EXHIBIT 10.9
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SECURITY AGREEMENT
This SECURITY AGREEMENT ("Agreement") is made as of this June 4,
2002, by and between LocatePLUS Holdings Corporation, a Delaware corporation
with a principal place of business located at 000 Xxxxxxxx Xxxxxx, Xxxxx 000X,
Xxxxxxx, Xxxxxxxxxxxxx 00000 ("Debtor"), and Gemstone Investment Company, Inc.,
a resident residing at 000 Xxxx Xxxxxx, Xxxxxxxxx, Xxxxxxxxxxxxx 00000 ("Secured
Party").
WHEREAS, pursuant to a Loan Agreement of even date herewith, Debtor
executed a Promissory Note (the "Note") as of the date hereof evidencing a loan
from the Secured Party as set forth in the Note (the "Secured Obligation"); and
WHEREAS, Debtor is the owner of the Pledged Collateral (as defined in
Section 1); and
WHEREAS, Secured Party's willingness to extend said Loan to Debtor
was subject to the condition that Debtor execute and deliver this Security
Agreement to secure the Loan.
NOW, THEREFORE, in consideration of the foregoing premises and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, Debtor and Secured Party agree as follows:
SECTION 1.GRANT OF SECURITY INTERESTS. As security for the prompt and
complete payment and performance when due of all the Secured Obligations, Debtor
hereby pledges, assigns, transfers and grants to Secured Party a continuing
security interest in and to all of the following property (collectively, the
"Pledged Collateral"): all of the right, title and interest of Debtor in, to and
under (I) all Receivables (as defined in Section 17 of this Agreement) now
existing or hereafter arising from time to time; (II) all Inventory (as defined
in Section 17) now existing or hereafter acquired from time to time; (III) all
books, records, ledgers, print-outs, file materials and other papers containing
information relating to Receivables and any account debtors in respect thereof,
together with all Contracts (as defined in Section 17) now existing or hereafter
arising from time to time; (IV) all Equipment (as defined in Section 17) now
existing or hereafter acquired from time to time; (V) all Intangibles (as
defined in Section 17) now existing or hereafter acquired from time to time;
(VI) all Investment Property (as defined in Section 17) now existing or
hereafter acquired from time to time; (VII) all Insurance Policies (as defined
in Section 17) now existing or hereafter acquired from time to time; (VIII) all
Licenses (as defined in Section 17) now existing or hereafter arising from time
to time; and (IX) any and all other property of the Debtor of every name and
nature which from time to time after the date hereof, by delivery or by writing
of any kind for the purposes hereof, shall have been conveyed, mortgaged,
pledged, assigned or transferred by Debtor or by anyone on its behalf or with
its consent to the Secured Party, as and for additional security for the payment
of the Secured Obligation; and all Proceeds of any and all of the foregoing.
SECTION 2. SECURED OBLIGATION. This Security Agreement secures, and
the Pledged Collateral is collateral security for, the prompt payment and
performance in full when due, whether at stated maturity, by acceleration
pursuant to the terms of the Note or otherwise (including, without limitation,
the payment of interest and other amounts which would accrue and become due but
for the filing of a petition in bankruptcy or the operation of the automatic
stay under Section 362(a) of the Bankruptcy Code) of all obligations of the
Debtor now or hereafter arising under or in respect of the Note or this Security
Agreement (including, without limitation, the Debtor's obligation to pay
principal and interest and all other charges, fees, expenses, commissions,
reimbursements, indemnities and other payments related to or in respect of the
obligations contained in the Note or this Security Agreement).
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SECTION 3. NO RELEASE. Nothing set forth in this Security Agreement
shall relieve the Debtor from the performance of any term, covenant, condition
or agreement on the Debtor's part to be performed or observed under or in
respect of any of the Pledged Collateral, or from any liability to any Person
under or in respect of any of the Pledged Collateral, or impose any obligation
on the Secured Party to perform or observe any such term, covenant, condition or
agreement on the Debtor's part to be so performed or observed, or shall impose
any liability on the Secured Party for any act or omission on the part of the
Debtor relating thereto, or for any breach of any representation or warranty on
the part of the Debtor contained in this Security Agreement or the Note, or in
respect of the Pledged Collateral or made in connection herewith or therewith.
The obligations of the Debtor contained in this Section 3 shall survive the
termination of this Security Agreement and the discharge of the Debtor's other
obligations hereunder and under the Note.
SECTION 4. REPRESENTATIONS, WARRANTIES AND COVENANTS. The Debtor
covenants as follows:
(A) NECESSARY FILINGS. The Debtor shall deliver to Secured
Party such documents, or shall make such filings, endorse such
certificates or otherwise do such things necessary or appropriate to
perfect the security interest of Secured Party with respect to the
Pledged Collateral under the provisions of the applicable law
(including, without limitation, the Uniform Commercial Code) as in
effect in Massachusetts or such other jurisdiction where such Pledged
Collateral is located.
(B) LOCATION OF INVENTORY. All Inventory now held or
subsequently acquired by the Debtor shall be located and remain on
property or premises owned, rented and/or leased by the Debtor on the
date hereof, except for Inventory in transit in the ordinary course
of business to such locations, or such new location as Debtor may
establish if (I) Debtor shall have given to Secured Party at least 45
days prior written notice of such intention, clearly describing such
new location and providing such other information in connection
therewith as Secured Party may request; and (II) with respect to such
new locations, the Debtor shall have taken all action satisfactory to
Secured Party to maintain the perfection and proof of the security
interest in the Pledged Collateral intended to be granted hereby,
including, without limitation, obtaining waivers of any landlord's or
warehouseman's liens with respect to such new location and amending
this Security Agreement accordingly.
