Exhibit 10.2
SECURITY AGREEMENT
SECURITY AGREEMENT, dated as of January 11, 2006 (this "Agreement"), among
Electronic Control Security, Inc., a New Jersey corporation (the "Company") and
all of the Subsidiaries of the Company that own or use material assets (such
subsidiaries, the "Guarantors") (the Company and Guarantors are collectively
referred to as the "Debtors") and the holder or holders of the Company's Senior
Secured Debenture due January 11, 2009 in the aggregate principal amount of
$1,000,000 (the "Debenture"), signatory hereto, their endorsees, transferees and
assigns (collectively referred to as the "Secured Parties").
W I T N E S S E T H:
WHEREAS, pursuant to the Debenture, the Secured Parties have severally
agreed to extend the loans to the Company evidenced by the Debenture;
WHEREAS, pursuant to a certain Subsidiary Guarantee dated as of the date
hereof (the "Guaranty"), the Guarantors have jointly and severally agreed to
guaranty and act as surety for payment of such loans; and
WHEREAS, in order to induce the Secured Parties to extend the loans
evidenced by the Debentures, each Debtor has agreed to execute and deliver to
the Secured Parties this Agreement and to grant the Secured Parties, pari passu
with each other Secured Party, a perfected security interest in certain property
of such Debtor to secure the prompt payment, performance and discharge in full
of all of the Company's obligations under the Debenture and the other Debtor's
obligations under the Guaranty.
NOW, THEREFORE, in consideration of the agreements herein contained and for
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties hereto hereby agree as follows:
1. Certain Definitions. As used in this Agreement, the following terms
shall have the meanings set forth in this Section 1. Terms used but not
otherwise defined in this Agreement that are defined in Article 9 of the UCC
(such as "account", "chattel paper", "commercial tort claim", "deposit account",
"document", "equipment", "fixtures", "general intangibles", "goods",
"instruments", "inventory", "investment property", "letter-of-credit rights",
"proceeds" and "supporting obligations") shall have the respective meanings
given such terms in Article 9 of the UCC.
(a) "Collateral" means the collateral in which the Secured Parties
are granted a security interest by this Agreement and which shall include
the following personal property of the Debtors, whether presently owned or
existing or hereafter acquired or coming into existence, wherever situated,
and all additions and accessions thereto and all substitutions and
replacements thereof, and all proceeds, products and accounts thereof,
including, without limitation, all proceeds from the sale or transfer of
the Collateral and of insurance covering the same and of any tort claims in
connection therewith, and all dividends, interest, cash, notes, securities,
equity interest or other property at any time and from time to time
acquired, receivable or otherwise distributed in respect of, or in exchange
for, any or all of the Pledged Securities (as defined below):
(i) All goods, including, without limitations, (A) all
machinery, equipment, computers, motor vehicles, trucks, tanks, boats,
ships, appliances, furniture, special and general tools, fixtures,
test and quality control devices and other equipment of every kind and
nature and wherever situated, together with all documents of title and
documents representing the same, all additions and accessions thereto,
replacements therefor, all parts therefor, and all substitutes for any
of the foregoing and all other items used and useful in connection
with any Debtor's businesses and all improvements thereto; and (B) all
inventory;
(ii) All contract rights and other general intangibles,
including, without limitation, all partnership interests, membership
interests, stock or other securities, rights under any of the
Organizational Documents, agreements related to the Pledged
Securities, licenses, distribution and other agreements, computer
software (whether "off-the-shelf", licensed from any third party or
developed by any Debtor), computer software development rights,
leases, franchises, customer lists, quality control procedures, grants
and rights, goodwill, trademarks, service marks, trade styles, trade
names, patents, patent applications, copyrights, and income tax
refunds;
(iii) All accounts, together with all instruments, all documents
of title representing any of the foregoing, all rights in any
merchandising, goods, equipment, motor vehicles and trucks which any
of the same may represent, and all right, title, security and
guaranties with respect to each account, including any right of
stoppage in transit;
(iv) All documents, letter-of-credit rights, instruments and
chattel paper;
(v) All commercial tort claims;
(vi) All deposit accounts and all cash (whether or not deposited
in such deposit accounts);
(vii) All investment property;
(viii) All supporting obligations; and
(ix) All files, records, books of account, business papers, and
computer programs; and
(x) the products and proceeds of all of the foregoing Collateral
set forth in clauses (i)-(ix) above.
Without limiting the generality of the foregoing, the
"Collateral" shall include all investment property and general
intangibles respecting ownership and/or other equity interests in each
Guarantor, including, without limitation, the shares of capital stock
and the other equity interests listed on Schedule H hereto (as the
same may be modified from time to time pursuant to the terms hereof),
and any other shares of capital stock and/or other equity interests of
any other direct or indirect subsidiary (which owns or uses material
assets) of any Debtor obtained in the future, and, in each case, all
certificates representing such shares and/or equity interests and, in
each case, all rights, options, warrants, stock, other securities
and/or equity interests that may hereafter be received, receivable or
distributed in respect of, or exchanged for, any of the foregoing (all
of the foregoing being referred to herein as the "Pledged Securities")
and all rights arising under or in connection with the Pledged
Securities, including, but not limited to, all dividends, interest and
cash.
Notwithstanding the foregoing, nothing herein shall be deemed to
constitute an assignment of any asset which, in the event of an
assignment, becomes void by operation of applicable law or the
assignment of which is otherwise prohibited by applicable law (in each
case to the extent that such applicable law is not overridden by
Sections 9-406, 9-407 and/or 9-408 of the UCC or other similar
applicable law); provided, however, that to the extent permitted by
applicable law, this Agreement shall create a valid security interest
in such asset and, to the extent permitted by applicable law, this
Agreement shall create a valid security interest in the proceeds of
such asset.
The definition of "Collateral" specifically excludes any
information or files of any nature in any format which is deemed
"classified information" by any U.S. federal government authority to
the extent that any agreement among the Company (or any Subsidiary)
and such government authority prohibits the granting of a security
interest in such information ("Classified Information").
(b) "Intellectual Property" means the collective reference to all
rights, priorities and privileges relating to intellectual property,
whether arising under United States, multinational or foreign laws or
otherwise, including, without limitation, (i) all copyrights arising under
the laws of the United States, any other country or any political
subdivision thereof, whether registered or unregistered and whether
published or unpublished, all registrations and recordings thereof, and all
applications in connection therewith, including, without limitation, all
registrations, recordings and applications in the United States Copyright
Office, (ii) all letters patent of the United States, any other country or
any political subdivision thereof, all reissues and extensions thereof, and
all applications for letters patent of the United States or any other
country and all divisions, continuations and continuations-in-part thereof,
(iii) all trademarks, trade names, corporate names, company names, business
names, fictitious business names, trade dress, service marks, logos, domain
names and other source or business identifiers, and all goodwill associated
therewith, now existing or hereafter adopted or acquired, all registrations
and recordings thereof, and all applications in connection therewith,
whether in the United States Patent and Trademark Office or in any similar
office or agency of the United States, any State thereof or any other
country or any political subdivision thereof, or otherwise, and all common
law rights related thereto, (iv) all trade secrets arising under the laws
of the United States, any other country or any political subdivision
thereof, (v) all rights to obtain any reissues, renewals or extensions of
the foregoing, (vi) all licenses for any of the foregoing, and (vii) all
causes of action for infringement of the foregoing.
(c) "Majority in Interest" shall mean, at any time of determination,
the majority in interest (based on then-outstanding principal amounts of
Debentures at the time of such determination) of the Secured Parties.
