EXHIBIT 10.4
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (as amended, restated, supplemented or otherwise
modified from time to time, this "Agreement") dated as of November __, 2018
between Esports Entertainment Group, Inc., a Nevada corporation ("Esports") and
Esports Services Antigua Ltd., Vie Esports Services B.V., Esports Services
(Malta) Limited and Esports Entertainment (Malta) Ltd., (collectively the
"Subsidiary") (the Subsidiary, together with each other Person who becomes a
party to this Agreement by execution of a joinder in the form of Exhibit A
attached hereto, which shall include all wholly-owned or majority-owned
subsidiaries of Esports acquired after the date hereof for so long as this
Agreement remains in effect, are hereinafter sometimes referred to individually
as a "Debtor" and, collectively, as the "Debtors") and Cavalry Fund I LP, a
Delaware limited partnership, in its capacity as Collateral Agent for the
benefit of itself and each of the Purchasers (as hereinafter defined) (each,
together with its respective successors and assigns, a "Secured Party," and
collectively the "Secured Parties").
W I T N E S S E T H:
WHEREAS, the Purchasers as from time to time parties to the Purchase
Agreements (as hereafter defined) (each a "Purchaser", and together with their
successors and assigns and each other purchaser of a Note (as defined below) and
their respective successors and assigns, individually and collectively, the
"Purchasers"), pursuant to which such Purchasers will purchase from Esports
certain senior secured notes each made by Esports and dated as of the date
hereof in an original aggregate principal amount of $_______ (all such notes,
together with any promissory notes or other securities issued in exchange or
substitution therefor or replacement thereof, and as any of the same may be
amended, supplemented, restated or modified and in effect from time to time, the
"Notes");
AND WHEREAS, the Notes are being acquired by Purchasers, and Purchasers
have made certain financial accommodations to Esports pursuant to certain
Purchase Agreements, dated as of the date hereof among Esports, and the
Purchasers (as the same may be amended, restated, supplemented or otherwise
modified from time to time, the "Purchase Agreements"). Capitalized terms used
herein but not otherwise defined shall have the meanings set forth in the
Purchase Agreements;
AND WHEREAS, each Debtor will derive substantial benefit and advantage from
the financial accommodations to Esports set forth in the Purchase Agreements and
the Notes, and it will be to each such Debtor's direct interest and economic
benefit to assist Esports in procuring said financial accommodations from
Purchasers;
AND WHEREAS, to induce Purchasers to enter into the Purchase Agreements and
purchase the Notes, (i) each Debtor (other than Esports) will guaranty the
Obligations (as hereinafter defined) of Esports pursuant to the terms of one or
more guaranties by each such Debtor in favor of Secured Party (on its behalf and
on behalf of the Purchasers) (such guaranties, as amended, restated, modified or
supplemented and in effect from time to time, individually and collectively, the
"Subsidiary Guaranty") and (ii) each Debtor will pledge and grant a security
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interest in all of its right, title and interest in and to the Collateral (as
hereinafter defined) as security for its Obligations for the benefit of the
Secured Party, Purchasers and their respective successors and assigns.
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
Section 1. Definitions. Capitalized terms used herein without definition
and defined in the Purchase Agreement are used herein as defined therein. In
addition, as used herein:
"Accounts" means any "account," as such term is defined in the UCC, and, in any
event, shall include, without limitation, "supporting obligations" as defined in
the UCC.
"Chattel Paper" means any "chattel paper," as such term is defined in the UCC.
"Collateral" shall have the meaning ascribed thereto in Section 3 hereof.
"Commercial Tort Claims" means "commercial tort claims", as such term is defined
in the UCC. "Contracts" means all contracts, undertakings, or other agreements
(other than rights evidenced by Chattel Paper, Documents or Instruments) in or
under which a Debtor may now or hereafter have any right, title or interest,
including, without limitation, with respect to an Account, any agreement
relating to the terms of payment or the terms of performance thereof.
"Copyrights" means any copyrights, rights and interests in copyrights, works
protectable by copyrights, copyright registrations and copyright applications,
including, without limitation, the copyright registrations and applications
listed on Schedule III attached hereto (if any), and all renewals of any of the
foregoing, all income, royalties, damages and payments now and hereafter due
and/or payable under or with respect to any of the foregoing, including, without
limitation, damages and payments for past, present and future infringements of
any of the foregoing and the right to sue for past, present and future
infringements of any of the foregoing.
"Deposit Accounts" means all "deposit accounts" as such term is defined in the
UCC, now or hereafter held in the name of a Debtor.
"Documents" means any "documents," as such term is defined in the UCC, and shall
include, without limitation, all documents of title (as defined in the UCC),
bills of lading or other receipts evidencing or representing Inventory or
Equipment.
"Equipment" means any "equipment," as such term is defined in the UCC and, in
any event, shall include, Motor Vehicles.
"Event of Default" shall have the meaning set forth in the Notes.
"Excluded Assets" means each of the following: (1) any lease, license or other
agreement or any property subject to a capital lease, purchase money security
interest or similar arrangement, to the extent that a grant of a Lien thereon in
favor of Secured Party would violate or invalidate such lease, license,
agreement or capital lease, purchase money security interest or similar
arrangement or create a right of termination in favor of any other party thereto
(other than the Debtors), so long as such provision exists and so long as such
lease, license or agreement was not entered into in contemplation of
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circumventing the obligation to provide Collateral hereunder or in violation of
the Purchase Agreement, other than to the extent that any such term would be
rendered ineffective pursuant to Sections 9-406, 9-407, 9-408 or 9-409 of the
UCC (or any successor provision or provisions) of any relevant jurisdiction or
any other applicable law including the bankruptcy code, or principles of equity.
"General Intangibles" means any "general intangibles," as such term is defined
in the UCC, and, in any event, shall include, without limitation, all right,
title and interest in or under any Contract, models, drawings, materials and
records, claims, literary rights, goodwill, rights of performance, Copyrights,
Trademarks, Patents, warranties, rights under insurance policies and rights of
indemnification.
"Goods" means any "goods", as such term is defined in the UCC, including,
without limitation, fixtures and embedded Software to the extent included in
"goods" as defined in the UCC.
"Governmental Authority" means the government of the United States of America or
any other nation, or any political subdivision thereof, whether state or local,
or any agency, authority, instrumentality, regulatory body, court, central bank
or other entity exercising executive, legislative, judicial, taxing, regulatory
or administration powers or functions of or pertaining to government over any
Debtor or any of its subsidiaries, or any of their respective properties, assets
or undertakings.
"Instruments" means any "instrument," as such term is defined in the UCC, and
shall include, without limitation, promissory notes, drafts, bills of exchange,
trade acceptances, letters of credit, letter of credit rights (as defined in the
UCC), and Chattel Paper.
"Inventory" means any "inventory," as such term is defined in the UCC.
"Investment Property" means any "investment property", as such term is defined
in the UCC.
"Obligations" means all obligations, liabilities and indebtedness of every
nature of Debtors from time to time owed or owing under or in respect of this
Agreement, the Notes, the Pledge Agreement, the Subsidiary Guaranty, and any of
the other Security Documents, as the case may be, including, without limitation,
the principal amount of all debts, claims and indebtedness, accrued and unpaid
interest and all fees, costs and expenses, whether primary, secondary, direct,
contingent, fixed or otherwise, heretofore, now and/or from time to time
hereafter owing, due or payable whether before or after the filing of a
bankruptcy, insolvency or similar proceeding under applicable federal, state,
foreign or other law and whether or not an allowed claim in any such proceeding.
