Exhibit 10.4

 

SECURITY AGREEMENT

 

This SECURITY AGREEMENT, dated as of July ___, 2014 (this “Agreement”), is among
Dataram Corporation, a New Jersey corporation (the “Company”), (the “Debtors”),
Collateral Services LLC, as collateral agent (the “Collateral Agent”) for the
holders of the Company’s Subordinated Secured Convertible Bridge Notes due
October 15, 2014 which were issued on July ___, 2014, in the original aggregate
principal amount of $750,000 (collectively, the “Notes”) (collectively, the
“Secured Parties”).

 

W I T N E S S E T H:

 

WHEREAS, pursuant to the Securities Purchase Agreement, the Secured Parties have
severally agreed to extend the loans to the Company evidenced by the Notes;

 

WHEREAS, in order to induce the Secured Parties to extend the loans evidenced by
the Notes, Debtor has agreed to execute and deliver to the Collateral Agent this
Agreement and to grant Collateral Agent, for the ratable benefit of the Secured
Parties, a Security Interest in certain property of Debtor to secure the prompt
payment, performance and discharge in full of all of the Debtors’ obligations
under the Notes and Transaction Documents.

 

WHEREAS, the security interest granted to the Collateral Agent, for the ratable
benefit of the Secured Parties in this Agreement, are subject to the security
interest granted to Rosenthal & Rosenthal, Inc. under the Security Agreement
dated November 6, 2013, as amended (the “Rosenthal Security Interest”).

 

NOW, THEREFORE, in consideration of the agreements herein contained and for
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties hereto hereby agree as follows:

 

1.      Certain Definitions. As used in this Agreement, the following terms
shall have the meanings set forth in this Section 1. Terms used but not
otherwise defined in this Agreement that are defined in Article 8 or 9 of the
UCC (such as “account,” “chattel paper,” “commercial tort claim,” “deposit
account,” “document,” “equipment,” “fixtures,” “general intangibles,” “goods,”
“instruments,” “inventory,” “investment property,” “letter-of-credit rights,”
“proceeds” and “supporting obligations”) shall have the respective meanings
given such terms in Article 8 or 9 of the UCC, as applicable. Upper case terms
shall have the meanings attributed to them in the Securities Purchase Agreement.

 

(a)      “Collateral” means the collateral in which the Collateral Agent is
granted a security interest by this Agreement and which shall include the
following personal property of the Debtors, whether presently owned or existing
or hereafter acquired or coming into existence, wherever situated, and all
additions and accessions thereto and all substitutions and replacements thereof,
and all proceeds, products and accounts thereof, including, without limitation,
all proceeds from the disposition, sale or transfer of the Collateral and of
insurance covering the same and of any tort claims in connection therewith:

 

(i)      All goods, including, without limitation, (A) all machinery, equipment,
computers, motor vehicles, trucks, tanks, boats, ships, appliances, furniture,
special and general tools, fixtures, test and quality control devices and other
equipment of every kind and nature and wherever situated, together with all
documents of title and documents representing the same, all additions and
accessions thereto, replacements therefor, all parts therefor, and all
substitutes for any of the foregoing and all other items used and useful in
connection with Debtor’s businesses and all improvements thereto; and (B) all
inventory;

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(ii)      All contract rights and other general intangibles, including, without
limitation, all partnership interests, membership interests, stock or other
securities, rights under any of the Organizational Documents (as defined
herein), agreements related to any subsidiary, licenses, distribution and other
agreements, computer software (whether “off-the-shelf,” licensed from any third
party or developed by Debtor), computer software development rights, leases,
franchises, customer lists, quality control procedures, grants and rights,
goodwill, trademarks, service marks, trade styles, trade names, patents, patent
applications, copyrights, and income tax refunds;

 

(iii)      All accounts, together with all instruments, all documents of title
representing any of the foregoing, all rights in any merchandising, goods, raw
materials, timber cut or to be cut, oil, gas, hydrocarbons, and minerals
extracted or to be extracted, equipment, motor vehicles and trucks which any of
the same may represent, and all right, title, security and guaranties with
respect to each account, including any right of stoppage in transit;

 

(iv)      All documents, letter-of-credit rights, instruments and chattel paper;

 

(v)      All commercial tort claims;

 

(vi)      All deposit accounts and all cash (whether or not deposited in such
deposit accounts);

 

(vii)      All investment property;

 

(viii)      All supporting obligations;

 

(ix)      All files, records, books of account, business papers, and computer
programs; and

 

(x)      the products and proceeds of all of the foregoing Collateral set forth
in clauses (i)-(ix) above.

 

Notwithstanding the foregoing, nothing herein shall be deemed to constitute an
assignment of any asset which, in the event of an assignment, becomes void by
operation of applicable law or the assignment of which is otherwise prohibited
by applicable law (in each case to the extent that such applicable law is not
overridden by Sections 9-406, 9-407 and/or 9-408 of the UCC or other similar
applicable law); provided, however, that to the extent permitted by applicable
law, this Agreement shall create a valid security interest in such asset and, to
the extent permitted by applicable law, this Agreement shall create a valid
security interest in the proceeds of such asset.

(b)      “Majority in Interest” means, at any time of determination, the holders
of more than fifty percent (50%) (based on then-outstanding principal amounts
and accrued interest of Notes at the time of such determination) of the Notes.

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(c)      “Obligations” means all of the liabilities and obligations (primary,
secondary, direct, contingent, sole, joint or several) due or to become due, or
that are now or may be hereafter contracted or acquired, or owing to, of Debtor
to the Secured Parties, including, without limitation, all obligations under
this Agreement, the Notes and obligations under any other Transaction Document,
instrument, agreement or other document executed and/or delivered in connection
herewith or therewith in each case, whether now or hereafter existing, voluntary
or involuntary, direct or indirect, absolute or contingent, liquidated or
unliquidated, whether or not jointly owed with others, and whether or not from
time to time decreased or extinguished and later increased, created or incurred,
and all or any portion of such obligations or liabilities that are paid, to the
extent all or any part of such payment is avoided or recovered directly or
indirectly from any of the Secured Parties as a preference, fraudulent transfer
or otherwise as such obligations may be amended, supplemented, converted,
extended or modified from time to time. Without limiting the generality of the
foregoing, the term “Obligations” shall include, without limitation: (i)
principal of, and interest on the Notes and the loans extended pursuant thereto;
(ii) any and all other fees, indemnities, costs, obligations and liabilities of
the Debtors from time to time under or in connection with this Agreement, the
Notes and any other Transaction Documents, instruments, agreements or other
documents executed and/or delivered in connection herewith or therewith; and
(iii) all amounts (including but not limited to post-petition interest) in
respect of the foregoing that would be payable but for the fact that the
obligations to pay such amounts are unenforceable or not allowable due to the
existence of a bankruptcy, reorganization or similar proceeding involving
Debtor.

