EXHIBIT 10.2
SECURITY AGREEMENT
SECURITY AGREEMENT, dated as of April 8, 2008 (this
"AGREEMENT"), made by
each of the parties set forth on the signature pages hereto (each a
"GRANTOR",
and collectively, the "GRANTORS"), in favor of SMITHFIELD FIDUCIARY
LLC, a
company organized under the laws of the Cayman Islands, in its
capacity as
collateral agent (in such capacity, the "COLLATERAL AGENT") to the
Secured
Parties (as defined below).
W I T N E S S E T H:
WHEREAS, InkSure Technologies Inc., a Delaware corporation,
(the
"COMPANY"), pursuant to that certain Securities Purchase Agreement,
dated as of
September 30, 2005 (the "EXISTING PURCHASE AGREEMENT") issued and
sold certain
Convertible Notes (the "EXISTING NOTES").
The Company and certain investors (the "INVESTORS") are
entering into
Amendment, Exchange and Purchase Agreements dated the date hereof
(collectively,
the "EXCHANGE AGREEMENTS"), pursuant to which, among other things,
(i) the
Existing Notes shall be amended and restated pursuant to the
"Amended Notes" (as
defined therein) and (ii) the Company shall agree to sell, and the
Investors
shall agree to purchase certain additional "New Notes" (as defined
therein) (the
"NEW NOTES", and collectively with the Amended Notes and as each
may be amended,
restated, replaced or otherwise modified from time to time in
accordance with
the terms thereof, the "NOTES").
WHEREAS, each of the Grantors (other than the Company) (each a
"GUARANTOR"
and collectively, the "GUARANTORS") has executed and delivered a
Guaranty, dated
the date hereof (as amended, restated, supplemented, replaced,
modified or
otherwise changed from time to time, the "GUARANTY"), in favor of
the Secured
Parties, to guarantee the Company's obligations under the Existing
Purchase
Agreement, the Exchange Agreements, the Notes and the Transaction
Documents (as
defined below);
WHEREAS, it is a condition precedent to each of the Investors
entering into
the Exchange Agreements that the Grantors execute and deliver this
Agreement
providing for the grant of a first priority perfected security
interest in all
of the property and assets of each Grantor to secure all of the
Company's
obligations under the Existing Purchase Agreement, the Exchange
Agreements, the
Notes, and the other Transaction Documents and the each Grantor's
obligations
under the Guaranty; and
WHEREAS, the Grantors have determined that the execution,
delivery and
performance of this Agreement directly benefits, and is in the best
interest of,
the Grantors;
NOW, THEREFORE, in consideration of the premises and the
agreements herein
and in order to induce each of the Secured Parties to enter into
the
transactions under the Exchange Agreements, each Grantor agrees as
follows:
SECTION 1. DEFINITIONS.
(a) Reference is hereby made to the Exchange Agreements 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 Existing Purchase
Agreement, the
Exchange Agreements, 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.
(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".
(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" means collectively, the Joint Collateral and the
New Note
Collateral.
"COLLATERAL ACCOUNT" means a deposit account number
22-652949-18 maintained
by the Company at Bank Leumi USA.
"COPYRIGHT LICENSES" means all licenses, contracts or other
agreements,
whether written or oral, naming any Grantor 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
Part F of SCHEDULE I 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 any Grantor
(including,
without limitation, all copyrights described in Part F of SCHEDULE
I 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.
"GOVERNMENTAL AUTHORITY" means any nation or government, any
Federal,
state, city, town, municipality, county, local or other political
subdivision
thereof or thereto and any department, commission, board, bureau,
instrumentality, agency or other entity exercising executive,
legislative,
judicial, taxing, regulatory or administrative powers or functions
of or
pertaining to government.
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"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.
"INTELLECTUAL PROPERTY OFFICES" means, (i) with respect to
United States
Copyrights or related Licenses, the United States Copyright Office,
(ii) with
respect to United States Trademarks and United States Patents or
related
Licenses, the United States Patent and Trademark Office and (iii)
with respect
to respect to foreign Intellectual Property and related Licenses,
the applicable
offices located in the jurisdictions outside of the United States
and covering
rights in such jurisdictions relating to such foreign Intellectual
Property and
Licenses.