"Lien" has the meaning set forth in the Purchase Agreement.
"Motor Vehicles" shall mean motor vehicles, tractors, trailers and other like
property, whether or not the title thereto is governed by a certificate of title
or ownership.
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"Patents" means any patents and patent applications, including, without
limitation, the inventions and improvements described and claimed therein, all
patentable inventions and those patents and patent applications listed on
Schedule IV attached hereto (if any), and the reissues, divisions,
continuations, renewals, extensions and continuations-in-part of any of the
foregoing, and all income, royalties, damages and payments now or hereafter due
and/or payable under or with respect to any of the foregoing, including, without
limitation, damages and payments for past, present and future infringements of
any of the foregoing and the right to sue for past, present and future
infringements of any of the foregoing.
"Permitted Indebtedness" has the meaning set forth in the Notes.
"Permitted Lien" has the meaning set forth in the Notes.
"Proceeds" means "proceeds," as such term is defined in the UCC and, in any
event, includes, without limitation, (a) any and all proceeds of any insurance,
indemnity, warranty or guaranty payable with respect to any of the Collateral,
(b) any and all payments (in any form whatsoever) made or due and payable from
time to time in connection with any requisition, confiscation, condemnation,
seizure or forfeiture of all or any part of the Collateral by any Governmental
Authority (or any person acting under color of Governmental Authority), and (c)
any and all other amounts from time to time paid or payable under, in respect of
or in connection with any of the Collateral.
"Representative" means any Person acting as agent, representative or trustee on
behalf of the Secured Party from time to time.
"Security Documents" means this Agreement, the Subsidiary Guaranty, the Pledge
Agreement, and any other documents securing the Liens of the Secured Party
hereunder.
"Software" means all "software" as such term is defined in the UCC, now owned or
hereafter acquired by a Debtor, other than software embedded in any category of
Goods, including, without limitation, all computer programs and all supporting
information provided in connection with a transaction related to any program.
"Trademarks" means any trademarks, trade names, corporate names, company names,
business names, fictitious business names, trade styles, service marks, logos,
other business identifiers, prints and labels on which any of the foregoing have
appeared or appear, all registrations and recordings thereof, and all
applications in connection therewith, including, without limitation, the
trademarks and applications listed in Schedule V attached hereto (if any) and
renewals thereof, and all income, royalties, damages and payments now or
hereafter due and/or payable under or with respect to any of the foregoing,
including, without limitation, damages and payments for past, present and future
infringements of any of the foregoing and the right to sue for past, present and
future infringements of any of the foregoing.
"Transaction Documents" means the Purchase Agreements, the Notes, the Security
Documents, the Warrants and any other related agreements.
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"UCC" shall mean the Uniform Commercial Code as in effect from time to time in
the State of New York; provided, that to the extent that the Uniform Commercial
Code is used to define any term herein and such term is defined differently in
different Articles or Divisions of the Uniform Commercial Code, the definition
of such term contained in Article or Division 9 shall govern.
Section 2. Representations, Warranties and Covenants of Debtors. Each
Debtor represents and warrants to, and covenants with, the Secured Party as
follows:
(a) Subject to the Permitted Liens, such Debtor has or will have rights in
and the power to transfer the Collateral in which it purports to grant a
security interest pursuant to Section 3 hereof (subject, with respect to after
acquired Collateral, to such Debtor acquiring the same) and no Lien other than
Permitted Indebtedness exists or will exist upon such Collateral at any time.
(b) Subject to the Permitted Liens, this Agreement is effective to create
in favor of Secured Party a valid security interest in and Lien upon all of such
Debtor's right, title and interest in and to the Collateral, and upon (i) the
filing of appropriate UCC financing statements in the jurisdictions listed on
Schedule I attached hereto, (ii) creation of each Deposit Account, (iii) filings
in the United States Patent and Trademark Office, or United States Copyright
Office with respect to Collateral that constitutes Patents and Trademarks, or
Copyrights, as the case may be, (iv) the filing of the Mortgages in the
jurisdictions listed on Schedule I hereto, (v) the delivery to the Secured Party
of the Pledged Collateral together with assignments in blank, (vi) the security
interest created hereby being noted on each certificate of title evidencing the
ownership of any Motor Vehicle in accordance with Section 4.1(d) hereof and (v)
delivery to the Secured Party or its Representative of Instruments duly endorsed
by such Debtor or accompanied by appropriate instruments of transfer duly
executed by such Debtor with respect to Instruments not constituting Chattel
Paper, such security interest will be a duly perfected first priority perfected
security interest (subject to Permitted Indebtedness) in all of the Collateral.
(c) All of the Equipment, Inventory and Goods owned by such Debtor is
located at the places as specified on Schedule I attached hereto. Except as
disclosed on Schedule I, none of the Collateral is in the possession of any
bailee, warehousemen, processor or consignee. Schedule I discloses such Debtor's
name as of the date hereof as it appears in official filings in the state or
province, as applicable, of its incorporation, formation or organization, the
type of entity of such Debtor (including corporation, partnership, limited
partnership or limited liability company), organizational identification number
issued by such Debtor's state of incorporation, formation or organization (or a
statement that no such number has been issued), such Debtor's state or province,
as applicable, of incorporation, formation or organization and the chief place
of business, chief executive office and the office where such Debtor keeps its
books and records and the states in which such Debtor conducts its business.
Such Debtor has only one state or province, as applicable, of incorporation,
formation or organization. Such Debtor does not do business and has not done
business during the past five (5) years under any trade name or fictitious
business name except as disclosed on Schedule II attached hereto.
(d) No Copyrights, Patents or Trademarks listed on Schedules III, IV and V,
respectively, if any, have been adjudged invalid or unenforceable or have been
canceled, in whole or in part, or are not presently subsisting. Each of such
Copyrights, Patents and Trademarks (if any) is valid and enforceable. Subject to
the Permitted Lien, such Debtor is the sole and exclusive owner of the entire
and unencumbered right, title and interest in and to each of such Copyrights,
Patents and Trademarks, identified on Schedules III, IV and V, as applicable, as
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being owned by such Debtor, free and clear of any liens (subject to the
Permitted Lien), charges and encumbrances, including without limitation
licenses, shop rights and covenants by such Debtor not to sue third persons.
Such Debtor has adopted, used and is currently using, or has a current bona fide
intention to use, all of such Trademarks and Copyrights. Such Debtor has no
notice of any suits or actions commenced or threatened with reference to the
Copyrights, Patents or Trademarks owned by it.
(e) Each Debtor agrees to deliver to the Secured Party an updated Schedule
I, II, III, IV and/or V within five (5) Business Days of any change thereto.
(f) All depositary and other accounts including, without limitation,
Deposit Accounts, securities accounts, brokerage accounts and other similar
accounts, maintained by each Debtor are described on Schedule VI hereto, which
description includes for each such account the name of the Debtor maintaining
such account, the name, address and telephone and telecopy numbers of the
financial institution at which such account is maintained, the account number
and the account officer, if any, of such account. No Debtor shall open any new
Deposit Accounts, securities accounts, brokerage accounts or other accounts
unless such Debtor shall have given Secured Party ten (10) Business Days' prior
written notice of its intention to open any such new accounts. Each Debtor shall
deliver to Secured Party a revised version of Schedule VI showing any changes
thereto within five (5) Business Days of any such change. Each Debtor hereby
authorizes the financial institutions at which such Debtor maintains an account
to provide Secured Party with such information with respect to such account as
Secured Party from time to time reasonably may request, and each Debtor hereby
consents to such information being provided to Secured Party. In addition, all
of such Debtor's depositary, security, brokerage and other accounts including,
without limitation, Deposit Accounts shall be subject to the provisions of
Section 2 hereof.