(d) "Necessary Endorsement" shall mean undated stock powers endorsed
in blank or other proper instruments of assignment duly executed and such
other instruments or documents as the Agent (as that term is defined below)
may reasonably request.
(e) "Obligations" means all of the Debtors' obligations under this
Agreement, the Debentures, the Guaranty and any other instruments,
agreements or other documents executed and/or delivered in connection
herewith or therewith, in each case, whether now or hereafter existing,
voluntary or involuntary, direct or indirect, absolute or contingent,
liquidated or unliquidated, whether or not jointly owed with others, and
whether or not from time to time decreased or extinguished and later
increased, created or incurred, and all or any portion of such obligations
or liabilities that are paid, to the extent all or any part of such payment
is avoided or recovered directly or indirectly from any of the Secured
Parties as a preference, fraudulent transfer or otherwise as such
obligations may be amended, supplemented, converted, extended or modified
from time to time. Without limiting the generality of the foregoing, the
term "Obligations" shall include, without limitation: (i) principal of, and
interest on the Debentures and the loans extended pursuant thereto; (ii)
any and all other fees, indemnities, costs, obligations and liabilities of
the Debtors from time to time under or in connection with this Agreement,
the Debentures, the Guaranty and any other instruments, agreements or other
documents executed and/or delivered in connection herewith or therewith;
and (iii) all amounts (including but not limited to post-petition interest)
in respect of the foregoing that would be payable but for the fact that the
obligations to pay such amounts are unenforceable or not allowable due to
the existence of a bankruptcy, reorganization or similar proceeding
involving any Debtor.
(f) "Organizational Documents" means with respect to any Debtor, the
documents by which such Debtor was organized (such as a certificate of
incorporation, certificate of limited partnership or articles of
organization, and including, without limitation, any certificates of
designation for preferred stock or other forms of preferred equity) and
which relate to the internal governance of such Debtor (such as bylaws, a
partnership agreement or an operating, limited liability or members
agreement).
(g) "UCC" means the Uniform Commercial Code of the State of New York
and or any other applicable law of any state or states which has
jurisdiction with respect to all, or any portion of, the Collateral or this
Agreement, from time to time. It is the intent of the parties that defined
terms in the UCC should be construed in their broadest sense so that the
term "Collateral" will be construed in its broadest sense. Accordingly if
there are, from time to time, changes to defined terms in the UCC that
broaden the definitions, they are incorporated herein and if existing
definitions in the UCC are broader than the amended definitions, the
existing ones shall be controlling.
2. Grant of Perfected First Priority Security Interest. As an inducement
for the Secured Parties to extend the loans as evidenced by the Debentures and
to secure the complete and timely payment, performance and discharge in full, as
the case may be, of all of the Obligations, each Debtor hereby unconditionally
and irrevocably pledges, grants and hypothecates to the Secured Parties a
continuing and perfected first priority security interest in and to, a lien upon
and a right of set-off against all of their respective right, title and interest
of whatsoever kind and nature in and to, the Collateral (the "Security
Interest").
3. Delivery of Certain Collateral. Contemporaneously or prior to the
execution of this Agreement, each Debtor shall deliver or cause to be delivered
to the Agent (a) any and all certificates and other instruments representing or
evidencing the Pledged Securities, and (b) any and all certificates and other
instruments or documents representing any of the other Collateral, in each case,
together with all Necessary Endorsements. The Debtors are, contemporaneously
with the execution hereof, delivering to Agent, or have previously delivered to
Agent, a true and correct copy of each Organizational Document governing any of
the Pledged Securities.
4. Representations, Warranties, Covenants and Agreements of the Debtors.
Each Debtor represents and warrants to, and covenants and agrees with, the
Secured Parties as follows:
(a) Each Debtor has the requisite corporate, partnership, limited
liability company or other power and authority to enter into this Agreement
and otherwise to carry out its obligations hereunder. The execution,
delivery and performance by each Debtor of this Agreement and the filings
contemplated therein have been duly authorized by all necessary action on
the part of such Debtor and no further action is required by such Debtor.
This Agreement has been duly executed by each Debtor. This Agreement
constitutes the legal, valid and binding obligation of each Debtor,
enforceable against each Debtor in accordance with its terms except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization and similar laws of general application relating to or
affecting the rights and remedies of creditors and by general principles of
equity.
(b) The Debtors have no place of business or offices where their
respective books of account and records are kept (other than temporarily at
the offices of its attorneys or accountants) or places where Collateral is
stored or located, except as set forth on Schedule A attached hereto.
Except as specifically set forth on Schedule A, each Debtor is the record
owner of the real property where such Collateral is located, and there
exist no mortgages or other liens on any such real property except for
Permitted Liens (as defined in the Debenture). Except as disclosed on
Schedule A, none of such Collateral is in the possession of any consignee,
bailee, warehouseman, agent or processor.
(c) Except for Permitted Liens and as set forth on Schedule B
attached hereto, the Debtors are the sole owner of, or have the right to
use, the Collateral (except for non-exclusive licenses granted by any
Debtor in the ordinary course of business), free and clear of any liens,
security interests, encumbrances, rights or claims, and are fully
authorized to grant the Security Interest. Except for the financing
statements filed with the New Jersey Secretary of State and security
interests granted by the Company in favor of ▇▇▇▇▇▇ United Bank in
connection with a term loan to the Company, which loan will be repaid from
the proceeds from the sale of the Securities and which financing statement
and security interest will be terminated contemporaneous with the Closing,
due evidence of which shall be provided to the Secured Parties, there is
not on file in any governmental or regulatory authority, agency or
recording office an effective financing statement, security agreement,
license or transfer or any notice of any of the foregoing (other than those
that will be filed in favor of the Secured Parties pursuant to this
Agreement) covering or affecting any of the Collateral. So long as this
Agreement shall be in effect, the Debtors shall not execute and shall not
knowingly permit to be on file in any such office or agency any such
financing statement or other document or instrument (except to the extent
filed or recorded in favor of the Secured Parties pursuant to the terms of
this Agreement).
(d) No written claim has been received that any Collateral or
Debtor's use of any Collateral violates the rights of any third party.
There has been no adverse decision to any Debtor's claim of ownership
rights in or exclusive rights to use the Collateral in any jurisdiction or
to any Debtor's right to keep and maintain such Collateral in full force
and effect, and there is no proceeding involving said rights pending or, to
the best knowledge of any Debtor, threatened before any court, judicial
body, administrative or regulatory agency, arbitrator or other governmental
authority.
(e) Each Debtor shall at all times maintain its books of account and
records relating to the Collateral at its principal place of business and
its Collateral at the locations set forth on Schedule A attached hereto and
may not relocate such books of account and records or tangible Collateral
unless it delivers to the Secured Parties at least 30 days prior to such
relocation (i) written notice of such relocation and the new location
thereof and (ii) evidence that appropriate financing statements under the
UCC and other necessary documents have been filed and recorded and other
steps have been taken to perfect the Security Interest to create in favor
of the Secured Parties a valid, perfected and continuing perfected first
priority lien in the Collateral.