 

(d)      “Organizational “Documents” means with respect to Debtor, the documents
by which Debtor was organized (Certificate of Incorporation, as amended) and
which relate to the internal governance of Debtor (such as bylaws).

 

(e)      “Securities Purchase Agreement” shall mean the Subordinated Secured
Convertible Bridge Note and Warrant Purchase Agreement between the Secured
Creditors and the Company, dated of even date herewith.

 

(f)      “UCC” means the Uniform Commercial Code of the State of New Jersey and
or any other applicable law of any state or states which has jurisdiction with
respect to all, or any portion of, the Collateral or this Agreement, from time
to time. It is the intent of the parties that defined terms in the UCC should be
construed in their broadest sense so that the term “Collateral” will be
construed in its broadest sense. Accordingly if there are, from time to time,
changes to defined terms in the UCC that broaden the definitions, they are
incorporated herein and if existing definitions in the UCC are broader than the
amended definitions, the existing ones shall be controlling.

 

2.      Grant of Security Interest in Collateral. As an inducement for the
Secured Parties to extend the loans as evidenced by the Notes and to secure the
complete and timely payment, performance and discharge in full, as the case may
be, of all of the Obligations, Debtor hereby unconditionally and irrevocably
pledges, grants and hypothecates to the Secured Parties a security interest in
and to, a lien upon and a right of set-off against all of their respective
right, title and interest of whatsoever kind and nature in and to, the
Collateral (a “Security Interest” and, collectively, the “Security Interests”).
The Security Interest granted to the Secured Parties hereunder shall be
subordinated to Rosenthal & Rosenthal, Inc. (“R&R”) under the Security Agreement
dated November 6, 2013, as amended to date and as may be further amended from
time to time (the “R&R Security Interest”) which is a first priority security
interest to which each Secured Party agrees the Security Interest granted under
this Agreement is subordinated to.

 

3.      Representations, Warranties, Covenants and Agreements of the Debtors. As
of the date hereof, Debtor represents and warrants to the Secured Parties as
follows and, until the repayment in full of the Obligations, covenants and
agrees with, the Secured Parties as follows:

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(a)      The Debtor has the requisite corporate authority to enter into this
Agreement and otherwise to carry out its obligations hereunder. The execution,
delivery and performance by Debtor of this Agreement and the filings
contemplated herein have been duly authorized by all necessary action on the
part of Debtor and no further action is required by Debtor. This Agreement, when
executed and delivered, will constitute the legal, valid and binding obligation
of Debtor, enforceable against Debtor in accordance with its terms except as
such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization and similar laws of general application relating to or affecting
the rights and remedies of creditors and by general principles of equity.

 

(b)      The Debtor has no place of business or offices where their respective
books of account and records are kept (other than temporarily at the offices of
its attorneys or accountants) or places where Collateral is stored or located,
except as set forth on Schedule A attached hereto. Except as specifically set
forth on Schedule A, Debtor is the record owner of the real property where such
Collateral is located, and there exist no mortgages or other liens on any such
real property or on the Collateral except for the R&R Security Interest. Except
as disclosed on Schedule A, none of such Collateral is in the possession of any
consignee, bailee, warehouseman, agent or processor.

 

(c)      The Debtor is the sole owner of the Collateral (except for
non-exclusive licenses granted by Debtor in the ordinary course of business),
free and clear of any liens, security interests, encumbrances, rights or claims
except for the Rosenthal Security Interest, and is fully authorized to grant the
Security Interests. Except for the Rosenthal Security Interest, there is not on
file in any governmental or regulatory authority, agency or recording office an
effective financing statement, security agreement, license or transfer or any
notice of any of the foregoing (other than those that will be filed in favor of
the Secured Parties pursuant to this Agreement) covering or affecting any of the
Collateral.

 

(d)      No written claim has been received that any Collateral or Debtor’s use
of any Collateral violates the rights of any third party. There has been no
adverse decision to Debtor’s claim of ownership rights in or exclusive rights to
use the Collateral in any jurisdiction or to Debtor’s right to keep and maintain
such Collateral in full force and effect, and there is no proceeding involving
said rights pending or, to the best knowledge of Debtor, threatened before any
court, judicial body, administrative or regulatory agency, arbitrator or other
governmental authority.

 

(e)      The Debtor shall at all times maintain its books of account and records
relating to the Collateral at its principal place of business and its Collateral
at the locations set forth on Schedule A attached hereto and may not relocate
such books of account and records or tangible Collateral except in the ordinary
course of sales unless it delivers to the Secured Parties at least 15 days prior
to such relocation (i) written notice of such relocation and the new location
thereof (which must be within the United States) and (ii) evidence that
appropriate financing statements under the UCC and other necessary documents
have been filed and recorded and other steps have been taken to perfect the
Security Interests to create in favor of the Secured Parties a valid, perfected
and continuing perfected first priority lien in the Collateral, except as
otherwise permitted hereby.

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(f)      This Agreement creates in favor of the Secured Parties a valid security
interest in the Collateral, subject only to the Rosenthal Security Interest,
securing the payment and performance of the Obligations. Upon making the filings
described in the immediately following paragraph, all security interests created
hereunder in any Collateral that may be perfected by filing Uniform Commercial
Code financing statements shall have been duly perfected. Except for the filing
of the Uniform Commercial Code financing statements referred to in the
immediately following paragraph, the execution and delivery of deposit account
control agreements satisfying the requirements of Section 9-104(a)(2) of the UCC
with respect to each deposit account of the Debtors, and the delivery of the
certificates and other instruments, no action is necessary to create, perfect or
protect the security interests created hereunder. Without limiting the
generality of the foregoing, except for the consent of Rosenthal & Rosenthal
Inc., filing of said financing statements, and the execution and delivery of
said deposit account control agreements, no consent of any third parties and no
authorization, approval or other action by, and no notice to or filing with, any
governmental authority or regulatory body is required for (i) the execution,
delivery and performance of this Agreement, (ii) the creation or perfection of
the Security Interests created hereunder in the Collateral or (iii) the
enforcement of the rights of the Collateral Agent and the Secured Parties
hereunder.

 

(g)      The Debtor hereby authorizes the Collateral Agent to file one or more
financing statements under the UCC, with respect to the Security Interests, with
the proper filing and recording agencies in any jurisdiction deemed proper by it
and authorizes Collateral Agent to take any other action in Collateral Agent’s
absolute discretion to effectuate, memorialize and protect Secured Parties’
interest and rights under this Agreement.