(g) Such Debtor does not own any Commercial Tort Claim except for those
disclosed on Schedule VII hereto (if any).
(h) Such Debtor does not have any interest in real property with respect to
real property except as disclosed on Schedule VIII (if any). Each Debtor shall
deliver to Secured Party a revised version of Schedule VIII showing any changes
thereto within ten (10) Business Days of any such change. Except as otherwise
agreed to by Secured Party, all such interests in real property with respect to
such real property are subject to a mortgage and deed of trust (in form and
substance satisfactory to Secured Party) in favor of Secured Party (hereinafter,
a "Mortgage").
(i) Each Debtor shall duly and properly record each interest in real
property held by such Debtor, except with respect to easements, rights of way,
access agreements, surface damage agreements, surface use agreements or similar
agreements that such Debtor, using prudent customs and practices in the industry
in which it operates, does not believe are of material value or material to the
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operation of such Debtor's business or, with respect to state and federal rights
of way, are not capable of being recorded as a matter of state and federal law.
(j) All Equipment (including, without limitation, Motor Vehicles) owned by
a Debtor and subject to a certificate of title or ownership statute is described
on Schedule IX hereto.
Section 3. Collateral. As collateral security for the prompt payment in
full when due (whether at stated maturity, by acceleration or otherwise) of the
obligations due the Secured Party under the Notes, each Debtor hereby pledges
and grants to the Secured Party, for the benefit of itself and each Purchaser, a
Lien on and security interest in and to all of such Debtor's right, title and
interest in the following properties and assets of such Debtor, whether now
owned by such Debtor or hereafter acquired and whether now existing or hereafter
coming into existence and wherever located (all being collectively referred to
herein as "Collateral"):
(a) all Instruments, together with all payments thereon or thereunder:
(b) all Accounts;
(c) all Inventory;
(d) all General Intangibles (including payment intangibles (as defined in
the UCC) and Software);
(e) all Equipment;
(f) all Documents;
(g) all Contracts;
(h) all Goods;
(i) all Investment Property, including without limitation all equity
interests now owned or hereafter acquired by such Debtor;
(j) all Deposit Accounts, including, without limitation, the balance from
time to time in all bank accounts maintained by such Debtor;
(k) all Commercial Tort Claims specified on Schedule VII;
(l) all Trademarks, Patents and Copyrights;
(m) all books and records pertaining to the other Collateral; and
(n) all other tangible and intangible property of such Debtor, including,
without limitation, all interests in real property, Proceeds, tort claims,
products, accessions, rents, profits, income, benefits, substitutions, additions
and replacements of and to any of the property of such Debtor described in the
preceding clauses of this Section 3 (including, without limitation, any proceeds
of insurance thereon, insurance claims and all rights, claims and benefits
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against any Person relating thereto), other rights to payments not otherwise
included in the foregoing, and all books, correspondence, files, records,
invoices and other papers, including without limitation all tapes, cards,
computer runs, computer programs, computer files and other papers, documents and
records in the possession or under the control of such Debtor, or any computer
bureau or service company from time to time acting for such Debtor.
Notwithstanding anything to the contrary contained herein or in any
Transaction Document, in no event shall the security interest granted herein or
therein attach to any Excluded Assets.
Section 4. Covenants; Remedies. In furtherance of the grant of the pledge
and security interest pursuant to Section 3 hereof, each Debtor hereby agrees
with the Secured Party as follows (subject to the Permitted Liens):
4.1 Delivery and Other Perfection; Maintenance, etc.
(a) Delivery of Instruments, Documents, Etc. Each Debtor shall deliver
and pledge to the Secured Party or its Representative any and all
Instruments, negotiable Documents, Chattel Paper and certificated
securities (accompanied by stock powers executed in blank, which stock
powers may be filled in and completed at any time upon the occurrence of
any Event of Default) duly endorsed and/or accompanied by such instruments
of assignment and transfer executed by such Debtor in such form and
substance as the Secured Party or its Representative may request; provided,
that so long as no Event of Default shall have occurred and be continuing,
each Debtor may retain for collection in the ordinary course of business
any Instruments, negotiable Documents and Chattel Paper received by such
Debtor in the ordinary course of business, and the Secured Party or its
Representative shall, promptly upon request of a Debtor, make appropriate
arrangements for making any other Instruments, negotiable Documents and
Chattel Paper pledged by such Debtor available to such Debtor for purposes
of presentation, collection or renewal (any such arrangement to be
effected, to the extent deemed appropriate by the Secured Party or its
Representative, against a trust receipt or like document). If a Debtor
retains possession of any Chattel Paper, negotiable Documents or
Instruments pursuant to the terms hereof, such Chattel Paper, negotiable
Documents and Instruments shall be marked with the following legend: "This
writing and the obligations evidenced or secured hereby are subject to the
security interest of Cavalry Fund I LP, in its capacity as Collateral Agent
for the benefit of Purchasers, as secured party."
(b) Other Documents and Actions. Each Debtor shall give, execute,
deliver, file and/or record any financing statement, registration, notice,
instrument, document, agreement, Mortgage or other papers that may be
necessary or desirable (in the reasonable judgment of the Secured Party or
its Representative) to create, preserve, perfect or validate the security
interest granted pursuant hereto (or any security interest or mortgage
contemplated or required hereunder, including with respect to Section 2(h)
of this Agreement) or to enable the Secured Party or its Representative to
exercise and enforce the rights of the Secured Party hereunder with respect
to such pledge and security interest, provided that notices to account
debtors in respect of any Accounts or Instruments shall be subject to the
provisions of clause (e) below. Notwithstanding the foregoing each Debtor
hereby irrevocably authorizes the Secured Party at any time and from time
to time to file in any filing office in any jurisdiction any initial
financing statements (and other similar filings or registrations under
other applicable laws and regulations pertaining to the creation,
attachment, or perfection of security interests) and amendments thereto
that (a) indicate the Collateral (i) as all assets of such Debtor or words
of similar effect, regardless of whether any particular asset comprised in
the Collateral falls within the scope of Article 9 of the UCC, or (ii) as
being of an equal or lesser scope or with greater detail, and (b) contain
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any other information required by part 5 of Article 9 of the UCC for the
sufficiency or filing office acceptance of any financing statement or
amendment, including (i) whether such Debtor is an organization, the type
of organization and any organization identification number issued to such
Debtor, and (ii) in the case of a financing statement filed as a fixture
filing, a sufficient description of real property to which the Collateral
relates. Each Debtor agrees to furnish any such information to the Secured
Party promptly upon request. Each Debtor also ratifies its authorization
for the Secured Party to have filed in any jurisdiction any like initial
financing statements or amendments thereto if filed prior to the date
hereof.
(c) Books and Records. Each Debtor (or a Company on behalf of a
Debtor) shall maintain at its own cost and expense complete and accurate
books and records of the Collateral, including, without limitation, a
record of all payments received and all credits granted with respect to the
Collateral and all other dealings with the Collateral. Upon the occurrence
and during the continuation of any Event of Default, each Debtor shall
deliver and turn over any such books and records (or true and correct
copies thereof) to the Secured Party or its Representative at any time on
demand. Each Debtor shall permit any Representative of the Secured Party,
to inspect such books and records at any time during reasonable business
hours and will provide photocopies thereof at such Debtor's expense to the
Secured Party upon request of the Secured Party.
