Registration of Securities of a Small-Business Issuer — Form 10-SB Filing Table of Contents
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1: 10SB12G Form 10Sb HTML 922K
2: EX-3.1 Articles of Incorporation/Organization or By-Laws HTML 70K
3: EX-3.2 Exhibit 3.1 HTML 100K
4: EX-3.3 Articles of Incorporation/Organization or By-Laws HTML 40K
5: EX-3.4 Articles of Incorporation/Organization or By-Laws HTML 60K
6: EX-4.1 Instrument Defining the Rights of Security Holders HTML 209K
7: EX-4.2 Instrument Defining the Rights of Security Holders HTML 72K
8: EX-4.3 Instrument Defining the Rights of Security Holders HTML 142K
9: EX-4.4 Instrument Defining the Rights of Security Holders HTML 193K
10: EX-10.1 Material Contract HTML 74K
11: EX-10.2 Material Contract HTML 35K
12: EX-10.3 Material Contract HTML 119K
13: EX-10.4 Material Contract HTML 24K
14: EX-10.6 Material Contract HTML 149K
15: EX-10.7 Material Contract HTML 31K
16: EX-14.1 Code of Ethics HTML 120K
EX-4.4 — Instrument Defining the Rights of Security Holders
SECURITY
AGREEMENT, dated
as
of March [●], 2007 (this "Agreement")
made
by
Mohen,
Inc. d/b/a Spiral Frog, a
Delaware corporation (the "Company"
or
"Grantor"),
in
favor
of
Gottbetter Capital Finance, LLC. in its capacity as collateral agent (in such
capacity, the "Collateral
Agent") for
the
"Buyers" (as defined below) party to the Purchase Agreement, dated as
of
even date herewith (as amended, restated or otherwise modified from time to
time, the "Purchase
Agreement").
W
I T N E S S E TH:
WHEREAS,
the Company and each party listed as a "Buyer" on the Schedule of Buyers
attached
thereto (collectively, the "Buyers")
are
parties to the Purchase Agreement, pursuant to which
the
Company shall be required to sell, and the Buyers shall purchase or have the
right to purchase,
the "Notes" (as defined therein) issued pursuant thereto (as such Notes may
be
amended,
restated, replaced or otherwise modified from time to time in accordance with
the terms
thereof, collectively, the "Notes");
WHEREAS,
it is a condition precedent to the Buyers purchasing the Notes pursuant to
the
Purchase Agreement that the Company shall have executed and delivered to the
Collateral Agent
this Agreement providing for the grant to the Collateral Agent for the benefit
of the Buyers
of
a security interest in all personal property of the Company to secure all of
the
Company's
obligations under the Purchase Agreement, the Notes and the other Transaction
Documents
as defined in the Purchase Agreement (the “Transaction
Documents”); and
WHEREAS,
the parties to such Transaction Documents wish to amend and restate this
agreement,
making certain changes thereto;
NOW,
THEREFORE, in consideration of the premises and the agreements herein and in
order to induce the Buyers to perform under the Purchase Agreement, the Company
agrees with the
Collateral Agent, for the benefit of the Buyers, as follows:
SECTION
1. DEFINITIONS.
(a) Reference
is hereby made to the Purchase Agreement and the Notes for a statement
of the terms thereof. All terms used in this Agreement and the recitals hereto
which are
defined in the Purchase Agreement, the Notes or in Articles 8 or 9 of the
Uniform Commercial
Code as in effect from time to time in the State of New York (the "Code"),
and
which
are
not otherwise defined herein shall have the same meanings herein as set forth
therein; provided
that
terms used herein which are defined in the Code as in effect in the State of
New
York
on
the date hereof shall continue to have the same meaning notwithstanding any
replacement
or amendment of such statute except as the Collateral Agent may otherwise
determine.
(b) The
following terms shall have the respective meanings provided for in the Code:
"Accounts","Cash
Proceeds", "Chattel Paper", "Commercial Tort Claim", "Commodity Account",
"Commodity Contracts", "Deposit Account", "Documents", "Equipment", "Fixtures",
"General
Intangibles", "Goods", "Instruments", "Inventory", "Investment Property",
"Letter-of-Credit Rights", "Noncash Proceeds", "Payment Intangibles",
"Proceeds", "Promissory Notes", "Security",
"Record", "Security Account", "Software", and "Supporting
Obligations".
1
(c)
As
used in this Agreement, the following terms shall have the respective
meanings
indicated below, such meanings to be applicable equally to both the singular
and
plural forms
of
such terms:
"Collateral"
shall
have the meaning set forth in Section 2 hereof.
"Copyright
Licenses" means
all
licenses, contracts or other agreements, whether written
or oral, naming the Company as licensee or licensor and providing for the grant
of any right to use or sell any works covered by any copyright (including,
without limitation, all Copyright
Licenses set forth in Schedule
II hereto).
"Copyrights"
means
all
domestic and foreign copyrights, whether registered or not,
including, without limitation, all copyright rights throughout the universe
(whether now or hereafter
arising) in any and all media (whether now or hereafter developed), in and
to
all original
works of authorship fixed in any tangible medium of expression, acquired or
used
by the Company
(including, without limitation, all copyrights described in Schedule
II hereto),
all applications, registrations and recordings thereof (including, without
limitation, applications, registrations
and recordings in the United States Copyright Office or in any similar office
or
agency
of
the United States or any other country or any political subdivision thereof),
and all reissues, divisions, continuations, continuations in part and extensions
or renewals thereof.
"Event
of Default" shall
have the meaning set forth in the Notes. "GAAP"
shall
have the meaning set forth in Section 4(a) hereof.
"Insolvency
Proceeding" means
any
proceeding commenced by or against any Person
under any provision of the Bankruptcy Code (Chapter 11 of Title 11 of the United
States Code) or under any other bankruptcy or insolvency law, assignments for
the benefit of creditors, formal
or
informal moratoria, compositions, or extensions generally with creditors, or
proceedings
seeking reorganization, arrangement, or other similar relief.
"Intellectual
Property" means
the
Copyrights, Trademarks and Patents.
"Licenses"
means
the
Copyright Licenses, the Trademark Licenses and the Patent Licenses.
"Lien"
means
any
mortgage, deed of trust, pledge, lien (statutory or otherwise), security
interest, charge or other encumbrance or security or preferential arrangement
of
any nature,
including, without limitation, any conditional sale or title retention
arrangement, any capitalized
lease and any assignment, deposit arrangement or financing lease intended as,
or
having
the effect of, security.
2
“Obligations”
shall
have the meaning set forth in Section 3 hereof.
"Patent
Licenses" means
all
licenses, contracts or other agreements, whether written or oral, naming the
Company as licensee or licensor and providing for the grant of any right
to
manufacture, use or sell any invention covered by any Patent (including, without
limitation, all Patent Licenses set forth in Schedule
II hereto).
"Patents"
means
all
domestic and foreign letters patent, design patents, utility patents,
industrial designs, inventions, trade secrets, ideas, concepts, methods,
techniques, processes,
proprietary information, technology, know-how, formulae, rights of publicity
and
other
general intangibles of like nature, now existing or hereafter acquired
(including, without limitation,
all domestic and foreign letters patent, design patents, utility patents,
industrial designs,
inventions, trade secrets, ideas, concepts, methods, techniques, processes,
proprietary information,
technology, know-how and formulae described in Schedule
II hereto),
all applications,
registrations and recordings thereof (including, without limitation,
applications, registrations and recordings in the United States Patent and
Trademark Office, or in any similar office
or
agency of the United States or any other country or any political subdivision
thereof), and
all
reissues, divisions, continuations, continuations in part and extensions or
renewals thereof.
"Trademark
Licenses" means
all
licenses, contracts or other agreements, whether
written or oral, naming the Company as licensor or licensee and providing for
the grant of
any
right concerning any Trademark, together with any goodwill connected with and
symbolized
by any such trademark licenses, contracts or agreements and the right to prepare
for sale
or
lease and sell or lease any and all Inventory now or hereafter owned by the
Company and now
or
hereafter covered by such licenses (including, without limitation, all Trademark
Licenses described
in Schedule
II hereto).
"Trademarks"
means
all
domestic and foreign trademarks, service marks, collective marks, certification
marks, trade names, business names, d/b/a's, Internet domain names,
trade styles, designs, logos and other source or business identifiers and all
general intangibles
of like nature, now or hereafter owned, adopted, acquired or used by the Company
(including,
without limitation, all domestic and foreign trademarks, service marks,
collective marks,
certification marks, trade names, business names, d/b/a's, Internet domain
names, trade styles,
designs, logos and other source or business identifiers described in
Schedule
II hereto),
all
applications, registrations and recordings thereof (including, without
limitation, applications, registrations
and recordings in the United States Patent and Trademark Office or in any
similar office
or
agency of the United States, any state thereof or any other country or any
political subdivision thereof), and all reissues, extensions or renewals
thereof, together with all goodwill of
the
business symbolized by such marks and all customer lists, formulae and other
Records of the
Company relating to the distribution of products and services in connection
with
which any of
such
marks are used.