 

(h)      The execution, delivery and performance of this Agreement by the Debtor
does not (i) violate any of the provisions of any Organizational Documents of
Debtor or, to the knowledge of Debtor, any judgment, decree, order or award of
any court, governmental body or arbitrator or any applicable law, rule or
regulation applicable to Debtor or (ii) to the knowledge of Debtor, conflict
with, or constitute a default (or an event that with notice or lapse of time or
both would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation (with or without notice, lapse of time
or both) of, any agreement, credit facility, debt or other instrument
(evidencing Debtor’s debt or otherwise) or other understanding to which Debtor
is a party or by which any property or asset of Debtor is bound or affected. If
any, all required consents (including, without limitation, from stockholders or
creditors of Debtor) necessary for Debtor to enter into and perform its
obligations hereunder have been obtained.

 

(i)      Subject to the R&R Security Interest, Debtor shall at all times
maintain the liens and Security Interests provided for hereunder as valid and
perfected liens and security interests in the Collateral in favor of the Secured
Parties until this Agreement and the Security Interest hereunder shall be
terminated pursuant to Section 14 hereof. Debtor hereby agrees to defend the
same against the claims of any and all persons and entities. Debtor shall
safeguard and protect all Collateral for the account of the Secured Parties.
Upon request of the Collateral Agent, Debtor will sign and deliver to the
Collateral Agent on behalf of the Secured Parties at any time or from time to
time one or more financing statements pursuant to the UCC in form reasonably
satisfactory to the Collateral Agent and will pay the cost of filing the same in
all public offices wherever filing is, or is deemed by the Collateral Agent to
be, necessary or desirable to effect the rights and obligations provided for
herein. Without limiting the generality of the foregoing, Debtor shall pay all
fees, taxes and other amounts necessary to maintain the Collateral and the
Security Interest hereunder.

 

(j)      Except in accordance with the R&R Security Interest, Debtor will not
transfer, pledge, hypothecate, encumber, license, sell or otherwise dispose of
any of the Collateral (except for non-exclusive licenses granted by a Debtor in
its ordinary course of business, sales of inventory by a Debtor in its ordinary
course of business and disposition of obsolete equipment) without the prior
written consent of the Collateral Agent.

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(k)      The Debtor shall keep and preserve its equipment, inventory and other
tangible Collateral in good condition, repair and order and shall not operate or
locate any such Collateral (or cause to be operated or located) in any area
excluded from insurance coverage.

 

(l)      The Debtor shall maintain with financially sound and reputable
insurers, insurance with respect to the Collateral, including Collateral
hereafter acquired, against loss or damage of the kinds and in the amounts
customarily insured against by entities of established reputation having similar
properties similarly situated and in such amounts as are customarily carried
under similar circumstances by other such entities and otherwise as is prudent
for entities engaged in similar businesses but in any event sufficient to cover
the full replacement cost thereof.

 

(m)      The Debtor shall, within twenty (20) days of obtaining knowledge
thereof, advise Collateral Agent promptly, in sufficient detail, of any material
adverse change in the Collateral, and of the occurrence of any event which would
have a material adverse effect on the value of the Collateral or on the Secured
Parties’ security interest.

 

(n)      The Debtor shall permit the Collateral Agent and its representatives
and agents to inspect the Collateral during normal business hours and upon
reasonable prior notice, and to make copies of records pertaining to the
Collateral as may be reasonably requested by the Collateral Agent from time to
time.

 

(o)      The Debtor shall take commercially reasonable steps necessary to
diligently pursue and seek to preserve, enforce and collect any rights, claims,
causes of action and accounts receivable in respect of the Collateral.

 

(p)      The Debtor shall promptly notify the Secured Parties in sufficient
detail upon becoming aware of any attachment, garnishment, execution or other
legal process levied against any Collateral and of any other information
received by Debtor that may materially affect the value of the Collateral, the
Security Interest or the rights and remedies of the Secured Parties hereunder.

 

(q)      All information heretofore, herein or hereafter supplied to the Secured
Parties by or on behalf of Debtor with respect to the Collateral is accurate and
complete in all material respects as of the date furnished and in light of the
circumstances under which such statements were made.

 

(r)      Except to the extent permitted by the R&R Security Agreement, Debtor
will from time to time, at its expense, promptly execute and deliver all such
further instruments and documents, and take all such further action as may be
reasonably necessary or desirable, or as the Collateral Agent may reasonably
request, in order to perfect and protect any security interest granted or
purported to be granted hereby or to enable the Collateral Agent to exercise and
enforce Collateral Agent’s rights and remedies hereunder and with respect to any
Collateral or to otherwise carry out the purposes of this Agreement.

 

(s)      Except in the ordinary course of business, Debtor may not consign any
of its inventory or sell any of its inventory on bill and hold, sale or return,
sale on approval, or other conditional terms of sale without the consent of the
Collateral Agent which shall not be unreasonably withheld.

 

(t)      Debtor may not relocate its chief executive office to a new location
without providing 15 days prior written notification thereof to the Secured
Parties and provided that at the time of such written notification, Debtor
provides any financing statements necessary to perfect and continue the
perfection of the Security Interests granted and evidenced by this Agreement.

 

(u)      Debtor was organized and remains organized solely under the laws of the
state of New Jersey.

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4.      Defaults. The following events shall be “Events of Default”:

 

(a)      The occurrence of an Event of Default (as defined in the Notes) under
the Notes;

 

(b)      Any representation or warranty of Debtor in this Agreement shall prove
to have been incorrect in any material respect when made;

 

(c)      The failure by Debtor to observe or perform any of its obligations
hereunder for five (5) days after delivery to Debtor of notice of such failure
by or on behalf of a Secured Party unless such default is capable of cure but
cannot be cured within such time frame and Debtor is using best efforts to cure
same in a timely fashion; or

 

(d)      If any material provision of this Agreement shall at any time for any
reason be declared to be null and void, or the validity or enforceability
thereof shall be contested by Debtor, or a proceeding shall be commenced by
Debtor, or by any governmental authority having jurisdiction over Debtor,
seeking to establish the invalidity or unenforceability thereof, or Debtor shall
deny that Debtor has any liability or obligation purported to be created under
this Agreement.

