EX-10.3
INTELLECTUAL PROPERTY SECURITY AGREEMENT
INTELLECTUAL PROPERTY SECURITY AGREEMENT (this "AGREEMENT"
dated as of June 7, 2006, by and among Midnight Auto Holdings, Inc., a Delaware
corporation (the "COMPANY"), and the secured parties signatory hereto and their
respective endorsees, transferees and assigns (collectively, the "SECURED
PARTY").
W I T N E S S E T H :
WHEREAS, pursuant to a Securities Purchase Agreement, dated the date
hereof, between Company and the Secured Party (the "PURCHASE AGREEMENT"),
Company has agreed to issue to the Secured Party and the Secured Party has
agreed to purchase from Company certain of Company's 10% Secured Convertible
Notes, due three years from the date of issue (the "NOTES"), which are
convertible into shares of Company's Common Stock, par value $.00005 per share
(the "COMMON STOCK"). In connection therewith, Company shall issue the Secured
Party certain Common Stock purchase warrants dated as of the date hereof to
purchase the number of shares of Common Stock indicated below each Secured
Party's name on the Purchase Agreement (the "WARRANTS"); and
WHEREAS, in order to induce the Secured Party to purchase the Notes,
Company has agreed to execute and deliver to the Secured Party this Agreement
for the benefit of the Secured Party and to grant to it a first priority
security interest in certain Intellectual Property (defined below) of Company to
secure the prompt payment, performance and discharge in full of all of Company's
obligations under the Notes and exercise and discharge in full of Company's
obligations under the Warrants; and
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. DEFINED TERMS. Unless otherwise defined herein, terms
which are defined in the Purchase Agreement and used herein are so used as so
defined; and the following terms shall have the following meanings:
"SOFTWARE INTELLECTUAL PROPERTY" shall mean:
(a) all software programs (including all source
code, object code and all related applications and data files), whether now
owned, upgraded, enhanced, licensed or leased or hereafter acquired by the
Company, above;
(b) all computers and electronic data processing
hardware and firmware associated therewith;
(c) all documentation (including flow charts,
logic diagrams, manuals, guides and specifications) with respect to such
software, hardware and firmware described in the preceding clauses (a) and (b);
and
(d) all rights with respect to all of the
foregoing, including, without limitation, any and all upgrades, modifications,
copyrights, licenses, options, warranties, service contracts, program services,
test rights, maintenance rights, support rights, improvement rights, renewal
rights and indemnifications and substitutions, replacements, additions, or model
conversions of any of the foregoing.
"COPYRIGHTS" shall mean (a) all copyrights,
registrations and applications for registration, ISSUED or filed, including any
reissues, extensions or renewals thereof, by or with the United States Copyright
Office or any similar office or agency of the United States, any state thereof,
or any other country or political subdivision thereof, or otherwise, including,
all rights in and to the material constituting the subject matter thereof,
including, without limitation, any referred to in SCHEDULE B hereto, and (b) any
rights in any material which is copyrightable or which is protected by common
law, United States copyright laws or similar laws or any law of any State,
including, without limitation, any thereof referred to in SCHEDULE B hereto.
"COPYRIGHT LICENSE" shall mean any agreement, written
or oral, providing for a grant by the Company of any right in any Copyright,
including, without limitation, any thereof referred to in SCHEDULE B hereto.
"INTELLECTUAL PROPERTY" shall means, collectively,
the Software Intellectual Property, Copyrights, Copyright Licenses, Patents,
Patent Licenses, Trademarks, Trademark Licenses and Trade Secrets.
"OBLIGATIONS" means all of the Company's obligations
under this Agreement and the Notes, 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 decreased, 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 the Secured Party as a preference, fraudulent
transfer or otherwise as such obligations may be amended, supplemented,
converted, extended or modified from time to time.
"PATENTS" shall mean (a) all letters patent of the
United States or any other country or any political subdivision thereof, and all
reissues and extensions thereof, including, without limitation, any thereof
referred to in SCHEDULE B hereto, and (b) all applications for letters patent of
the United States and all divisions, continuations and continuations-in-part
thereof or any other country or any political subdivision, including, without
limitation, any thereof referred to in SCHEDULE B hereto.