"JOINT COLLATERAL" shall have the meaning set forth for such
term in
Section 2(a) hereof.
"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 lease required
under GAAP
to be capitalized on the balance sheet of such Person and any
assignment,
deposit arrangement or financing lease intended as, or having the
effect of,
security.
"NEW NOTE COLLATERAL" means (i) the Collateral Account, all
amounts which
may now or hereafter be on deposit in the Collateral Account,
including without
limitation, all cash now or hereafter held in the Collateral
Account; (ii) all
cash, and other property from time to time received, receivable, or
otherwise
distributed in respect thereof or in exchange therefor; and (iii)
to the extent
not described above, all Proceeds of any and all of the foregoing
New Note
Collateral.
"NEW NOTE HOLDERS" means the holders of the New Notes.
"NEW NOTE OBLIGATIONS" has the meaning set forth for such term
in Section
3(b) hereof.
"NOTEHOLDERS" means the Investors and the holders of the
Notes.
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"PATENT LICENSES" means all licenses, contracts or other
agreements,
whether written or oral, naming any Grantor 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 Part F of SCHEDULE I 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 or used by any Grantor (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 Part F of SCHEDULE I 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.
"PERSON" means an individual, corporation, limited liability
company,
partnership, association, joint-stock company, trust,
unincorporated
organization, joint venture or other enterprise or entity or
Governmental
Authority.
"SECURED PARTIES" means each of the Collateral Agent and the
Investors and
all other Noteholders.
"TRADEMARK LICENSES" means all licenses, contracts or other
agreements,
whether written or oral, naming any Grantor 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 any Grantor and now or
hereafter
covered by such licenses (including, without limitation, all
Trademark Licenses
described in Part F of SCHEDULE I 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 any Grantor (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
Part F of SCHEDULE I 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 any Grantor
relating to the
distribution of products and services in connection with which any
of such marks
are used.
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"TRANSACTION DOCUMENTS" means the Existing Purchase Agreement,
the Exchange
Agreements, the Notes, the Guaranty, this Agreement and the other
Transaction
Documents as defined in the Existing Purchase Agreement as defined
by the
Exchange Agreements.
SECTION 2. GRANT OF SECURITY INTEREST. (a) As collateral
security for all
of the Obligations referred to below, each Grantor hereby pledges
and assigns to
the Collateral Agent for the benefit of the Secured Parties, and
grants to the
Collateral Agent for the benefit of the Secured Parties a
continuing security
interest in, all personal property of each Grantor, 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
"JOINT
COLLATERAL"), including, without limitation, the following:
(i) all Accounts; (ii) all Chattel Paper (whether tangible or
electronic);
(iii) the Commercial Tort Claims specified on Part D of SCHEDULE I
hereto; (iv)
all Deposit Accounts, all cash and other property from time to time
deposited
therein and the monies and property in the possession or under the
control of
the Secured Parties or any affiliate, representative, agent or
correspondent of
any Secured Party; (v) all Documents; (vi) all Equipment; (vii) all
Fixtures;
(viii) all General Intangibles (including, without limitation, all
Payment
Intangibles); (ix) all Goods; (x) all Instruments (including,
without
limitation, Promissory Notes and each certificated Security); (xi)
all
Inventory; (xii) all Investment Property; (xiii) all Copyrights,
Patents and
Trademarks, and all Licenses; (xiv) all Letter-of-Credit Rights;
(xv) all
Supporting Obligations; (xvi) all other tangible and intangible
personal
property of each Grantor (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 any
Grantor 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 each Grantor 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 any
Grantor or any
other Person from time to time acting for any Grantor, in each
case, to the
extent of such Grantor's rights therein, 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 (xvii) all Proceeds, including all Cash
Proceeds and
Noncash Proceeds, and products of any and all of the foregoing
Joint Collateral;
in each case howsoever any Grantor's interest therein may arise or
appear
(whether by ownership, security interest, claim or otherwise).