 

5.      Rights and Remedies Upon Default.

 

(a)      After the occurrence and during the continuance of any Event of
Default, and subject to the R&R Security Interest, the Collateral Agent shall
have the right to exercise all of the remedies conferred hereunder and under the
Notes, and the Collateral Agent shall have all the rights and remedies of a
secured party under the UCC. Without limitation, the Collateral Agent, for the
benefit of the Secured Parties, shall have the following rights and powers:

 

(i)      To the extent permitted by the R&R Security Interest, the Collateral
Agent shall have the right to seek an Order from a court appointing a Trustee to
operate the business of Debtor using the Collateral and shall have the right to
assign, sell, lease or otherwise dispose of and deliver all or any part of the
Collateral, at public or private sale or otherwise, either with or without
special conditions or stipulations, for cash or on credit or for future
delivery, in such parcel or parcels and at such time or times and at such place
or places, and upon such terms and conditions as are commercially reasonable.
Upon each such sale, lease, assignment or other transfer or disposition of
Collateral, the Collateral Agent, for the benefit of the Secured Parties, may,
unless prohibited by applicable law which cannot be waived, purchase all or any
part of the Collateral being sold, free from and discharged of all trusts,
claims, right of redemption and equities of Debtor, which are hereby waived and
released.

 

(ii)      The Collateral Agent shall have the right (but not the obligation) to
notify any account debtors and any obligors under instruments or accounts to
make payments directly to the Collateral Agent, on behalf of the Secured
Parties, and to enforce the Debtors’ rights against such account debtors and
obligors.

 

(iii)      The Collateral Agent, for the benefit of the Secured Parties, may
(but is not obligated to) direct any financial intermediary or any other person
or entity holding any investment property to transfer the same to the Collateral
Agent, on behalf of the Secured Parties, or its designee.

 

(b)      Subject to the R&R Security Interest, the Collateral Agent shall comply
with any applicable law in connection with a disposition of Collateral and such
compliance will not be considered adversely to affect the commercial
reasonableness of any sale of the Collateral.

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(c)      Subject to the R&R Security Interest, if any notice to Debtor of the
sale or other disposition of Collateral is required by then applicable law, five
(5) business days prior written notice (which Debtor agree is reasonable notice
within the meaning of Section 9.612(a) of the Uniform Commercial Code) shall be
given to Debtor of the time and place of any sale of Collateral. The rights
granted in this Section are in addition to any and all rights available to
Collateral Agent under the Uniform Commercial Code.

 

(d)      For the purpose of enabling the Collateral Agent to further exercise
rights and remedies under this Section 5 or elsewhere provided by agreement or
applicable law, Debtor hereby grants to the Collateral Agent, for the benefit of
the Collateral Agent and the Secured Parties, an irrevocable, nonexclusive
license (exercisable without payment of royalty or other compensation to Debtor)
to use, license or sublicense during the continuance of an Event of Default, any
Intellectual Property now owned or hereafter acquired by Debtor, and wherever
the same may be located, and including in such license access to all media in
which any of the licensed items may be recorded or stored and to all computer
software and programs used for the compilation or printout thereof.

 

6.      Costs and Expenses. The Debtor agrees to pay all reasonable
out-of-pocket fees, costs and expenses incurred in connection with any filing
required hereunder, including without limitation, any financing statements
pursuant to the UCC, continuation statements, partial releases and/or
termination statements related thereto or any expenses of any searches
reasonably required by the Collateral Agent.

 

7.      Duty to Hold In Trust.

 

(a)      During the continuance of an Event of Default and to the extent
permitted under the R&R Security Interest, Debtor shall, upon receipt of any
revenue, income, dividend, interest or other sums subject to the Security
Interests, whether payable pursuant to the Notes or otherwise, or of any check,
draft, note, trade acceptance or other instrument evidencing an obligation to
pay any such sum, hold the same in trust for the Secured Parties and shall
forthwith endorse and transfer any such sums or instruments, or both, to the
Collateral Agent for distribution to the Secured Parties, pro-rata in proportion
to their respective then-currently outstanding principal amount of Notes for
application to the satisfaction of the Obligations (and if any Note is not
outstanding, pro-rata in proportion to the initial purchases of the remaining
Notes).

 

(b)      If Debtor shall become entitled to receive or shall receive any
securities or other property (including, without limitation, stock, membership
interest, any options, warrants, rights or other similar property or
certificates representing a dividend, or any distribution in connection with any
recapitalization, reclassification or increase or reduction of capital, or
issued in connection with any reorganization of Debtor or any of its direct or
indirect subsidiaries) Debtor agrees, to (i) hold the same in trust on behalf of
and for the benefit of the Secured Parties; and (ii) upon an Event of Default
deliver any and all certificates or instruments evidencing the same to
Collateral Agent in the exact form received together with any necessary
endorsements, to be disposed of by Collateral Agent subject to the terms of this
Agreement as Collateral.

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8.      Responsibility for Collateral. The Debtor shall assume all liabilities
and responsibility in connection with all Collateral, and the Obligations shall
in no way be affected or diminished by reason of the loss, destruction, damage
or theft of any of the Collateral or its unavailability for any reason. Without
limiting the generality of the foregoing, (a) neither the Collateral Agent nor
any Secured Party (i) has any duty (either before or after an Event of Default)
to collect any amounts in respect of the Collateral or to preserve any rights
relating to the Collateral, or (ii) has any obligation to clean-up or otherwise
prepare the Collateral for sale, and (b) Debtor shall remain obligated and
liable under each contract or agreement included in the Collateral to be
observed or performed by Debtor thereunder. Neither the Collateral Agent nor any
Secured Party shall have any obligation or liability under any such contract or
agreement by reason of or arising out of this Agreement or the receipt by the
Collateral Agent or any Secured Party of any payment relating to any of the
Collateral, nor shall the Collateral Agent or any Secured Party be obligated in
any manner to perform any of the obligations of Debtor under or pursuant to any
such contract or agreement, to make inquiry as to the nature or sufficiency of
any payment received by the Collateral Agent or any Secured Party in respect of
the Collateral or as to the sufficiency of any performance by any party under
any such contract or agreement, to present or file any claim, to take any action
to enforce any performance or to collect the payment of any amounts which may
have been assigned to the Collateral Agent or to which the Collateral Agent or
any Secured Party may be entitled at any time or times.

 

9.      Applications of Proceeds. To the extent permitted under the R&R Security
Interest, the proceeds of any such sale, lease or other disposition of the
Collateral hereunder or from payments made on account of any insurance policy
insuring any portion of the Collateral shall be applied first, to the expenses
of retaking, holding, storing, processing and preparing for sale, selling, and
the like (including, without limitation, any taxes, fees and other costs
incurred in connection therewith) of the Collateral, if any, to the reasonable
attorneys’ fees and expenses incurred by the Collateral Agent in enforcing the
Secured Parties’ rights hereunder and in connection with collecting, storing and
disposing of the Collateral, and then to satisfaction of the Obligations pro
rata among the Secured Parties (based on then-outstanding principal amounts of
Notes at the time of any such determination), and then to the payment of any
other amounts required by applicable law, after which the Secured Parties shall
pay to the applicable Debtor any surplus proceeds.