3
SECTION
2. GRANT
OF SECURITY INTEREST. As
collateral security for all of the Obligations,
the Company hereby pledges and assigns to the Collateral Agent for the benefit
of the
Buyers, and grants to the Collateral Agent for the benefit of the Buyers a
continuing security interest
in, all personal property of the Company, wherever located and whether now
or
hereafter existing
and whether now owned or hereafter acquired, of every kind and description,
tangible or intangible
(collectively, the "Collateral"),
including,
without limitation, the following:
(a)
all
Accounts;
(b)
all
Chattel Paper (whether tangible or
electronic);
(c)
the
Commercial Tort Claims;
(d) all
Deposit Accounts, all cash, and all other property from time to time deposited
therein
and the monies and property in the possession or under the control of the
Collateral Agent or any Buyer or any affiliate, representative, agent or
correspondent of the Collateral Agent
or
any Buyer;
(e) all
Documents;
(f) all
Fixtures;
(g) all
General Intangibles (including, without limitation, all Payment
Intangibles);
(h) all
Goods;
(i) all
Instruments (including, without limitation, Promissory Notes and each
certificated Security);
(j) all
Inventory;
(k) all
Investment Property;
(l) all
Copyrights, Patents and Trademarks, and all Licenses;
(m) all
Letter-of-Credit Rights;
(n) all
Supporting Obligations;
(o)
all
other tangible and intangible personal property of the Company (whether or
not
subject to the Code), including, without limitation, all bank and other accounts
and all cash and
all
investments therein, all proceeds, products, offspring, accessions, rents,
profits, income, benefits,
substitutions and replacements of and to any of the property of the Company
described in
the
preceding clauses of this Section
2 (including,
without limitation, any proceeds of insurance
thereon and all causes of action, claims and warranties now or hereafter held
by
the Company
in respect of any of the items listed above), and all books, correspondence,
files and other
Records, including, without limitation, all tapes, desks, cards, Software,
data
and computer programs
in the possession or under the control of the Company or any other Person from
time to time
acting for the Company that at any time evidence or contain information relating
to any of the
property described in the preceding clauses of this Section
2 or
are
otherwise necessary or helpful
in the collection or realization thereof; and
4
(p) all
Proceeds, including all Cash Proceeds and Noncash Proceeds, and products of
any
and
all of the foregoing Collateral;
in
each
case, howsoever, the Company's interest therein may arise or appear (whether
by
ownership,
security interest, claim or otherwise); provided,
that
no
security interest is granted in Equipment.
SECTION
3. SECURITY
FOR OBLIGATIONS. The
security interest created hereby in the Collateral constitutes continuing
collateral security for all of the following obligations, whether now
existing or hereafter incurred (collectively, the "Obligations"):
(a) the
payment by the Company, as and when due and payable (by scheduled maturity,
required prepayment, acceleration, demand or otherwise), of all amounts from
time to time
owing by it in respect of the Purchase Agreement, the Notes and the other
Transaction Documents,
including, without limitation, (A) all principal of and interest on the Notes
(including, without limitation, all interest that accrues after the commencement
of any Insolvency
Proceeding of the Company, whether or not the payment of such interest is
unenforceable
or is not allowable due to the existence of such Insolvency Proceeding), and
(B)
all
fees,
commissions, expense reimbursements, indemnifications and all other amounts
due
or to become
due under any of the Transaction Documents; and
(b) the
due
performance and observance by the Company of all of its other obligations
from time to time existing in respect of any of the Transaction Documents,
including without
limitation, with respect to any conversion or redemption rights of the Buyers
under the Notes,
for so long as the Notes are outstanding.
SECTION
4. REPRESENTATIONS
AND WARRANTIES. The
Company represents and warrants
as follows:
(a) Schedule
I hereto sets forth (i) the exact legal name of the Company, and (ii) the
organizational
identification number of the Company or states that no such organizational
identification
number exists.
(b) There
is
no pending or written notice threatening any action, suit, proceeding or
claim
affecting the Company before any governmental authority or any arbitrator,
or,
to the knowledge of the Company, any order, judgment or award by any
governmental authority or arbitrator, that may adversely affect the grant by
the
Company, or the perfection, of the security interest
purported to be created hereby in the Collateral, or the exercise by the
Collateral Agent of
any of
its rights or remedies hereunder.
5
(c) Except
as
otherwise disclosed in the Purchase Agreement, all Federal, state and
local
tax
returns and other reports required by applicable law to be filed by the Company
have been
filed, or extensions have been obtained, and all taxes, assessments and other
governmental charges
imposed upon the Company or any property of the Company (including, without
limitation,
all Federal income and social security taxes on employees' wages) and which
have
become
due and payable on or prior to the date hereof have been paid, except to
the
extent contested
in good faith by proper proceedings which stay the imposition of any penalty,
fine or Lien
resulting from the non-payment thereof and with respect to which adequate
reserves have been
set
aside for the payment thereof in accordance with accounting principles generally
accepted
in the United States ("GAAP")
consistently
applied.
(d) All
Equipment, Fixtures, Goods and Inventory of the Company now existing are, and
all Equipment, Fixtures, Goods and Inventory of the Company hereafter existing
will be, located
and/or based at the addresses specified therefor in Schedule
III hereto,
except that the Company
will give the Collateral Agent written notice of any change in the location
of
any such Collateral
within 20 days of such change, other than to locations set forth on Schedule
III hereto
(or
a new
Schedule III delivered by the Company to Collateral Agent from time to time)
and
with
respect to which the Collateral Agent has filed financing statements and
otherwise fully perfected
its Liens thereon. The Company's chief place of business and chief executive
office, the place where the Company keeps its Records concerning Accounts and
all originals of all Chattel
Paper are located at the addresses specified therefor in Schedule
III hereto.
None of the Accounts
is evidenced by Promissory Notes or other Instruments. Set forth in Schedule
IV hereto
is
a complete and accurate list, as of the date of this Agreement, of (i) each
Promissory Note,
Security and other Instrument owned by the Company and (ii) each Deposit
Account, Securities
Account and Commodities Account of the Company, together with the name and
address
of each institution at which each such Account is maintained, the account number
for each
such
Account and a description of the purpose of each such Account. Set forth in
Schedule
II
hereto
is a complete and correct list of each trade name used by the Company and the
name of, and
each
trade name used by, each person from which the Company has acquired any
substantial part
of
the Collateral.
(e) The
Company has delivered to the Collateral Agent complete and correct copies
of
each
License described in Schedule
II hereto,
including all schedules and exhibits thereto, which
represents all of the material Licenses existing on the date of this Agreement.
Each such License
sets forth the entire agreement and understanding of the parties thereto
relating to the subject
matter thereof, and there are no other agreements, arrangements or
understandings, written
or oral, relating to the matters covered thereby or the rights of the Company
or
any of its affiliates
in respect thereof. Each material License now existing is, and any material
License entered
into in the future will be, the legal, valid and binding obligation of the
parties thereto, enforceable
against such parties in accordance with its terms. No default under any material
License
by any such party has occurred, nor does any defense, offset, deduction or
counterclaim exist
thereunder in favor of any such party.
(f)
The
Company owns and controls, or otherwise possesses adequate rights to use,
all
its
Trademarks, Patents and Copyrights, which are the only trademarks, patents,
copyrights, inventions,
trade secrets, proprietary information and technology, know-how, formulae,
rights of publicity
necessary to conduct its business in substantially the same manner as conducted
as of the
date
hereof. Schedule
II hereto
sets forth a true and complete list of all registered copyrights, issued
Patents, Trademarks, and Licenses annually owned or used by the Company as
of
the date hereof.
To the knowledge of the Company, all such Intellectual Property of the Company
is in full
force and effect, has not been adjudged invalid or unenforceable, is valid
and
enforceable and
has
not been abandoned in whole or in part. Except as set forth in Schedule II,
no
such Intellectual
Property is the subject of any licensing or franchising agreement. The Company
has no
knowledge of any conflict with the rights of others to any Intellectual Property
and, to the knowledge
of the Company, the Company is not now infringing or in conflict with any such
rights
of
others in any material respect, and to the knowledge of the Company, no other
Person is now
infringing or in conflict in any material respect with any such properties,
assets and rights owned
or
used by the Company. The Company has not received any notice that it is
violating or has
violated the trademarks, patents, copyrights, inventions, trade secrets,
proprietary information and technology, know-how, formulae, rights of publicity
or other intellectual property
rights of any third party.
6
(g) The
Company is and will be at all times the sole and exclusive owner of, or
otherwise
has and will have adequate rights in, the Collateral pledged hereunder by the
Company free
and
clear of any Liens, except for Permitted Liens on any Collateral and except
as
otherwise provided
for herein. No effective financing statement or other instrument similar in
effect covering
all or any part of the Collateral is on file in any recording or filing office
except such (i) as
may
have been filed in favor of the Collateral Agent and/or the Buyers relating
to
this Agreement,
(ii) as shall be filed at the Closing and (iii) as are identified in Schedule
4(g) hereto.