Notwithstanding anything herein to the contrary, the term
"Joint
Collateral" shall not include (i) any New Note Collateral nor (ii)
any General
Intangibles or other rights arising under any contracts,
instruments, licenses
or other documents as to which the grant of a security interest
would (A)
constitute a violation of a valid and enforceable restriction in
favor of a
third party on such grant, unless and until any required consents
shall have
been obtained, or (B) give any other party to such contract,
instrument, license
or other document an enforceable right to terminate its obligations
thereunder,
or (iii) any asset, the granting of a security interest in which
would be void
or illegal under any applicable governmental law, rule or
regulation, or
pursuant thereto would result in, or permit the termination of,
such asset
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(b) As collateral security for all of the New Note Obligations
referred to
below, the Company hereby pledges and assigns to the Collateral
Agent for the
benefit of the New Note Holders, and grants to the Collateral Agent
for the
benefit of the New Note Holders a continuing security interest in,
the New Note
Collateral, whether now or hereafter existing and whether now owned
or hereafter
acquired.
SECTION 3. SECURITY FOR OBLIGATIONS. (a) The security interest
created
hereby in the Joint Collateral constitutes continuing collateral
security for
all of the following obligations of the respective Grantor, whether
now existing
or hereafter incurred (collectively, the "OBLIGATIONS"):
(i) (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
Existing Purchase Agreement, the Exchange Agreements, the
Notes and the
other Transaction Documents, including, without limitation,
all principal
of and interest on the Notes (including, without limitation,
all interest
that accrues after the commencement of any Insolvency
Proceeding, whether
or not the payment of such interest is unenforceable or is not
allowable
due to the existence of such Insolvency Proceeding), and (B)
in the case of
any other Grantor, the payment by such Grantor, as and when
due and payable
of all "Guaranteed Obligations" under (and as defined in) the
Guaranty,
including, without limitation, in both cases, all fees,
commissions,
expense reimbursements, indemnifications and all other amounts
due or to
become due under any of the Transaction Documents; and
(ii) the due performance and observance by each Grantor
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 Noteholders.
(b) The security interest created hereby in the New Note
Collateral
constitutes continuing collateral security for all of the following
obligations
of the Company, whether now existing or hereafter incurred
(collectively, the
"NEW NOTE OBLIGATIONS"):
(i) 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
New Notes, including, without limitation, all principal of and
interest on
the New Notes (including, without limitation, all interest
that accrues
after the commencement of any Insolvency Proceeding, whether
or not the
payment of such interest is unenforceable or is not allowable
due to the
existence of such Insolvency Proceeding); and
(ii) 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 New
Notes, including without limitation, with respect to any
conversion or
redemption rights of the New Note Holders under the New Notes.
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SECTION 4. REPRESENTATIONS AND WARRANTIES. Each Grantor
represents and
warrants as of the date of this Agreement as follows:
(a) Part A of SCHEDULE I hereto sets forth (i) the exact legal
name of each
Grantor, and (ii) the state of incorporation, organization or
formation and the
organizational identification number of each Grantor in such state.
(b) There is no pending or threatened action, suit, proceeding
or claim
affecting any Guarantor before any Governmental Authority or any
arbitrator, or
any order, judgment or award issued by any Governmental Authority
or arbitrator,
in each case, that would reasonably be expected to adversely affect
the grant by
any Grantor, 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.
(c) All Federal, state and local tax returns and other reports
required by
applicable law to be filed by any Grantor have been filed, or
extensions have
been obtained, and all taxes, assessments and other governmental
charges imposed
upon any Grantor or any property of any Grantor (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 generally accepted accounting principles
consistently
applied ("GAAP").
(d) All Equipment, Fixtures, Goods and Inventory of each
Grantor now
existing are, and all Equipment, Fixtures, Goods and Inventory of
each Grantor
hereafter existing will be, located and/or based at the addresses
specified
therefor in Part B of SCHEDULE I hereto, except that each Grantor
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
Part B of SCHEDULE I hereto (or a new Part B of SCHEDULE I
delivered by the
Grantors to the 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 or will take such actions pursuant to
Section 5(n).