 

10.      Securities Law Provision. To the extent permitted under the R&R
Security Interest, Debtor recognizes that Collateral Agent may be limited in its
ability to effect a sale to the public of all or part of the Collateral by
reason of certain prohibitions in the Securities Act of 1933, as amended, or
other federal or state securities laws (collectively, the “Securities Laws”),
and may reasonably be obliged to resort to one or more sales to a restricted
group of purchasers who may be required to agree to acquire the such portion of
the Collateral for their own account, for investment and not with a view to the
distribution or resale thereof. Debtor agrees that sales so made may be at
prices and on terms less favorable than if the such portion of the Collateral
were sold to the public, and that Collateral Agent has no obligation to delay
the sale of any such portion of the Collateral for the period of time necessary
to register such portion of the Collateral for sale to the public under the
Securities Laws. Debtor shall cooperate with Collateral Agent in its attempt to
satisfy any requirements under the Securities Laws (including, without
limitation, registration thereunder if requested by Collateral Agent) applicable
to the sale of such portion of the Collateral by Collateral Agent.

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11.      Security Interests Absolute. All rights of the Secured Parties and all
obligations of the Debtors hereunder, subject to the R&R Security Interest,
shall be absolute and unconditional, irrespective of: (a) any lack of validity
or enforceability of this Agreement, the Notes or any agreement entered into in
connection with the foregoing, or any portion hereof or thereof; (b) any change
in the time, manner or place of payment or performance of, or in any other term
of, all or any of the Obligations, or any other amendment or waiver of or any
consent to any departure from the Notes or any other agreement entered into in
connection with the foregoing; (c) any exchange, release or non-perfection of
any of the Collateral, or any release or amendment or waiver of or consent to
departure from any other collateral for, or any guarantee, or any other
security, for all or any of the Obligations; (d) any action by the Secured
Parties to obtain, adjust, settle and cancel in its sole discretion any
insurance claims or matters made or arising in connection with the Collateral;
or (e) any other circumstance which might otherwise constitute any legal or
equitable defense available to a Debtor, or a discharge of all or any part of
the Security Interests granted hereby. Until the Obligations shall have been
paid and performed in full, the rights of the Secured Parties shall continue
even if the Obligations are barred for any reason, including, without
limitation, the running of the statute of limitations or bankruptcy. Debtor
expressly waives presentment, protest, notice of protest, demand, notice of
nonpayment and demand for performance. In the event that at any time any
transfer of any Collateral or any payment received by the Secured Parties
hereunder shall be deemed by final order of a court of competent jurisdiction to
have been a voidable preference or fraudulent conveyance under the bankruptcy or
insolvency laws of the United States, or shall be deemed to be otherwise due to
any party other than the Secured Parties, then, in any such event, Debtor’s
obligations hereunder shall survive cancellation of this Agreement, and shall
not be discharged or satisfied by any prior payment thereof and/or cancellation
of this Agreement, but shall remain a valid and binding obligation enforceable
in accordance with the terms and provisions hereof. Debtor waives all right to
require the Secured Parties to proceed against any other person or entity or to
apply any Collateral which the Secured Parties may hold at any time, or to
marshal assets, or to pursue any other remedy. Debtor waives any defense arising
by reason of the application of the statute of limitations to any Obligations
secured hereby.

 

12.      Term of Agreement. This Agreement and the Security Interest shall
terminate on the date on which all payments under the Notes have been
indefeasibly paid in full and all other Obligations have been paid or
discharged.

 

Further Assurances. On a continuing basis, Debtor will make, execute,
acknowledge, deliver, file and record, as the case may be, with the proper
filing and recording agencies in any jurisdiction, all such instruments, and
take all such action as may reasonably be deemed necessary or advisable, or as
reasonably requested by the Collateral Agent, to perfect the Security Interest
granted hereunder and otherwise to carry out the intent and purposes of this
Agreement, or for assuring and confirming to the Collateral Agent the grant or
perfection of a perfected security interest in all the Collateral under the UCC.

10

 

13.      Power of Attorney. Subject to the R&R Security Interest, Debtor
authorizes the Collateral Agent, and does hereby make, constitute and appoint
the Collateral Agent and its officers, agents, successors or assigns with full
power of substitution, as Debtor’s true and lawful attorney-in-fact, with power,
in the name of the Collateral Agent or Debtor, after the occurrence and during
the continuance of an Event of Default, (i) to endorse any note, checks, drafts,
money orders or other instruments of payment (including, without limitation,
payments payable under or in respect of any policy of insurance) in respect of
the Collateral that may come into possession of the Collateral Agent; (ii) to
sign and endorse any financing statement pursuant to the UCC or any invoice,
freight or express bill, bill of lading, storage or warehouse receipts, drafts
against debtors, assignments, verifications and notices in connection with
accounts, and other documents relating to the Collateral; (iii) to pay or
discharge taxes, liens, security interests or other encumbrances at any time
levied or placed on or threatened against the Collateral; (iv) to demand,
collect, receipt for, compromise, settle and sue for monies due in respect of
the Collateral; (v) to transfer any Intellectual Property or provide licenses
respecting any Intellectual Property; and (vi) generally, at the option of the
Collateral Agent, and at the expense of the Debtors, at any time, or from time
to time, to execute and deliver any and all documents and instruments and to do
all acts and things which the Collateral Agent deems necessary to protect,
preserve and realize upon the Collateral and the Security Interests granted
therein in order to effect the intent of this Agreement and the Notes all as
fully and effectually as the Debtors might or could do; and Debtor hereby
ratifies all that said attorney shall lawfully do or cause to be done by virtue
hereof. This power of attorney is coupled with an interest and shall be
irrevocable for the term of this Agreement and thereafter as long as any of the
Obligations shall be outstanding. The designation set forth herein shall be
deemed to amend and supersede any inconsistent provision in the Organizational
Documents or other documents or agreements to which Debtor is subject or to
which Debtor is a party. Without limiting the generality of the foregoing, after
the occurrence and during the continuance of an Event of Default, each Secured
Party is specifically authorized to execute and file any applications for or
instruments of transfer and assignment of any patents, trademarks, copyrights or
other Intellectual Property with the United States Patent and Trademark Office
and the United States Copyright Office. Debtor hereby irrevocably appoints the
Collateral Agent as Debtor’s attorney-in-fact, with full authority in the place
and instead of Debtor and in the name of Debtor, from time to time in the
Collateral Agent’s discretion, to take any action permitted under this Agreement
and to execute any instrument which the Collateral Agent may reasonably deem
necessary or advisable to accomplish the purposes of this Agreement, including
the filing, in its sole discretion, of one or more financing or continuation
statements and amendments thereto, relative to any of the Collateral without the
signature of Debtor where permitted by law, which financing statements may (but
need not) describe the Collateral as “all assets” or “all personal property” or
words of like import, and ratifies all such actions taken by the Collateral
Agent. This power of attorney is coupled with an interest and shall be
irrevocable for the term of this Agreement and thereafter as long as any of the
Obligations shall be outstanding.