(f) This Agreement creates in favor of the Secured Parties a valid,
first priority security interest in the Collateral, securing the payment
and performance of the Obligations. Upon making the filings described in
the immediately following paragraph, all security interests created
hereunder in any Collateral which may be perfected by filing Uniform
Commercial Code financing statements shall have been duly perfected. Except
for the filing of the Uniform Commercial Code financing statements referred
to in the immediately following paragraph, the recordation of the
Intellectual Property Security Agreement (as defined below) with respect to
copyrights and copyright applications in the United States Copyright Office
referred to in paragraph (m), when requested by any Secured Party, the
execution and delivery of deposit account control agreements satisfying the
requirements of Section 9-104(a)(2) of the UCC with respect to each deposit
account of the Debtors, and the delivery of the certificates and other
instruments provided in Section 3, no action is necessary to create,
perfect or protect the security interests created hereunder. Without
limiting the generality of the foregoing, except for the filing of said
financing statements, the recordation of said Intellectual Property
Security Agreement, and the execution and delivery of said deposit account
control agreements when requested by any Secured Party, no consent of any
third parties and no authorization, approval or other action by, and no
notice to or filing with, any governmental authority or regulatory body is
required for (i) the execution, delivery and performance of this Agreement,
(ii) the creation or perfection of the Security Interests created hereunder
in the Collateral or (iii) the enforcement of the rights of the Secured
Parties hereunder.
(g) Each Debtor hereby authorizes the Secured Parties, or any of
them, to file one or more financing statements under the UCC, with respect
to the Security Interest with the proper filing and recording agencies in
any jurisdiction deemed proper by them.
(h) The execution, delivery and performance of this Agreement by the
Debtors does not (i) violate any of the provisions of any Organizational
Documents of any Debtor or any judgment, decree, order or award of any
court, governmental body or arbitrator or any applicable law, rule or
regulation applicable to any Debtor or (ii) conflict with, or constitute a
default (or an event that with notice or lapse of time or both would become
a default) under, or give to others any rights of termination, amendment,
acceleration or cancellation (with or without notice, lapse of time or
both) of, any agreement, credit facility, debt or other instrument
(evidencing any Debtor's debt or otherwise) or other understanding to which
any Debtor is a party or by which any property or asset of any Debtor is
bound or affected. No consent (including, without limitation, from
stockholders or creditors of any Debtor) is required for any Debtor to
enter into and perform its obligations hereunder.
(i) The capital stock and other equity interests listed on Schedule H
hereto represent all of the capital stock and other equity interests of the
Guarantors, and represent all capital stock and other equity interests
owned, directly or indirectly, by the Company. All of the Pledged
Securities are validly issued, fully paid and nonassessable, and the
Company is the legal and beneficial owner of the Pledged Securities, free
and clear of any lien, security interest or other encumbrance except for
the security interests created by this Agreement.
(j) The ownership and other equity interests in partnerships and
limited liability companies (if any) included in the Collateral (the
"Pledged Interests") by their express terms do not provide that they are
securities governed by Article 8 of the UCC and are not held in a
securities account or by any financial intermediary.
(k) Each Debtor shall at all times maintain the liens and Security
Interest provided for hereunder as valid and perfected first priority liens
and security interests in the Collateral in favor of the Secured Parties
until this Agreement and the Security Interest hereunder shall be
terminated pursuant to Section 11 hereof. Each Debtor hereby agrees to
defend the same against the claims of any and all persons and entities.
Each Debtor shall safeguard and protect all Collateral for the account of
the Secured Parties. At the request of the Secured Parties, each Debtor
will sign and deliver to the Secured Parties at any time or from time to
time one or more financing statements pursuant to the UCC in form
reasonably satisfactory to the Secured Parties and will pay the cost of
filing the same in all public offices wherever filing is, or is deemed by
the Secured Parties to be, necessary or desirable to effect the rights and
obligations provided for herein. Without limiting the generality of the
foregoing, each Debtor shall pay all fees, taxes and other amounts
necessary to maintain the Collateral and the Security Interest hereunder,
and each Debtor shall obtain and furnish to the Secured Parties from time
to time, upon demand, such releases and/or subordinations of claims and
liens which may be required to maintain the priority of the Security
Interest hereunder.
(l) No Debtor will transfer, pledge, hypothecate, encumber, license,
sell or otherwise dispose of any of the Collateral (except for (i)
non-exclusive licenses granted by a Debtor in its ordinary course of
business, (ii) sales of inventory by a Debtor in its ordinary course of
business, (iii) sales, transfers or dispositions of surplus, worn-out or
obsolete equipment, (iv) leases or subleases granted in the ordinary course
of business, (v) non-exclusive licenses of intellectual property or
know-how granted in the ordinary course of business, (vi) other sales,
transfers, conveyances or dispositions of property with an aggregate book
value not to exceed $50,000 in any year, (vii) the granting of Permitted
Liens, (viii) payments and transfers consistent with a Debtor's practices
in the ordinary course of business not otherwise prohibited by this
Agreement to the extent such payments and transfers do not create or with
the passage of time would create an Event of Default; (ix) the surrender or
waiver of litigation rights or settlement, release or surrender of tort or
other litigation claims of any kind except for any claim or claims asserted
by Borrower having a book value individually or in the aggregate of
$250,000 in any fiscal year and (x) loans, advances or contributions to
subsidiaries of a Debtor to fund the operations of such subsidiaries)
without the prior written consent of a Majority in Interest.
(m) Each Debtor shall keep and preserve its equipment, inventory and
other tangible Collateral in good condition, repair and order (ordinary
wear and tear excepted) and shall not operate or locate any such Collateral
(or cause to be operated or located) in any area excluded from insurance
coverage.
(n) Each Debtor shall maintain with financially sound and reputable
insurers, insurance with respect to the Collateral against loss or damage
of the kinds and in the amounts customarily insured against by entities of
established reputation having similar properties similarly situated and in
such amounts as are customarily carried under similar circumstances by
other such entities and otherwise as is prudent for entities engaged in
similar businesses but in any event sufficient to cover the full
replacement cost thereof. Each Debtor shall cause each insurance policy
issued in connection herewith to provide, and the insurer issuing such
policy to certify to the Agent that (a) the Agent will be named as lender
loss payee and additional insured under each such insurance policy; (b) if
such insurance be proposed to be cancelled or materially changed for any
reason whatsoever, such insurer will promptly notify the Agent and such
cancellation or change shall not be effective as to the Agent for at least
thirty (30) days after receipt by the Agent of such notice, unless the
effect of such change is to extend or increase coverage under the policy;
and (c) the Agent will have the right (but no obligation) at its election
to remedy any default in the payment of premiums within thirty (30) days of
notice from the insurer of such default. If no Event of Default (as defined
in the Debenture) exists, loss payments in each instance will be applied by
the applicable Debtor to the repair and/or replacement of property with
respect to which the loss was incurred to the extent reasonably feasible,
and any loss payments or the balance thereof remaining, to the extent not
so applied, shall be payable to the applicable Debtor; provided, however,
that payments received by any Debtor after an Event of Default occurs and
is continuing shall be paid to the Agent and, if received by such Debtor,
shall be held in trust for and immediately paid over to the Agent unless
otherwise directed in writing by the Agent. Copies of such policies or the
related certificates, in each case, naming the Agent as lender loss payee
and additional insured shall be delivered to the Agent at least annually
and at the time any new policy of insurance is issued.
(o) Each Debtor shall, within fifteen (15) days of obtaining
knowledge thereof, advise the Secured Parties promptly, in sufficient
detail, of any substantial change in the Collateral, and of the occurrence
of any event which would have a material adverse effect on the value of the
Collateral or on the Secured Parties' security interest therein.
(p) Each Debtor shall promptly execute and deliver to the Secured
Parties such further deeds, mortgages, assignments, security agreements,
financing statements or other instruments, documents, certificates and
assurances and take such further action as the Secured Parties may from
time to time reasonably request and may in its reasonable discretion deem
necessary to perfect, protect or enforce its security interest in the
Collateral including, without limitation, if applicable, the execution and
delivery of a separate security agreement with respect to each Debtor's
Intellectual Property ("Intellectual Property Security Agreement") in which
the Secured Parties have been granted a security interest hereunder,
substantially in a form acceptable to the Secured Parties, which
Intellectual Property Security Agreement, other than as stated therein,
shall be subject to all of the terms and conditions hereof.
