SECURITY
AGREEMENT
(Senior)
THIS SECURITY AGREEMENT dated as of August 21,
2008 (this "Agreement"), is by and between REMOTE KNOWLEDGE, INC.,
a Delaware corporation (the "Debtor"), and SLW INTERNATIONAL, LLC,
a Texas limited liability company ("Secured Party").
A. Debtor
has executed and delivered to Secured Party that certain Senior
Convertible Note in the original principal amount of $800,000.00
dated of even date herewith (such promissory note, as the same may
be renewed, extended, increased, amended or modified from time to
time, is referred to herein as the "Note").
B. Secured
Party has conditioned its obligations under the Note upon, among
other things, the execution and delivery of this Agreement by
Debtor.
NOW THEREFORE, in consideration of the premises
and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
Section
1.1
Security Interest . Debtor hereby grants to
Secured Party a security interest in the following property,
whether now owned or existing or hereafter arising or acquired and
wherever arising or located (such property being hereinafter
sometimes called the "Collateral"):
a) all
of its accounts, accounts receivable, contract rights, general
intangibles, chattel paper, instruments, documents, promissory
notes, deposit accounts, funds on deposit with Secured Party,
investment property, investment securities, financial assets,
letter of credit rights, electronic chattel paper, software,
supporting obligations, payment intangibles, commercial tort claims
and all other personal property, whether now owned or hereafter
acquired, including without limitation, all lease receivables and
note receivables, all cash, notes, drafts and acceptances arising
therefrom, all returned and repossessed goods arising from or
relating to any such accounts, or other proceeds of any sale, lease
or other disposition of inventory, all tradenames, trademarks,
patents and other licenses, and all proceeds (including insurance
proceeds) and products thereof;
b) all
of its inventory, whether now owned or hereafter acquired,
including, without limitation, all raw materials, goods in process,
finished goods and other tangible personal property held for sale
or lease or furnished or to be furnished under contracts for
service or used or consumed in Debtor's trade or business and all
additions, accessions, substitutions, attachments and replacements
thereto and all contracts with respect thereto and all documents of
title evidencing or representing any part thereof and all products
and proceeds (including insurance proceeds) thereof; and
c) all
of its machinery, equipment, rolling stock, furniture, fixtures and
personalty of every nature and description, whether now owned or
hereafter acquired, and all appurtenances, accessions and additions
thereto and substitutions and replacements therefor, wheresoever
located, including all tools, parts and accessories used in
connection therewith, and all products and proceeds thereof
(including insurance proceeds).
All terms used
herein that are defined in the Uniform Commercial Code as adopted
in the State of Texas shall have the meanings specified in the
Uniform Commercial Code as adopted by the State of Texas as in
effect from time to time (the "UCC").
Section
1.2)
Obligations . The Collateral shall secure the
following obligations, indebtedness, and liabilities (all such
obligations, indebtedness, and liabilities being hereinafter
sometimes called the "Obligations"):
a) the
obligations and indebtedness of Debtor to Secured Party evidenced
by the Note;
b) all
future advances by Secured Party to Debtor;
c) the
Obligations (as defined in the Note);
d) all
costs and expenses, including, without limitation, all attorneys'
fees and legal expenses, incurred by Secured Party to preserve and
maintain the Collateral, collect the obligations herein described,
and enforce this Agreement;
e) all
other obligations, indebtedness, and liabilities of Debtor to
Secured Party, now existing or hereafter arising, regardless of
whether such obligations, indebtedness, and liabilities are
similar, dissimilar, related, unrelated, direct, indirect, fixed,
contingent, primary, secondary, joint, several, or joint and
several; and
f) all
extensions, renewals, and modifications of any of the foregoing and
all promissory notes given in extension, renewal or modification of
any of the foregoing.
ARTICLE II.
Representations and
Warranties
To induce Secured Party to enter into this
Agreement and the Note, Debtor represents and warrants to Secured
Party that:
Section
2.1
Title . Debtor owns, and with respect to
Collateral acquired after the date hereof Debtor will own, the
Collateral free and clear of any lien, security interest, or other
encumbrance other than in favor of Muragai LLC, a Delaware
corporation, as Lender Representative (as defined in the Credit
Agreement (hereinafter defined)) for the Lenders (as defined in the
Credit Agreement) (the “Junior Secured Party”) pursuant
to that certain Security Agreement dated as of even date herewith
(the “Junior Security Agreement”). Secured
Party, by its acceptance hereof, acknowledges that the Junior
Secured Party has a second priority security interest and liens in
the Collateral pursuant to the Junior Security
Agreement.