 

14.      Notices. All notices, demands, requests, consents, approvals, and other
communications required or permitted hereunder shall be in writing and, unless
otherwise specified herein, shall be (a) personally served, (b) deposited in the
mail, registered or certified, return receipt requested, postage prepaid, (c)
delivered by a reputable overnight courier service with charges prepaid, or (d)
transmitted by hand delivery, telegram, or facsimile, addressed as set forth
below or to such other address as such party shall have specified most recently
by written notice. Any notice or other communication required or permitted to be
given hereunder shall be deemed effective (i) upon hand delivery or delivery by
facsimile, with accurate confirmation generated by the transmitting facsimile
machine, at the address or number designated below (if delivered on a Business
Day during normal business hours), or the first Business Day following such
delivery (if delivered other than on a Business Day during normal business
hours), (ii) on the first Business Day following the date deposited with an
overnight courier service with charges prepaid, or (iii) on the fifth Business
Day following the date of mailing pursuant to subpart (b) above, or upon actual
receipt of such mailing, whichever shall first occur. The addresses for such
communications shall be:

11

 

 

  To Debtor, to:   Dataram Corporation       777 Alexander Road       Princeton,
New Jersey 08540       Fax: (609) 799–6734           With a copy by fax only to
  Richard G. Satin, Esq.   (which shall not constitute notice):   Meyer, Suozzi,
English & Klein, P.C.       990 Stewart Avenue, Suite 300       Garden City, New
York 11530       Fax: (516) 741–6706           To the Secured Parties:   To the
addresses set forth on the       signature pages hereto.           To the
Collateral Agent:   Collateral Services LLC       c/o Barbara Mittman       515
Rockaway Avenue       Valley Stream, New York 11581       Fax: (212) 697-3575  
        If to Debtor or Collateral Agent,   Grushko & Mittman, P.C.   with a
copy by telecopier only to   515 Rockaway Avenue   (which shall not constitute
notice):   Valley Stream, New York 11581       Fax: (212) 697-3575

 

15.      Appointment of Collateral Agent. The Secured Parties hereby appoint
Collateral Services LLC to act as their agent (“Collateral Agent”) for purposes
of exercising any and all rights and remedies of the Secured Parties hereunder.
Such appointment shall continue until revoked in writing by a Majority in
Interest, at which time a Majority in Interest shall appoint a new Collateral
Agent. The Collateral Agent shall have the rights, responsibilities and
immunities set forth in Annex B hereto.

 

16.      Miscellaneous.

 

(a)      No course of dealing between the Debtors and the Collateral Agent, nor
any failure to exercise, nor any delay in exercising, on the part of the
Collateral Agent, any right, power or privilege hereunder or under the Notes
shall operate as a waiver thereof; nor shall any single or partial exercise of
any right, power or privilege hereunder or thereunder preclude any other or
further exercise thereof or the exercise of any other right, power or privilege.

 

(b)      All of the rights and remedies of the Collateral Agent with respect to
the Collateral, whether established hereby or by the Notes or by any other
agreements, instruments or documents or by law shall be cumulative and may be
exercised singly or concurrently.

 

(c)      This Agreement, together with the exhibits and schedules hereto,
contain the entire understanding of the parties with respect to the subject
matter hereof and supersede all prior agreements and understandings, oral or
written, with respect to such matters, which the parties acknowledge have been
merged into this Agreement and the exhibits and schedules hereto. No provision
of this Agreement may be waived, modified, supplemented or amended except in a
written instrument signed, in the case of an amendment, by the Debtors and
Collateral Agent or, in the case of a waiver, by the party against whom
enforcement of any such waived provision is sought.

12

 

(d)      If any term, provision, covenant or restriction of this Agreement is
held by a court of competent jurisdiction to be invalid, illegal, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions set forth herein shall remain in full force and effect and shall in
no way be affected, impaired or invalidated, and the parties hereto shall use
their commercially reasonable efforts to find and employ an alternative means to
achieve the same or substantially the same result as that contemplated by such
term, provision, covenant or restriction. It is hereby stipulated and declared
to be the intention of the parties that they would have executed the remaining
terms, provisions, covenants and restrictions without including any of such that
may be hereafter declared invalid, illegal, void or unenforceable.

 

(e)      No waiver of any default with respect to any provision, condition or
requirement of this Agreement shall be deemed to be a continuing waiver in the
future or a waiver of any subsequent default or a waiver of any other provision,
condition or requirement hereof, nor shall any delay or omission of any party to
exercise any right hereunder in any manner impair the exercise of any such
right.

 

(f)      This Agreement shall be binding upon and inure to the benefit of the
parties and their successors and permitted assigns. The Debtor may not assign
this Agreement or any rights or obligations hereunder without the prior written
consent of a Majority in Interest (other than by merger). Any Secured Party may
assign any or all of its rights under this Agreement to any Person to whom such
Secured Party assigns or transfers any Obligations, provided such transferee
agrees in writing to be bound, with respect to the transferred Obligations, by
the provisions of this Agreement that apply to the “Secured Parties.”

 

(g)      Each party shall take such further action and execute and deliver such
further documents as may be necessary or appropriate in order to carry out the
provisions and purposes of this Agreement.

 

(h)      All questions concerning the construction, validity, enforcement and
interpretation of this Agreement shall be governed by and construed and enforced
in accordance with the internal laws of the State of New York, without regard to
the principles of conflicts of law thereof. The Debtor agrees that all
proceedings concerning the interpretations, enforcement and defense of the
transactions contemplated by this Agreement and the Notes (whether brought
against a party hereto or its respective affiliates, directors, officers,
shareholders, partners, members, employees or agents) shall be commenced
exclusively in the state and federal courts sitting in the City of New York,
Borough of Manhattan. The Debtor hereby irrevocably submits to the exclusive
jurisdiction of the state and federal courts sitting in the City of New York,
Borough of Manhattan for the adjudication of any dispute hereunder or in
connection herewith or with any transaction contemplated hereby or discussed
herein, and hereby irrevocably waives, and agrees not to assert in any
proceeding, any claim that it is not personally subject to the jurisdiction of
any such court, that such proceeding is improper. Each party hereto hereby
irrevocably waives personal service of process and consents to process being
served in any such proceeding by mailing a copy thereof via registered or
certified mail or overnight delivery (with evidence of delivery) to such party
at the address in effect for notices to it under this Agreement and agrees that
such service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law. Each party hereto hereby
irrevocably waives, to the fullest extent permitted by applicable law, any and
all right to trial by jury in any legal proceeding arising out of or relating to
this Agreement or the transactions contemplated hereby. If any party shall
commence a proceeding to enforce any provisions of this Agreement, then the
prevailing party in such proceeding shall be reimbursed by the other party for
its reasonable attorney’s fees and other costs and expenses incurred with the
investigation, preparation and prosecution of such proceeding.