(C) LOCATION OF EQUIPMENT. All Equipment held on the date
hereof by the Debtor shall be located on property or premises owned,
leased and/or rented by the Debtor on the date hereof, except that
Equipment may be removed from these locations solely for the purpose
of performing repairs to such Equipment; PROVIDED that (I)
immediately upon completion of the repair work, such Equipment shall
be returned to said property and or premises; and (II) the aggregate
value of all Equipment not located on said property or premises at
any one time shall not exceed $50,000. All Equipment now held or
subsequently acquired shall be kept on property or premises owned,
leased or rented by Debtor as of the date hereof, or such new
location as the Debtor may establish if (I) Debtor shall have given
to the Secured Party at least 45 days prior written notice of such
intention, clearly describing such new location and providing such
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other information in connection therewith as Secured Party may
request; and (II) with respect to such new location, Debtor shall
have taken all action satisfactory to Secured Party to maintain the
perfection and proof of the security interest of Secured Party in the
Pledged Collateral intended to be granted hereby, including, without
limitation, obtaining waivers of any landlord's or warehouseman's
liens with respect to such new location and amending this Security
Agreement accordingly.
SECTION 5. ADDITIONAL REPRESENTATIONS, WARRANTIES AND COVENANTS OF
DEBTOR. The Debtor hereby repeats each of the representations and warranties
made by the Debtor and contained or incorporated by reference in the Note as
fully as if each such representation and warranty were expressly set forth
herein and expressly made herein by the Debtor on and as of the date hereof,
each such representation and warranty being incorporated in this Security
Agreement by reference MUTATIS MUTANDIS.
SECTION 6. SPECIAL PROVISIONS CONCERNING RECEIVABLES.
(A) SPECIAL REPRESENTATIONS AND WARRANTIES. As of the time
when each of its Receivables arises, Debtor shall be deemed to have
represented and warranted that such Receivable and all records,
papers and documents relating thereto: (I) are genuine and in all
material respects what they purport to be, (II) represent the legal,
valid and binding obligation of the account debtor evidencing
indebtedness unpaid and owed by such account debtor arising out of
the performance of labor or services or the sale or lease and
delivery of the merchandise listed therein, or both, (III) will,
except for the original or duplicate original invoice sent to a
purchaser evidencing such purchaser's account, be the only original
writings evidencing and embodying such obligation of the account
debtor named therein, (IV) constitute and evidence true and valid
obligations, enforceable in accordance with their respective terms,
except as the binding nature thereof may be limited by applicable
bankruptcy, insolvency, reorganization or moratorium or other similar
laws from time to time in effect affecting the enforcement of
creditors' rights and remedies generally and by general principles of
equity (regardless of whether enforcement is sought in a proceeding
at law or in equity), and (V) in all material respects are in
compliance and conform with all applicable federal, state and local
laws and applicable laws of any relevant foreign jurisdiction.
(B) MAINTENANCE OF RECORDS. Debtor shall keep and maintain
at its own cost and expense satisfactory and complete records of each
Receivable, in a manner consistent with prudent business practices,
for at least three years from the date on which such Receivable comes
into existence, including, without limitation, records of all
payments received, all credits granted thereon, all merchandise
returned and all other documentation relating thereto, and Debtor
shall make the same available to Secured Party for inspection, at
Debtor's own cost and expense, at any and all reasonable times upon
demand. Upon the occurrence and during the continuance of an Event of
Default (as defined in Section 3 of the Loan Agreement), Debtor
shall, at its own cost and expense, deliver all tangible evidence of
Receivables (including, without limitation, all documents evidencing
Receivables) and such books and records to Secured Party or to its
representatives (copies of which evidence and books and records may
be retained by Debtor) at any time upon Secured Party's demand. Upon
the occurrence and during the continuance of an Event of Default,
Secured Party may transfer a full and complete copy of Debtor's
books, records, credit information, reports, memoranda and all other
writings
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relating to the Receivables to and for the use by any Person that has
acquired or is contemplating acquisition of an interest in the
Receivables or Secured Party's security interest therein without the
consent of Debtor.
(C) LEGEND. Debtor shall legend, in form and manner
satisfactory to Secured Party, the Receivables and other books,
records and documents of Debtor evidencing or pertaining to the
Receivables with an appropriate reference to the fact that the
Receivables have been assigned to Secured Party and that Secured
Party has a security interest therein.
(D) MODIFICATION OF TERMS, ETC. Subject to the provisions
of Section 6(e), Debtor shall not rescind or cancel any indebtedness
evidenced by any Receivable or modify any term thereof or make any
adjustment with respect thereto, or extend or renew any such
indebtedness, or compromise or settle any dispute, claim, suit or
legal proceeding relating thereto, or sell any Receivable or interest
therein, without the prior written consent of the Secured Party.
Debtor shall timely fulfill in all material respects all obligations
on its part to be fulfilled under or in connection with the
Receivables.