Each Grantor's chief place of business and chief executive office,
the place
where each Grantor keeps its Records concerning Accounts and all
originals of
all Chattel Paper are located at the addresses specified therefor
in Part B of
SCHEDULE I hereto. None of the Accounts is evidenced by Promissory
Notes or
other Instruments. Set forth in Part E of SCHEDULE I 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 each Grantor and (ii) each
Deposit
Account, Securities Account and Commodities Account of each
Grantor, 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 Part G of SCHEDULE I
hereto is a
complete and correct list of each trade name used by each Grantor.
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(e) Each Grantor has delivered to the Collateral Agent
complete and correct
copies of each License described in Part F of SCHEDULE I hereto,
including all
schedules and exhibits thereto, which represents all of the
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 such
Grantor 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
Grantor or to any Grantor's knowledge, any other party thereto has
occurred, nor
does any defense, offset, deduction or counterclaim exist
thereunder in favor of
any such party.
(f) Each Grantor owns and controls, or otherwise possesses
adequate rights
to use, all Intellectual Property, 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.
Part F of
SCHEDULE I hereto sets forth a true and complete list of all
registered
copyrights, issued Patents, Trademarks, and Licenses owned or used
by each
Grantor as of the date hereof. To the best knowledge of each
Grantor, all such
Intellectual Property of each Grantor is subsisting and in full
force and
effect, has not been adjudged invalid or unenforceable and has not
been
abandoned in whole or in part. Except as set forth in Part F of
SCHEDULE I, no
such Intellectual Property is the subject of any licensing or
franchising
agreement. Each Grantor has no knowledge of any conflict with the
rights of
others to any such Intellectual Property and, to the knowledge of
each Grantor,
the Intellectual Property is not now infringing or in conflict with
any such
rights of others in any material respect, and to the knowledge of
each Grantor,
no other Person is now infringing or in conflict in any material
respect with
any of the Intellectual Property. No Grantor has 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.
(g) Each Grantor is and will be at all times the sole and
exclusive owner
of, or otherwise has and will have adequate rights in, the
Collateral free and
clear of any Liens, except for Permitted Liens, provided, that the
Company shall
not create or grant any Lien upon the New Note Collateral. 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
as may have been filed in favor of the Collateral Agent for the
benefit of the
Secured Parties relating to this Agreement or the other Security
Documents.
(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 each Grantor or any of its properties and
will not result
in or require the creation of any Lien upon or with respect to any
of its
properties.
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(i) No authorization or approval or other action by, and no
notice to or
filing with, any Governmental Authority or other regulatory body,
is required
for (i) the grant by each Grantor, or the perfection, of the
security interest
purported to be created hereby in the Collateral, or (ii) the
exercise by the
Collateral Agent of 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 Part C of
SCHEDULE I
hereto (or a new Part C of SCHEDULE I delivered by the Grantors to
the
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, or Commodity
Contracts for the
execution of a control agreement with the depository institution or
commodity
intermediary with which such account is maintained, each as
provided in Section
5(i), (C) with respect to the perfection of the security interest
created hereby
in the Intellectual Property and Licenses, for the recording of the
appropriate
Assignment for Security, substantially in the form of EXHIBIT A
hereto in the
applicable Intellectual Property Office, (D) 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 applicable Grantor, together with the
Certificate of Title
or certificate of ownership, with respect to such Titled
Collateral, to the
appropriate Governmental Authority, (E) 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, (F) with respect to any action that may be necessary
to obtain
control of Collateral constituting Electronic Chattel Paper or
Investment
Property, the taking of such actions, and (G) the Collateral Agent
having
possession of all Documents, Chattel Paper, Instruments and cash
constituting
Collateral (subclauses (A), (B), (C), (D), (E), (F) and (G), each a
"PERFECTION
REQUIREMENT" and collectively, the "PERFECTION REQUIREMENTS").