(d) Motor Vehicles. Each Debtor shall, promptly upon acquiring same,
cause the Secured Party to be listed as the lienholder on each certificate
of title or ownership covering any items of Equipment, including Motor
Vehicles, having a value in excess of $50,000 individually or in the
aggregate for all such items of Equipment of the Debtor, or otherwise
comply with the certificate of title or ownership laws of the relevant
jurisdiction issuing such certificate of title or ownership in order to
properly evidence and perfect Secured Party's security interest in the
assets represented by such certificate of title or ownership.
(e) Notice to Account Debtors; Verification. (i) Upon the occurrence
and during the continuance of any Event of Default (or if any rights of
set-off (other than set-offs against an Account arising under the Contract
giving rise to the same Account) or contra accounts may be asserted, upon
request of the Secured Party or its Representative, each Debtor shall
promptly notify (and each Debtor hereby authorizes the Secured Party and
its Representative so to notify) each account debtor in respect of any
Accounts or Instruments or other Persons obligated on the Collateral that
such Collateral has been assigned to the Secured Party hereunder, and that
any payments due or to become due in respect of such Collateral are to be
made directly to the Secured Party, and (ii) the Secured Party and its
Representative shall have the right at any time or times to make direct
verification with the account debtors or other Persons obligated on the
Collateral of any and all of the Accounts or other such Collateral.
(f) Intellectual Property. Each Debtor represents and warrants that
the Copyrights, Patents and Trademarks listed on Schedules III, IV and V,
respectively (if any), constitute all of the registered Copyrights and all
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of the Patents and Trademarks now owned by such Debtor. If such Debtor
shall (i) obtain rights to any new patentable inventions, any registered
Copyrights or any Patents or Trademarks, or (ii) become entitled to the
benefit of any registered Copyrights or any Patents or Trademarks or any
improvement on any Patent, the provisions of this Agreement above shall
automatically apply thereto and such Debtor shall give to Secured Party
prompt written notice thereof. Each Debtor hereby authorizes Secured Party
to modify this Agreement by amending Schedules III, IV and V, as
applicable, to include any such registered Copyrights or any such Patents
and Trademarks. Each Debtor shall have the duty (i) to prosecute diligently
any patent, trademark, or service mark applications pending as of the date
hereof or hereafter, (ii) to preserve and maintain all rights in the
Copyrights, Patents and Trademarks, to the extent material to the
operations of the business of such Debtor and (iii) to ensure that the
Copyrights, Patents and Trademarks are and remain enforceable, to the
extent material to the operations of the business of such Debtor. Any
expenses incurred in connection with such Debtor's obligations under this
Section 4.1(f) shall be borne by such Debtor. Except for any such items
that a Debtor reasonably believes (using prudent industry customs and
practices) are no longer necessary for the on-going operations of its
business, no Debtor shall abandon any material right to file a patent,
trademark or service mark application, or abandon any pending patent,
trademark or service mark application or any other Copyright, Patent or
Trademark without the prior written consent of Secured Party, which consent
shall not be unreasonably withheld.
(g) Further Identification of Collateral. Each Debtor will, when and
as often as requested by the Secured Party or its Representative, furnish
to the Secured Party or such Representative, statements and schedules
further identifying and describing the Collateral and such other reports in
connection with the Collateral as the Secured Party or its Representative
may reasonably request, all in reasonable detail.
(h) Investment Property. Each Debtor will take any and all actions
required or requested by the Secured Party, from time to time, to (i) cause
the Secured Party to obtain exclusive control of any Investment Property
owned by such Debtor in a manner acceptable to the Secured Party and (ii)
obtain from any issuers of Investment Property and such other Persons, for
the benefit of the Secured Party, written confirmation of the Secured
Party's control over such Investment Property. For purposes of this Section
4.1(h), the Secured Party shall have exclusive control of Investment
Property if (i) such Investment Property consists of certificated
securities and a Debtor delivers such certificated securities to the
Secured Party (with appropriate endorsements if such certificated
securities are in registered form); (ii) such Investment Property consists
of uncertificated securities and either (x) a Debtor delivers such
uncertificated securities to the Secured Party or (y) the issuer thereof
agrees, pursuant to documentation in form and substance satisfactory to the
Secured Party, that it will comply with instructions originated by the
Secured Party without further consent by such Debtor, and (iii) such
Investment Property consists of security entitlements and either (x) the
Secured Party becomes the entitlement holder thereof or (y) the appropriate
securities intermediary agrees, pursuant to the documentation in form and
substance satisfactory to the Secured Party, that it will comply with
entitlement orders originated by the Secured Party without further consent
by any Debtor.
(i) Commercial Tort Claims. Each Debtor shall promptly notify Secured
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Party of any Commercial Tort Claim acquired by it that concerns a claim in
excess of $50,000 and unless otherwise consented to by Secured Party, such
Debtor shall enter into a supplement to this Agreement granting to Secured
Party a Lien on and security interest in such Commercial Tort Claim.
4.2 Other Liens. Other than Permitted Liens as defined in the Notes,
Debtors will not create, permit or suffer to exist, and will defend the
Collateral against and take such other action as is necessary to remove, any
Lien on the Collateral except Permitted Indebtedness, and will defend the right,
title and interest of the Secured Party in and to the Collateral and in and to
all Proceeds thereof against the claims and demands of all Persons whatsoever.
4.3 Preservation of Rights. Whether or not any Event of Default has
occurred or is continuing, the Secured Party and its Representative may, but
shall not be required to, take any steps the Secured Party or its Representative
deems necessary or appropriate to preserve any Collateral or any rights against
third parties to any of the Collateral, including obtaining insurance for the
Collateral at any time when such Debtor has failed to do so, and Debtors shall
promptly pay, or reimburse the Secured Party for, all expenses incurred in
connection therewith.
4.4 Formation of Subsidiaries; Name Change; Location; Bailees.
(a) No Debtor shall form or acquire any subsidiary unless (i) such
Debtor pledges all of the stock or equity interests of such subsidiary to
the Secured Party pursuant to an agreement in a form agreed to by the
Secured Party, (ii) such subsidiary becomes a party to this Agreement and
all other applicable Security Documents and (iii) the formation or
acquisition of such Subsidiary is not prohibited by the terms of the
Transaction Documents.
(b) No Debtor shall (i) reincorporate or reorganize itself under the
laws of any jurisdiction other than the jurisdiction in which it is
incorporated or organized as of the date hereof, or (ii) otherwise change
its name, identity or corporate structure, in each case, without the prior
written consent of Secured Party, which consent shall not be unreasonably
withheld. Each Debtor will notify Secured Party promptly in writing prior
to any such change in the proposed use by such Debtor of any tradename or
fictitious business name other than any such name set forth on Schedule II
attached hereto.
(c) Except for the sale of Inventory in the ordinary course of
business and other sales of assets expressly permitted by the terms of the
Purchase Agreement, each Debtor will keep the Collateral at the locations
specified in Schedule I. Each Debtor will give Secured Party thirty (30)
day's prior written notice of any change in such Debtor's chief place of
business or of any new location for any of the Collateral.
(d) If any Collateral is at any time in the possession or control of
any warehousemen, bailee, consignee or processor, such Debtor shall, upon
the request of Secured Party or its Representative, notify such
warehousemen, bailee, consignee or processor of the Lien and security
interest created hereby and shall instruct such Person to hold all such
Collateral for Secured Party's account subject to Secured Party's
instructions.