(E) COLLECTION. Debtor shall take all commercially
reasonable actions to cause to be collected from the account debtor
of each of the Receivables, as and when due (including, without
limitation, Receivables that are delinquent, such Receivables to be
collected in accordance with generally accepted commercial collection
procedures), any and all amounts owing under or on account of such
Receivable, and apply forthwith upon receipt thereof all such amounts
as are so collected to the outstanding balance of such Receivable,
except that Debtor may allow in the ordinary course of business (I) a
refund or credit due as a result of returned or damaged or defective
merchandise and (II) so long as no Event of Default shall exist and
be continuing, such extensions of time to pay amounts due in respect
of Receivables and such other modifications or payment terms or
settlements in respect of Receivables as shall be commercially
reasonable in the circumstances, all in accordance with Debtor's
ordinary course of business consistent with its collection practices
as in effect from time to time. The costs and expenses (including,
without limitation, attorneys' fees and the allocated costs of
internal counsel) of collection, whether incurred by Debtor or
Secured Party, shall be paid by Debtor. The Secured Party shall have
the right at any time to notify an account debtor or the obligor on
any insurance with respect to a Receivable of the security interest
herein and to make payment directly to the Secured Party.
SECTION 7. PROVISIONS CONCERNING ALL PLEDGED COLLATERAL.
(A) PROTECTION OF SECURED PARTY'S SECURITY. Debtor shall
not take any action that impairs the rights of Secured Party in the
Pledged Collateral. Debtor shall at all times keep the Inventory and
Equipment insured in favor of Secured Party, at the Debtors' own
expense, to Secured Party's reasonable satisfaction against fire,
theft and all other risks to which the Pledged Collateral may be
subject, in such amounts (but in no event greater than the
replacement cost thereof) and with such deductibles as would be
maintained by operators of businesses similar to the business of
Debtor or as Secured Party may otherwise require. Each policy or
certificate with respect to such insurance shall be endorsed to
Secured Party's satisfaction for the benefit of Secured Party
(including, without limitation, by naming Secured Party as an
additional named insured or an additional loss payee as Secured Party
may request) and such policy or
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certificate shall be delivered to Secured Party. Each such policy
shall state that it cannot be cancelled without 30 days' prior
written notice to Secured Party. At least 30 days prior to the
expiration of any such policy of insurance, Debtor shall deliver to
Secured Party an extension or renewal policy or an insurance
certificate evidencing renewal or extension of such policy. If Debtor
shall fail to insure such Pledged Collateral to Secured Party's
reasonable satisfaction or if Debtor shall fail to so endorse and
deposit, or to extend or renew, all such insurance policies or
certificates with respect thereto, Secured Party shall have the right
(but shall be under no obligation) to advance funds to procure or
renew or extend such insurance and Debtor agrees to reimburse Secured
Party for all costs and expenses thereof, with interest on all such
funds from the date advanced, at the highest rate then payable under
the Note. Except to the extent such proceeds are used to repair,
replace or improve damaged Equipment as provided in Section 7(h),
Secured Party may apply any proceeds of such insurance when received
by it toward the payment of any of the Secured Obligations in such
order as Secured Party shall determine.
(B) MAINTENANCE OF EQUIPMENT. Debtor shall cause the
Equipment to be maintained and preserved in the same condition,
repair and working order as when new, ordinary wear and tear
excepted, and to the extent consistent with past business practice in
accordance with any manufacturer's manual, and shall forthwith, or in
the case of any loss or damage which (individually or in the
aggregate) exceeds $100,000 to any of the Equipment (of which prompt
notice shall be given to the Secured Party), as quickly as
practicable after the occurrence thereof, make or cause to be made
all repairs, replacements and other improvements in connection
therewith which are necessary or desirable to such end.
(C) PAYMENT OF TAXES; CLAIMS. Debtor shall pay promptly
when due all property and other taxes, assessments and governmental
charges or levies imposed upon, and all claims (including claims for
labor, materials and supplies) against, the Pledged Collateral.
(D) FURTHER ACTIONS. Debtor shall, at its own expense,
make, execute, endorse, acknowledge, file and/or deliver to Secured
Party from time to time such lists, descriptions and designations of
the Pledged Collateral, copies of warehouse receipts, receipts in the
nature of warehouse receipts, bills of lading, documents of title,
vouchers, invoices, schedules, confirmatory assignments, supplements,
additional security agreements, conveyances, financing statements,
transfer endorsements, powers of attorney, certificates, reports and
other assurances or instruments and take such further steps relating
to the Pledged Collateral and other property or rights covered by the
security interest hereby granted, which Secured Party deems
appropriate or advisable to exercise and enforce its rights and
remedies hereunder with respect to any Pledged Collateral and to
perfect, preserve or protect the security interest in the Pledged
Collateral created by this Agreement.
(E) FINANCING STATEMENTS. Debtor shall sign and deliver to
Secured Party such financing and continuation statements, in form
acceptable to Secured Party, as may from time to time, be rehired to
continue and maintain a valid, enforceable, security interest in the
Pledged Collateral as provided herein and the other rights, as
against third parties, provided hereby, all in accordance with the
Uniform Commercial Code as
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enacted in any and all relevant jurisdictions or any other relevant
law. Debtor shall pay any applicable filing fees and other expenses
related to the filing of such financing and continuation statements.
Debtor authorizes Secured Party to file any such financing or
continuation statements without the signature of Debtor.
(F) WAREHOUSE RECEIPTS NON-NEGOTIABLE. If any warehouse
receipt or receipt in the nature of a warehouse receipt is issued
with respect to any of the Inventory, Debtor shall not permit such
warehouse receipt or receipt in the nature thereof to be "negotiable"
(as such term is used in Section 7-104 of the Code or under other
relevant law).