"PATENT LICENSE" shall mean all agreements, whether
written or oral, providing for the grant by the Company of any right to
manufacture, use or sell any invention covered by a Patent, including, without
limitation, any thereof referred to in SCHEDULE B hereto.
"SECURITY AGREEMENT" shall mean the a Security
Agreement, dated the date hereof between Company and the Secured Party.
"TRADEMARKS" shall mean (a) all trademarks, trade
names, corporate names, company names, business names, fictitious business
names, trade styles, service marks,
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logos and other source or business identifiers, and the 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, including, without limitation, any thereof
referred to in SCHEDULE B hereto, and (b) all reissues, extensions or renewals
thereof.
"TRADEMARK LICENSE" shall mean any agreement, written
or oral, providing for the grant by the Company of any right to use any
Trademark, including, without limitation, any thereof referred to in SCHEDULE B
hereto.
"TRADE SECRETS" shall mean common law and statutory
trade secrets and all other confidential or proprietary or useful information
and all know-how obtained by or used in or contemplated at any time for use in
the business of the Company (all of the foregoing being collectively called a
"TRADE SECRET"), whether or not such Trade Secret has been reduced to a writing
or other tangible form, including all documents and things embodying,
incorporating or referring in any way to such Trade Secret, all Trade Secret
licenses, including each Trade Secret license referred to in SCHEDULE B hereto,
and including the right to ▇▇▇ for and to enjoin and to collect damages for the
actual or threatened misappropriation of any Trade Secret and for the breach or
enforcement of any such Trade Secret license.
2. GRANT OF SECURITY INTEREST. In accordance with
Section 3(m) of the Security Agreement, to secure the complete and timely
payment, performance and discharge in full, as the case may be, of all of the
Obligations, the Company hereby, unconditionally and irrevocably, pledges,
grants and hypothecates to the Secured Party, a continuing security interest in,
a continuing first lien upon, an unqualified right to possession and disposition
of and a right of set-off against, in each case to the fullest extent permitted
by law, all of the Company's right, title and interest of whatsoever kind and
nature in and to the Intellectual Property (the "SECURITY INTEREST").
3. REPRESENTATIONS AND WARRANTIES. The Company hereby
represents and warrants, and covenants and agrees with, the Secured Party as
follows:
(a) The Company has the requisite corporate
power and authority to enter into this Agreement and otherwise to carry out its
obligations thereunder. The execution, delivery and performance by the Company
of this Agreement and the filings contemplated therein have been duly authorized
by all necessary action on the part of the Company and no further action is
required by the Company. This Agreement constitutes a legal, valid and binding
obligation of the Company enforceable in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting the enforcement of creditor's rights
generally.
(b) The Company represents and warrants that it
has no place of business or offices where its respective books of account and
records are kept (other than temporarily at the offices of its attorneys or
accountants) or places where the Intellectual Property is stored or located,
except as has been disclosed to the Secured Party;
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(c) Except as set forth on SCHEDULE 3(C), the
Company is the sole owner of the Intellectual Property (except for non-exclusive
licenses granted by the Company in the ordinary course of business), free and
clear of any liens, security interests, encumbrances, rights or claims, and is
fully authorized to grant the Security Interest in and to pledge the
Intellectual Property. 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 have been filed in favor of the Secured Party pursuant to this
Agreement) covering or affecting any of the Intellectual Property. So long as
this Agreement shall be in effect, the Company 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 Party pursuant to the terms of this Agreement),
except for a financing statement covering assets acquired by the Company after
the date hereof, provided that the value of the Intellectual Property covered by
this Agreement along with the Collateral (as defined in the Security Agreement)
is equal to at least 150% of the Obligations.
(d) The Company shall at all times maintain its
books of account and records relating to the Intellectual Property at its
principal place of business and may not relocate such books of account and
records unless it delivers to the Secured Party at least 30 days prior to such
relocation (i) written notice of such relocation and the new location thereof
(which must be within the United States) and (ii) evidence that the 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 Party valid,
perfected and continuing first priority liens in the Intellectual Property to
the extent they can be perfected through such filings.