(q) Each Debtor shall permit the Secured Parties and their
representatives and agents to inspect the Collateral at reasonable times
during business hours from time to time, and to make copies of records
pertaining to the Collateral (provided, however, copies of any such
Collateral that constitutes Classified Information may only be copied after
the classified portion of such information has been redacted) as may be
requested by a Secured Party from time to time.
(r) Each Debtor shall take all steps reasonably necessary to
diligently pursue and seek to preserve, enforce and collect any material
rights, claims, causes of action and accounts receivable in respect of the
Collateral.
(s) Each Debtor shall promptly notify the Secured Parties in
sufficient detail upon becoming aware of any attachment, garnishment,
execution or other legal process levied against any material portion of the
Collateral and of any other information received by such Debtor that may
materially affect the value of the Collateral, the Security Interest or the
rights and remedies of the Secured Parties hereunder.
(t) All information heretofore, herein or hereafter supplied to the
Secured Parties by or on behalf of any Debtor with respect to the
Collateral is or will be accurate and complete in all material respects as
of the date furnished.
(u) The Debtors shall at all times preserve and keep in full force
and effect their respective valid existence and good standing and any
rights and franchises material to its business.
(v) No Debtor will change its name, type of organization,
jurisdiction of organization, organizational identification number (if it
has one), legal or corporate structure, or identity, or add any new
fictitious name unless it provides at least 15 days prior written notice to
the Secured Parties of such change and, at the time of such written
notification, such Debtor provides any financing statements or fixture
filings necessary to perfect and continue perfected the perfected security
Interest granted and evidenced by this Agreement.
(w) No Debtor may consign any of its Inventory or sell any of its
Inventory on ▇▇▇▇ and hold, sale or return, sale on approval, or other
conditional terms of sale without the consent of a Majority in Interest
which shall not be unreasonably withheld, except for demo and test
equipment or to the extent such consignment or sale does not exceed 25% of
the total value of all of the Company's finished goods in Inventory.
(x) No Debtor may relocate its chief executive office to a new
location without providing 30 days prior written notification thereof to
the Secured Parties and so long as, at the time of such written
notification, such Debtor provides any financing statements or fixture
filings necessary to perfect and continue perfected the perfected Security
Interest granted and evidenced by this Agreement.
(y) Each Debtor was organized and remains organized solely under the
laws of the state set forth next to such Debtor's name in the first
paragraph of this Agreement. Schedule D attached hereto sets forth each
Debtor's organizational identification number or, if any Debtor does not
have one, states that one does not exist.
(z) (i) The actual name of each Debtor is the name set forth in
Schedule D; (ii) no Debtor has any trade names except as set forth on
Schedule E attached hereto; (iii) no Debtor has used any name other than
that stated in the preamble hereto or as set forth on Schedule E for the
preceding five years; and (iv) no entity has merged into any Debtor or been
acquired by any Debtor within the past five years except as set forth on
Schedule E.
(aa) At any time and from time to time that any Collateral consists of
instruments, certificated securities or other items that require or permit
possession by the secured party to perfect the security interest created
hereby, the applicable Debtor shall deliver such Collateral to the Agent.
(bb) Each Debtor, in its capacity as issuer, hereby agrees to comply
with any and all orders and instructions of Agent regarding the Pledged
Interests consistent with the terms of this Agreement without the further
consent of any Debtor as contemplated by Section 8-106 (or any successor
section) of the UCC. Further, each Debtor agrees that it shall not enter
into a similar agreement (or one that would confer "control" within the
meaning of Article 8 of the UCC) with any other person or entity.
(cc) Each Debtor shall cause all tangible chattel paper constituting
Collateral to be delivered to the Agent, or, if such delivery is not
possible, then to cause such tangible chattel paper to contain a legend
noting that it is subject to the security interest created by this
Agreement. To the extent that any Collateral consists of electronic chattel
paper, the applicable Debtor shall cause the underlying chattel paper to be
"marked" within the meaning of Section 9-105 of the UCC (or successor
section thereto).
(dd) If there is any investment property or deposit account included
as Collateral that can be perfected by "control" through an account control
agreement, the applicable Debtor shall cause such an account control
agreement, in form and substance in each case satisfactory to the Secured
Parties, to be entered into and delivered to the Secured Parties.
(ee) To the extent that any Collateral consists of letter-of-credit
rights, the applicable Debtor shall cause the issuer of each underlying
letter of credit to consent to an assignment of the proceeds thereof to the
Secured Parties upon any Event of Default.
(ff) To the extent that any material Collateral is in the possession
of any third party, the applicable Debtor shall join with the Secured
Parties in notifying such third party of the Secured Parties' security
interest in such Collateral and shall use its commercially reasonable
efforts to obtain an acknowledgement and agreement from such third party
with respect to the Collateral, in form and substance satisfactory to the
Secured Parties.
(gg) If any Debtor shall at any time hold or acquire a commercial tort
claim, such Debtor shall promptly notify the Secured Parties in a writing
signed by such Debtor of the particulars thereof and grant to the Secured
Parties in such writing a security interest therein and in the proceeds
thereof, all upon the terms of this Agreement, with such writing to be in
form and substance satisfactory to the Secured Parties.
(hh) Each Debtor shall immediately provide written notice to the
Secured Parties of any and all accounts which arise out of contracts with
any governmental authority and, to the extent necessary to perfect or
continue the perfected status of the Security Interest in such accounts and
proceeds thereof, shall execute and deliver to the Secured Parties an
assignment of claims for such accounts, to the extent permitted under such
contracts with such governmental authority and cooperate with the Secured
Parties in taking any other steps required, in their reasonable judgment,
under the Federal Assignment of Claims Act or any similar federal, state or
local statute or rule to perfect or continue the perfected status of the
Security Interest in such accounts and proceeds thereof.
(ii) Each Debtor shall cause each Subsidiary to promptly become a
party hereto (an "Additional Debtor"), by executing and delivering an
Additional Debtor Joinder in substantially the form of Annex A attached
hereto and comply with the provisions hereof applicable to the Debtors.
Concurrent therewith, the Additional Debtor shall deliver replacement
schedules for, or supplements to all other Schedules to (or referred to in)
this Agreement, as applicable, which replacement schedules shall supersede,
or supplements shall modify, the Schedules then in effect. The Additional
Debtor shall also deliver such opinions of counsel, authorizing
resolutions, good standing certificates, incumbency certificates,
organizational documents, financing statements and other information and
documentation as the Secured Parties may reasonably request. Upon delivery
of the foregoing to the Secured Parties, the Additional Debtor shall be and
become a party to this Agreement with the same rights and obligations as
the Debtors, for all purposes hereof as fully and to the same extent as if
it were an original signatory hereto and shall be deemed to have made the
representations, warranties and covenants set forth herein as of the date
of execution and delivery of such Additional Debtor Joinder, and all
references herein to the "Debtors" shall be deemed to include each
Additional Debtor.
(jj) Each Debtor shall vote the Pledged Securities to comply with the
covenants and agreements set forth herein and in the Debentures.