(G) LICENSES. Debtor will not sell, license, amend or
permit the amendment of any of the Licenses in any manner adverse to
the interests of the Secured Party without the prior written consent
of the Secured Party.
(H) NO PROHIBITION. Nothing in this Section 7 shall be
deemed to prohibit (I) the sale of Inventory and the collection of
Receivables by Debtor in the ordinary course of business, or (II) the
disposition and replacement of obsolete assets.
SECTION 8. REASONABLE CARE. Secured Party shall be deemed to have
exercised reasonable care in the custody and preservation of Pledged Collateral
in its possession if such Pledged Collateral is accorded treatment substantially
equivalent to that which Secured Party, in its individual capacity, accords its
own property, it being understood that Secured Party shall not have
responsibility for taking any necessary steps to preserve rights against any
Person with respect to any Pledged Collateral.
SECTION 9. REMEDIES.
(A) OBTAINING THE PLEDGED COLLATERAL UPON EVENT OF DEFAULT.
If any Event of Default shall have occurred and be continuing, then
and in every such case, the Secured Party may, at any time or from
time to time during the continuance of such Event of Default:
(I) Personally, or by agents or attorneys,
immediately take possession of the Pledged Collateral or any
part thereof, from Debtor or any other Person who then has
possession of any part thereof with or without notice or
process of law, and for that purpose may enter upon Debtor's
premises where any of the Pledged Collateral is located and
remove such Pledged Collateral, and use in connection with
such removal any and all services, supplies, aids and other
facilities of Debtor;
(II) Instruct the obligor or obligors on any
agreement, instrument or other obligation (including, without
limitation, the Receivables) constituting the Pledged
Collateral, to make any payment required by the terms of such
instrument or agreement directly to Secured Party; PROVIDED,
HOWEVER, in the event that any such payments are made
directly to Debtor, Debtor shall hold such payments in trust
and shall segregate all amounts received pursuant thereto in
a separate account and pay the same promptly to Secured
Party;
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(III) Sell, assign or otherwise liquidate, or
direct Debtor to sell, assign or otherwise liquidate the
Pledged Collateral, or any part thereof, and take possession
of the proceeds of any such sale, assignment or liquidation;
(IV) Take possession of the Pledged Collateral, or
any part thereof, by directing Debtor in writing to deliver
the same to Secured Party at any place or places designated
by Secured Party, in which event Debtor shall at its own
expense:
(A) forthwith cause the same to be moved
to the place or places so designated by Secured
Party and there delivered to Secured Party;
(B) store and keep any Pledged
Collateral so delivered to Secured Party at such
place or places pending further action by Secured
Party as provided in Section 9(b); and
(C) while the Pledged Collateral shall
be so stored and kept, provide such guards and
maintenance services as shall be necessary to
protect the same and to preserve and maintain them
in good condition. Debtor's obligation to deliver
the Pledged Collateral is of the essence of this
Agreement. Upon application to a court of equity
having jurisdiction, Secured Party shall be
entitled to a decree requiring specific performance
by the Debtor of such obligation.
(B) DISPOSITION OF THE PLEDGED COLLATERAL.
(I) Upon the occurrence and during the
continuance of an Event of Default, the Secured Party may,
from time to time, exercise in respect of the Pledged
Collateral, in addition to other rights and remedies
provided for herein or otherwise available to it, all the
rights and remedies of a secured party under the Uniform
Commercial Code at the time of an event of default, and the
Secured Party may also in its sole discretion, without
notice except as specified below, sell the Pledged
Collateral or any part thereof in one or more parcels at
public or private sale , at any exchange, broker's board or
at any of the Secured Party's offices or elsewhere, for
cash, on credit or for future delivery, and at such price
or prices and upon such other terms as the Secured Party
may deem commercially reasonable. The Secured Party may be
the purchaser of any or all of the Pledged Collateral at
any such sale and shall be entitled, for the purpose of
bidding and making settlement or payment of the purchase
price for all or any portion of the Pledged Collateral sold
at such sale, to use and apply any of the Secured
Obligations owed to such Person as a credit on account of
the purchase price of any Pledged Collateral payable by
such Person at such sale. Each purchaser at any such sale
shall acquire the property sold free from any claim or
right on the part of Debtor and Debtor hereby waives, to
the fullest extent permitted by law, all rights of
redemption, stay or appraisal hereafter enacted. The
Secured Party shall not be obligated to make any sale of
Pledged Collateral regardless of notice of sale having been
given. The Secured Party may adjourn any public or private
sale from time to time by announcement at the time and
place fixed therefor, and such sale may, without further
notice, be made
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at the time and place to which it was so adjourned. Debtor
hereby waives, to the fullest extent permitted by law, any
claims against the Secured Party arising by reason of the
fact that the price at which any Pledged Collateral may
have been sold at such a private sale was less than the
price which might have been obtained at a public sale, even
if the Secured Party accepts the first offer received and
does not offer such Pledged Collateral to more than one
offeree.
(II) Debtor agrees that, to the extent notice of
sale shall be required by law, 10 days' notice from Secured
Party of the time and place of any public sale or of the
time after which a private sale or other intended
disposition is to take place shall be commercially
reasonable notification of such matters. No notification
need be given to Debtor if it has signed, after the
occurrence of an Event of Default, a statement renouncing
or modifying any right to notification of sale or other
intended disposition. In addition to the rights and
remedies provided in this Agreement and in the Note,
Secured Party shall have all the rights and remedies of a
secured party under the Uniform Commercial Code.