(e) This Agreement creates in favor of the
Secured Party a valid security interest in the Intellectual Property securing
the payment and performance of the Obligations and, upon making the filings
required hereunder, a perfected first priority security interest in such
Intellectual Property to the extent that it can be perfected through such
filings.
(f) Upon request of the Secured Party, the
Company shall execute and deliver any and all agreements, instruments,
documents, and papers as the Secured Party may request to evidence the Secured
Party's security interest in the Intellectual Property and the goodwill and
general intangibles of the Company relating thereto or represented thereby, and
the Company hereby appoints the Secured Party its attorney-in-fact to execute
and file all such writings for the foregoing purposes, all acts of such attorney
being hereby ratified and confirmed; such power being coupled with an interest
is irrevocable until the Obligations have been fully satisfied and are paid in
full.
(g) The execution, delivery and performance of
this Agreement does not conflict with or cause a breach or default, or an event
that with or without the passage of time or notice, shall constitute a breach or
default, under any agreement to which the Company is a party or by which the
Company is bound. No consent (including, without limitation, from stock holders
or creditors of the Company) is required for the Company to enter into and
perform its obligations hereunder.
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(h) The Company shall at all times maintain the
liens and Security Interest provided for hereunder as valid and perfected liens
and security interests in the Intellectual Property to the extent they can be
perfected by filing in favor of the Secured Party until this Agreement and the
Security Interest hereunder shall terminate pursuant to Section 11. The Company
hereby agrees to defend the same against any and all persons. The Company shall
safeguard and protect all Intellectual Property for the account of the Secured
Party. Without limiting the generality of the foregoing, the Company shall pay
all fees, taxes and other amounts necessary to maintain the Intellectual
Property and the Security Interest hereunder, and the Company shall obtain and
furnish to the Secured Party 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.
(i) The Company will not transfer, pledge,
hypothecate, encumber, license (except for non-exclusive licenses granted by the
Company in the ordinary course of business), sell or otherwise dispose of any of
the Intellectual Property without the prior written consent of the Secured
Party.
(j) The Company shall, within ten (10) days of
obtaining knowledge thereof, advise the Secured Party promptly, in sufficient
detail, of any substantial change in the Intellectual Property, and of the
occurrence of any event which would have a material adverse effect on the value
of the Intellectual Property or on the Secured Party's security interest
therein.
(k) The Company shall permit the Secured Party
and its representatives and agents to inspect the Intellectual Property at any
time, and to make copies of records pertaining to the Intellectual Property as
may be requested by the Secured Party from time to time.
(l) The Company will take all steps reasonably
necessary to diligently pursue and seek to preserve, enforce and collect any
rights, claims, causes of action and accounts receivable in respect of the
Intellectual Property.
(m) The Company shall promptly notify the
Secured Party in sufficient detail upon becoming aware of any attachment,
garnishment, execution or other legal process levied against any Intellectual
Property and of any other information received by the Company that may
materially affect the value of the Intellectual Property, the Security Interest
or the rights and remedies of the Secured Party hereunder.
(n) All information heretofore, herein or
hereafter supplied to the Secured Party by or on behalf of the Company with
respect to the Intellectual Property is accurate and complete in all material
respects as of the date furnished.
(o) SCHEDULE 3(a) to the Purchase Agreement
contains a list of all of the subsidiaries of Company.
(p) SCHEDULE B attached hereto includes all
Patents and Patent Licenses, if any, owned by the Company in its own name as of
the date hereof. SCHEDULE B hereto includes all Trademarks and Trademark
Licenses, if any, owned by the Company in its own name as of the date hereof.
SCHEDULE B hereto includes all Copyrights and Copyright
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Licenses, if any, owned by the Company in its own name as of the date hereof.