(kk) Each Debtor shall register the pledge of the applicable Pledged
Securities on the books of such Debtor. Each Debtor shall notify each
issuer of Pledged Securities to register the pledge of the applicable
Pledged Securities in the name of the Secured Parties on the books of such
issuer. Further, except with respect to certificated securities delivered
to the Agent, the applicable Debtor shall deliver to Agent an
acknowledgement of pledge (which, where appropriate, shall comply with the
requirements of the relevant UCC with respect to perfection by
registration) signed by the issuer of the applicable Pledged Securities,
which acknowledgement shall confirm that: (a) it has registered the pledge
on its books and records; and (b) at any time directed by Agent during the
continuation of an Event of Default, such issuer will transfer the record
ownership of such Pledged Securities into the name of any designee of
Agent, will take such steps as may be necessary to effect the transfer, and
will comply with all other instructions of Agent regarding such Pledged
Securities without the further consent of the applicable Debtor.
(ll) In the event that, upon an occurrence of an Event of Default,
Agent shall sell all or any of the Pledged Securities to another party or
parties (herein called the "Transferee") or shall purchase or retain all or
any of the Pledged Securities, each Debtor shall, to the extent applicable:
(i) deliver to Agent or the Transferee, as the case may be, the articles of
incorporation, bylaws, minute books, stock certificate books, corporate
seals, deeds, leases, indentures, agreements, evidences of indebtedness,
books of account, financial records and all other Organizational Documents
and records of the Debtors and their direct and indirect subsidiaries; (ii)
use its best efforts to obtain resignations of the persons then serving as
officers and directors of the Debtors and their direct and indirect
subsidiaries, if so requested; and (iii) use its best efforts to obtain any
approvals that are required by any governmental or regulatory body in order
to permit the sale of the Pledged Securities to the Transferee or the
purchase or retention of the Pledged Securities by Agent and allow the
Transferee or Agent to continue the business of the Debtors and their
direct and indirect subsidiaries.
(mm) Without limiting the generality of the other obligations of the
Debtors hereunder, each Debtor shall promptly (i) cause to be registered at
the United States Copyright Office all of its material copyrights, (ii)
cause the security interest contemplated hereby with respect to all
Intellectual Property registered at the United States Copyright Office or
United States Patent and Trademark Office to be duly recorded at the
applicable office, and (iii) give the Agent notice whenever it acquires
(whether absolutely or by license) or creates any additional material
Intellectual Property.
(nn) Each Debtor will from time to time, at the joint and several
expense of the Debtors, promptly execute and deliver all such further
instruments and documents, and take all such further action as may be
necessary or desirable, or as the Secured Parties may reasonably request,
in order to perfect and protect any security interest granted or purported
to be granted hereby or to enable the Secured Parties to exercise and
enforce their rights and remedies hereunder and with respect to any
Collateral or to otherwise carry out the purposes of this Agreement.
(oo) Schedule F attached hereto lists all of the patents, patent
applications, trademarks, trademark applications, registered copyrights,
and domain names owned by any of the Debtors as of the date hereof.
Schedule F lists all material licenses in favor of any Debtor for the use
of any patents, trademarks, copyrights and domain names as of the date
hereof. All material patents and trademarks of the Debtors have been duly
recorded at the United States Patent and Trademark Office and all material
copyrights of the Debtors have been recorded at the United States Copyright
Office.
(pp) Except as set forth on Schedule G attached hereto, none of the
account debtors or other persons or entities obligated on any of the
Collateral is a governmental authority covered by the Federal Assignment of
Claims Act or any similar federal, state or local statute or rule in
respect of such Collateral.
5. Effect of Pledge on Certain Rights. If any of the Collateral subject
to this Agreement consists of nonvoting equity or ownership interests
(regardless of class, designation, preference or rights) that may be converted
into voting equity or ownership interests upon the occurrence of certain events
(including, without limitation, upon the transfer of all or any of the other
stock or assets of the issuer), it is agreed that the pledge of such equity or
ownership interests pursuant to this Agreement or the enforcement of any of
Agent's rights hereunder shall not be deemed to be the type of event which would
trigger such conversion rights notwithstanding any provisions in the
Organizational Documents or agreements to which any Debtor is subject or to
which any Debtor is party.
6. Defaults. The following events shall be "Events of Default":
(a) The occurrence of an Event of Default (as defined in the
Debenture) under the Debenture;
(b) Any material representation or warranty of any Debtor in this
Agreement shall prove to have been incorrect in any material respect when
made;
(c) The failure by any Debtor to observe or perform any of its
obligations hereunder for ten (10) days after delivery to such Debtor of
written notice of such failure by or on behalf of a Secured Party unless
such default is capable of cure but cannot be cured within such time frame
and such Debtor is using best efforts to cure same in a timely fashion, in
which case, such event shall not be an Event of Default; or
(d) If any provision of this Agreement shall at any time for any
reason be declared to be null and void, or the validity or enforceability
thereof shall be contested by any Debtor, or a proceeding shall be
commenced by any Debtor, or by any governmental authority having
jurisdiction over any Debtor, seeking to establish the invalidity or
unenforceability thereof, or any Debtor shall deny that any Debtor has any
liability or obligation purported to be created under this Agreement.
7. Duty To Hold In Trust.
(a) Upon the occurrence of any Event of Default and at any time
thereafter, each Debtor shall, upon receipt of any revenue, income,
dividend, interest or other sums subject to the Security Interest, whether
payable pursuant to the Debenture or otherwise, or of any check, draft,
note, trade acceptance or other instrument evidencing an obligation to pay
any such sum, hold the same in trust for the Secured Parties and shall
forthwith endorse and transfer any such sums or instruments, or both, to
the Secured Parties, pro-rata in proportion to their initial purchases of
Debentures for application to the satisfaction of the Obligations (and if
any Debenture is not outstanding, pro-rata in proportion to the initial
purchases of the remaining Debentures).
(b) If any Debtor shall become entitled to receive or shall receive
any securities or other property (including, without limitation, shares of
Pledged Securities or instruments representing Pledged Securities acquired
after the date hereof, or any options, warrants, rights or other similar
property or certificates representing a dividend, or any distribution in
connection with any recapitalization, reclassification or increase or
reduction of capital, or issued in connection with any reorganization of
such Debtor or any of its direct or indirect subsidiaries) in respect of
the Pledged Securities (whether as an addition to, in substitution of, or
in exchange for, such Pledged Securities or otherwise), such Debtor agrees
to (i) accept the same as the agent of the Secured Parties; (ii) hold the
same in trust on behalf of and for the benefit of the Secured Parties; and
(iii) to deliver any and all certificates or instruments evidencing the
same to Agent on or before the close of business on the fifth business day
following the receipt thereof by such Debtor, in the exact form received
together with the Necessary Endorsements, to be held by Agent subject to
the terms of this Agreement as Collateral.
8. Rights and Remedies Upon Default.
(a) Upon the occurrence of any Event of Default and at any time
thereafter, the Secured Parties, acting through any agent appointed by them
for such purpose, shall have the right to exercise all of the remedies
conferred hereunder and under the Debentures, and the Secured Parties shall
have all the rights and remedies of a secured party under the UCC. Without
limitation, the Secured Parties shall have the following rights and powers:
(i) The Secured Parties shall have the right to take possession
of the Collateral and, for that purpose, enter, with the aid and
assistance of any person, any premises where the Collateral, or any
part thereof, is or may be placed and remove the same, and each Debtor
shall assemble the Collateral and make it available to the Secured
Parties at places which the Secured Parties shall reasonably select,
whether at such Debtor's premises or elsewhere, and make available to
the Secured Parties, without rent, all of such Debtor's respective
premises and facilities for the purpose of the Secured Parties taking
possession of, removing or putting the Collateral in saleable or
disposable form.