Section 2.2
Accounts . Unless Debtor has given Secured Party
written notice to the contrary, whenever the security interest
granted hereunder attaches to an account, Debtor shall be deemed to
have represented and warranted to Secured Party as to each and all
of its accounts that (a) each account is genuine and is in all
respects what it purports to be, (b) each account represents the
legal, valid, and binding obligation of the account debtor
evidencing indebtedness unpaid and owed by such account debtor
arising out of the performance of labor or services by Debtor or
the sale or lease of goods by Debtor, (c) the amount of each
account represented as owing is the correct amount actually and
unconditionally owing except for normal trade discounts granted in
the ordinary course of business, and (d) no account is subject to
any offset, counterclaim, or other defense.
Section 2.3
Financing Statements . Except for those in favor
of Subordinated Lenders, no financing statement, security
agreement, or other lien instrument covering all or any part of the
Collateral is on file in any public office, except as may have been
filed in favor of Secured Party.
Section 2.4
Jurisdiction of Organization; Legal Name . Debtor
is a Delaware corporation. Debtor's legal name set forth
in its Certificate of Incorporation filed with the Delaware
Secretary of State, as amended to date is: Remote Knowledge,
Inc. Debtor's organizational ID is 3679746.
Section 2.5
Principal Place of Business . The principal place
of business and chief executive office of Debtor, and the office
where Debtor keeps its books and records, is located at the address
of Debtor listed in the Note.
Section 2.6
Location of Collateral . All inventory,
machinery, and equipment of Debtor are located at the address of
Debtor listed in the Note.
Section 2.7
Business Purpose . The Collateral is used,
acquired and held exclusively for business purposes and no portion
of the Collateral is consumer goods. The Obligations
were incurred solely for business purposes and not as a
consumer-goods transaction or a consumer transaction.
ARTICLE III.
Covenants
Debtor covenants and agrees with Secured Party
that until the Obligations are paid and performed in
full:
Section 3.1
Maintenance . Debtor shall maintain the
Collateral in good operating condition and repair and shall not
permit any waste or destruction of the Collateral or any part
thereof. Debtor shall not use or permit the Collateral
to be used in violation of any law or inconsistently with the terms
of any policy of insurance. Debtor shall not use or
permit the Collateral to be used in any manner or for any purpose
that would impair the value of the Collateral or expose the
Collateral to unusual risk.
Section 3.2
Encumbrances . Debtor shall not create, permit,
or suffer to exist, and shall defend the Collateral, against any
lien, security interest, or other encumbrance on the Collateral
except the security interest of Secured Party hereunder and the
security interest of Senior Lender, and shall defend Debtor's
rights in the Collateral and Secured Party's security interest in
the Collateral against the claims of all persons and
entities.
Section 3.3
Modification of Collateral . Debtor shall do
nothing to impair the rights of Secured Party in the
Collateral. Without the prior written consent of Secured
Party, Debtor shall not grant any extension of time for any payment
with respect to the Collateral, or compromise, compound, or settle
any of the Collateral, or release in whole or in part any person or
entity liable for payment with respect to the Collateral, or allow
any credit or discount for payment with respect to the Collateral
other than normal trade discounts granted in the ordinary course of
business, or release any lien, security interest, or assignment
securing the Collateral, or otherwise amend or modify any of the
Collateral.
Section 3.4
Disposition of Collateral . Debtor shall not
sell, lease, or otherwise dispose of the Collateral or any part
thereof without the prior written consent of Secured Party, except
Debtor may sell inventory in the ordinary course of
business.
Section 3.5
Further Assurances . At any time and from time to
time, upon the request of Secured Party, and at the sole expense of
Debtor, Debtor shall promptly execute and deliver all such further
instruments and documents and take such further action as Secured
Party may deem necessary or desirable to preserve and perfect its
security interest in the Collateral and carry out the provisions
and purposes of this Agreement. Debtor shall promptly
endorse and deliver to Secured Party all documents, instruments,
and chattel paper that it now owns or may hereafter acquire which
constitute Collateral or relate to the Collateral.
Section 3.6
Risk of Loss; Insurance . Debtor shall be
responsible for any loss of or damage to the
Collateral. Debtor shall maintain insurance on the
Collateral as provided in the Note.
Section 3.7
Inspection . Debtor shall permit Secured Party
and its representatives to examine or inspect the Collateral
wherever located and to examine, inspect, and copy Debtor's books
and records at any reasonable time and as often as Secured Party
may desire all as further provided in the Note.
Section 3.8
Notification . Debtor shall promptly notify
Secured Party of (a) any lien, security interest, encumbrance, or
claim made or threatened against the Collateral, and (b) any
material change in the Collateral, including, without limitation,
any material damage to or loss of the Collateral.
Section 3.9
Organizational Changes . Debtor shall not,
without the prior written consent of Secured Party, change its
name, identity, organizational structure or state of organization
(including, without limitation, through any merger or
reorganization). Debtor shall not do business under any
trade name, unless such trade name has been disclosed to Secured
Party. Debtor shall not change its principal place of
business, chief executive office, or the place where it keeps its
books and records unless
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