(j) This Agreement creates in favor of the Collateral Agent a
legal, valid
and enforceable security interest in (i) the Joint Collateral, as
security for
the Obligations and (ii) the New Note Collateral, as security for
the New Note
Obligations. The Perfection Requirements result in the perfection
of such
security interests. Such security interests are, or in the case of
Collateral in
which each Grantor obtains rights after the date hereof, will be,
perfected,
first priority security interests, subject only to Permitted Liens
and to the
Perfection Requirements, provided, that the Company shall not
create or grant
any Lien upon the New Note Collateral. Such recordings and filings
and all other
action necessary to perfect and protect such security interest have
been duly
taken, and, in the case of Collateral in which each Grantor obtains
rights after
the date hereof, will be duly taken, except for the Collateral
Agent's having
possession of all Documents, Chattel Paper, Instruments and cash
constituting
Collateral after the date hereof and the other actions, filings and
recordations
described above, including the Perfection Requirements.
(k) As of the date hereof, no Grantor holds any Commercial
Tort Claims or
has knowledge of any pending Commercial Tort Claims, except for
such Commercial
Tort Claims described in Part D of SCHEDULE I hereto.
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:
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(a) FURTHER ASSURANCES. Each Grantor 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 any Grantor, 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 any
Grantor's signature is required thereon) or authenticating the
filing of, such
financing or continuation statements, or amendments thereto, as may
be necessary
or that the Collateral Agent may reasonably 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
reasonably satisfactory to the Collateral Agent, (F) if at any time
after the
date hereof, any Grantor acquires or holds any Commercial Tort
Claim, promptly
notifying the Collateral Agent in a writing signed by such Grantor
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 any Grantor 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
Section 5(j) hereof; and (H) taking all actions required by other
law in any
relevant Uniform Commercial Code jurisdiction, or by other law as
applicable in
any foreign jurisdiction.
(b) LOCATION OF EQUIPMENT AND INVENTORY. Each Grantor will
keep the
Equipment and Inventory (i) at the locations specified therefor on
Part B of
SCHEDULE I hereto, or (ii) at such other locations set forth on
Part B of
SCHEDULE I hereto (or a new Part B of SCHEDULE I delivered by the
Grantors 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, or (iii) at such other locations in the United States,
provided that
within 20 days following the relocation of Equipment or Inventory
to such other
location or the acquisition of Equipment or Inventory, such Grantor
shall
deliver to the Collateral Agent a new Part B of SCHEDULE I
indicating such new
locations.
(c) CONDITION OF EQUIPMENT. Each Grantor will maintain or
cause the
Equipment (necessary or useful to its business) to be maintained
and preserved
in good condition, repair and working order, ordinary wear and tear
excepted,
and will forthwith, or in the case of any loss or damage to any
Equipment of any
Grantor within a commercially reasonable time after the occurrence
thereof, make
or cause to be made all repairs, replacements and other
improvements in
connection therewith which are necessary or desirable, consistent
with past
practice, or which the Collateral Agent may request to such end.
Any Grantor
will promptly furnish to the Collateral Agent a statement
describing in
reasonable detail any such loss or damage in excess of $250,000 per
occurrence
to any Equipment.
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(d) TAXES, ETC. Each Grantor 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 or
enforcement 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) Each Grantor will, at its own expense, maintain
insurance
(including, without limitation, commercial general liability
and property
insurance) 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. 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 any Grantor as
their respective
interests may appear. To the extent requested by the
Collateral Agent at
any time and from time to time, each such policy shall (A)
name the
Collateral Agent as an additional insured party thereunder
(without any
representation or warranty by or obligation upon the
Collateral Agent) as
its interests may appear, (B) provide that there shall be no
recourse
against the Collateral Agent for payment of premiums or other
amounts with
respect thereto, and (C) 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. Any Grantor
will, if so
requested by the Collateral Agent, deliver to the Collateral
Agent original
or duplicate policies of such insurance. Any Grantor will
also, at the
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.
(ii) Reimbursement under any liability insurance
maintained by any
Grantor pursuant to this Section 5(e) may be paid directly to
the Person
who shall have incurred liability covered by such insurance.
During the
continuance of an Event of Default, any proceeds of property
insurance
maintained by any Grantor pursuant to this Section 5(e) shall
be paid to
the Collateral Agent, and, at the Collateral Agent's option
exercised in
its sole discretion, the
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