(ii) Upon notice to the Debtors by Agent, all rights of each
Debtor to exercise the voting and other consensual rights which it
would otherwise be entitled to exercise and all rights of each Debtor
to receive the dividends and interest which it would otherwise be
authorized to receive and retain, shall cease. Upon such notice, Agent
shall have the right to receive any interest, cash dividends or other
payments on the Collateral and, at the option of Agent, to exercise in
such Agent's discretion all voting rights pertaining thereto. Without
limiting the generality of the foregoing, Agent shall have the right
(but not the obligation) to exercise all rights with respect to the
Collateral as it were the sole and absolute owners thereof, including,
without limitation, to vote and/or to exchange, at its sole
discretion, any or all of the Collateral in connection with a merger,
reorganization, consolidation, recapitalization or other readjustment
concerning or involving the Collateral or any Debtor or any of its
direct or indirect subsidiaries.
(iii) The Secured Parties shall have the right to operate the
business of each Debtor using the Collateral and shall have the right
to assign, sell, lease or otherwise dispose of and deliver all or any
part of the Collateral, at public or private sale or otherwise, either
with or without special conditions or stipulations, for cash or on
credit or for future delivery, in such parcel or parcels and at such
time or times and at such place or places, and upon such terms and
conditions as the Secured Parties may deem commercially reasonable,
all without (except as shall be required by applicable statute which
cannot be waived) advertisement or demand upon or notice to any Debtor
or right of redemption of a Debtor, which are hereby expressly waived.
Upon each such sale, lease, assignment or other transfer of
Collateral, the Secured Parties may, unless prohibited by applicable
law which cannot be waived, purchase all or any part of the Collateral
being sold, free from and discharged of all trusts, claims, right of
redemption and equities of any Debtor, which are hereby waived and
released.
(iv) The Secured Parties shall have the right (but not the
obligation) to notify any account debtors and any obligors under
instruments or accounts to make payments directly to the Secured
Parties and to enforce the Debtors' rights against such account
debtors and obligors.
(v) The Secured Parties may (but are not obligated to) direct
any financial intermediary or any other person or entity holding any
investment property to transfer the same to the Secured Parties or
their designee.
(vi) The Secured Parties may (but are not obligated to) transfer
any or all Intellectual Property registered in the name of any Debtor
at the United States Patent and Trademark Office and/or Copyright
Office into the name of the Secured Parties or any designee or any
purchaser of any Collateral.
(b) The Secured Parties shall comply with any applicable law in
connection with a disposition of Collateral and such compliance will
not be considered adversely to affect the commercial reasonableness of
any sale of the Collateral. The Agent may sell the Collateral without
giving any warranties and may specifically disclaim such warranties.
If the Agent sells any of the Collateral on credit, the Debtors will
only be credited with payments actually made by the purchaser. In
addition, each Debtor waives any and all rights that it may have to a
judicial hearing in advance of the enforcement of any of the Agent's
rights and remedies hereunder, including, without limitation, its
right following an Event of Default to take immediate possession of
the Collateral and to exercise its rights and remedies with respect
thereto, except as otherwise required by law.
(c) For the purpose of enabling the Agent to further exercise
rights and remedies under this Section 8 or elsewhere provided by
agreement or applicable law, each Debtor hereby grants to the Agent,
for the benefit of the Agent and the Secured Parties, to the extent it
is in such Debtor's power, an irrevocable, nonexclusive license
(exercisable without payment of royalty or other compensation to such
Debtor) to use, license or sublicense following an Event of Default,
any Intellectual Property now owned or hereafter acquired by such
Debtor, and wherever the same may be located, and including in such
license access to all media in which any of the licensed items may be
recorded or stored and to all computer software and programs used for
the compilation or printout thereof.
(d) The rights of the Secured Parties or their agent enumerated
in this section shall be subject to the Debtor's obligation to
maintain the confidentiality of any Classified Information.
9. Applications of Proceeds. The proceeds of any such sale, lease or
other disposition of the Collateral hereunder shall be applied first, to the
actual expenses of retaking, holding, storing, processing and preparing for
sale, selling, and the like (including, without limitation, any taxes, fees and
other costs incurred in connection therewith) of the Collateral, to the
reasonable attorneys' fees and expenses incurred by the Secured Parties in
enforcing their rights hereunder and in connection with collecting, storing and
disposing of the Collateral, and then to satisfaction of the Obligations pro
rata among the Secured Parties (based on then-outstanding principal amounts of
Debentures at the time of any such determination), and to the payment of any
other amounts required by applicable law, after which the Secured Parties shall
pay to the applicable Debtor any surplus proceeds. If, upon the sale, license or
other disposition of the Collateral, the proceeds thereof are insufficient to
pay all amounts to which the Secured Parties are legally entitled, the Debtors
will be liable for the deficiency, together with interest thereon, at the rate
of 10% per annum or the lesser amount permitted by applicable law (the "Default
Rate"), and the reasonable fees of one counsel employed by the Secured Parties
to collect such deficiency. To the extent permitted by applicable law, each
Debtor waives all claims, damages and demands against the Secured Parties
arising out of the repossession, removal, retention or sale of the Collateral,
unless due solely to the gross negligence or willful misconduct of the Secured
Parties as determined by a final judgment (not subject to further appeal) of a
court of competent jurisdiction.
10. Securities Law Provision. Each Debtor recognizes that Agent may be
limited in its ability to effect a sale to the public of all or part of the
Pledged Securities by reason of certain prohibitions in the Securities Act of
1933, as amended, or other federal or state securities laws (collectively, the
"Securities Laws"), and may be compelled to resort to one or more sales to a
restricted group of purchasers who may be required to agree to acquire the
Pledged Securities for their own account, for investment and not with a view to
the distribution or resale thereof. Each Debtor agrees that sales so made may be
at prices and on terms less favorable than if the Pledged Securities were sold
to the public, and that Agent has no obligation to delay the sale of any Pledged
Securities for the period of time necessary to register the Pledged Securities
for sale to the public under the Securities Laws. Each Debtor shall cooperate
with Agent in its attempt to satisfy any requirements under the Securities Laws
(including, without limitation, registration thereunder if requested by Agent)
applicable to the sale of the Pledged Securities by Agent.
11. Costs and Expenses. Each Debtor agrees to pay all reasonable
out-of-pocket fees, costs and expenses incurred in connection with any filing
required hereunder, upon presentation of documentary evidence thereof, including
without limitation, any financing statements pursuant to the UCC, continuation
statements, partial releases and/or termination statements related thereto or
any expenses of any searches reasonably required by the Secured Parties. The
Debtors shall also pay all other claims and charges which in the reasonable
opinion of the Secured Parties might prejudice, imperil or otherwise affect the
Collateral or the Security Interest therein. The Debtors will also, upon demand,
pay to the Secured Parties the amount of any and all reasonable expenses,
including the reasonable fees and expenses of one counsel and of any experts and
agents, which the Secured Parties may incur in connection with (i) the
enforcement of this Agreement, (ii) the custody or preservation of, or the sale
of, collection from, or other realization upon, any of the Collateral, or (iii)
the exercise or enforcement of any of the rights of the Secured Parties under
the Debentures. Any fees payable hereunder not paid within twenty (20) days of
written request by the Secured Parties shall be added to the principal amount of
the Debentures and shall bear interest at the Default Rate.