(h) The
exercise by the Collateral Agent of any of its rights and remedies hereunder
will
not
contravene any law or any contractual restriction binding on or otherwise
affecting the Company
or any of its properties.
(i)
No
authorization or approval or other action by, and no notice to or filing with,
any
governmental authority or other regulatory body, or any other Person, is
required for (i) the grant by the Company, or the perfection, of the security
interest purported to be created hereby in the
Collateral, or (ii) the exercise by the Collateral Agent any of its rights
and
remedies hereunder,
except (A) for the filing under the Uniform Commercial Code as in effect in
the
applicable
jurisdiction of the financing statements described in Schedule
V hereto
(or a new Schedule
V delivered
by the Company to Collateral Agent from time to time), all of which financing
statements have been duly filed and are in full force and effect or will be
duly
filed and in
full
force and effect, (B) with respect to Deposit Accounts, and all cash and other
property from
time
to time deposited therein, for the execution of a control agreement with the
depository institution with which such account is maintained, as provided in
Section
5(i),(C)
with
respect to Commodity
Contracts, for the execution of a control agreement with the commodity
intermediary
with which such commodity contract is carried, as provided in Section
5(i),(D)
with
respect to the perfection of the security interest created hereby in the
Intellectual Property, for
the
recording of the appropriate Assignment for Security, substantially in the
form
of Exhibit
A
hereto,
as applicable, in the United States Patent and Trademark Office or the United
States Copyright Office, as applicable, (E) with respect to the perfection
of
the security interest created hereby in foreign Intellectual Property and
Licenses, for registrations and filings in jurisdictions located
outside of the United States and covering rights in such jurisdictions relating
to the Intellectual
Property and Licenses, (F) with respect to the perfection of the security
interest created
hereby in Titled Collateral, for the submission of an appropriate application
requesting that
the
Lien of the Collateral Agent be noted on the Certificate of Title or certificate
of ownership,
completed and authenticated by the Company, together with the Certificate of
Title or
certificate of ownership, with respect to such Titled Collateral, to the
appropriate governmental
authority, (G) with respect to the perfection of the security interest created
hereby in
any
Letter-of-Credit Rights, for the consent of the issuer of the applicable letter
of credit to the assignment
of proceeds as provided in the Uniform Commercial Code as in effect in the
applicable
jurisdiction, (H) with respect to any action that may be necessary to obtain
control of Collateral constituting Deposit Accounts, Commodity Contracts,
Electronic Chattel Paper, Investment Property or Letter-of-Credit Rights, the
taking of such actions, and (I) the Collateral Agent having possession of all
Documents, Chattel Paper, Instruments and cash constituting Collateral
(subclauses (A), (B), (C), (D), (E), (F),
G), (H)
and (I),
each a
"Perfection
Requirement"
and
collectively, the "Perfection
Requirements").
7
(j) This
Agreement creates in favor of the Collateral Agent a legal, valid and
enforceable
security interest in the Collateral, as security for the Obligations. Collateral
Agent’s satisfaction
of the Perfection Requirements will result in the perfection of such security
interests. Such
security interests will be, perfected, first priority security interests,
subject only to Permitted
Liens and the recording of such instruments of assignment.
(k) As
of the
date hereof, the Company holds no Commercial Tort Claims nor is aware
of
any such pending claims.
SECTION
5. COVENANTS
AS TO THE COLLATERAL. So
long
as any of the Obligations shall
remain outstanding, unless the Collateral Agent shall otherwise consent in
writing:
(a)
Further
Assurances. The
Company will at its expense, at any time and from time to
time,
promptly execute and deliver all further instruments and documents and take
all
further action
that the Collateral Agent may reasonably request in order to: (i) perfect and
protect the security
interest purported to be created hereby; (ii) enable the Collateral Agent to
exercise and enforce its rights and remedies hereunder in respect of the
Collateral; or (iii) otherwise effect the purposes
of this Agreement, including, without limitation: (A) marking conspicuously
all
Chattel
Paper and each License and, at the request of the Collateral Agent, each of
its
Records pertaining
to the Collateral with a legend, in form and substance satisfactory to the
Collateral Agent,
indicating that such Chattel Paper, License or Collateral is subject to the
security interest created
hereby, (B) delivering and pledging to the Collateral Agent each Promissory
Note, Security,
Chattel Paper or other Instrument, now or hereafter owned by the Company, duly
endorsed
and accompanied by executed instruments of transfer or assignment, all in form
and substance satisfactory to the Collateral Agent, (C) executing and filing
(to
the extent, if any, that the Company's signature is required thereon) or
authenticating the filing of, such financing or continuation
statements, or amendments thereto, as may be necessary or desirable or that
the
Collateral
Agent may request in order to perfect and preserve the security interest
purported to be created
hereby, (D) furnishing to the Collateral Agent from time to time statements
and
schedules
further identifying and describing the Collateral and such other reports in
connection with
the
Collateral in each case as the Collateral Agent may reasonably request, all
in
reasonable detail,
(E) if any Collateral shall be in the possession of a third party, notifying
such Person of the
Collateral Agent's security interest created hereby and obtaining a written
acknowledgment from
such
Person that such Person holds possession of the Collateral for the benefit
of
the Collateral
Agent, which such written acknowledgement shall be in form and substance
satisfactory
to the Collateral Agent (F) if at any time after the date hereof, the Company
acquires or
holds
any Commercial Tort Claim, promptly notifying the Collateral Agent in a writing
signed by
the
Company setting forth a brief description of such Commercial Tort Claim and
granting to the
Collateral Agent a security interest therein and in the proceeds thereof, which
writing shall incorporate
the provisions hereof and shall be in form and substance satisfactory to the
Collateral Agent,
(G) upon the acquisition after the date hereof by the Company of any motor
vehicle or other Equipment subject to a certificate of title or ownership (other
than a Motor Vehicle or Equipment
that is subject to a purchase money security interest), causing the Collateral
Agent to be
listed
as the lienholder on such certificate of title or ownership and delivering
evidence of the same
to
the Collateral Agent in accordance with the Purchase Agreement; and (H) taking
all actions
required by any earlier versions of the Uniform Commercial Code or by other
law,
as applicable,
in any relevant Uniform Commercial Code jurisdiction, or by other law as
applicable in
any
foreign jurisdiction.
8
(b)Location
of Equipment and Inventory. The
Company will keep the Equipment and Inventory at the locations specified
therefor on Schedule III hereto, or, at such other locations
in the United States, provided that within 10 days following the relocation
of
Equipment
or Inventory to such other location, The Company shall deliver to the Collateral
Agent
a
new Schedule III indicating such new location.
(c) [
Reserved. ]
(d)Taxes,
Etc. The
Company agrees to pay promptly when due all property and other
taxes, assessments and governmental charges or levies imposed upon, and all
claims (including
claims for labor, materials and supplies) against, the Equipment and Inventory,
except to
the
extent the validity thereof is being contested in good faith by proper
proceedings which stay
the
imposition of any penalty, fine or Lien resulting from the non-payment thereof
and with respect
to which adequate reserves in accordance with GAAP have been set aside for
the
payment
thereof.
(e)Insurance.
(i)
The
Company will, at its own expense, maintain insurance (including, without
limitation, commercial general liability and property insurance) with respect
to
the
Equipment and Inventory in such amounts, against such risks, in such form and
with responsible and reputable insurance companies or associations as is
required by any governmental
authority having jurisdiction with respect thereto or as is carried generally
in
accordance with sound business practice by companies in similar businesses
similarly situated
and in any event, in amount, adequacy and scope reasonably satisfactory to
the
Collateral
Agent. To the extent requested by the Collateral Agent at any time and from
time
to
time, each such policy for liability insurance shall provide for all losses
to
be paid on
behalf
of the Collateral Agent and the Company as their respective interests may
appear,
and each policy for property damage insurance shall provide for all losses
to be
adjusted
with, and paid directly to, the Collateral Agent. To the extent requested by
the
Collateral Agent at any time and from time to time, each such policy shall
in
addition (A) name the Collateral Agent as an additional insured party thereunder
(without any representation
or warranty by or obligation upon the Collateral Agent) as their interests
may
appear, (B) contain an agreement by the insurer that any loss thereunder shall
be payable
to the Collateral Agent on its own account notwithstanding any action, inaction
or
breach
of representation or warranty by the Company, (C) provide that there shall
be
no
recourse against the Collateral Agent for payment of premiums or other amounts
with respect
thereto, and (D) provide that at least 30 days prior written notice of
cancellation, lapse,
expiration or other adverse change shall be given to the Collateral Agent by
the
insurer.
The Company will, if so requested by the Collateral Agent, deliver to the
Collateral
Agent original or duplicate policies of such insurance and, as often as the
Collateral
Agent may reasonably request, a report of a reputable insurance broker with
respect
to such insurance. The Company will also, at the reasonable request of the
Collateral
Agent, execute and deliver instruments of assignment of such insurance
policies
and cause the respective insurers to acknowledge notice of such
assignment.