(e) Each Debtor acknowledges that it is not authorized to file any
financing statement or amendment or termination statement with respect to
any financing statement without the prior written consent of Secured Party
and agrees that it will not do so without the prior written consent of
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Secured Party, subject to such Debtor's rights under Section 9-509(d)(2) to
the UCC.
(f) No Debtor shall enter into any Contract that restricts or
prohibits the grant to Secured Party of a security interest in Accounts,
Chattel Paper, Instruments or payment intangibles or the proceeds of the
foregoing.
4.5 Reserved.
4.6 Events of Default, Etc. During the period during which an Event of
Default shall have occurred and be continuing subject to the Permitted
Lien:
(a) each Debtor shall, at the request of the Secured Party or its
Representative, assemble the Collateral and make it available to Secured
Party or its Representative at a place or places designated by the Secured
Party or its Representative which are reasonably convenient to Secured
Party or its Representative, as applicable, and such Debtor;
(b) the Secured Party or its Representative may make any reasonable
compromise or settlement deemed desirable with respect to any of the
Collateral and may extend the time of payment, arrange for payment in
installments, or otherwise modify the terms of, any of the Collateral;
(c) the Secured Party shall have all of the rights and remedies with
respect to the Collateral of a secured party under the UCC (whether or not
said UCC is in effect in the jurisdiction where the rights and remedies are
asserted) and such additional rights and remedies to which a secured party
is entitled under the laws in effect in any jurisdiction where any rights
and remedies hereunder may be asserted, including, without limitation, the
right, to the maximum extent permitted by law, to: (i) exercise all voting,
consensual and other powers of ownership pertaining to the Collateral as if
the Secured Party were the sole and absolute owner thereof (and each Debtor
agrees to take all such action as may be appropriate to give effect to such
right) and (ii) the appointment of a receiver or receivers for all or any
part of the Collateral or business of a Debtor, whether such receivership
be incident to a proposed sale or sales of such Collateral or otherwise and
without regard to the value of the Collateral or the solvency of any person
or persons liable for the payment of the Obligations secured by such
Collateral. Each Debtor hereby consents to the appointment of such receiver
or receivers, waives any and all defenses to such appointment and agrees
that such appointment shall in no manner impair, prejudice or otherwise
affect the rights of Secured Party under this Agreement. Each Debtor hereby
expressly waives notice of a hearing for appointment of a receiver and the
necessity for bond or an accounting by the receiver;
(d) the Secured Party or its Representative in its discretion may, in
the name of the Secured Party or in the name of a Debtor or otherwise,
demand, sue for, collect or receive any money or property at any time
payable or receivable on account of or in exchange for any of the
Collateral, but shall be under no obligation to do so;
(e) the Secured Party or its Representative may take immediate
possession and occupancy of any premises owned, used or leased by a Debtor
and exercise all other rights and remedies which may be available to the
Secured Party;
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(f) the Secured Party may, upon reasonable notice (such reasonable
notice to be determined by Secured Party in its sole and absolute
discretion, which shall not be less than ten (10) days), with respect to
the Collateral or any part thereof which shall then be or shall thereafter
come into the possession, custody or control of the Secured Party or its
Representative, sell, lease, license, assign or otherwise dispose of all or
any part of such Collateral, at such place or places as the Secured Party
deems best, and for cash or for credit or for future delivery (without
thereby assuming any credit risk), at public or private sale, without
demand of performance or notice of intention to effect any such disposition
or of the time or place thereof (except such notice as is required above or
by applicable statute and cannot be waived), and the Secured Party or
anyone else may be the purchaser, lessee, licensee, assignee or recipient
of any or all of the Collateral so disposed of at any public sale (or, to
the extent permitted by law, at any private sale) and thereafter hold the
same absolutely, free from any claim or right of whatsoever kind, including
any right or equity of redemption (statutory or otherwise), of Debtors, any
such demand, notice and right or equity being hereby expressly waived and
released. The Secured Party may, without notice or publication, adjourn any
public or private sale or cause the same to be adjourned from time to time
by announcement at the time and place fixed for the sale, and such sale may
be made at any time or place to which the sale may be so adjourned; and
(g) the rights, remedies and powers conferred by this Section 4.6 are
in addition to, and not in substitution for, any other rights, remedies or
powers that the Secured Party may have under any Transaction Document, at
law, in equity or by or under the UCC or any other statute or agreement.
The Secured Party may proceed by way of any action, suit or other
proceeding at law or in equity and no right, remedy or power of the Secured
Party will be exclusive of or dependent on any other. The Secured Party may
exercise any of its rights, remedies or powers separately or in combination
and at any time.
The proceeds of each collection, sale or other disposition under this Section
4.6 shall be applied in accordance with Section 4.9 hereof.
4.7 Deficiency. If the proceeds of sale, collection or other realization of
or upon the Collateral are insufficient to cover the costs and expenses of such
realization and the payment in full of the Obligations, Debtors shall remain
jointly and severally liable for any deficiency.
4.8 Private Sale. Each Debtor recognizes that the Secured Party may be
unable to effect a public sale of any or all of the Collateral consisting of
securities by reason of certain prohibitions contained in the Securities Act of
1933, as amended (the "Act"), and applicable state securities laws, but may be
compelled to resort to one or more private sales thereof to a restricted group
of purchasers who will be obliged to agree, among other things, to acquire such
Collateral for their own account for investment and not with a view to the
distribution or resale thereof. Each Debtor acknowledges and agrees that any
such private sale may result in prices and other terms less favorable to the
seller than if such sale were a public sale and each Debtor agrees that it is
not commercially unreasonable for Secured Party to engage in any such private
sales or dispositions under such circumstances. The Secured Party shall be under
no obligation to delay a sale of any of the Collateral to permit a Debtor to
register such Collateral for public sale under the Act, or under applicable
state securities laws, even if Debtors would agree to do so. The Secured Party
shall not incur any liability as a result of the sale of any such Collateral, or
any part thereof, at any private sale provided for in this Agreement conducted
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in a commercially reasonable manner, and so long as Secured Party conducts such
sale in a commercially reasonable manner each Debtor hereby waives any claims
against the Secured Party arising by reason of the fact that the price at which
the Collateral may have been sold at such 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 Secured Party accepts the first offer
received and does not offer the Collateral to more than one offeree.
Each Debtor further agrees to do or cause to be done all such other acts
and things as may be necessary to make such sale or sales of any portion or all
of any such Collateral valid and binding and in compliance with any and all
applicable laws, regulations, orders, writs, injunctions, decrees or awards of
any and all courts, arbitrators or governmental instrumentalities, domestic or
foreign, having jurisdiction over any such sale or sales, all at such Debtor's
expense. Each Debtor further agrees that a breach of any of the covenants
contained in this Section 4.8 will cause irreparable injury to the Secured
Party, that the Secured Party has no adequate remedy at law in respect of such
breach and, as a consequence, agrees that each and every covenant contained in
this Section 4.8 shall be specifically enforceable against Debtors, and each
Debtor hereby waives and agrees not to assert any defenses against an action for
specific performance of such covenants except for a defense that no Event of
Default has occurred and is continuing.
4.9 Application of Proceeds. The proceeds of any collection, sale or other
realization of all or any part of the Collateral, and any other cash at the time
held by the Secured Party under this Agreement, shall be applied to the
Obligations on a pro-rata basis based on investments made under the Securities
Purchase Agreement as detailed on Schedule 4.9.