13

 

(i)      Debtor shall indemnify, reimburse and hold harmless the Collateral
Agent and the Secured Parties and their respective partners, members,
shareholders, officers, directors, employees and agents (and any other persons
with other titles that have similar functions) (collectively, “Indemnitees”)
from and against any and all losses, claims, liabilities, damages, penalties,
suits, costs and expenses, of any kind or nature, (including fees relating to
the cost of investigating and defending any of the foregoing) imposed on,
incurred by or asserted against such Indemnitee in any way related to or arising
from or alleged to arise from this Agreement or the Collateral, except any such
losses, claims, liabilities, damages, penalties, suits, costs and expenses which
result from the gross negligence or willful misconduct of the Indemnitee as
determined by a final, nonappealable decision of a court of competent
jurisdiction. This indemnification provision is in addition to, and not in
limitation of, any other indemnification provision in the Notes, the Securities
Purchase Agreement (as such term is defined in the Notes) or any other
agreement, instrument or other document executed or delivered in connection
herewith or therewith.

 

(j)      Nothing in this Agreement shall be construed to subject Collateral
Agent or any Secured Party to liability as a partner in Debtor or any if its
direct or indirect subsidiaries that is a partnership or as a member in Debtor
or any of its direct or indirect subsidiaries that is a limited liability
company, nor shall Collateral Agent or any Secured Party be deemed to have
assumed any obligations under any partnership agreement or limited liability
company agreement, as applicable, of Debtor or any if its direct or indirect
subsidiaries or otherwise, unless and until any such Secured Party exercises its
right to be substituted for Debtor as a partner or member, as applicable,
pursuant hereto.

 

(k)      This Agreement may be executed in any number of counterparts, each of
which when so executed shall be deemed to be an original and, all of which taken
together shall constitute one and the same Agreement. In the event that any
signature is delivered by facsimile or other electronic transmission, such
signature shall create a valid binding obligation of the party executing (or on
whose behalf such signature is executed) the same with the same force and effect
as if such signature were the original thereof.

 

 

 

[SIGNATURE PAGES FOLLOW]

14

 

IN WITNESS WHEREOF, the parties hereto have caused this Security Agreement to be
duly executed on the day and year first above written.

 

 

DATARAM CORPORATION      

 

 

By:     Name:      John H. Freeman   Title:      Chief Executive Officer        

 

 

COLLATERAL AGENT

 

COLLATERAL SERVICES LLC

 

 

 

By: ____________________________________________

Name:

Title:

 

15

 

OMNIBUS SECURED PARTY SIGNATURE PAGE TO
DATARAM CORPORATION
SECURITY AGREEMENT

 

The undersigned, in its capacity as a Secured Party, hereby executes and
delivers the Security Agreement to which this signature page is attached and
agrees to be bound by the Security Agreement on the date set forth on the first
page of the Security Agreement. This counterpart signature page, together with
all counterparts of the Security Agreement and signature pages of the other
parties named therein, shall constitute one and the same instrument in
accordance with the terms of the Security Agreement.

 

 

 

___________________________________________
[Print Name of Secured Party]

 

 

 

___________________________________________
[Signature]

      Name: _____________________________________       Title:
______________________________________  

 

Address:
____________________________________________________________________      

 

___________________________________________________________________________

 

______________________________________________________________________________________

 

 

Fax No.: _______________________

 

Email: _______________________________________

 

Taxpayer ID# (if applicable): ______________________

 

16

 

 

SCHEDULE A

 

 

Principal Place of Business of Debtor:

 

•      777 Alexander Road

Princeton, New Jersey 08540

 

 

 

Locations Where Collateral is Located or Stored:

 

•      777 Alexander Road

Princeton, New Jersey 08540

 

•      130 Corporate Drive

Montgomery, PA 18936

 

 

 

 

17

 

 

SCHEDULE B

 

Jurisdictions

 

 

 

•      New Jersey

•      Pennsylvania

 

18

 

 

ANNEX A

to

SECURITY

AGREEMENT

 

THE COLLATERAL AGENT

 

1. Appointment. The Secured Parties (all capitalized terms used herein and not
otherwise defined shall have the respective meanings provided in the Security
Agreement to which this Annex A is attached (the “Agreement”), by their
acceptance of the benefits of the Agreement, hereby designate Collateral
Services LLC (“Collateral Agent”) as the Collateral Agent to act as specified
herein and in the Agreement. Each Secured Party shall be deemed irrevocably to
authorize the Collateral Agent to take such action on its behalf under the
provisions of the Agreement and any other Transaction Document (as such term is
defined in the Notes) and to exercise such powers and to perform such duties
hereunder and thereunder as are specifically delegated to or required of the
Collateral Agent by the terms hereof and thereof and such other powers as are
reasonably incidental thereto. The Collateral Agent may perform any of its
duties hereunder by or through its agents or employees.

 

2. Nature of Duties. The Collateral Agent shall have no duties or
responsibilities except those expressly set forth in the Agreement. Neither the
Collateral Agent nor any of its partners, members, shareholders, officers,
directors, employees or agents shall be liable for any action taken or omitted
by it as such under the Agreement or hereunder or in connection herewith or
therewith, be responsible for the consequence of any oversight or error of
judgment or answerable for any loss, unless caused solely by its or their gross
negligence or willful misconduct as determined by a final judgment (not subject
to further appeal) of a court of competent jurisdiction. The duties of the
Collateral Agent shall be mechanical and administrative in nature; the
Collateral Agent shall not have by reason of the Agreement or any other
Transaction Document a fiduciary relationship in respect of Debtor or any
Secured Party; and nothing in the Agreement or any other Transaction Document,
expressed or implied, is intended to or shall be so construed as to impose upon
the Collateral Agent any obligations in respect of the Agreement or any other
Transaction Document except as expressly set forth herein and therein.