9
(ii) Reimbursement
under any liability insurance maintained by the Company pursuant
to this Section
5(e) may
be
paid directly to the Person who shall have incurred liability
covered by such insurance. Following the occurrence of an Event of Default
and
until
such Event of Default has been cured and no amounts payable under the Notes
are
due
but
not paid, in the case of any loss involving damage to Equipment or Inventory,
any
proceeds of insurance maintained by the Company pursuant to this Section
5(e) shall
be
paid
to the Collateral Agent (except as to which paragraph (iii) of this Section
5(e) is
not
applicable), the Company will make or cause to be made the necessary repairs
to
or replacements
of such Equipment or Inventory, and any proceeds of insurance maintained
by
the
Company pursuant to this Section
5(e) shall
be
paid by the Collateral Agent to the Company
as reimbursement for the costs of such repairs or replacements.
(iii) All
insurance payments in respect of such Equipment or Inventory shall be
paid
to
the Collateral Agent and applied as specified in Section
7(b) hereof.
(f
)
Provisions
Concerning the Accounts and the
Licenses.
(i) The
Company will (A) give the Collateral Agent at least 30 days prior written
notice of any change in the Company's name, identity or organizational
structure, (B)
maintain its jurisdiction of incorporation as set forth in Section
4(b) hereto,
(C) immediately notify the Collateral Agent upon obtaining an organizational
identification number,
if on the date hereof the Company did not have such identification number,
and
(D) keep adequate records concerning the Accounts and Chattel Paper and permit
representatives of the Collateral Agent during normal business hours on
reasonable notice to
the
Company, to inspect and make abstracts from such Records and Chattel
Paper.
10
(ii) The
Company will, except as otherwise provided in this subsection (f), use
commercially
reasonable efforts to continue to collect, at its own expense, all amounts
due
or to
become due under the Accounts. The Collateral Agent shall have the right at
any
time,
upon the occurrence and during the continuance of an Event of Default, to
notify
the account debtors or obligors under any Accounts of the assignment of such
Accounts
to the Collateral Agent and to direct such account debtors or obligors to make
payment
of all amounts due or to become due to the Company thereunder directly to the
Collateral
Agent or its designated agent and, upon such notification and at the expense
of
the
Company and to the extent permitted by law, to enforce collection of any such
Accounts
and to adjust, settle or compromise the amount or payment thereof, in the same
manner and to the same extent as may Grantor might have done. After receipt
by
the Company of a notice from the Collateral Agent that the Collateral Agent
has
notified, intends
to notify, or has enforced or intends to enforce the Company's rights against
the account debtors or obligors under any Accounts as referred to in the proviso
to the immediately
preceding sentence, upon the occurrence of an Event of Default and for so
long
as
an Event of Default shall be continuing, (A) all amounts and proceeds (including
Instruments)
received by the Company in respect of the Accounts shall be received in trust
for the benefit of the Collateral Agent hereunder, shall be segregated from
other funds of the Company and shall be forthwith paid over to the Collateral
Agent in the same
form
as so received (with any necessary endorsement) to be held as cash collateral
and
either (i) credited to the outstanding obligations so long as no Event of
Default shall have
occurred and be continuing or (ii) if an Event of Default shall have occurred
and be continuing,
applied as specified in Section
7(b) hereof,
and (B) the Company will adjust, settle or compromise the amount or payment
of
any Account or release wholly or partly any
account debtor or obligor thereof or allow any credit or discount thereon.
In
addition,
upon the occurrence and during the continuance of an Event of Default, the
Collateral
Agent may (in its sole and absolute discretion) direct any or all of the banks
and
financial institutions with which the Company either maintains a Deposit Account
or a
lockbox
or deposits the proceeds of any Accounts to send immediately to the Collateral
Agent
by
wire transfer (to such account as the Collateral Agent shall specify, or in
such
other
manner as the Collateral Agent shall direct) all or a portion of such
securities, cash, investments
and other items held by such institution; provided, that if Collateral Agent
shall
give such a notice it shall, upon notification and verification of the
discontinuance of
the
applicable Event of Default, promptly give a notice to each such bank and
financial institution
that it should no longer send any such securities, cash, investments or other
items
to
the Collateral, and the Collateral Agent shall return all such items theretofore
received
(except to the extent properly applied against the Obligations) to the Company.
Subject
to the preceding sentence, any such securities, cash, investments and other
items so
received by the Collateral Agent shall be applied as specified in accordance
with Section
7 hereof.
(iii)
Upon the occurrence and during the continuance of any breach or default
under
any
material License referred to in Schedule
II hereto
by
any party thereto other than
the
Company, the Company will, promptly after obtaining knowledge thereof, give
the
Collateral Agent written notice of the nature and duration thereof, specifying
what action,
if any, it has taken and proposes to take with respect thereto and thereafter
will take
reasonable steps to protect and preserve its rights and remedies in respect
of
such breach
or
default, or will obtain or acquire an appropriate substitute License if
reasonably necessary
in the continued conduct of the Company’s business as theretofore
conducted.
11
(iv) The
Company will, at its expense, promptly deliver to the Collateral Agent
a
copy of
each notice or other communication received by it by which any other party
to
any
material License referred to in Schedule
II hereto
purports to exercise any of its rights
or
affect any of its obligations thereunder, together with a copy of any reply
by
the Company
thereto.
(v) The
Company will exercise promptly and diligently each and every right which it
may
have under each material License (other than any right of termination) and
will
duly perform and observe in all respects all of its obligations under each
material License
and will take all action reasonably necessary to maintain such Licenses in
full
force
and
effect.
(g)
Transfers
and Other Liens.
(i) The
Company will sell, assign (by operation of law or otherwise), lease, license,
exchange or otherwise transfer or dispose of any of the Collateral, except
(A)
Inventory
in the ordinary course of business, (B) damaged, worn-out or obsolete assets
not
necessary to the business and (C) other assets not exceeding, individually
or in
the aggregate,
$25,000.
(ii) The
Company will create, suffer to exist or grant any Lien upon or with respect
to any Collateral other than Permitted Liens.
(h)
Intellectual
Property.
12
(i)
If
applicable, the Company shall, upon the Collateral Agent's written request,
duly execute and deliver the applicable Assignment for Security in the form
attached
hereto as Exhibit
A. The
Company (either itself or through licensees) will, and will
cause each licensee thereof to, take all commercially reasonable action
necessary to maintain all of the Intellectual Property material to the Company
in full force and effect, including,
without limitation, using the proper statutory notices and markings and using
the
Trademarks on each applicable trademark class of goods in order to so maintain
the Trademarks
in full force and free from any claim of abandonment for non-use, and the
Company
will not (nor permit any licensee thereof to) do any act or knowingly omit
to do
any
act
whereby any Intellectual Property may become invalidated; provided,
however, that
so
long as no Event of Default has occurred and is continuing, the Company shall
have
an
obligation to use or to maintain any Intellectual Property (A) that relates
solely to any product or work, that has been, or is in the process of being,
discontinued, abandoned or
terminated, (B) that is being replaced with Intellectual Property substantially
similar to the
Intellectual Property that may be abandoned or otherwise become invalid, so
long
as the
failure to use or maintain such Intellectual Property does not materially
adversely affect the validity of such replacement Intellectual Property and
so
long as such replacement
Intellectual Property is subject to the Lien created by this Agreement or (C)
that
is
substantially the same as another Intellectual Property that is in full force,
so long the
failure to use or maintain such Intellectual Property does not materially
adversely affect
the validity of such replacement Intellectual Property and so long as such
other
Intellectual
Property is subject to the Lien and security interest created by this
Agreement.
The Company will cause to be taken all necessary steps in any proceeding
before
the United States Patent and Trademark Office and the United States Copyright
Office
or
any similar office or agency in any other country or political subdivision
thereof to
maintain each registration of the Intellectual Property (other than the
Intellectual Property
described in the proviso to the immediately preceding sentence), including,
without limitation, filing of renewals, affidavits of use, affidavits of
incontestability and opposition,
interference and cancellation proceedings and payment of maintenance fees,
filing fees, taxes or other governmental fees. If any Intellectual Property
(other than Intellectual
Property described in the proviso to the first sentence of subsection (i) of
this clause (h))
is
infringed, misappropriated, diluted or otherwise violated in any material
respect
by a third party, the Company shall (x) upon learning of such infringement,
misappropriation,
dilution or other violation, promptly notify the Collateral Agent and (y) to
the
extent the Company shall deem appropriate under the circumstances, promptly
sue
for
infringement, misappropriation, dilution or other violation, seek injunctive
relief where
appropriate and recover any and all damages for such infringement, misappropriation,
dilution or other violation, or take such other actions as the Company
shall
deem appropriate under the circumstances to protect such Intellectual Property.