4.10 Attorney-in-Fact. Each Debtor hereby irrevocably constitutes and
appoints the Secured Party, with full power of substitution, as its true and
lawful attorney-in-fact with full irrevocable power and authority in the place
and stead of such Debtor and in the name of such Debtor or in its own name, from
time to time in the discretion of the Secured Party, for the purpose of carrying
out the terms of this Agreement, to take any and all appropriate action and to
execute and deliver any and all documents and instruments which may be necessary
or desirable to perfect or protect any security interest granted hereunder, to
maintain the perfection or priority of any security interest granted hereunder,
or to otherwise accomplish the purposes of this Agreement, and, without limiting
the generality of the foregoing, hereby gives the Secured Party the power and
right, on behalf of such Debtor, without notice to or assent by such Debtor (to
the extent permitted by applicable law), to do the following:
(a) to take any and all appropriate action and to execute and deliver any
and all documents and instruments which may be necessary or desirable to
accomplish the purposes of this Agreement;
(b) upon the occurrence and during the continuation of an Event of Default,
to ask, demand, collect, receive and give acquittance and receipts for any and
all moneys due and to become due under any Collateral and, in the name of such
Debtor or its own name or otherwise, to take possession of and endorse and
collect any checks, drafts, notes, acceptances or other Instruments for the
payment of moneys due under any Collateral and to file any claim or to take any
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other action or proceeding in any court of law or equity or otherwise deemed
appropriate by the Secured Party for the purpose of collecting any and all such
moneys due under any Collateral whenever payable and to file any claim or to
take any other action or proceeding in any court of law or equity or otherwise
deemed appropriate by the Secured Party for the purpose of collecting any and
all such moneys due under any Collateral whenever payable;
(c) to pay or discharge charges or liens levied or placed on or threatened
against the Collateral, to effect any insurance called for by the terms of this
Agreement and to pay all or any part of the premiums therefor;
(d) to direct any party liable for any payment under any of the Collateral
to make payment of any and all moneys due, and to become due thereunder,
directly to the Secured Party or as the Secured Party shall direct, and to
receive payment of and receipt for any and all moneys, claims and other amounts
due, and to become due at any time, in respect of or arising out of any
Collateral;
(e) upon the occurrence and during the continuation of an Event of Default,
to sign and indorse any invoices, freight or express bills, bills of lading,
storage or warehouse receipts, drafts against debtors, assignments,
verifications and notices in connection with accounts and other Documents
constituting or relating to the Collateral;
(f) upon the occurrence and during the continuation of an Event of Default,
to commence and prosecute any suits, actions or proceedings at law or in equity
in any court of competent jurisdiction to collect the Collateral or any part
thereof and to enforce any other right in respect of any Collateral;
(g) upon the occurrence and during the continuation of an Event of Default,
to defend any suit, action or proceeding brought against a Debtor with respect
to any Collateral;
(h) upon the occurrence and during the continuation of an Event of Default,
to settle, compromise or adjust any suit, action or proceeding described above
and, in connection therewith, to give such discharges or releases as the Secured
Party may deem appropriate;
(i) to the extent that a Debtor's authorization given in Section 4.1(b) of
this Agreement is not sufficient to file such financing statements with respect
to this Agreement, with or without such Debtor's signature, or to file a
photocopy of this Agreement in substitution for a financing statement, as the
Secured Party may deem appropriate and to execute in such Debtor's name such
financing statements and amendments thereto and continuation statements which
may require such Debtor's signature;
(j) upon the occurrence and during the continuation of an Event of Default,
generally to sell, transfer, pledge, make any agreement with respect to or
otherwise deal with any of the Collateral as fully and completely as though the
Secured Party were the absolute owners thereof for all purposes; and
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(k) to do, at the Secured Party's option and at such Debtor's expense, at
any time, or from time to time, all acts and things which the Secured Party
reasonably deems necessary to protect or preserve or, upon the occurrence and
during the continuation of an Event of Default, realize upon the Collateral and
the Secured Party's lien therein, in order to effect the intent of this
Agreement, all as fully and effectively as such Debtor might do.
Each Debtor hereby ratifies, to the extent permitted by law, all that such
attorneys lawfully do or cause to be done by virtue hereof provided the same is
performed in a commercially reasonable manner. The power of attorney granted
hereunder is a power coupled with an interest and shall be irrevocable until the
Obligations are indefeasibly paid in full in cash and this Agreement is
terminated in accordance with Section 4.12 hereof.
Each Debtor also authorizes the Secured Party, at any time from and after
the occurrence and during the continuation of any Event of Default, (x) to
communicate in its own name with any party to any Contract with regard to the
assignment of the right, title and interest of such Debtor in and under the
Contracts hereunder and other matters relating thereto and (y) to execute, in
connection with any sale of Collateral provided for in Section 4.6 hereof, any
endorsements, assignments or other instruments of conveyance or transfer with
respect to the Collateral.
4.11 Perfection. Prior to or concurrently with the execution and delivery
of this Agreement, each Debtor shall:
(a) file such financing statements, assignments for security and other
documents in such offices as may be necessary or as the Secured Party or the
Representative may request to perfect the security interests granted by Section
3 of this Agreement;
(b) at Secured Party's request, deliver to the Secured Party or its
Representative the originals of all Instruments together with, in the case of
Instruments constituting promissory notes, allonges attached thereto showing
such promissory notes to be payable to the order of a blank payee;
(c) deliver to the Secured Party or its Representative the originals of all
Motor Vehicle Titles, duly endorsed indicating the Secured Party's interest
therein as a lienholder, together with such other documents as may be required
consistent with Section 4.1(d) hereof to perfect the security interest granted
by Section 3 in all such Motor Vehicles (if any).
(d) If the Debtor has not done so, the Collateral Agent may do so at any
later time at the sole cost of the Debtors.
4.12 Termination; Partial Release of Collateral. This Agreement and the
Liens and security interests granted hereunder shall not terminate until the
full and complete performance and indefeasible satisfaction of all of the
Obligations (including, without limitation, the indefeasible payment in full in
cash of all such Obligations) (i) in respect of the Transaction Documents, and
(ii) with respect to which claims have been asserted by Collateral Agent and/or
Purchasers, whereupon the Secured Party shall forthwith cause to be assigned,
transferred and delivered, against receipt but without any recourse, warranty or
representation whatsoever, any remaining Collateral to or on the order of
Debtors. The Secured Party shall also execute and deliver to Debtors upon such
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termination and at Debtors' expense such UCC termination statements,
certificates for terminating the liens on the Motor Vehicles (if any) and such
other documentation as shall be reasonably requested by Debtors to effect the
termination and release of the Liens and security interests in favor of the
Secured Party affecting the Collateral. Notwithstanding anything to the contrary
in this Agreement, upon full and complete satisfaction of the Notes Debtors
obligations under this Agreement shall terminate and any Liens shall thereupon
be void.
4.13 Further Assurances. At any time and from time to time, upon the
written request of the Secured Party or its Representative, and at the sole
expense of Debtors, Debtors will promptly and duly execute and deliver any and
all such further instruments, documents and agreements and take such further
actions as the Secured Party or its Representative may reasonably require in
order for the Secured Party to obtain the full benefits of this Agreement and of
the rights and powers herein granted in favor of the Secured Party, including,
without limitation, using Debtors' best efforts to secure all consents and
approvals necessary or appropriate for the assignment to the Secured Party of
any Collateral held by Debtors or in which a Debtor has any rights not
heretofore assigned, the filing of any financing or continuation statements
under the UCC with respect to the liens and security interests granted hereby,
transferring Collateral to the Secured Party's possession (if a security
interest in such Collateral can be perfected by possession), placing the
interest of the Secured Party as lienholder on the certificate of title of any
Motor Vehicle, and obtaining waivers of liens from landlords and mortgagees.