SCHEDULE B hereto includes all Trade Secrets and Trade Secret Licenses, if any,
owned by the Company as of the date hereof. To the best of the Company's
knowledge, each License, Patent, Trademark, Copyright and Trade Secret is valid,
subsisting, unexpired, enforceable and has not been abandoned. Except as set
forth in SCHEDULE B, none of such Licenses, Patents, Trademarks, Copyrights and
Trade Secrets is the subject of any licensing or franchise agreement. To the
best of the Company's knowledge, no holding, decision or judgment has been
rendered by any Governmental Body which would limit, cancel or question the
validity of any License, Patent, Trademark, Copyright and Trade Secrets . No
action or proceeding is pending (i) seeking to limit, cancel or question the
validity of any License, Patent, Trademark, Copyright or Trade Secret, or (ii)
which, if adversely determined, would have a material adverse effect on the
value of any License, Patent, Trademark, Copyright or Trade Secret. The Company
has used and will continue to use for the duration of this Agreement, proper
statutory notice in connection with its use of the Patents, Trademarks and
Copyrights and consistent standards of quality in products leased or sold under
the Patents, Trademarks and Copyrights.
(q) With respect to any Intellectual Property:
(i) such Intellectual Property is
subsisting and has not been
adjudged invalid or unenforceable,
in whole or in part;
(ii) such Intellectual Property is valid
and enforceable;
(iii) the Company has made all necessary
filings and recordations to protect
its interest in such Intellectual
Property, including, without
limitation, recordations of all of
its interests in the Patents,
Patent Licenses, Trademarks and
Trademark Licenses in the United
States Patent and Trademark Office
and in corresponding offices
throughout the world and its claims
to the Copyrights and Copyright
Licenses in the United States
Copyright Office and in
corresponding offices throughout
the world;
(iv) other than as set forth in SCHEDULE
B, the Company is the exclusive
owner of the entire and
unencumbered right, title and
interest in and to such
Intellectual Property and no claim
has been made that the use of such
Intellectual Property infringes on
the asserted rights of any third
party; and
(v) the Company has performed and will
continue to perform all acts and
has paid all required fees and
taxes to maintain each and every
item of Intellectual Property in
full force and effect throughout
the world, as applicable.
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(r) Except with respect to any Trademark or
Copyright that the Company shall reasonably determine is of negligible economic
value to the Company, the Company shall:
(i) maintain each Trademark and
Copyright in full force free from any claim of abandonment for non-use,
maintain as in the past the quality of products and services offered
under such Trademark or Copyright; employ such Trademark or Copyright
with the appropriate notice of registration; not adopt or use any ▇▇▇▇
which is confusingly similar or a colorable imitation of such Trademark
or Copyright unless the Secured Party shall obtain a perfected security
interest in such ▇▇▇▇ pursuant to this Agreement; and not (and not
permit any licensee or sublicensee thereof to) do any act or knowingly
omit to do any act whereby any Trademark or Copyright may become
invalidated;
(ii) not, except with respect to any
Patent that it shall reasonably determine is of negligible economic
value to it, do any act, or omit to do any act, whereby any Patent may
become abandoned or dedicated; and
(iii) notify the Secured Party
immediately if it knows, or has reason to know, that any application or
registration relating to any Patent, Trademark or Copyright may become
abandoned or dedicated, or of any adverse determination or development
(including, without limitation, the institution of, or any such
determination or development in, any proceeding in the United States
Patent and Trademark Office, United States Copyright Office or any
court or tribunal in any country) regarding its ownership of any
Patent, Trademark or Copyright or its right to register the same or to
keep and maintain the same.
(s) Whenever the Company, either by itself or
through any agent, employee, licensee or designee, shall file an application for
the registration of any Patent, Trademark or Copyright with the United States
Patent and Trademark Office, United States Copyright Office or any similar
office or agency in any other country or any political subdivision thereof or
acquire rights to any new Patent, Trademark or Copyright whether or not
registered, report such filing to the Secured Party within five business days
after the last day of the fiscal quarter in which such filing occurs.
(t) The Company shall take all reasonable and
necessary steps, including, without limitation, in any proceeding before the
United States Patent and Trademark Office, United States Copyright Office or any
similar office or agency in any other country or any political subdivision
thereof, to maintain and pursue each application (and to obtain the relevant
registration) and to maintain each registration of the Patents, Trademarks and
Copyrights, including, without limitation, filing of applications for renewal,
affidavits of use and affidavits of incontestability.