(C) WAIVER OF CLAIMS. Except as otherwise provided herein,
Debtor hereby waives, to the fullest extent permitted by applicable
law, notice or judicial hearing in connection with Secured Party's
taking possession, or Secured Party's disposition of any of the
Pledged Collateral, including, without limitation, any and all prior
notice and hearing for any prejudgment remedy or remedies and any
such right which Debtor would otherwise have under law, and Debtor
hereby further waives to the extent permitted by applicable law: (I)
all damages, occasioned by such taking of possession; (II) all other
requirements as to the time, place and terms of sale or other
requirements with respect to the enforcement of Secured Party's
rights hereunder; and (III) all rights of redemption, appraisal,
valuation, stay, extension or moratorium now or hereafter in force
under any applicable law. Any sale of, or the grant of options to
purchase, or any other realization upon, any Pledged Collateral shall
operate to divest all rights, title, interest, claim and demand,
either at law or in equity, of Debtor therein and thereto, and shall
be a perpetual bar both at law and in equity against Debtor and
against any and all Persons claiming or attempting to claim the
Pledged Collateral so sold, optioned or realized upon, or a thereof,
from, through or under Debtor.
SECTION 10. APPLICATION OF PROCEEDS. The proceeds of any Pledged
Collateral obtained pursuant to the exercise of any remedy set forth in Section
9 shall be applied, together with any other sums then held by Secured Party
pursuant to this Agreement, promptly by Secured Party:
FIRST, to the payment of all costs and expenses, fees,
commissions and taxes of such sale, collection or other realization,
including, without limitation, reasonable compensation to the Secured
Party and its agents and counsel, and all expenses, liabilities and
advances made or incurred by the Secured Party in connection
therewith, together with interest on each such amount at the highest
rate then in effect under the Note;
SECOND, to the indefeasible payment in full in cash of the
Secured Obligations, ratably according to the unpaid amounts thereof,
without preference or priority of any kind among amounts so due and
payable ; and
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THIRD, to Debtor, or its successors or assigns, or to
whomsoever may be lawfully entitled to receive the same or as a court
of competent jurisdiction may direct, of any surplus then remaining
from such proceeds.
SECTION 11. EXPENSES. Debtor will upon demand pay to Secured Party
the amount of any and all reasonable expenses, including the fees and expenses
of its counsel and the allocated fees and expenses of staff counsel and the fees
and expenses of any experts and agents, which Secured Party may incur in
connection with (I) the collection of the Secured Obligations, (II) the
administration of this Agreement, (III) the custody or preservation of, or the
sale of, collection from, or other realization upon, any of the Pledged
Collateral, (IV) the exercise or enforcement of any of the rights of Secured
Party hereunder, or (V) the failure by Debtor to perform or observe any of the
provisions hereof. All amounts payable by Debtor under this Section 11 shall be
due upon demand and shall be part of the Secured Obligations. Debtor's
obligations under this Section shall survive the termination of this Agreement
and the discharge of Debtor's other obligations hereunder.
SECTION 12. NO WAIVER: CUMULATIVE REMEDIES.
(A) No failure on the part of Secured Party to exercise, no
course of dealing with respect to, and no delay on the part of
Secured Party in exercising, any right, power or remedy hereunder
shall operate as a waiver thereof; nor shall any single orpartial
exercise of any such right, power or remedy hereunder preclude any
other or further exercise thereof or the exercise of any other right,
power or remedy. The remedies herein provided are cumulative and are
not exclusive of any remedies provided by law.
(B) In the event Secured Party shall have instituted any
proceeding to enforce any right, power or remedy under this Agreement
by foreclosure, sale, entry or otherwise, and such proceeding shall
have been discontinued or abandoned for any reason or shall have been
determined adversely to Secured Party, then and in every such case,
Debtor and Secured Party shall be restored to their respective former
positions and rights hereunder with respect to the Pledged
Collateral, and all rights, remedies and powers of Secured Party
shall continue as if no such proceeding had been instituted.
SECTION 13. SECURED PARTY APPOINTED ATTORNEY-IN-FACT. If Debtor shall
fail to do any act or thing that it has covenanted to do hereunder or if any
warranty on the part of Debtor contained herein shall be breached, Secured Party
may (but shall not be obligated to) do the same or cause it to be done, or may
remedy any such breach, and may expend funds for such purpose. Any and all
amounts so expended by Secured Party shall be paid by Debtor promptly upon
demand therefor, with interest at the highest rate then in effect under the Note
during the period from and including the date on which such funds were so
expended to the date of repayment. Debtor's obligations under this Section 13
shall survive the termination of this Agreement and the discharge and Debtor's
other obligations hereunder. Debtor hereby appoints Secured Party its
attorney-in-fact with an interest, with full authority in the place and stead of
Debtor and in the name of Debtor, or otherwise, from time to time in Secured
Party's discretion, to take any action and to execute any instrument consistent
with the terms of this Agreement and the Note which the Secured Party may deem
necessary or advisable to accomplish the purposes of this Agreement. The
foregoing grant of authority is a power of attorney coupled with an interest and
such appointment shall be irrevocable for the term of this Agreement. Debtor
hereby ratifies all that such attorney shall lawfully do or cause to do be done
by virtue hereof.
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SECTION 14. INDEMNITY.