The Company
shall furnish to the Collateral Agent, from time to time upon its request,
statements
and schedules further identifying and describing the Intellectual Property
and
Licenses
and such other reports in connection with the Intellectual Property and Licenses
as
the
Collateral Agent may reasonably request, all in reasonable detail and promptly
upon
request of the Collateral Agent, following receipt by the Collateral Agent
of
any such
statements, schedules or reports, the Company shall modify this Agreement by
amending
Schedule
II hereto,
as the case may be, to include any Intellectual Property and License, as the
case may be, which becomes part of the Collateral under this Agreement
and shall execute and authenticate such documents and do such commercially
reasonable
acts as shall be necessary or, in the judgment of the Collateral Agent,
desirable
to subject such Intellectual Property and Licenses to the Lien and security
interest created by this Agreement. Notwithstanding anything herein to the
contrary, upon
the
occurrence and during the continuance of an Event of Default, the Company
may
not
abandon or otherwise permit any Intellectual Property to become invalid without
the
prior
written consent of the Collateral Agent, which consent shall not be unreasonably
withheld
or delayed, and if any Intellectual Property is infringed, misappropriated,
diluted or
otherwise violated in any material respect by a third party, the Company will
take such action
as
the Collateral Agent shall deem appropriate under the circumstances to protect
such
Intellectual Property.
13
(ii)
In
no event shall the Company, either itself or through any agent, employee,
licensee or designee, file an application for the registration of any Trademark
or
Copyright or the issuance of any Patent with the United States Patent and
Trademark Office
or
the United States Copyright Office, as applicable, or in any similar office
or
agency
of
the United States or any country or any political subdivision thereof unless
it
gives
the
Collateral Agent prior written notice thereof. Upon request of the Collateral
Agent,
the Company shall execute, authenticate and deliver any and all assignments,
agreements,
instruments, documents and papers as the Collateral Agent may reasonably
request
to evidence the Collateral Agent's security interest hereunder in such
Intellectual Property
and the General Intangibles of the Company relating thereto or represented
thereby, and the Company hereby appoints the Collateral Agent its
attorney-in-fact to execute
and/or authenticate and file all such writings for the foregoing purposes,
all
acts of
such
attorney being hereby ratified and confirmed, and such power (being coupled
with
an interest) shall be irrevocable until the indefeasible payment in full
in cash
of all of
the
Obligations in full and the termination of each of the Transaction
Documents.
(i)Deposit,
Commodities and Securities Accounts. Upon
the
Collateral Agent's written
request, the Company shall use its best efforts to cause each bank and other
financial institution
with an account referred to in Schedule
IV hereto
to
execute and deliver to the Collateral
Agent a control agreement, in form and substance reasonably satisfactory to
the
Collateral
Agent, duly executed by the Company and such bank or financial institution,
or
enter into
other arrangements in form and substance satisfactory to the Collateral Agent,
pursuant to which
such institution shall irrevocably agree, inter
alia, that
(i)
upon the occurrence and during the
continuation of an Event of Default, it will comply at any time with the
instructions originated by the Collateral Agent to such bank or financial
institution directing the disposition of
cash,
Commodity Contracts, securities, Investment Property and other items from time
to time credited
to such account, without further consent of the Company, which instructions
the
Collateral
Agent will not give to such bank or other financial institution in the absence
of a continuing
Event of Default, (ii) all cash, Commodity Contracts, securities, Investment
Property and
other
items of the Company deposited with such institution shall be subject to a
perfected, first
priority security interest in favor of the Collateral Agent, (iii) any right
of
set off (other than recoupment
of standard fees), banker's Lien or other similar Lien, security interest or
encumbrance
shall be fully waived as against the Collateral Agent, and (iv) upon receipt
of
written
notice from the Collateral Agent during the continuance of an Event of Default,
such bank
or
financial institution shall immediately send to the Collateral Agent by wire
transfer (to such
account as the Collateral Agent shall specify, or in such other manner as the
Collateral Agent
shall direct) all such cash, the value of any Commodity Contracts, securities,
Investment Property
and other items held by it. Without the prior written consent of the Collateral
Agent, the
Company shall not make or maintain any Deposit Account, Commodity Account or
Securities
Account except for the accounts set forth in Schedule
IV hereto;
provided that as long as
there
is no Event of Default then continuing, the Company may make, open or maintain
new Deposit
Accounts without the Collateral Agent’s prior written consent provided that any
such Deposit
Accounts shall constitute Collateral under this Agreement and the Company shall
comply with the provisions of this Agreement with respect thereto. The
provisions of this paragraph
5(i) shall not apply to (i) Deposit Accounts for which the Collateral Agent
is
the depositary
and (ii) Deposit Accounts specially and exclusively used for payroll, payroll
taxes and other
employee wage and benefit payments to or for the benefit of the Company's
salaried or hourly
employees.
(j)Motor
Vehicles.
(i)
Upon
the Collateral Agent's written request, the Company shall deliver
to the
Collateral Agent originals of the certificates of title or ownership
for
all motor vehicles
with a value in excess of $50,000, owned by the Company with the
Collateral Agent
listed as lienholder, for the benefit of the
Buyers.
14
(ii) The
Company hereby appoints the Collateral Agent as its attorney-in-fact,
effective
the date hereof and terminating upon the termination of this Agreement, for
the
purpose
of (A) executing on behalf of the Company title or ownership applications for
filing
with appropriate state agencies to enable motor vehicles now owned or hereafter
acquired
by the Company to be retitled and the Collateral Agent listed as lienholder
thereof, (B) filing such applications with such state agencies, and (C)
executing such other
documents and instruments on behalf of, and taking such other action in the
name
of,
the
Company as the Collateral Agent may deem necessary or advisable to accomplish
the
purposes hereof (including, without limitation, for the purpose of creating
in
favor of the
Collateral Agent a perfected Lien on the motor vehicles and exercising the
rights and remedies
of the Collateral Agent hereunder). This appointment as attorney-in-fact is
coupled
with an interest and is irrevocable until all of the Obligations are
indefeasibly paid
in
full in cash and after all Transaction Documents have been
terminated.
(iii) Any
certificates of title or ownership delivered pursuant to the terms hereof
shall be accompanied by odometer statements for each motor vehicle covered
thereby.
(iv)
So
long as no Event of Default shall have occurred and be continuing, upon
the
request of the Company, the Collateral Agent shall execute and deliver to the
Company
such instruments as the Company shall reasonably request to remove the notation
of the Collateral Agent as lienholder on any certificate of title for any motor
vehicle;
provided,
however, that
any
such instruments shall be delivered, and the release effective, only upon
receipt by the Collateral Agent of a certificate from the Company stating
that such motor vehicle is to be sold or has suffered a casualty loss (with
title thereto
passing to the casualty insurance company therefor in settlement of the claim
for such loss) and the amount that the Company will receive as sale proceeds
or
insurance proceeds.
Any proceeds of such sale or casualty loss shall be paid to the Collateral
Agent
hereunder
immediately upon receipt, to be applied to the Obligations then
outstanding.
(k)Control.
The
Company hereby agrees to take any or all action that may be necessary
or desirable or that the Collateral Agent may request in order for the
Collateral Agent to
obtain
control in accordance with Sections 9-105 - 9-107 of the Code with respect
to
the following
Collateral: (i) Electronic Chattel Paper, (ii) Investment Property, and (iii)
Letter-of-Credit
Rights.
(l)Inspection
and Reporting. The
Company shall permit the Collateral Agent, or any agent
or
representatives thereof or such professionals or other Persons as the Collateral
Agent may
designate, not more frequently than once a year in the absence of an Event
of
Default, during
normal business hours, upon reasonable advance notice to the Company, and
without unreasonably
disrupting the business of the Company, (i) to examine and make copies of and
abstracts
from the Company's records and books of account, (ii) to visit and inspect
its
properties,
(iii) to verify materials, leases, Instruments, Accounts, Inventory and other
assets of the Company from time to time, (iii) to conduct audits, physical
counts, appraisals and/or valuations,
examinations at the locations of the Company. The Company shall also, upon
reasonable
advance notice from the Collateral Agent, permit the Collateral Agent, or any
agent or
representatives thereof or such professionals or other Persons as the Collateral
Agent may designate,
to discuss the Company's affairs, finances and accounts with any of its
directors, officers,
managerial employees, independent accountants or any of its other
representatives during
normal business hours at a time and place to be mutually agreed upon by the
Collateral Agent
or
its designee and the Company.
15
(m)
Future
Subsidiaries. If
the
Company shall hereafter create or acquire any Subsidiary,
simultaneously with the creation of acquisition of such Subsidiary, the Company
shall
cause such Subsidiary to become a party to this Agreement as an additional
"Grantor" hereunder,
and to duly execute and deliver a guaranty of the Obligations in favor of the
Collateral
Agent in form and substance reasonably acceptable to the Collateral Agent,
and
to duly
execute and/or deliver such opinions of counsel and other documents, in form
and
substance reasonably
acceptable to the Collateral Agent, as the Collateral Agent shall reasonably
request with
respect thereto.
SECTION
6. ADDITIONAL
PROVISIONS CONCERNING THE COLLATERAL.