12. Responsibility for Collateral. The Debtors assume all liabilities and
responsibility in connection with all Collateral, and the Obligations shall in
no way be affected or diminished by reason of the loss, destruction, damage or
theft of any of the Collateral or its unavailability for any reason. Without
limiting the generality of the foregoing, (a) neither the Agent nor any Secured
Party (i) has any duty (either before or after an Event of Default) to collect
any amounts in respect of the Collateral or to preserve any rights relating to
the Collateral, or (ii) has any obligation to clean-up or otherwise prepare the
Collateral for sale, and (b) each Debtor shall remain obligated and liable under
each contract or agreement included in the Collateral to be observed or
performed by such Debtor thereunder. Neither the Agent nor any Secured Party
shall have any obligation or liability under any such contract or agreement by
reason of or arising out of this Agreement or the receipt by the Agent or any
Secured Party of any payment relating to any of the Collateral, nor shall the
Agent or any Secured Party be obligated in any manner to perform any of the
obligations of any Debtor under or pursuant to any such contract or agreement,
to make inquiry as to the nature or sufficiency of any payment received by the
Agent or any Secured Party in respect of the Collateral or as to the sufficiency
of any performance by any party under any such contract or agreement, to present
or file any claim, to take any action to enforce any performance or to collect
the payment of any amounts which may have been assigned to the Agent or to which
the Agent or any Secured Party may be entitled at any time or times.
13. Security Interest Absolute. Except as otherwise required by law, all
rights of the Secured Parties and all obligations of the Debtors hereunder,
shall be absolute and unconditional, irrespective of: (a) any lack of validity
or enforceability of this Agreement, the Debentures or any agreement entered
into in connection with the foregoing, or any portion hereof or thereof; (b) any
change in the time, manner or place of payment or performance of, or in any
other term of, all or any of the Obligations, or any other amendment or waiver
of or any consent to any departure from the Debentures or any other agreement
entered into in connection with the foregoing; (c) any exchange, release or
nonperfection of any of the Collateral, or any release or amendment or waiver of
or consent to departure from any other collateral for, or any guaranty, or any
other security, for all or any of the Obligations; (d) any action by the Secured
Parties to obtain, adjust, settle and cancel in its sole discretion any
insurance claims or matters made or arising in connection with the Collateral;
or (e) any other circumstance which might otherwise constitute any legal or
equitable defense available to a Debtor, or a discharge of all or any part of
the Security Interest granted hereby. Until the Obligations shall have been paid
and performed in full, the rights of the Secured Parties shall continue even if
the Obligations are barred for any reason, including, without limitation, the
running of the statute of limitations or bankruptcy. Each Debtor expressly
waives presentment, protest, notice of protest, demand, notice of nonpayment and
demand for performance. In the event that at any time any transfer of any
Collateral or any payment received by the Secured Parties hereunder shall be
deemed by final order of a court of competent jurisdiction to have been a
voidable preference or fraudulent conveyance under the bankruptcy or insolvency
laws of the United States, or shall be deemed to be otherwise due to any party
other than the Secured Parties, then, in any such event, each Debtor's
obligations hereunder shall survive cancellation of this Agreement, and shall
not be discharged or satisfied by any prior payment thereof and/or cancellation
of this Agreement, but shall remain a valid and binding obligation enforceable
in accordance with the terms and provisions hereof. Each Debtor waives all right
to require the Secured Parties to proceed against any other person or entity or
to apply any Collateral which the Secured Parties may hold at any time, or to
marshal assets, or to pursue any other remedy. Each Debtor waives any defense
arising by reason of the application of the statute of limitations to any
obligation secured hereby.
The Secured Parties shall promptly notify the Debtors of the sale of any
Collateral and the amount received therefor.
14. Term of Agreement. This Agreement and the Security Interest shall
terminate on the date on which all payments under the Debentures have been
indefeasibly paid in full and all other Obligations have been paid or
discharged; provided, however, that all indemnities of the Debtors contained in
this Agreement (including, without limitation, Annex B hereto) shall survive and
remain operative and in full force and effect regardless of the termination of
this Agreement.
15. Power of Attorney; Further Assurances.
(a) Each Debtor authorizes the Secured Parties, and does hereby make,
constitute and appoint the Secured Parties and their respective officers,
agents, successors or assigns with full power of substitution, as such Debtor's
true and lawful attorney-in-fact, with power, in the name of the various Secured
Parties or such Debtor, subject to he other terms hereof, to, after the
occurrence and during the continuance of an Event of Default, (i) endorse any
note, checks, drafts, money orders or other instruments of payment (including
payments payable under or in respect of any policy of insurance) in respect of
the Collateral that may come into possession of the Secured Parties; (ii) to
sign and endorse any financing statement pursuant to the UCC or any invoice,
freight or express ▇▇▇▇, ▇▇▇▇ of lading, storage or warehouse receipts, drafts
against debtors, assignments, verifications and notices in connection with
accounts, and other documents relating to the Collateral; (iii) to pay or
discharge taxes, liens, security interests or other encumbrances at any time
levied or placed on or threatened against the Collateral; (iv) to demand,
collect, receipt for, compromise, settle and ▇▇▇ for monies due in respect of
the Collateral; (v) to transfer any Intellectual Property or provide licenses
respecting any Intellectual Property; and (vi) generally, at the option of the
Secured Parties, and at the expense of the Debtors, at any time, or from time to
time, to execute and deliver any and all documents and instruments and to do all
acts and things which the Secured Parties deem necessary to protect, preserve
and realize upon the Collateral and the Security Interest granted therein in
order to effect the intent of this Agreement and the Debentures all as fully and
effectually as the Debtors might or could do; and each Debtor hereby ratifies
all that said attorney shall lawfully do or cause to be done by virtue hereof.
This power of attorney is coupled with an interest and shall be irrevocable for
the term of this Agreement and thereafter as long as any of the Obligations
shall be outstanding. The designation set forth herein shall be deemed to amend
and supersede any inconsistent provision in the Organizational Documents or
other documents or agreements to which any Debtor is subject or to which any
Debtor is a party. Without limiting the generality of the foregoing, after the
occurrence and during the continuance of an Event of Default, each Secured Party
is specifically authorized to execute and file any applications for or
instruments of transfer and assignment of any patents, trademarks, copyrights or
other Intellectual Property with the United States Patent and Trademark Office
and the United States Copyright Office.
(b) On a continuing basis, each Debtor will make, execute,
acknowledge, deliver, file and record, as the case may be, with the proper
filing and recording agencies in any jurisdiction, including, without
limitation, the jurisdictions indicated on Schedule C attached hereto, all
such instruments, and take all such action as may reasonably be deemed
necessary or advisable, or as reasonably requested by the Secured Parties,
to perfect the Security Interest granted hereunder and otherwise to carry
out the intent and purposes of this Agreement, or for assuring and
confirming to the Secured Parties the grant or perfection of a perfected
security interest in all the Collateral under the UCC.
(c) Each Debtor hereby irrevocably appoints the Secured Parties as
such Debtor's attorney-in-fact, with full authority in the place and
instead of such Debtor and in the name of such Debtor, from time to time in
the Secured Parties' discretion, to take any action and to execute any
instrument which the Secured Parties may deem necessary or advisable to
perfect the Security Interests granted pursuant to the terms of this
Agreement, including the filing, in its sole discretion, of one or more
financing or continuation statements and amendments thereto, relative to
any of the Collateral without the signature of such Debtor where permitted
by law, which financing statements may (but need not) describe the
Collateral as "all assets" or "all personal property" or words of like
import, and ratifies all such actions taken by the Secured Parties. This
power of attorney is coupled with an interest and shall be irrevocable for
the term of this Agreement and thereafter as long as any of the Obligations
shall be outstanding.
16. Notices. All notices, requests, demands and other communications
hereunder shall be subject to the notice provision of the Purchase Agreement (as
such term is defined in the Debentures).
17. Other Security. To the extent that the Obligations are now or
hereafter secured by property other than the Collateral or by the guarantee,
endorsement or property of any other person, firm, corporation or other entity,
then the Secured Parties shall have the right, in its sole discretion, to
pursue, relinquish, subordinate, modify or take any other action with respect
thereto, without in any way modifying or affecting any of the Secured Parties'
rights and remedies hereunder.