(A) INDEMNITY. Debtor agrees to indemnify, reimburse and
hold Secured Party and its respective successors, assigns, employees,
agents, attorneys and servants (collectively, "Indemnitees") harmless
from and against any and all liabilities, obligations, damages,
injuries, penalties, claims, demands, actions, suits, judgments and
any and all costs and expenses (including, without limitation,
attorneys' fees and expenses and the allocated costs of internal
counsel) of whatsoever kind and nature imposed on, asserted against
or incurred by any of the Indemnitees in any way relating to or
arising out of this Agreement or the Note or in any other way
connected with the administration of the transactions contemplated
hereby or the enforcement of any of the terms hereof, or the
preservation of any rights hereunder, or in any way relating to or
arising out of the manufacture, processing, ownership, ordering,
purchase, delivery, control, acceptance, lease, financing,
possession, operation, condition, sale, return or other disposition,
or use of the Pledged Collateral (including, without limitation,
latent or other defects, whether or not discoverable), the violation
of the laws of any country, state or other governmental body or unit,
any tort (including, without limitation, claims arising or imposed
under the doctrine of strict liability, or for or on account of
injury to or the death of any Person (including any Indemnitee)), or
property damage, or contract claim; PROVIDED, that Debtor shall have
no obligation to an Indemnitee hereunder to the extent it is
judicially determined by a final order or decree that such
indemnified liabilities arise solely from the gross negligence or
willful misconduct of that Indemnitee. Upon written notice by any
Indemnitee of the assertion of such a liability, obligation, damage,
injury, penalty, claim, demand, action, judgement or suit, Debtor
shall assume full responsibility for the defense thereof. If any
action, suit or proceeding arising from any of the foregoing is
brought against any Indemnitee, Debtor shall, if requested by such
Indemnitee, resist and defend such action, suit or proceeding or
cause the same to be resisted and defended by counsel reasonably
satisfactory to such Indemnitee. Each Indemnitee shall, unless any
other Indemnitee has made the request described in the preceding
sentence and such request has been complied with, have the right to
employ its own counsel (or internal counsel) to investigate and
control the defense of any matter covered by the indemnity set forth
in this Section 14, and the fees and expenses of such counsel shall
be paid by Debtor; PROVIDED that, only to the extent no conflict
exists between or among the Indemnitees as reasonably determined by
the Indemnitees, Debtor shall not be obligated to pay the fees and
expenses of more than one counsel for all Indemnitees as a group with
respect to any such matter, action, suit or proceeding.
(B) MISREPRESENTATIONS. Without limiting the application of
subsection 14(a), Debtor agrees to pay, indemnify and hold each
Indemnitee harmless from and against any loss, costs, damages and
expenses which such Indemnitee may suffer, expend or incur in
consequence of or growing out of any misrepresentation by Debtor in
this Agreement or the Note or in any statement or writing
contemplated by or made or delivered pursuant to or in connection
with this Agreement or the Note.
(C) CONTRIBUTION. If and to the extent that the obligations
of Debtor under this Section 14 are unenforceable for any reason,
Debtor hereby agrees to make the
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maximum contribution to the payment and satisfaction of such
obligations that is permissible under applicable law.
(D) SURVIVAL. The obligations of Debtor contained in this
Section 14 shall survive the termination of this Agreement and the
discharge of Debtor's other obligations hereunder and under the Note.
(E) REIMBURSEMENT. Any amounts paid by an Indemnitee as to
which such Indemnitee has the right to reimbursement shall constitute
Secured Obligations secured by the Pledged Collateral.
SECTION 15. MODIFICATIONS IN WRITING. No amendment, modification,
supplement, termination or waiver of or to any provision of this Agreement, nor
consent to any departure by Debtor therefrom, shall be effective unless the same
shall be in writing and signed by the Secured Party. Any amendment, modification
or supplement of or to any provision of this Agreement, any waiver of any
provision of this Agreement, and any consent to any departure by Debtor from the
terms of any provision of this Agreement, shall be effective only in the
specific instance and for the specific purpose for which made or given. Except
where notice is specifically required by this Agreement or the Note, no notice
to or demand on Debtor in any case shall entitle Debtor to any other or further
notice or demand in similar or other circumstances.
SECTION 16. TERMINATION; RELEASE. When all the Secured Obligations
(other than Secured Obligations in the nature of continuing indemnitees or
expense reimbursement obligations not yet due and payable) have been
indefeasibly paid in full and have been terminated, the commitments of the
Secured Party to make any loan or issue any letter of credit, and all letters of
credit issued under the Note have expired, this Agreement shall terminate. Upon
termination of this Agreement or any release of Pledged Collateral in accordance
with the provisions of the Note, Secured Party shall, upon the request and at
the expense of Debtor, forthwith assign, transfer and deliver to Debtor, against
receipt and without recourse to or warranty by Secured Party, such of the
Pledged Collateral to be released as may then be in the possession of Secured
Party, on the order of and at the expense of Debtor, and proper instruments
(including Uniform Commercial Code termination statements on Form UCC-3)
acknowledging the termination of this Agreement or the release of such Pledged
Collateral, as the case may be.
SECTION 17. DEFINITIONS. The following terms shall have the following
meanings. Such definitions shall be equally applicable to the singular and
plural forms of the terms defined.
"CONTRACTS" shall mean, all right, title and interest of
Debtor in, to and under, or derived from, any and all sale, service,
performance and equipment lease contracts (whether written or oral),
and any other contract (whether written or oral), between Debtor and
third parties.