(a) The
Company hereby (i) authorizes the Collateral Agent to file one or more
Uniform
Commercial Code financing or continuation statements, and amendments thereto,
relating
to the Collateral and (ii) ratifies such authorization to the extent that the
Collateral Agent has
filed
any such financing or continuation statements, or amendments thereto, prior
to
the date hereof.
A
photocopy or other reproduction of this Agreement or any financing statement
covering
the Collateral or any part thereof shall be sufficient as a financing statement
where permitted
by law.
(b) The
Company hereby irrevocably appoints the Collateral Agent as its attorney-in-fact
and proxy, with full authority in the place and stead of the Company and in
the
name of the Company
or otherwise, from time to time in the Collateral Agent's discretion, so long
as
an Event
of
Default shall have occurred and is continuing, to take any action and to execute
any instrument
which the Collateral Agent may deem necessary or advisable to accomplish the
purposes
of this Agreement (subject to the rights of the Company under Section
5 hereof),
including,
without limitation, after the occurrence and during the continuance of an Event
of Default,
(i) to obtain and adjust insurance required to be paid to the Collateral Agent
pursuant to Section
5(e) hereof,
(ii) to ask, demand, collect, sue for, recover, compound, receive and give
acquittance
and receipts for moneys due and to become due under or in respect of any
Collateral, (iii)
to
receive, endorse, and collect any drafts or other instruments, documents and
chattel paper in
connection with clause (i) or (ii) above, (iv) to file any claims or take any
action or institute any
proceedings which the Collateral Agent may deem necessary or desirable for
the
collection of
any
Collateral or otherwise to enforce the rights of the Collateral Agent and the
Buyers with respect
to any Collateral, and (v) to execute assignments, licenses and other documents
to enforce the rights of the Collateral Agent and the Buyers with respect to
any
Collateral. This power
is
coupled with an interest and is irrevocable until all of the Obligations are
indefeasibly paid
in
full in cash.
16
(c) For
the
purpose of enabling the Collateral Agent to exercise rights and remedies
hereunder,
at such time as the Collateral Agent shall be lawfully entitled to exercise
such
rights and remedies, and for no other purpose, the Company hereby grants to
the
Collateral Agent, to the
extent assignable, an irrevocable, non-exclusive license (exercisable without
payment of royalty
or other compensation to the Company) to use, assign, license or sublicense
any
Intellectual
Property now owned or hereafter acquired by the Company, wherever the same
may
be
located, including in such license reasonable access to all media in which
any
of the licensed items
may
be recorded or stored and to all computer programs used for the compilation
or
printout
thereof. Notwithstanding anything contained herein to the contrary, but subject
to the provisions
of the Purchase Agreement that limit the right of the Company to dispose of
its
property
and Section
5(h) hereof,
so long as no Event of Default shall have occurred and be continuing,
the Company may exploit, use, enjoy, protect, license, sublicense, assign,
sell,
dispose
of or take other actions with respect to the Intellectual Property in the
ordinary course of its business. In furtherance of the foregoing, unless an
Event of Default shall have occurred and be
continuing, the Collateral Agent shall from time to time, upon the request
of
the Company, execute
and deliver any instruments, certificates or other documents, in the form so
requested, which
the
Company shall have certified are appropriate (in the Company's judgment) to
allow it to
take
any action permitted above (including relinquishment of the license provided
pursuant to this
clause (c) as to any Intellectual Property). Further, upon the indefeasible
payment in full in cash
of
all of the Obligations, the Collateral Agent (subject to Section
10(e) hereof)
shall release and
reassign to the Company all of the Collateral Agent's right, title and interest
in and to the Intellectual
Property, and the Licenses, all without recourse, representation or warranty
whatsoever.
The exercise of rights and remedies hereunder by the Collateral Agent shall
not
terminate
the rights of the holders of any licenses or sublicenses theretofore granted
by
the Company in accordance with the second sentence of this clause (c). The
Company hereby releases
the Collateral Agent from any claims, causes of action and demands at any time
arising out
of or
with respect to any actions taken or omitted to be taken by the Collateral
Agent
under the
powers of attorney granted herein other than actions taken or omitted to be
taken through the Collateral
Agent's gross negligence or willful misconduct, as determined by a final
determination of
a
court of competent jurisdiction.
(d) If
the
Company fails to perform any agreement contained herein, the Collateral Agent
may itself perform, or cause performance of, such agreement or obligation,
in
the name of the
Company or the Collateral Agent, and the expenses of the Collateral Agent
incurred in connection
therewith shall be payable by the Company pursuant to Section
8 hereof
and shall be secured
by the Collateral.
(e) The
powers conferred on the Collateral Agent hereunder are solely to protect its
interest
in the Collateral and shall not impose any duty upon it to exercise any such
powers. Except
for the safe custody of any Collateral in its possession and the accounting
for
moneys actually
received by it hereunder, the Collateral Agent shall have no duty as to any
Collateral or as
to the
taking of any necessary steps to preserve rights against prior parties or any
other rights pertaining
to any Collateral.
(f) Anything
herein to the contrary notwithstanding, (i) the Company shall remain
liable
under the Licenses and otherwise with respect to any of the Collateral to the
extent set forth
therein to perform all of its obligations thereunder to the same extent as
if
this Agreement had
not
been executed, (ii) the exercise by the Collateral Agent of any of its rights
hereunder shall
not
release the Company from any of its obligations under the Licenses or otherwise
in respect
of the Collateral, and (iii) the Collateral Agent shall not have any obligation
or liability by
reason
of this Agreement under the Licenses or with respect to any of the other
Collateral, nor shall
the
Collateral Agent be obligated to perform any of the obligations or duties of
the
Company
thereunder or to take any action to collect or enforce any claim for payment
assigned hereunder.
17
SECTION
7. REMEDIES
UPON EVENT OF DEFAULT. If
any
Event of Default shall have occurred
and be continuing:
(a)
The
Collateral Agent may exercise in respect of the Collateral, in addition to
any
other
rights and remedies provided for herein or otherwise available to it, all of
the
rights and remedies of a secured party upon default under the Code (whether
or
not the Code applies to the affected Collateral), and also may (i) take absolute
control of the Collateral, including, without limitation,
transfer into the Collateral Agent's name or into the name of its nominee or
nominees (to the extent the Collateral Agent has not theretofore done so) and
thereafter receive, for the benefit
of the Collateral Agent, all payments made thereon, give all consents, waivers
and ratifications
in respect thereof and otherwise act with respect thereto as though it were
the
outright
owner thereof, (ii) require the Company to, and the Company hereby agrees that
it will at
its
expense and upon request of the Collateral Agent forthwith, assemble all or
part
of its respective Collateral as directed by the Collateral Agent and make it
available to the Collateral Agent
at
a place or places to be designated by the Collateral Agent that is reasonably
convenient to
both
parties, and the Collateral Agent may enter into and occupy any premises owned
or leased
by
the Company where the Collateral or any part thereof is located or assembled
for
a reasonable
period in order to effectuate the Collateral Agent's rights and remedies
hereunder or under
law, without obligation to the Company in respect of such occupation, and (iii)
without notice
except as specified below and without any obligation to prepare or process
the
Collateral for sale, (A) sell the Collateral or any part thereof in one or
more
parcels at public or private sale, at
any of
the Collateral Agent's offices or elsewhere, for cash, on credit or for future
delivery, and
at
such price or prices and upon such other terms as the Collateral Agent may
deem
commercially
reasonable and/or (B) lease, license or dispose of the Collateral or any part
thereof upon
such
terms as the Collateral Agent may deem commercially reasonable. The Company
agrees
that, to the extent notice of sale or any other disposition of its respective
Collateral shall be
required by law, at least ten (10) days notice to the Company of the time and
place of any public
sale or the time after which any private sale or other disposition of its
respective Collateral is to be made shall constitute reasonable notification.
The Collateral Agent shall not be obligated to
make
any sale or other disposition of any Collateral regardless of notice of sale
having been given. The Collateral Agent may adjourn any public or private sale
from time to time by announcement
at the time and place fixed therefor, and such sale may, without further notice,
be made
at
the time and place to which it was so adjourned. The Company hereby waives
any
claims
against the Collateral Agent and the Buyers arising by reason of the fact that
the price at which
its
respective Collateral may have been sold at a private sale was less than the
price which might
have been obtained at a public sale or was less than the aggregate amount of
the
Obligations,
even if the Collateral Agent accepts the first offer received and does not
offer
such Collateral
to more than one offeree, and waives all rights that the Company may have to
require that
all
or any part of such Collateral be marshalled upon any sale (public or private)
thereof. The
Company hereby acknowledges that (i) any such sale of its respective Collateral
by the Collateral
Agent shall be made without warranty, (ii) the Collateral Agent may specifically
disclaim
any warranties of title, possession, quiet enjoyment or the like, and (iii)
such
actions set forth in clauses (i) and (ii) above shall not adversely effect
the
commercial reasonableness of any such
sale
of Collateral. In addition to the foregoing, (1) upon written notice to the
Company from
the
Collateral Agent after and during the continuance of an Event of Default, the
Company shall
cease any use of the Intellectual Property or any trademark, patent or copyright
similar thereto
for any purpose described in such notice; (2) the Collateral Agent may, at
any
time and from
time
to time, upon 10 days prior notice to the Company, license, whether general,
special or otherwise, and whether on an exclusive or non-exclusive basis, any
of
the Intellectual Property, throughout
the universe for such term or terms, on such conditions, and in such manner,
as
the Collateral Agent shall in its sole discretion determine; and (3) the
Collateral Agent may, at any time,
pursuant to the authority granted in Section
6 hereof
(such authority being effective upon the
occurrence and during the continuance of an Event of Default), execute and
deliver on behalf of
the
Company, one or more instruments of assignment of the Intellectual Property
(or
any application
or registration thereof), in form suitable for filing, recording or registration
in any country.