(u) In the event that any Patent, Trademark or
Copyright included in the Intellectual Property is infringed, misappropriated or
diluted by a third party, promptly notify the Secured Party after it learns
thereof and shall, unless it shall reasonably determine that such Patent,
Trademark or Copyright is of negligible economic value to it, which
determination it
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shall promptly report to the Secured Party, promptly ▇▇▇ for infringement,
misappropriation or dilution, to seek injunctive relief where appropriate and to
recover any and all damages for such infringement, misappropriation or dilution,
or take such other actions as it shall reasonably deem appropriate under the
circumstances to protect such Patent, Trademark or Copyright. If the Company
lacks the financial resources to comply with this Section 3(t), the Company
shall so notify the Secured Party and shall cooperate fully with any enforcement
action undertaken by the Secured Party on behalf of the Company.
4. DEFAULTS. The following events shall be "EVENTS OF
DEFAULT":
(a) The occurrence of an Event of Default (as
defined in the Notes) under the Notes;
(b) Any representation or warranty of the
Company in this Agreement or in the Security Agreement shall prove to have been
incorrect in any material respect when made;
(c) The failure by the Company to observe or
perform any of its obligations hereunder or in the Security Agreement for ten
(10) days after receipt by the Company of notice of such failure from the
Secured Party; and
(d) Any breach of, or default under, the
Warrants.
5. DUTY TO HOLD IN TRUST. Upon the occurrence of any
Event of Default and at any time thereafter, the Company shall, upon receipt by
it of any revenue, income or other sums subject to the Security Interest,
whether payable pursuant to the Notes 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 Party and shall forthwith
endorse and transfer any such sums or instruments, or both, to the Secured Party
for application to the satisfaction of the Obligations.
6. RIGHTS AND REMEDIES UPON DEFAULT. Upon occurrence of
any Event of Default and at any time thereafter, the Secured Party shall have
the right to exercise all of the remedies conferred hereunder and under the
Notes, and the Secured Party shall have all the rights and remedies of a secured
party under the UCC and/or any other applicable law (including the Uniform
Commercial Code of any jurisdiction in which any Intellectual Property is then
located). Without limitation, the Secured Party shall have the following rights
and powers:
(a) The Secured Party shall have the right to
take possession of the Intellectual Property and, for that purpose, enter, with
the aid and assistance of any person, any premises where the Intellectual
Property, or any part thereof, is or may be placed and remove the same, and the
Company shall assemble the Intellectual Property and make it available to the
Secured Party at places which the Secured Party shall reasonably select, whether
at the Company's premises or elsewhere, and make available to the Secured Party,
without rent, all of the Company's respective premises and facilities for the
purpose of the Secured Party taking possession of, removing or putting the
Intellectual Property in saleable or disposable form.
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(b) The Secured Party shall have the right to
operate the business of the Company using the Intellectual Property and shall
have the right to assign, sell, lease or otherwise dispose of and deliver all or
any part of the Intellectual Property, 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 Party
may deem commercially reasonable, all without (except as shall be required by
applicable statute and cannot be waived) advertisement or demand upon or notice
to the Company or right of redemption of the Company, which are hereby expressly
waived. Upon each such sale, lease, assignment or other transfer of Intellectual
Property, the Secured Party may, unless prohibited by applicable law which
cannot be waived, purchase all or any part of the Intellectual Property being
sold, free from and discharged of all trusts, claims, right of redemption and
equities of the Company, which are hereby waived and released.
7. APPLICATIONS OF PROCEEDS. The proceeds of any such
sale, lease or other disposition of the Intellectual Property hereunder shall be
applied first, to the expenses of retaking, holding, storing, processing and
preparing for sale, selling, and the like (including, without limitation, any
taxes, fees and other costs incurred in connection therewith) of the
Intellectual Property, to the reasonable attorneys' fees and expenses incurred
by the Secured Party in enforcing its rights hereunder and in connection with
collecting, storing and disposing of the Intellectual Property, and then to
satisfaction of the Obligations, and to the payment of any other amounts
required by applicable law, after which the Secured Party shall pay to the
Company any surplus proceeds. If, upon the sale, license or other disposition of
the Intellectual Property, the proceeds thereof are insufficient to pay all
amounts to which the Secured Party is legally entitled, the Company will be
liable for the deficiency, together with interest thereon, at the rate of 15%
per annum (the "DEFAULT RATE"), and the reasonable fees of any attorneys
employed by the Secured Party to collect such deficiency. To the extent
permitted by applicable law, the Company waives all claims, damages and demands
against the Secured Party arising out of the repossession, removal, retention or
sale of the Intellectual Property, unless due to the gross negligence or willful
misconduct of the Secured Party.