"EQUIPMENT" shall mean all equipment, wherever located,
including, without limitation, all machinery, equipment, office
machinery, furniture, and all other equipment of every kind and
nature, wherever situated, and owned by Debtor or in which Debtor may
have any interest (to the extent of such interest), all
modifications, alterations, repairs, substitutions, additions and
accessions thereto, all replacements and all parts therefor, and
together with all substitutes for any of the foregoing.
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"INSTRUMENT" shall have the meaning assigned to that term
under the Uniform Commercial Code.
"INSURANCE POLICIES" shall mean all insurance policies held
by Debtor or naming Debtor as insured, additional insured or loss
payee (including, without limitation, casualty insurance, liability
insurance, property insurance and business interruption insurance)
and all such insurance policies entered into after the date hereof.
"INTANGIBLES" shall mean all manuals, blueprints, know-how,
warranties and records in connection with the Equipment; all
documents of title or documents representing the Inventory and all
records, files and writings with respect thereto; any and all other
rights, claims and causes of action of Debtor against any other
Person and the benefits of any and all collateral or other security
given by any other Person in connection therewith; all information,
customer lists, identification of suppliers, data, plans, blueprints,
specification designs, drawings, recorded knowledge, surveys,
engineering reports, test reports, manuals, materials, standards,
processing standards, performance standards, catalogs, research data,
computer and automatic machinery software and programs, and the like
pertaining to operations by Debtor; all information relating to sales
of products now or hereafter manufactured, distributed or franchised
by Debtor; all accounting information pertaining to Debtor's
operations of any of the Equipment, Inventory, Receivables or
Intangibles and all media in which or on which any of the information
or knowledge or data or records relating to such operations or any of
the Equipment, Inventory, Receivables or Intangibles may be recorded
or stored and all computer programs used for the compilation or
printout of such information, knowledge, records or data; all
licenses, consents, permits, variances, certifications and approvals
of governmental agencies now or hereafter held by Debtor pertaining
to operations now or hereafter conducted by Debtor; all causes of
action, claims and warranties now or hereafter owned or acquired by
Debtor; all patents issued and assigned to or applications made by
Debtor; all trademarks (including service marks), federal and state
trademark registrations and applications made by Debtor, common law
trademarks and trade names owned by or assigned to Debtor and all
registrations and applications for the foregoing; all copyrights,
whether statutory or common law, owned by or assigned to Debtor; the
entire goodwill of Debtor's business and other general intangibles
(including know-how, trade secrets, customer lists, proprietary
information, inventions, methods, procedures and formulas) connected
with the use and symbolized by the trademarks of Debtor; and any
other property consisting of a general intangible under the Uniform
Commercial Code in effect in any jurisdiction where Debtor maintains
its records relating to such property.
"INVENTORY" shall mean, inclusively, all inventory of
Debtor, wherever located, and whether now existing or hereafter
acquired, including, without limitation, all raw materials, work in
process, goods (as defined under the Uniform Commercial Code),
materials and supplies of any kind or nature.
"INVESTMENT PROPERTY" shall mean all of the Debtor's
financial assets, securities (whether certificated or
uncertificated), security entitlements, security accounts, commodity
contracts and commodity accounts.
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"LICENSES" shall mean all of Debtor's license agreements
and covenants not to xxx with any other Person with respect to a
patent, trademark, service xxxx or copyright, whether Debtor is a
licensor or licensee under any such license agreement, along with any
and all (I) renewals, extensions, supplements and continuations
thereof, (II) income, royalties, damages, claims and payments now and
hereafter due and/or payable to Debtor with respect thereto,
including, without limitation, damages and payments for past, present
or future infringements thereof, (III) rights to xxx for past,
present and future infringements thereof and (IV) any other rights to
use, exploit or practice any patent, trademark, service xxxx or
copyright of Debtor.
"LIEN" shall mean any mortgage, pledge, assignment,
security interest, encumbrance, lien or charge of any kind, any
conditional sale or other title retention agreement or any lease in
the nature thereof (including any agreement to give any of the
foregoing).
"MATERIALLY ADVERSE EFFECT" shall mean, (I) with respect to
the Debtor, any materially adverse change with respect to the
business, franchises, results of operations, assets, liabilities
(contingent or otherwise), condition (financial or otherwise) or
prospects of the Debtor, or (II) any fact or circumstance (whether or
not the result thereof would be covered by insurance) as to which,
singly or in the aggregate, there is a reasonable likelihood of (X) a
materially adverse change described in clause (i) with respect to the
Debtor, (Y) the inability of the Debtor to perform in any material
respect its Secured Obligations hereunder or under the Note or the
inability of the Secured Party to enforce in any material respect its
rights hereunder or under the Note or the Secured Obligations
(including realizing on the Pledged Collateral), or (Z) materially
adverse effect on the legality, validity or enforceability of this
Agreement or the Note.
"PERSON" shall mean and include any individual,
partnership, joint venture, firm, corporation, association, trust or
other enterprise or any body politic.