Each Debtor also hereby authorizes the Secured Party and its Representative to
file any such financing or continuation statement without the signature of such
Debtor to the extent permitted by applicable law.
4.14 Limitation on Duty of Secured Party. The powers conferred on the
Secured Party under this Agreement are solely to protect the Secured Party's
interest on behalf of itself and the Purchasers in the Collateral and shall not
impose any duty upon it to exercise any such powers. The Secured Party shall be
accountable only for amounts that it actually receives as a result of the
exercise of such powers and neither the Secured Party nor its Representative nor
any of their respective officers, directors, employees or agents shall be
responsible to Debtors for any act or failure to act, except for gross
negligence or willful misconduct. Without limiting the foregoing, the Secured
Party and any Representative shall be deemed to have exercised reasonable care
in the custody and preservation of the Collateral in their possession if such
Collateral is accorded treatment substantially equivalent to that which the
relevant Secured Party or any Representative, in its individual capacity,
accords its own property consisting of the type of Collateral involved, it being
understood and agreed that neither the Secured Party nor any Representative
shall have any responsibility for taking any necessary steps (other than steps
taken in accordance with the standard of care set forth above) to preserve
rights against any Person with respect to any Collateral.
Also without limiting the generality of the foregoing, neither the Secured
Party nor any Representative shall have any obligation or liability under any
Contract or license by reason of or arising out of this Agreement or the
granting to the Secured Party of a security interest therein or assignment
thereof or the receipt by the Secured Party or any Representative of any payment
relating to any Contract or license pursuant hereto, nor shall the Secured Party
or any Representative be required or obligated in any manner to perform or
fulfill any of the obligations of Debtors under or pursuant to any Contract or
17
license, or to make any payment, or to make any inquiry as to the nature or the
sufficiency of any payment received by it or the sufficiency of any performance
by any party under any Contract or license, or to present or file any claim, or
to take any action to collect or enforce any performance or the payment of any
amounts which may have been assigned to it or to which it may be entitled at any
time or times.
Section 5. Miscellaneous.
5.1 No Waiver. No failure on the part of the Secured Party or any of its
Representatives to exercise, and no course of dealing with respect to, and no
delay in exercising, any right, power or remedy hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise by the Secured Party or
any of its Representatives of any right, power or remedy hereunder preclude any
other or further exercise thereof or the exercise of any other right, power or
remedy. The rights and remedies hereunder provided are cumulative and may be
exercised singly or concurrently, and are not exclusive of any rights and
remedies provided by law.
5.2 Governing Law. All questions concerning the construction, validity,
enforcement and interpretation of this Agreement shall be governed by the
internal laws of the State of New York, without giving effect to any choice of
law or conflict of law provision or rule (whether of the State of New York or
any other jurisdiction) that would cause the application of the laws of any
jurisdiction other than the State of New York.
5.3 Notices. All notices, approvals, requests, demands and other
communications hereunder shall be delivered or made in the manner set forth in,
and shall be effective in accordance with the terms of, the Purchase Agreement.
Debtors and Collateral Agent may change their respective notice addresses by
written notice given to each other party five (5) days prior to the
effectiveness of such change.
5.4 Amendments, Etc. The terms of this Agreement may be waived, altered or
amended only by an instrument in writing duly executed by the Debtor sought to
be charged or benefited thereby and each of the Purchasers. Any such amendment
or waiver shall be binding upon the Secured Party and the Debtor sought to be
charged or benefited thereby and their respective successors and assigns.
5.5 Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the respective successors and assigns of each of the parties
hereto, provided, that no Debtor shall assign or transfer its rights hereunder
without the prior written consent of each of the Secured Parties. Any Secured
Party, including the Collateral Agent in its capacity as Collateral Agent, may
assign its rights hereunder without the consent of Debtors, in which event such
assignee shall be deemed to be Secured Party and/or Collateral Agent, as
applicable, hereunder with respect to such assigned rights; provided, so long as
no Event of Default has occurred and is continuing, no Secured Party shall
assign any of its rights hereunder to a competitor of any Company.
5.6 Counterparts; Headings. This Agreement may be authenticated in any
number of counterparts, all of which taken together shall constitute one and the
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same instrument and any of the parties hereto may authenticate this Agreement by
signing any such counterpart. This Agreement may be authenticated by manual
signature or facsimile, .pdf or similar electronic signature, all of which shall
be equally valid. The headings in this Agreement are for convenience of
reference only and shall not alter or otherwise affect the meaning hereof.
5.7 Severability. If any provision hereof is invalid and unenforceable in
any jurisdiction, then, to the fullest extent permitted by law, (a) the other
provisions hereof shall remain in full force and effect in such jurisdiction and
shall be liberally construed in favor of the Secured Party and its
Representative in order to carry out the intentions of the parties hereto as
nearly as may be possible and (b) the invalidity or unenforceability of any
provision hereof in any jurisdiction shall not affect the validity or
enforceability of such provision in any other jurisdiction.
5.8 SUBMISSION TO JURISDICTION; WAIVER OF VENUE; SERVICE OF PROCESS. EACH
DEBTOR HEREBY IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF ANY UNITED
STATES FEDERAL OR NEW YORK STATE COURT SITTING IN NEW YORK COUNTY, NEW YORK, IN
ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT AND EACH
DEBTOR HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR
PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH COURT AND IRREVOCABLY WAIVES
ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH SUIT,
ACTION OR PROCEEDING BROUGHT IN SUCH A COURT OR THAT SUCH COURT IS AN
INCONVENIENT FORUM. NOTHING HEREIN SHALL LIMIT THE RIGHT OF SECURED PARTY TO
BRING PROCEEDINGS AGAINST ANY DEBTOR IN THE COURTS OF ANY OTHER JURISDICTION.
ANY JUDICIAL PROCEEDING BY A DEBTOR AGAINST SECURED PARTY, ANY PURCHASER OR ANY
AFFILIATE THEREOF INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY WAY
ARISING OUT OF, RELATED TO, OR CONNECTION WITH THIS AGREEMENT SHALL BE BROUGHT
ONLY IN A COURT IN NEW YORK COUNTY, NEW YORK (AND SECURED PARTY AND PURCHASERS
HEREBY SUBMIT TO THE JURISDICTION OF SUCH COURT). EACH DEBTOR HERETO HEREBY
IRREVOCABLY WAIVES PERSONAL SERVICE OF PROCESS AND CONSENTS TO PROCESS BEING
SERVED IN ANY SUCH ACTION OR PROCEEDING BY MAILING BY REGISTERED OR CERTIFIED
MAIL A COPY THEREOF TO SUCH DEBTOR AT THE ADDRESS FOR NOTICES TO IT IN
ACCORDANCE WITH SECTION 5.3 OF THIS AGREEMENT AND AGREES THAT SUCH NOTICE SHALL
CONSTITUTE GOOD AND SUFFICIENT SERVICE OF PROCESS AND NOTICE THEREOF. NOTHING
CONTAINED HEREIN SHALL BE DEEMED TO LIMIT IN ANY WAY ANY RIGHT OF SECURED PARTY
OR ANY PURCHASER TO SERVE PROCESS IN ANY MANNER PERMITTED BY LAW.