 

3. Lack of Reliance on the Collateral Agent. Independently and without reliance
upon the Collateral Agent, each Secured Party, to the extent it deems
appropriate, has made and shall continue to make (i) its own independent
investigation of the financial condition and affairs of the Company and its
subsidiaries in connection with such Secured Party’s investment in the Debtors,
the creation and continuance of the Obligations, the transactions contemplated
by the Transaction Documents, and the taking or not taking of any action in
connection therewith, and (ii) its own appraisal of the creditworthiness of the
Company and its subsidiaries, and of the value of the Collateral from time to
time, and the Collateral Agent shall have no duty or responsibility, either
initially or on a continuing basis, to provide any Secured Party with any
credit, market or other information with respect thereto, whether coming into
its possession before any Obligations are incurred or at any time or times
thereafter. The Collateral Agent shall not be responsible to the Debtors or any
Secured Party for any recitals, statements, information, representations or
warranties herein or in any document, certificate or other writing delivered in
connection herewith, or for the execution, effectiveness, genuineness, validity,
enforceability, perfection, collectability, priority or sufficiency of the
Agreement or any other Transaction Document, or for the financial condition of
the Debtors or the value of any of the Collateral, or be required to make any
inquiry concerning either the performance or observance of any of the terms,
provisions or conditions of the Agreement or any other Transaction Document, or
the financial condition of the Debtors, or the value of any of the Collateral,
or the existence or possible existence of any default or Event of Default under
the Agreement, the Notes or any of the other Transaction Documents.

19

 

4. Certain Rights of the Collateral Agent. The Collateral Agent shall have the
right to take any action with respect to the Collateral, on behalf of all of the
Secured Parties, subject to the Security Interest of R&R. To the extent
practical, the Collateral Agent shall request instructions from the Secured
Parties with respect to any material act or action (including failure to act) in
connection with the Agreement or any other Transaction Document, and shall be
entitled to act or refrain from acting in accordance with the instructions of
Secured Parties holding a majority in principal amount of Notes (based on
then-outstanding principal amounts of Notes at the time of any such
determination); if such instructions are not provided despite the Collateral
Agent’s request therefor, the Collateral Agent shall be entitled to refrain from
such act or taking such action, and if such action is taken, shall be entitled
to appropriate indemnification from the Secured Parties in respect of actions to
be taken by the Collateral Agent; and the Collateral Agent shall not incur
liability to any person or entity by reason of so refraining. Without limiting
the foregoing, (a) no Secured Party shall have any right of action whatsoever
against the Collateral Agent as a result of the Collateral Agent acting or
refraining from acting hereunder in accordance with the terms of the Agreement
or any other Transaction Document, and the Debtors shall have no right to
question or challenge the authority of, or the instructions given to, the
Collateral Agent pursuant to the foregoing and (b) the Collateral Agent shall
not be required to take any action which the Collateral Agent believes (i) could
reasonably be expected to expose it to personal liability or (ii) is contrary to
this Agreement, the Transaction Documents or applicable law.

 

5. Reliance. The Collateral Agent shall be entitled to rely, and shall be fully
protected in relying, upon any writing, resolution, notice, statement,
certificate, telex, teletype or telecopier message, cablegram, radiogram, order
or other document or telephone message signed, sent or made by the proper person
or entity, and, with respect to all legal matters pertaining to the Agreement
and the other Transaction Documents and its duties thereunder, upon advice of
counsel selected by it and upon all other matters pertaining to this Agreement
and the other Transaction Documents and its duties thereunder, upon advice of
other experts selected by it. Anything to the contrary notwithstanding, the
Collateral Agent shall have no obligation whatsoever to any Secured Party to
assure that the Collateral exists or is owned by the Debtors or is cared for,
protected or insured or that the liens granted pursuant to the Agreement have
been properly or sufficiently or lawfully created, perfected, or enforced or are
entitled to any particular priority.

 

6. Indemnification. To the extent that the Collateral Agent is not reimbursed
and indemnified by the Debtors, the Secured Parties will jointly and severally
reimburse and indemnify the Collateral Agent, in proportion to their initially
purchased respective principal amounts of Notes, from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or nature whatsoever which may be
imposed on, incurred by or asserted against the Collateral Agent in performing
its duties hereunder or under the Agreement or any other Transaction Document,
or in any way relating to or arising out of the Agreement or any other
Transaction Document except for those determined by a final judgment (not
subject to further appeal) of a court of competent jurisdiction to have resulted
solely from the Collateral Agent’s own gross negligence or willful misconduct.
Prior to taking any action hereunder as Collateral Agent, the Collateral Agent
may require each Secured Party to deposit with it sufficient sums as it
determines in good faith is necessary to protect the Collateral Agent for costs
and expenses associated with taking such action.

 

7. Resignation by the Collateral Agent. 

 

(a) The Collateral Agent may resign from the performance of all its functions
and duties under the Agreement and the other Transaction Documents at any time
by giving 5 days’ prior written notice (as provided in the Agreement) to the
Debtors and the Secured Parties. Such resignation shall take effect upon the
appointment of a successor Collateral Agent pursuant to clauses (b) and (c)
below.

20

 

(b) Upon any such notice of resignation, the Secured Parties, acting by
a Majority in Interest, shall appoint a successor Collateral Agent hereunder.

 

(c) If a successor Collateral Agent shall not have been so appointed within said
5-day period, the Collateral Agent shall then appoint a successor Collateral
Agent who shall serve as Collateral Agent until such time, if any, as the
Secured Parties appoint a successor Collateral Agent as provided above. If a
successor Collateral Agent has not been appointed within such 5-day period, the
Collateral Agent may petition any court of competent jurisdiction or may
interplead the Debtors and the Secured Parties in a proceeding for the
appointment of a successor Collateral Agent, and all fees, including, but not
limited to, extraordinary fees associated with the filing of interpleader and
expenses associated therewith, shall be payable by the Debtors on demand.

 

8. Rights with respect to Collateral. Each Secured Party agrees with all other
Secured Parties and the Collateral Agent (i) that it shall not, and shall not
attempt to, exercise any rights with respect to its security interest in the
Collateral, whether pursuant to any other agreement or otherwise (other than
pursuant to this Agreement), or take or institute any action against the
Collateral Agent or any of the other Secured Parties in respect of the
Collateral or its rights hereunder (other than any such action arising from the
breach of this Agreement) and (ii) that such Secured Party has no other rights
with respect to the Collateral other than as set forth in this Agreement and the
other Transaction Documents. Upon the acceptance of any appointment as
Collateral Agent hereunder by a successor Collateral Agent, such successor
Collateral Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Collateral Agent and the
retiring Collateral Agent shall be discharged from its duties and obligations
under the Agreement.  After any retiring Collateral Agent’s resignation or
removal hereunder as Collateral Agent, the provisions of the Agreement including
this Annex A shall inure to its benefit as to any actions taken or omitted to be
taken by it while it was Collateral Agent.

 

 

 

21