention: Xxxxx Xxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
With a copy to: Xxxxxxxxxxx & Xxxxxxxx Xxxxxxxxx Xxxxxx LLP
000 Xxxxx Xxxxxxxx Xxxxxxxxx, Xxxxx 0000
Xxxxx, Xxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Any party may change its address by giving notice to the other party
stating its new address. Commencing on the tenth (10th) day after the giving of
such notice, such newly designated address shall be such party's address for the
purpose of all notices or other communications required or permitted to be given
pursuant to this Agreement.
Section 8.2. Severability.
If any provision of this Agreement shall be held invalid or unenforceable,
such invalidity or unenforceability shall attach only to such provision and
shall not in any manner affect or render invalid or unenforceable any other
severable provision of this Agreement, and this Agreement shall be carried out
as if any such invalid or unenforceable provision were not contained herein.
Section 8.3. Expenses.
In the event of an Event of Default, the Company will pay to the Secured
Party the amount of any and all reasonable expenses, including the reasonable
fees and expenses of its counsel, which the Secured Party may incur in
connection with: (i) the custody or preservation of, or the sale, collection
from, or other realization upon, any of the Pledged Property; (ii) the exercise
or enforcement of any of the rights of the Secured Party hereunder or (iii) the
failure by the Company to perform or observe any of the provisions hereof.
Section 8.4. Waivers, Amendments, Etc.
The Secured Party's delay or failure at any time or times hereafter to
require strict performance by Company of any undertakings, agreements or
covenants shall not waiver, affect, or diminish any right of the Secured Party
under this Agreement to demand strict compliance and performance herewith. Any
waiver by the Secured Party of any Event of Default shall not waive or affect
any other Event of Default, whether such Event of Default is prior or subsequent
thereto and whether of the same or a different type. None of the undertakings,
agreements and covenants of the Company contained in this Agreement, and no
Event of Default, shall be deemed to have been waived by the Secured Party, nor
may this Agreement be amended,
12
changed or modified, unless such waiver, amendment, change or modification is
evidenced by an instrument in writing specifying such waiver, amendment, change
or modification and signed by the Secured Party.
Section 8.5. Continuing Security Interest.
This Agreement shall create a continuing security interest in the Pledged
Property and shall: (i) remain in full force and effect until payment in full of
the Obligations; and (ii) be binding upon the Company and its successors and
heirs and (iii) inure to the benefit of the Secured Party and its successors and
assigns. Upon the payment or satisfaction in full of the Obligations, the
Company shall be entitled to the return, at its expense, of such of the Pledged
Property as shall not have been sold in accordance with Section 5.2 hereof or
otherwise applied pursuant to the terms hereof.
Section 8.6. Independent Representation.
Each party hereto acknowledges and agrees that it has received or has had
the opportunity to receive independent legal counsel of its own choice and that
it has been sufficiently apprised of its rights and responsibilities with regard
to the substance of this Agreement.
Section 8.7. Applicable Law: Jurisdiction.
This Agreement shall be governed by and interpreted in accordance with the
laws of the State of New Jersey without regard to the principles of conflict of
laws. The parties further agree that any action between them shall be heard in
Xxxxxx County, New Jersey, and expressly consent to the jurisdiction and venue
of the Superior Court of New Jersey, sitting in Xxxxxx County and the United
States District Court for the District of New Jersey sitting in Newark, New
Jersey for the adjudication of any civil action asserted pursuant to this
Paragraph.
Section 8.8. Waiver of Jury Trial.
AS A FURTHER INDUCEMENT FOR THE SECURED PARTY TO ENTER INTO THIS AGREEMENT
AND TO MAKE THE FINANCIAL ACCOMMODATIONS TO THE COMPANY, THE COMPANY HEREBY
WAIVES ANY RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING RELATED IN ANY WAY TO
THIS AGREEMENT AND/OR ANY AND ALL OTHER DOCUMENTS RELATED TO THIS TRANSACTION.
Section 8.9. Entire Agreement.
This Agreement constitutes the entire agreement among the parties and
supersedes any prior agreement or understanding among them with respect to the
subject matter hereof.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
COMPANY:
UCA SERVICES, INC.
By: /s/ Xxxxx Xxxx
------------------------------
Name: Xxxxx Xxxx
Title: Managing Director
SECURED PARTY:
CORNELL CAPITAL PARTNERS, LP
By: Yorkville Advisors, LLC
Its: General Partner
By: /s/ Xxxx Xxxxxx
------------------------------
Name: Xxxx Xxxxxx
Title: Portfolio Manager
14
EXHIBIT A
DEFINITION OF PLEDGED PROPERTY
For the purpose of securing prompt and complete payment and performance by
the Company of all of the Obligations, the Company unconditionally and
irrevocably hereby grants to the Secured Party a continuing security interest in
and to, and lien upon, the following Pledged Property of the Company:
(a) all goods of the Company, including, without limitation, machinery,
equipment, furniture, furnishings, fixtures, signs, lights, tools, parts,
supplies and motor vehicles of every kind and description, now or hereafter
owned by the Company or in which the Company may have or may hereafter acquire
any interest, and all replacements, additions, accessions, substitutions and
proceeds thereof, arising from the sale or disposition thereof, and where
applicable, the proceeds of insurance and of any tort claims involving any of
the foregoing;
(b) all inventory of the Company, including, but not limited to, all
goods, wares, merchandise, parts, supplies, finished products, other tangible
personal property, including such inventory as is temporarily out of Company's
custody or possession and including any returns upon any accounts or other
proceeds, including insurance proceeds, resulting from the sale or disposition
of any of the foregoing;
(c) all contract rights and general intangibles of the Company, including,
without limitation, goodwill, trademarks, trade styles, trade names, leasehold
interests, partnership or joint venture interests, patents and patent
applications, copyrights, deposit accounts whether now owned or hereafter
created;
(d) all documents, warehouse receipts, instruments and chattel paper of
the Company whether now owned or hereafter created;
(e) all accounts and other receivables, instruments or other forms of
obligations and rights to payment of the Company (herein collectively referred
to as "Accounts"), together with the proceeds thereof, all goods represented by
such Accounts and all such goods that may be returned by the Company's
customers, and all proceeds of any insurance thereon, and all guarantees,
securities and liens which the Company may hold for the payment of any such
Accounts including, without limitation, all rights of stoppage in transit,
replevin and reclamation and as an unpaid vendor and/or lienor, all of which the
Company represents and warrants will be bona fide and existing obligations of
its respective customers, arising out of the sale of goods by the Company in the
ordinary course of business;
(f) to the extent assignable, all of the Company's rights under all
present and future authorizations, permits, licenses and franchises issued or
granted in connection with the operations of any of its facilities;
(g) all products and proceeds (including, without limitation, insurance
proceeds) from the above-described Pledged Property.
A-1