8. COSTS AND EXPENSES. The Company agrees to pay all
out-of-pocket fees, costs and expenses incurred in connection with any filing
required hereunder, including without limitation, any financing statements,
continuation statements, partial releases and/or termination statements related
thereto or any expenses of any searches reasonably required by the Secured
Party. The Company shall also pay all other claims and charges which in the
reasonable opinion of the Secured Party might prejudice, imperil or otherwise
affect the Intellectual Property or the Security Interest therein. The Company
will also, upon demand, pay to the Secured Party the amount of any and all
reasonable expenses, including the reasonable fees and expenses of its counsel
and of any experts and agents, which the Secured Party 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
Intellectual Property, or (iii) the exercise or enforcement of any of the rights
of the Secured Party under the Notes. Until so paid, any fees payable hereunder
shall be added to the principal amount of the Notes and shall bear interest at
the Default Rate.
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9. RESPONSIBILITY FOR INTELLECTUAL PROPERTY. The Company
assumes all liabilities and responsibility in connection with all Intellectual
Property, and the obligations of the Company hereunder or under the Notes and
the Warrants shall in no way be affected or diminished by reason of the loss,
destruction, damage or theft of any of the Intellectual Property or its
unavailability for any reason.
10. SECURITY INTEREST ABSOLUTE. All rights of the Secured
Party and all Obligations of the Company hereunder, shall be absolute and
unconditional, irrespective of: (a) any lack of validity or enforceability of
this Agreement, the Notes, the Warrants 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 Notes, the Warrants or any other agreement
entered into in connection with the foregoing; (c) any exchange, release or
nonperfection of any of the Intellectual Property, or any release or amendment
or waiver of or consent to departure from any other Intellectual Property for,
or any guaranty, or any other security, for all or any of the Obligations; (d)
any action by the Secured Party to obtain, adjust, settle and cancel in its sole
discretion any insurance claims or matters made or arising in connection with
the Intellectual Property; or (e) any other circumstance which might otherwise
constitute any legal or equitable defense available to the Company, 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 Party shall continue even if the Obligations are barred for any reason,
including, without limitation, the running of the statute of limitations or
bankruptcy. The Company 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 Intellectual Property or any payment
received by the Secured Party 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 Party,
then, in any such event, the Company'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. The Company waives all right to require the Secured Party to
proceed against any other person or to apply any Intellectual Property which the
Secured Party may hold at any time, or to marshal assets, or to pursue any other
remedy. The Company waives any defense arising by reason of the application of
the statute of limitations to any obligation secured hereby.
11. TERM OF AGREEMENT. This Agreement and the Security
Interest shall terminate on the date on which all amounts outstanding under the
Notes are no longer outstanding and all other Obligations have been paid or
discharged. Upon such termination, the Secured Party, at the request and at the
expense of the Company, will join in executing any termination statement with
respect to any financing statement executed and filed pursuant to this
Agreement.
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12. POWER OF ATTORNEY; FURTHER ASSURANCES.
(a) The Company authorizes the Secured Party,
and does hereby make, constitute and appoint it, and its respective officers,
agents, successors or assigns with full power of substitution, as the Company's
true and lawful attorney-in-fact, with power, in its own name or in the name of
the Company, to, after the occurrence and during the continuance of an Event of
Default, (i) endorse any notes, 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 Intellectual Property that may come into
possession of the Secured Party; (ii) to sign and endorse any UCC financing
statement 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
Intellectual Property; (iii) to pay or discharge taxes, liens, security
interests or other encumbrances at any time levied or placed on or threatened
against the Intellectual Property; (iv) to demand, collect, receipt for,
compromise, settle and ▇▇▇ for monies due in respect of the Intellectual
Property; and (v) generally, to do, at the option of the Secured Party, and at
the Company's expense, at any time, or from time to time, all acts and things
which the Secured Party deems necessary to protect, preserve and realize upon
the Intellectual Property and the Security Interest granted therein in order to
effect the intent of this Agreement, the Notes and the Warrants, all as fully
and effectually as the Company might or could do; and the Company 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.