18
(b) Any
cash
held by the Collateral Agent as Collateral and all Cash Proceeds received
by the Collateral Agent in respect of any sale of or collection from, or other
realization upon,
all
or any part of the Collateral may, in the discretion of the Collateral Agent,
be
held by the Collateral Agent as collateral for, and/or then or at any time
thereafter applied (after payment of
any
amounts payable to the Collateral Agent pursuant to Section
8 hereof)
in whole or in part by
the
Collateral Agent against, all or any part of the Obligations in such order
as
the Collateral Agent
shall elect, consistent with the provisions of the Purchase Agreement. Any
surplus of such
cash
or Cash Proceeds held by the Collateral Agent and remaining after the
indefeasible payment
in full in cash of all of the Obligations shall be paid over to whomsoever
shall
be lawfully
entitled to receive the same or as a court of competent jurisdiction shall
direct.
(c) In
the
event that the proceeds of any such sale, collection or realization are
insufficient
to pay all amounts to which the Collateral Agent and the Buyers are legally
entitled, the
Company shall be liable for the deficiency, together with interest thereon
at
the highest rate specified
in any of the applicable Transaction Documents for interest on overdue principal
thereof
or such other rate as shall be fixed by applicable law, together with the costs
of collection and
the
reasonable fees, costs, expenses and other client charges of any attorneys
employed by the
Collateral Agent to collect such deficiency.
(d) The
Company hereby acknowledges that if the Collateral Agent complies with
any
applicable state, provincial, or federal law requirements in connection with
a
disposition of the
Collateral, such compliance will not adversely affect the commercial
reasonableness of any sale
or
other disposition of the Collateral.
19
(e) The
Collateral Agent shall not be required to marshal any present or future
collateral
security (including, but not limited to, this Agreement and the Collateral)
for,
or other assurances
of payment of, the Obligations or any of them or to resort to such collateral
security or
other
assurances of payment in any particular order, and all of the Collateral Agent's
rights hereunder
and in respect of such collateral security and other assurances of payment
shall
be cumulative and in addition to all other rights, however existing or arising.
To the extent that the Company
lawfully may, the Company hereby agrees that it will not invoke any law relating
to the
marshalling of collateral which might cause delay in or impede the enforcement
of the Collateral
Agent's rights under this Agreement or under any other instrument creating
or
evidencing
any of the Obligations or under which any of the Obligations is outstanding
or
by which
any
of the Obligations is secured or payment thereof is otherwise assured, and,
to
the extent
that it lawfully may, the Company hereby irrevocably waives the benefits of
all
such laws.
SECTION
8. INDEMNITY
AND EXPENSES.
(a) The
Company agrees to defend, protect, indemnify and hold the Collateral Agent
and
each
of the Buyers, jointly and severally, harmless from and against any and all
claims, damages,
losses, liabilities, obligations, penalties, fees, costs and expenses
(including, without limitation, reasonable legal fees, costs, expenses, and
disbursements of such Person's counsel) to the
extent that they arise out of or otherwise result from this Agreement
(including, without limitation,
enforcement of this Agreement), except claims, losses or liabilities resulting
solely and
directly from such Person's gross negligence or willful misconduct, as
determined by a final judgment
of a court of competent jurisdiction.
(b) The
Company agrees, jointly and severally, to pay to the Collateral Agent upon
demand
the amount of any and all costs and expenses, including the reasonable fees,
costs, expenses
and disbursements of counsel for the Collateral Agent and of any experts and
agents (including,
without limitation, any collateral trustee which may act as agent of the
Collateral Agent),
which the Collateral Agent may properly incur under the terms hereof after
the
occurrence
and during the continuance of an Event of Default in connection with (i) the
custody, preservation,
use or operation of, or the sale of, collection from, or other realization
upon,
any Collateral,
(ii) the exercise or enforcement of any of the rights of the Collateral Agent
hereunder, or
(iii)
the failure by the Company to perform or observe any of the provisions
hereof.
SECTION
9. Notices,
Etc. All
notices and other communications provided for hereunder shall be in writing
and
shall be mailed (by certified mail, postage prepaid and return receipt
requested), telecopied, e-mailed or delivered, if to the Company at its address
specified below and
if to
the Collateral Agent to it, at its address specified on the signature pages
below; or as to any
such
Person, at such other address as shall be designated by such Person in a written
notice to
all
other parties hereto complying as to delivery with the terms of this
Section
9. All
such
notices
and other communications shall be effective (a) if sent by certified mail,
return receipt requested,
when received or three days after deposited in the mails, whichever occurs
first, (b) if telecopied
or e-mailed, when transmitted (during normal business hours) and confirmation
is
received,
and otherwise, the day after the notice or communication was transmitted and
confirmation
is received, or (c) if delivered in person, upon delivery.
SECTION
10. MISCELLANEOUS.
20
(a) No
amendment of any provision of this Agreement shall be effective unless it is
in
writing
and signed by the Company and the Collateral Agent, and no waiver of any
provision of this
Agreement, and no consent to any departure by the Company therefrom, shall
be
effective unless it is in writing and signed by the Company and the Collateral
Agent, and then such waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given.
(b) No
failure on the part of the Collateral Agent to exercise, and no delay in
exercising,
any right hereunder or under any of the other Transaction Documents shall
operate as a
waiver
thereof; nor shall any single or partial exercise of any such right preclude
any
other or further
exercise thereof or the exercise of any other right. The rights and remedies
of
the Buyers and
the
Collateral Agent provided herein and in the other Transaction Documents are
cumulative and
are
in addition to, and not exclusive of, any rights or remedies provided by law.
The rights of
the
Collateral Agent under any of the other Transaction Documents against any party
thereto are
not
conditional or contingent on any attempt by such Person to exercise any of
its
rights under
any
of the other Transaction Documents against such party or against any other
Person, including
but not limited to, the Company.
(c) Any
provision of this Agreement that is prohibited or unenforceable in any
jurisdiction
shall, as to such jurisdiction, be ineffective to the extent of such prohibition
or unenforceability without invalidating the remaining portions hereof or
thereof or affecting the validity
or enforceability of such provision in any other jurisdiction.
(d) This
Agreement shall create a continuing security interest in the Collateral and
shall
(i)
remain in full force and effect until the indefeasible payment in full in cash
of the Obligations,
and (ii) be binding on the Company and all other Persons who become bound as
debtor
to
this Agreement in accordance with Section 9-203(d) of the Code and shall inure,
together
with all rights and remedies of the Collateral Agent and the Buyers hereunder,
to the benefit
of the Collateral Agent and the Buyers and their respective permitted
successors, transferees
and assigns. Without limiting the generality of clause (ii) of the immediately
preceding
sentence, without notice to the Company, the Collateral Agent and the Buyers
may
assign
or
otherwise transfer their rights and obligations under this Agreement and any
of
the other
Transaction Documents, to any other Person and such other Person shall thereupon
become vested
with all of the benefits in respect thereof granted to the Collateral Agent
and
the Buyers herein
or
otherwise. Upon any such assignment or transfer, all references in this
Agreement to the
Collateral Agent or any such Buyer shall mean the assignee of the Collateral
Agent or such Buyer.
None of the rights or obligations of the Company hereunder may be assigned
or
otherwise
transferred without the prior written consent of the Collateral Agent, and
any
such assignment
or transfer without the consent of the Collateral Agent shall be null and
void.
(e)
Upon
the indefeasible payment in full in cash of the Obligations, (i) this
Agreement
and the security interests created hereby shall terminate and all rights to
the
Collateral
shall revert to the respective Grantor that granted such security interests
hereunder, and
(ii)
the Collateral Agent will, upon the Company's request and at the Company's
expense, (A)
return to the Company such of the Collateral as shall not have been sold or
otherwise disposed
of or applied pursuant to the terms hereof, and (B) execute and deliver to
the
Company such
documents as the Company shall reasonably request to evidence such termination,
all without
any representation, warranty or recourse whatsoever.