"PROCEEDS" shall have the meaning assigned to that term
under the Uniform Commercial Code or under other relevant law and, in
any event, shall include, without limitation, any and all (I)
proceeds of any insurance (except payments made to a Person which is
not a party to this Agreement), indemnity, warranty or guaranty
payable to Secured Party or to Debtor from time to time with respect
to any of the Pledged Collateral, (II) payments (in any form
whatsoever) made or due and payable to Debtor from time to time in
connection with any requisition, confiscation, condemnation, seizure
or forfeiture of all or any part of the Pledged Collateral by any
governmental authority (or any person acting on behalf of a
governmental authority), (III) instruments representing obligations
to pay amounts in respect of Equipment, Intangibles, Inventory, or
Receivables, (IV) products of the Pledged Collateral, and (V) other
amounts from time to time paid or payable under or in connection with
any of the Pledged Collateral.
"RECEIVABLES" shall mean all of Debtor's rights to payment
for goods sold or leased or services performed by Debtor or any other
party, whether now in existence or arising from time to time
hereafter, including, without limitation, rights evidenced by an
account, note, contract, security agreement, chattel paper, or other
evidence of indebtedness or security together with (I) all security
pledged, assigned, hypothecated or granted to or held by Debtor to
secure the foregoing, (II) general intangibles arising
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out of Debtor's rights in any goods, the sale of which gave rise
thereto, (III) all guarantees, endorsements and indemnifications on,
or of, any of the foregoing, (IV) all powers of attorney for the
execution of any evidence of indebtedness or security or other
writing in connection therewith, and (V) all evidences of the filing
of financing statements and other statements and the registration of
other instruments in connection therewith and amendments thereto,
notices to other creditors or secured parties, and certificates from
filing or other registration officers.
SECTION 18. NOTICES. Unless otherwise provided herein or in the Note,
any notice or other communication herein required or permitted to be given shall
be in writing and may be personally served, telecopied, telexed or sent by
United States mail, to Debtor or Secured Party, as the case may be, addressed to
it at the respective address set forth in the Note, or at such other address as
shall be designated by Debtor or Secured Party, as the case may be, in a written
notice to the other party complying as to delivery with the terms of this
Section 18. All such notices and other communications shall be deemed to have
been given when delivered in person, or received by telecopy or telex; or four
business days after deposit in the United States mail, registered or certified,
with postage prepaid and properly addressed; PROVIDED, that notices to Secured
Party shall not be effective until received by Secured Party.
SECTION 19. CONTINUING SECURITY INTEREST; ASSIGNMENT. This Agreement
shall create a continuing security interest in the Pledged Collateral and shall
(I) remain in full force and effect until the undefeasible payment in full in
cash of all Secured Obligations, (II) be binding upon the Debtor, its successors
and assigns, and (III) inure, together with the rights and remedies of Secured
Party hereunder, to the benefit of Secured Party and its successors, transferees
and assigns; no other Persons (including, without limitation, any other creditor
of the Debtor) shall have any interest herein or any right or benefit with
respect hereto. Without limiting the generality of the foregoing clause (iii),
the Secured Party may assign or otherwise transfer any indebtedness held by it
and secured by this Agreement to any other Person, and such other Person shall
thereupon become vested with all the benefits in respect thereof granted to such
Secured Party, herein or otherwise, subject however, to the provisions of the
Note.
SECTION 20. GOVERNING LAW; TERMS. This Agreement shall be governed
by, and shall be construed and enforced in accordance with, the laws of the
Commonwealth of Massachusetts, without regard to principles of conflicts of
laws.
SECTION 21. CONSENT TO JURISDICTION AND SERVICE OF PROCESS. All
judicial proceedings brought against Debtor with respect to this Agreement may
be brought in any state or federal court of competent jurisdiction in the
Commonwealth of Massachusetts and by execution and delivery of this Agreement,
Debtor accepts for itself and in connection with its properties, generally and
unconditionally, the nonexclusive jurisdiction of the aforesaid courts, and
irrevocably agrees to be bound by any judgment rendered thereby in connection
with this Agreement. Debtor hereby irrevocably waives any objection, including,
without limitation, any objection to the laying of venue or based on the grounds
of FORUM NON CONVENIENS, which it may now or hereafter have to the bringing of
any such action or proceeding in such respective jurisdictions. Nothing herein
shall affect the right to serve process in any other manner permitted by law or
shall limit the right of the Secured Party to bring proceedings against Debtor
in the courts of any other jurisdiction.
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SECTION 22. WAIVER OF JURY TRIAL. DEBTOR HEREBY WAIVES TRIAL BY JURY
IN ANY JUDICIAL PROCEEDING TO WHICH IT IS A PARTY INVOLVING, DIRECTLY OR
INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY
WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS AGREEMENT OR THE
RELATIONSHIP ESTABLISHED HEREUNDER.
SECTION 23. SEVERABILITY OF PROVISIONS. Any provision of this
Agreement which is prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or
affecting the validity or enforceability of such provision in any other
jurisdiction.
SECTION 24. EXECUTION IN COUNTERPARTS. This Agreement and any
amendments, waivers, consents or supplements hereby may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed and delivered shall be deemed to be an original,
but all such counterparts together shall constitute one and the same agreement.
SECTION 25. HEADINGS. The Section headings used in this Agreement
are for convenience of reference only and shall not affect the construction of
this Agreement.
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INTENDED TO TAKE EFFECT AS AN INSTRUMENT UNDER SEAL AS OF THE DATE
FIRST WRITTEN ABOVE.
Debtor:
LOCATEPLUS HOLDINGS CORPORATION
By: ___________________________
Xxx X. Xxxxxxxxx, President
Secured Party:
GEMSTONE INVESTMENT COMPANY, INC.
By: ___________________________
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