(b) On a continuing basis, the Company will
make, execute, acknowledge, deliver, file and record, as the case may be, in the
proper filing and recording places in any jurisdiction, all such instruments,
and take all such action as may reasonably be deemed necessary or advisable, or
as reasonably requested by the Secured Party, 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 Party the grant or
perfection of a security interest in all the Intellectual Property.
(c) The Company hereby irrevocably appoints the
Secured Party as the Company's attorney-in-fact, with full authority in the
place and stead of the Company and in the name of the Company, from time to time
in the Secured Party's discretion, to take any action and to execute any
instrument which the Secured Party may deem necessary or advisable to accomplish
the purposes of this Agreement, including the filing, in its sole discretion, of
one or more financing or continuation statements and amendments thereto,
relative to any of the Intellectual Property without the signature of the
Company where permitted by law.
13. NOTICES. All notices, requests, demands and other
communications hereunder shall be in writing, with copies to all the other
parties hereto, and shall be deemed to have been duly given when (i) if
delivered by hand, upon receipt, (ii) if sent by facsimile, upon receipt of
proof of sending thereof, (iii) if sent by nationally recognized overnight
delivery service (receipt requested), the next business day or (iv) if mailed by
first-class registered or certified mail, return receipt requested, postage
prepaid, four days after posting in the U.S. mails, in each case if delivered to
the following addresses:
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If to the Company: Midnight Auto Holdings, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Chief Executive Officer
Telephone:
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
With copies to: Reitler ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇, Esq.
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
If to the Secured Party: AJW Partners, LLC
AJW Offshore, Ltd.
AJW Qualified Partners, LLC
New Millennium Capital Partners II, LLC
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
With copies to: ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, LLP
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esquire
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
14. OTHER SECURITY. To the extent that the Obligations
are now or hereafter secured by property other than the Intellectual Property or
by the guarantee, endorsement or property of any other person, firm, corporation
or other entity, then the Secured Party 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 Party's rights and remedies hereunder.
12
15. MISCELLANEOUS.
(a) No course of dealing between the Company and
the Secured Party, nor any failure to exercise, nor any delay in exercising, on
the part of the Secured Party, any right, power or privilege hereunder or under
the Notes 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 Party with respect to the Intellectual Property, whether established
hereby or by the Notes or by any other agreements, instruments or documents or
by law shall be cumulative and may be exercised singly or concurrently.
(c) This Agreement and the Security Agreement
constitute 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 that 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) This Agreement shall be construed in
accordance with the laws of the State of New York, except to the extent the
validity, perfection or enforcement of a security interest hereunder in respect
of any particular Intellectual Property which are governed by a jurisdiction
other than the State of New York in which case such law shall govern. Each of
the parties hereto irrevocably submit to the exclusive jurisdiction of any New
York State or United States Federal court sitting in Manhattan county over any
action or proceeding arising out of or
13
relating to this Agreement, and the parties hereto hereby irrevocably agree that
all claims in respect of such action or proceeding may be heard and determined
in such New York State or Federal court. The parties hereto agree that a final
judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law. The parties hereto further waive any objection to venue in the
State of New York and any objection to an action or proceeding in the State of
New York on the basis of forum non conveniens.
(i) EACH PARTY HERETO HEREBY AGREES TO WAIVE ITS
RESPECTIVE RIGHTS TO A JURY TRAIL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF THIS AGREEMENT. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL
ENCOMPASSING OF ANY DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO
THE SUBJECT MATER OF THIS AGREEMENT, INCLUDING WITHOUT LIMITATION CONTRACT
CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS AND ALL OTHER COMMON LAW AND
STATUTORY CLAIMS. EACH PARTY HERETO ACKNOWLEDGES THAT THIS WAIVER IS A MATERIAL
INDUCEMENT FOR EACH PARTY TO ENTER INTO A BUSINESS RELATIONSHIP, THAT EACH PARTY
HAS ALREADY RELIED ON THIS WAIVER IN ENTERING INTO THIS AGREEMENT AND THAT EACH
PARTY WILL CONTINUE TO RELY ON THIS WAIVER IN THEIR RELATED FUTURE DEALINGS.