5.9 WAIVER OF RIGHT TO TRIAL BY JURY. EACH DEBTOR AND SECURED PARTY WAIVE
THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED
UPON OR ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY, IN ANY ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE
BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER PARTY OR PARTIES, WHETHER WITH
19
RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE. EACH DEBTOR AND SECURED
PARTY AGREE THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT
TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, THE PARTIES FURTHER AGREE
THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS
SECTION 5.9 AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN
WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS AGREEMENT
OR ANY PROVISION HEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT.
5.10 Joint and Several. The obligations, covenants and agreements of
Debtors hereunder shall be the joint and several obligations, covenants and
agreements of each Debtor, whether or not specifically stated herein without
preferences or distinction among them.
5.11 Collateral Agent and Purchaser Indemnification.
(a) Each Purchaser has pursuant to the Securities Purchase Agreements
designated and appointed the Collateral Agent as the administrative agent
of such Purchaser under this Agreement and the related agreements.
(b) Nothing in this Section 5.11 shall be deemed to limit or otherwise
affect the rights of Secured Party or Purchasers to exercise any remedy
provided in this Agreement or any other Transaction Document.
(c) If pursuant to any related agreement Secured Party is given the
discretion to allocate proceeds received by Secured Party pursuant to the
exercise of remedies under the related agreements or at law or in equity
(including without limitation with respect to any secured creditor remedies
exercised against the Collateral and any other collateral security provided
for under any related agreement), Secured Party shall apply such proceeds
to the then outstanding Obligations in the following order of priority
(with amounts received being applied in the numerical order set forth below
until exhausted prior to the application to the next succeeding category
and each of the Purchasers or other Persons entitled to payment shall
receive an amount equal to its pro rata share of amounts available to be
applied pursuant to clauses second, third and fourth below):
first, to payment of fees, costs and expenses (including
reasonable attorney's fees) owing to the Secured Party;
second, to payment of all accrued unpaid interest and fees (other
than fees owing to Collateral Agent) on the Obligations;
third, to payment of principal of the Obligations;
fourth, to payment of any other amounts owing constituting
Obligations; and
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fifth, any remainder shall be for the account of and paid to
whoever may be lawfully entitled thereto.
5.12 No Strict Construction. The language used in this Agreement will be
deemed to be the language chosen by the parties to express their mutual intent,
and no rules of strict construction will be applied against any party.
5.13 ENTIRE AGREEMENT; AMENDMENT. THIS AGREEMENT, TOGETHER WITH THE OTHER
TRANSACTION DOCUMENTS, SUPERSEDES ALL OTHER PRIOR ORAL OR WRITTEN AGREEMENTS
BETWEEN SECURED PARTY, THE DEBTORS, THEIR AFFILIATES AND PERSONS ACTING ON THEIR
BEHALF WITH RESPECT TO THE MATTERS DISCUSSED HEREIN, AND THIS AGREEMENT,
TOGETHER WITH THE OTHER TRANSACTION DOCUMENTS AND THE OTHER INSTRUMENTS
REFERENCED HEREIN AND THEREIN, CONTAIN THE ENTIRE UNDERSTANDING OF THE PARTIES
WITH RESPECT TO THE MATTERS COVERED HEREIN AND THEREIN AND, EXCEPT AS
SPECIFICALLY SET FORTH HEREIN OR THEREIN, NEITHER THE SECURED PARTY NOR ANY
DEBTOR MAKES ANY REPRESENTATION, WARRANTY, COVENANT OR UNDERTAKING WITH RESPECT
TO SUCH MATTERS. AS OF THE DATE OF THIS AGREEMENT, THERE ARE NO UNWRITTEN
AGREEMENTS BETWEEN THE PARTIES WITH RESPECT TO THE MATTERS DISCUSSED HEREIN. NO
PROVISION OF THIS AGREEMENT MAY BE AMENDED, MODIFIED OR SUPPLEMENTED OTHER THAN
BY AN INSTRUMENT IN WRITING SIGNED BY THE DEBTORS AND THE SECURED PARTY.
- Remainder of Page Intentionally Left Blank; Signature Page Follows -
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IN WITNESS WHEREOF, the parties hereto have caused this Security Agreement
to be duly executed and delivered as of the day and year first above written.
DEBTORS:
ESPORTS ENTERTAINMENT GROUP, INC., a Nevada
corporation
By: ____________________________
Name: Grant Johnson
Title: Chief Executive Officer
ESPORTS SERVICES ANTIGUA, LTD., an Antigua
corporation
By:____________________________
Name: Grant Johnson
Title: President and Chief Executive Officer
VIE ESPORTS SERVICES B.V., a Curacao corporation
By:____________________________
Name: Grant Johnson
Title: President and Chief Executive Officer
ESPORTS SERVICES (MALTA) LIMITED, a Malta
corporation
By:____________________________
Name: Grant Johnson
Title: President and Chief Executive Officer
ESPORTS ENTERTAINMENT (MALTA) LTD., a Malta
corporation
By:____________________________
Name: Grant Johnson
Title: President and Chief Executive Officer
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COLLATERAL AGENT:
CAVALRY FUND I LP, a Delaware limited partnership,
in its capacity as Collateral Agent for Purchasers
By: Cavalry Fund I Management LLC
Its General Partner
By:
---------------------------------------
Name: Thomas P. Walsh
Title: Manager
Notice Address:
Cavalry Fund I LP
61 Kinderkamack Road
Woodcliff Lake, NJ 07677
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EXHIBIT A
Form of Joinder
Joinder to Security Agreement
The undersigned, ______________________________, hereby joins in the
execution of that certain Security Agreement dated as of November ____, 2018 (as
amended, restated, supplemented or otherwise modified from time to time, the
"Security Agreement") by Esports Entertainment Group, Inc., a Nevada corporation
and _____________, Inc., a _______ corporation, the Purchasers (as defined
therein), and each other Person that becomes a Debtor or a Purchaser thereunder
after the date thereof and hereof and pursuant to the terms thereof, to and in
favor of Cavalry Fund I LP, a Delaware limited partnership, in its capacity as
Collateral Agent for Purchasers. By executing this Joinder, the undersigned
hereby agrees that it is a Debtor thereunder and agrees to be bound by all of
the terms and provisions of the Security Agreement. The undersigned represents
and warrants that the representations and warranties set forth in the Security
Agreement are, with respect to the undersigned, true and correct as of the date
hereof.
The undersigned represents and warrants to Secured Party that:
(a) all of the Equipment, Inventory and Goods owned by such Debtor is
located at the places as specified on Schedule I and such Debtor conducts
business in the jurisdiction set forth on Schedule I;
(b) except as disclosed on Schedule I, none of such Collateral is in the
possession of any bailee, warehousemen, processor or consignee;
(c) the chief place of business, chief executive office and the office
where such Debtor keeps its books and records are located at the place specified
on Schedule I;
(d) such Debtor (including any Person acquired by such Debtor) does not do
business or has not done business during the past five years under any tradename
or fictitious business name, except as disclosed on Schedule II;
(e) all Copyrights, Patents and Trademarks owned or licensed by the
undersigned are listed in Schedules III, IV and V, respectively;
(f) all Deposit Accounts, securities accounts, brokerage accounts and other
similar accounts maintained by such Debtor, and the financial institutions at
which such accounts are maintained, are listed on Schedule VI;
(g) all Commercial Tort Claims of such Debtor are listed on Schedule VII;
(h) all interests in real property and mining rights held by such Debtor
are listed on Schedule VIII;
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(i) all Equipment (including Motor Vehicles) owned by such debtor are
listed on Schedule IX.
________________, a ________
By:_________________________________
Title:______________
FEIN: ______________
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