18. Appointment of Agent. The Secured Parties hereby appoint Bluegrass
Growth Fund Partners, LLC ("Bluegrass") to act as their agent ("Agent") for
purposes of exercising any and all rights and remedies of the Secured Parties
hereunder. Such appointment shall continue until revoked in writing by a
Majority in Interest, at which time a Majority in Interest shall appoint a new
Agent; provided, that the Bluegrass may not be removed as Agent unless Bluegrass
shall then hold less than $25,000 principal amount of Debentures.
19. Miscellaneous.
(a) No course of dealing between the Debtors and the Secured Parties,
nor any failure to exercise, nor any delay in exercising, on the part of
the Secured Parties, any right, power or privilege hereunder or under the
Debentures shall operate as a waiver thereof; nor shall any single or
partial exercise of any right, power or privilege hereunder or thereunder
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege.
(b) All of the rights and remedies of the Secured Parties with
respect to the Collateral, whether established hereby or by the Debentures
or by any other agreements, instruments or documents or by law shall be
cumulative and may be exercised singly or concurrently.
(c) This Agreement constitutes the entire agreement of the parties
with respect to the subject matter hereof and is intended to supersede all
prior negotiations, understandings and agreements with respect thereto.
Except as specifically set forth in this Agreement, no provision of this
Agreement may be modified or amended except by a written agreement
specifically referring to this Agreement and signed by the parties hereto.
(d) In the event any provision of this Agreement is held to be
invalid, prohibited or unenforceable in any jurisdiction for any reason,
unless such provision is narrowed by judicial construction, this Agreement
shall, as to such jurisdiction, be construed as if such invalid, prohibited
or unenforceable provision had been more narrowly drawn so as not to be
invalid, prohibited or unenforceable. If, notwithstanding the foregoing,
any provision of this Agreement is held to be invalid, prohibited or
unenforceable in any jurisdiction, such provision, as to such jurisdiction,
shall be ineffective to the extent of such invalidity, prohibition or
unenforceability without invalidating the remaining portion of such
provision or the other provisions of this Agreement and without affecting
the validity or enforceability of such provision or the other provisions of
this Agreement in any other jurisdiction.
(e) No waiver of any breach or default or any right under this
Agreement shall be considered valid unless in writing and signed by the
party giving such waiver, and no such waiver shall be deemed a waiver of
any subsequent breach or default or right, whether of the same or similar
nature or otherwise.
(f) This Agreement shall be binding upon and inure to the benefit of
each party hereto and its successors and assigns.
(g) Each party shall take such further action and execute and deliver
such further documents as may be necessary or appropriate in order to carry
out the provisions and purposes of this Agreement.
(h) All questions concerning the construction, validity, enforcement
and interpretation of this Agreement shall be governed by and construed and
enforced in accordance with the internal laws of the State of New York,
without regard to the principles of conflicts of law thereof. Each Debtor
agrees that all proceedings concerning the interpretations, enforcement and
defense of the transactions contemplated by this Agreement and the
Debentures (whether brought against a party hereto or its respective
affiliates, directors, officers, shareholders, partners, members, employees
or agents) shall be commenced exclusively in the state and federal courts
sitting in the City of New York, Borough of Manhattan. Each Debtor hereby
irrevocably submits to the exclusive jurisdiction of the state and federal
courts sitting in the City of New York, Borough of Manhattan for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any proceeding, any claim that it is
not personally subject to the jurisdiction of any such court, that such
proceeding is improper. Each party hereto hereby irrevocably waives
personal service of process and consents to process being served in any
such proceeding by mailing a copy thereof via registered or certified mail
or overnight delivery (with evidence of delivery) to such party at the
address in effect for notices to it under this Agreement and agrees that
such service shall constitute good and sufficient service of process and
notice thereof. Nothing contained herein shall be deemed to limit in any
way any right to serve process in any manner permitted by law. Each party
hereto hereby irrevocably waives, to the fullest extent permitted by
applicable law, any and all right to trial by jury in any legal proceeding
arising out of or relating to this Agreement or the transactions
contemplated hereby. If any party shall commence a proceeding to enforce
any provisions of this Agreement, then the prevailing party in such
proceeding shall be reimbursed by the other party for its reasonable
attorney's fees and other costs and expenses incurred with the
investigation, preparation and prosecution of such proceeding.
(i) This Agreement may be executed in any number of counterparts,
each of which when so executed shall be deemed to be an original and, all
of which taken together shall constitute one and the same Agreement. In the
event that any signature is delivered by facsimile transmission, such
signature shall create a valid binding obligation of the party executing
(or on whose behalf such signature is executed) the same with the same
force and effect as if such facsimile signature were the original thereof.
(j) All Debtors shall jointly and severally be liable for the
obligations of each Debtor to the Secured Parties hereunder.
(k) Each Debtor shall indemnify, reimburse and hold harmless the
Secured Parties and their respective partners, members, shareholders,
officers, directors, employees and agents (collectively, "Indemnitees")
from and against any and all losses, claims, liabilities, damages,
penalties, suits, costs and expenses, of any kind or nature, (including
fees relating to the cost of investigating and defending any of the
foregoing) imposed on, incurred by or asserted against such Indemnitee in
any way related to or arising from or alleged to arise from this Agreement
or the Collateral, except any such losses, claims, liabilities, damages,
penalties, suits, costs and expenses which result from the gross negligence
or willful misconduct of the Indemnitee as determined by a final,
nonappealable decision of a court of competent jurisdiction. This
indemnification provision is in addition to, and not in limitation of, any
other indemnification provision in the Debentures, the Purchase Agreement
(as such term is defined in the Debentures) or any other agreement,
instrument or other document executed or delivered in connection herewith
or therewith.
(l) Nothing in this Agreement shall be construed to subject Agent or
any Secured Party to liability as a partner in any Debtor or any if its
direct or indirect subsidiaries that is a partnership or as a member in any
Debtor or any of its direct or indirect subsidiaries that is a limited
liability company, nor shall Agent or any Secured Party be deemed to have
assumed any obligations under any partnership agreement or limited
liability company agreement, as applicable, of any such Debtor or any if
its direct or indirect subsidiaries or otherwise, unless and until any such
Secured Party exercises its right to be substituted for such Debtor as a
partner or member, as applicable, pursuant hereto.
(m) To the extent that the grant of the security interest in the
Collateral and the enforcement of the terms hereof require the consent,
approval or action of any partner or member, as applicable, of any Debtor
or any direct or indirect subsidiary of any Debtor or compliance with any
provisions of any of the Organizational Documents, the Debtors hereby grant
such consent and approval and waive any such noncompliance with the terms
of said documents.
[SIGNATURE PAGES FOLLOW]
IN WITNESS WHEREOF, the parties hereto have caused this Security Agreement
to be duly executed on the day and year first above written.
ELECTRONIC CONTROL SECURITY, INC.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Title: President
ECSI INTERNATIONAL, INC.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Title: President
ECSI-FOIDS INC.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Title: President
CLARION SENSING SYSTEMS, INC.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
--------------------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Title: President
[SIGNATURE PAGE OF HOLDERS FOLLOWS]
[SIGNATURE PAGE OF HOLDERS TO EKCS SA]
Name of Investing Entity: __________________________
Signature of Authorized Signatory of Investing entity: ______________________
Name of Authorized Signatory: _________________________
Title of Authorized Signatory: __________________________
[SIGNATURE PAGE OF HOLDERS FOLLOWS]