EACH PARTY FURTHER WARRANTS AND REPRESENTS THAT IT HAS REVIEWED THIS WAIVER WITH
ITS LEGAL COUNSEL, AND THAT SUCH PARTY HAS KNOWINGLY AND VOLUNTARILY WAIVES ITS
RIGHTS TO A JURY TRIAL FOLLOWING SUCH CONSULTATION. THIS WAIVER IS IRREVOCABLE,
MEANING THAT, NOTWITHSTANDING ANYTHING HEREIN TO THE CONTRARY, IT MAY NOT BE
MODIFIED EITHER ORALLY OR IN WRITING, AND THIS WAIVER SHALL APPLY TO ANY
SUBSEQUENT AMENDMENTS, RENEWALS AND SUPPLEMENTS OR MODIFICATIONS TO THIS
AGREEMENT. IN THE EVENT OF A LITIGATION, THIS AGREEMENT MAY BE FILED AS A
WRITTEN CONSENT TO A TRIAL BY THE COURT.
(j) 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.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed on the day and year first above written.
MIDNIGHT AUTO HOLDINGS, INC.
By:
--------------------------------------------------
▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Chief Executive Officer
AJW PARTNERS, LLC
By: SMS Group, LLC
By:
--------------------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Manager
AJW OFFSHORE, LTD.
By: First Street Manager II, LLC
By:
--------------------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Manager
AJW QUALIFIED PARTNERS, LLC
By: AJW Manager, LLC
By:
--------------------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Manager
NEW MILLENNIUM CAPITAL PARTNERS II, LLC
By: First Street Manager II, LLC
By:
--------------------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Manager
15
WHOLLY-OWNED SUBSIDIARIES OF
MIDNIGHT AUTO HOLDINGS, INC.:
MIDNIGHT AUTO HOLDINGS, INC.,
a Michigan corporation
By: Midnight Auto Holdings, Inc., its parent
By:
--------------------------------------------------
▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Chief Executive Officer
MIDNIGHT AUTO FRANCHISE CORP.,
a Michigan corporation
By: Midnight Auto Holdings, Inc., its parent
By:
--------------------------------------------------
▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Chief Executive Officer
ALL NIGHT AUTO(R) STORES, INC.,
a Michigan corporation
By: Midnight Auto Holdings, Inc., its parent
By:
--------------------------------------------------
▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Chief Executive Officer
16
ALL NIGHT AUTO INC.,
a Michigan corporation -does business as All Night
Auto of Troy
By: Midnight Auto Holdings, Inc., its parent
By:
--------------------------------------------------
▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Chief Executive Officer
ALL NIGHT AUTO-GROSSE POINTE, INC.,
a Michigan corporation - did business as All Night
Auto of Grosse Pointe (Facility is now shut down.)
By: Midnight Auto Holdings, Inc., its parent
By:
--------------------------------------------------
▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Chief Executive Officer
ALL NIGHT AUTO OF NORMAL NORTH,
a Michigan corporation
By: Midnight Auto Holdings, Inc., its parent
By:
--------------------------------------------------
▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Chief Executive Officer
17
ALL NIGHT AUTO OF AURORA,
a Michigan corporation
By: Midnight Auto Holdings, Inc., its parent
By:
--------------------------------------------------
▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Chief Executive Officer
ALL NIGHT AUTO OF JOLIET,
a Michigan corporation
By: Midnight Auto Holdings, Inc., its parent
By:
--------------------------------------------------
▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Chief Executive Officer
ALL NIGHT AUTO OF FORT ▇▇▇▇▇,
a Michigan corporation
By: Midnight Auto Holdings, Inc., its parent
By:
--------------------------------------------------
▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Chief Executive Officer
18