21
(f) THIS
AGREEMENT SHALL BE GOVERNED BY, CONSTRUED AND INTERPRETED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, EXCEPT
AS
REQUIRED BY MANDATORY PROVISIONS OF LAW AND EXCEPT TO THE
EXTENT THAT THE VALIDITY AND PERFECTION OR THE PERFECTION AND THE
EFFECT OF PERFECTION OR NON-PERFECTION OF THE SECURITY INTEREST CREATED
HEREBY, OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL
ARE GOVERNED BY THE LAW OF A JURISDICTION OTHER THAN THE
STATE
OF NEW YORK.
(g) ANY
LEGAL
ACTION, SUIT OR PROCEEDING WITH RESPECT TO THIS AGREEMENT
OR ANY DOCUMENT RELATED THERETO MAY BE BROUGHT IN THE COURTS
OF
THE STATE OF NEW YORK IN THE COUNTY OF NEW YORK OR THE UNITED
STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK, AND APPELLATE
COURTS THEREOF, AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT,
THE COMPANY HEREBY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS
PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID
COURTS. EACH PARTY HEREBY EXPRESSLY AND IRREVOCABLY WAIVES,
TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION, INCLUDING,
WITHOUT LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS
OF FORUM
NON CONVENIENS, WHICH
IT
MAY NOW OR
HEREAFTER HAVE TO THE BRINGING OF ANY SUCH ACTION, SUIT OR PROCEEDING
IN SUCH RESPECTIVE JURISDICTIONS AND CONSENTS TO THE GRANTING OF SUCH LEGAL
OR
EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY
THE
COURT.
(h) THE
COMPANY AND (BY ITS ACCEPTANCE OF THE BENEFITS OF THIS AGREEMENT)
THE COLLATERAL AGENT WAIVES ANY RIGHT IT MAY HAVE TO TRIAL
BY
JURY IN RESPECT OF ANY LITIGATION BASED ON, ARISING OUT OF, UNDER
OR
IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER TRANSACTION
DOCUMENTS, OR ANY COURSE OF CONDUCT, COURSE OF DEALING,
VERBAL OR WRITTEN STATEMENT OR OTHER ACTION OF THE PARTIES HERETO.
(i) Each
party irrevocably consents to the service of process of any of the aforesaid
courts
in
any such action, suit or proceeding by the mailing of copies thereof by
registered or certified
mail (or any substantially similar form of mail), postage prepaid, to such
party
at the address of such party specified for notices hereunder, such service
to
become effective 10 days after
such mailing.
(j)
Nothing contained herein shall affect the right of the Collateral Agent to
serve
process
in any other manner permitted by law or commence legal proceedings or otherwise
proceed against the Company or any property of the Company in any other
jurisdiction.
22
(k) The
Company irrevocably and unconditionally waives any right it may have to
claim
or
recover in any legal action, suit or proceeding referred to in this Section
any
special, exemplary,
punitive or consequential damages.
(l) Section
headings herein are included for convenience of reference only and shall
not
constitute a part of this Agreement for any other purpose.
(m)
This
Agreement may be executed in any number of counterparts and by different
parties
hereto in separate counterparts, each of which shall be deemed to be an
original, but all of which
taken together constitute one in the same Agreement.
[REMAINDER
OF THIS PAGE INTENTIONALLY LEFT BLANK]
23
IN
WITNESS WHEREOF, each party has caused this Agreement to be executed and
delivered
by its officer thereunto duly authorized, as of the date first above
written.
MOHEN
INC.
Date:
By:
/s/
Name:Orville
Hagler
Title: Corporate
Secretary
Address:
By:
ACCEPTED
BY:
GOTTBETTER
CAPITAL FINANCE, LLC
as
Collateral Agent
By:_________________________________
Name:
Title:
24
SCHEDULE
I
LEGAL
NAMES; ORGANIZATIONAL IDENTIFICATION NUMBERS; STATES OR
JURISDICTION
OF ORGANIZATION
Grantor’s
Name
State
of Organization
Federal
Employer I.D.
Organizationla
I.D.
Mohen,
Inc.
Delaware
14-1928717
25
SCHEDULE
II
INTELLECTUAL
PROPERTY
Copyrights:
All
source codes written or developed by the Company is copyrighted.
Trademarks:
Spiral
FrogTM
Licenses:
License
Agreement, dated December 20, 2004, between Good Mood Records and Mohen
Entertainment Portals, LLC.
AMG
Data
License and Data Agreement, dated August 22, 2006, between All Media
Guide, LLC and Mohen, Inc.
Online
License Agreement, dated August 7, 2006, between CMRRA-SODRAC Inc.
and
Mohen, Inc.
Internet
License
Agreement, dated August 3, 2006, between SESAC, Inc. and Mohen,
Inc.
Website
Music Performance Agreement, dated October 31, 2005, between Broadcast
Music, Inc. and Mohen, Inc.
Digital
Music and Video License Agreement, dated November 15, 2006, between Helene
Blue Musique Ltd. and Mohen, Inc.
Digital
Music and Video License Agreement, dated November 3, 2006, between La
Culpula [House of Music] and Mohen, Inc.
Digital
Music and Video License Agreement, dated November 15, 2006, between The
Orchard Enterprises, Inc. and Mohen, Inc.
Digital
Music and Video License Agreement, dated November 2, 2006, between Kufala
_____ and Mohen, Inc.
Digital
Music and Video License Agreement, dated November 21, 2006, between M.C.
Productions, Inc. and Mohen, Inc.
26
Digital
Music and Video License Agreement, dated February 12, 2007, between Kudo
Records Limited and Mohen, Inc.
Digital
Music and Video License Agreement, dated September 6, 2006, between KOCH
Entertainment, LP and Mohen, Inc.
License
Agreement, dated August 23, 2006, between Society of Composers, Authors
and Music Publishers of Canada and Mohen, Inc.
WHEREAS,
_______________________________ (the
"Assignor")
[has
adopted, used
and
is using, and holds all right, title and interest in and to, the trademarks
and
service marks
listed on the annexed Schedule
1A, which
trademarks and service marks are registered or applied
for in the United States Patent and Trademark Office (the "Trademarks")]
[holds
all right,
title and interest in the letter patents, design patents and utility patents
listed on the annexed
Schedule
1A, which
patents are issued or applied for in the United States Patent and Trademark
Office (the "Patents")]
[holds
all right, title and interest in the copyrights listed on the annexed
Schedule
1A, which
copyrights are registered in the United States Copyright Office (the
"Copyrights")];
WHEREAS,
the Assignor has entered into a Security Agreement, dated as of July31,2006
(as amended, restated or otherwise modified from time to time the "Security
Agreement"),
in
favor
Gottbetter Capital Finance, LLC, as collateral agent for certain purchasers
(the
"Assignee");
WHEREAS,
pursuant to the Security Agreement, the Assignor has assigned to the
Assignee
and granted to the Assignee for the benefit of the Buyers (as defined in the
Security Agreement)
a continuing security interest in all right, title and interest of the Assignor
in, to and under
the
[Trademarks, together with, among other things, the good-will of the business
symbolized
by the Trademarks] [Patents] [Copyrights] and the applications and registrations
thereof,
and all proceeds thereof, including, without limitation, any and all causes
of
action which
may
exist by reason of infringement thereof and any and all damages arising from
past, present
and future violations thereof (the "Collateral"),
to
secure
the payment, performance and observance
of the "Obligations" (as defined in the Security Agreement);
NOW,
THEREFORE, for good and valuable consideration, the receipt and sufficiency
of
which are hereby acknowledged, the Assignor does hereby pledge, convey, sell,
assign,
transfer and set over unto the Assignee and grants to the Assignee for the
benefit of the Buyers
a
continuing security interest in the Collateral to secure the prompt payment,
performance
and for the benefit of the Buyers observance of the Obligations.
The
Assignor does hereby further acknowledge and affirm that the rights and
remedies
of the Assignee with respect to the Collateral are more fully set forth in
the
Security Agreement,
the terms and provisions of which are hereby incorporated herein by reference
as
if fully
set
forth herein.
32
IN
WITNESS WHEREOF, the Assignor has caused this Assignment to be duly executed
by its officer thereunto duly authorized as of ,
2007
MOHEN,
INC.
Date:
By:
/s/ Orville
Hagler
Name:
Orville Hagler
Title:
Corporate Secretary
STATE
OF_____________
ss.:
COUNTY
OF____________
On
this ____ day of
,
20__,
before me personally came ________________________,
to me
known to be the person who executed the foregoing instrument, and
who,
being duly sworn by me, did depose and say that s/he is
the___________________________ of
____________________________,
a
_____________,
and
thats/he
executed the foregoing instrument in the firm nameof
______________________________,
and
that s/he had authority to sign the same, and
s/he
acknowledged to me that he executed the same as the act and deed of said firm
for the uses
and
purposes therein mentioned.
_____________________________________
33
SCHEDULE
II TO ASSIGNMENT FOR SECURITY
[Trademarks
and Trademark Applications]
[Patent
and Patent Applications]
[Copyright
and Copyright Applications]
Owned
by___________________________
34
Dates Referenced Herein and Documents Incorporated by Reference
