Exhibit 10.2

  

SECURITY AGREEMENT

SECURITY AGREEMENT, dated as of October 3, 2012 (together with all amendments,
if any, from time to time hereto, this “Security Agreement”), among the grantors
signatory hereto (together with their respective successors and assigns, each a
“Grantor”), and the Investors (as defined below).

W I T N E S S E T H:

WHEREAS, pursuant to that certain Securities Purchase Agreement (as the same may
be amended from time to time, the “Purchase Agreement”) dated as of the date
hereof by and among Stratus Media Group, Inc. a Nevada corporation (the
“Corporation”), and each investor identified on the signature pages thereto
(together with their respective successors and assigns, collectively, the
“Investors”), the Investors purchased Preferred Shares (as defined herein);

WHEREAS, pursuant to that certain Amended and Restated Certificate of
Designations of Series E Convertible Preferred Stock (the “Certificate of
Designations”), as filed with the Secretary of State of Delaware on October ___,
2012, the Corporation authorized the issuance shares of Series E Convertible
Preferred Stock (the “Preferred Shares”) and provided that the Corporation shall
redeem any and all outstanding Preferred Shares on the fifth anniversary of the
Original Issue Date (as defined in the Certificate of Designations) for a sum
equal to the Stated Value (as defined in the Certificate of Designations) of
each Preferred Share plus all declared or accumulated but unpaid dividends on
such shares;

WHEREAS, in order to induce the Investors to enter into the Purchase Agreement,
each Grantor has agreed to grant a continuing perfected Security Interest in (as
hereinafter defined) and Lien (as hereinafter defined) on the Collateral (as
hereinafter defined) to secure the all of the Secured Obligations (as
hereinafter defined);

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

1.                  DEFINED TERMS. All terms not specifically defined herein
which are defined in the Code (as defined herein) shall have the meanings as
defined in the Code. In addition, as used herein:

(a)                “Accounts” means all “accounts,” as such term is defined in
the Code, now owned or hereafter acquired by any Grantor, including (i) all
accounts receivable, other receivables, book debts and other forms of
obligations (other than forms of obligations evidenced by Chattel Paper, or
Instruments), (including any such obligations that may be characterized as an
account or contract right under the Code), (ii) all rights in, to and under all
purchase orders or receipts for goods or services, (iii) all rights to any goods
represented by any of the foregoing (including unpaid sellers’ rights of
rescission, replevin, reclamation and stoppage in transit and rights to
returned, reclaimed or repossessed goods), (iv) all rights to payment due to any
Grantor for property sold, leased, licensed, assigned or otherwise disposed of,
for a policy of insurance issued or to be issued, for a secondary obligation
incurred or to be incurred, for energy provided or to be provided, for the use
or hire of a vessel under a charter or other contract, arising out of the use of
a credit card or charge card, or for services rendered or to be rendered by such
Grantor or in connection with any other transaction (whether or not yet earned
by performance on the part of such Grantor), (v) all health care insurance
receivables and (vi) all collateral security of any kind, given by any Account
Debtor or any other Person with respect to any of the foregoing.

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(b)               “Account Debtor” means any Person who may become obligated to
any Grantor under, with respect to, or on account of, an Account, Chattel Paper
or General Intangibles (including a payment intangible).

(c)                “Business” means the business from time to time, now or
hereafter, conducted by the Corporation and any Subsidiary (as defined herein).

(d)               “Chattel Paper” means any “chattel paper,” as such term is
defined in the Code, including electronic chattel paper, now owned or hereafter
acquired by any Grantor.

(e)                “Code” means the Uniform Commercial Code as the same may,
from time to time, be enacted and in effect in the State of New York; provided,
that to the extent that the Code is used to define any term herein and such term
is defined differently in different Articles or Divisions of the Code, the
definition of such term contained in Article or Division 9 shall govern;
provided further, that in the event that, by reason of mandatory provisions of
law, any or all of the attachment, perfection or priority of, or remedies with
respect to, any Investor’s Security Interest on any Collateral is governed by
the Uniform Commercial Code as enacted and in effect from time to time in a
jurisdiction other than the State of New York, the term “Code” shall mean the
Uniform Commercial Code as enacted and in effect in such other jurisdiction
solely for purposes of the provisions thereof relating to such attachment,
perfection, priority or remedies and for purposes of definitions related to such
provisions.

(f)                “Collateral” has the meaning ascribed thereto in Section 2(a)
hereof.

(g)               Intentionally deleted.

(h)               “Contracts” means all contracts and agreements to which any
Grantor is a party, as the same may be amended, supplemented or otherwise
modified from time to time, including without limitation, (i) all rights of any
Grantor to receive moneys due and to become due to it thereunder or in
connection therewith, (ii) all rights of any Grantor to damages arising
thereunder and (iii) all rights of any Grantor to perform and to exercise all
remedies thereunder.

(i)                 “Copyright Licenses” means any and all rights now owned or
hereafter acquired by any Grantor under any written agreement granting any right
to use any Copyright (as defined below) or Copyright registration.

(j)                 “Copyrights” means all of the following now owned or
hereafter adopted or acquired by any Grantor: (i) all copyrights and General
Intangibles of like nature (whether registered or unregistered), all
registrations and recordings thereof, and all applications in connection
therewith, including all registrations, recordings and applications in the
United States Copyright Office or in any similar office or agency of the United
States, any state or territory thereof, or any other country or any political
subdivision thereof, and (ii) all reissues, extensions or renewals thereof.

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(k)               “Default” shall have the meaning ascribed thereto in
Section 16(c) of the Certificate of Designations.

(l)                 “Deposit Accounts” means all “deposit accounts” as such term
is defined in the Code, now or hereafter held in the name of any Grantor.

(m)             “Documents” means all “documents”, as such term is defined in
the Code, now owned or hereafter acquired by any Grantor, wherever located.

(n)               “Equipment” means all “equipment,” as such term is defined in
the Code, now owned or hereafter acquired by any Grantor, wherever located and,
in any event, including all such Grantor’s machinery and equipment, including
processing equipment, conveyors, machine tools, data processing and computer
equipment, including embedded software and peripheral equipment and all
engineering, processing and manufacturing equipment, office machinery,
furniture, materials handling equipment, tools, attachments, accessories,
automotive equipment, trailers, trucks, forklifts, molds, dies, stamps, motor
vehicles, rolling stock and other equipment of every kind and nature, trade
fixtures and fixtures not forming a part of real property, together with all
additions and accessions thereto, replacements therefor, all parts therefor, all
substitutes for any of the foregoing, fuel therefor, and all manuals, drawings,
instructions, warranties and rights with respect thereto, and all products and
proceeds thereof and condemnation awards and insurance proceeds with respect
thereto.

(o)               “Fixtures” means all “fixtures” as such term is defined in the
Code, now owned or hereafter acquired by any Grantor.

(p)               “General Intangibles” means all “general intangibles,” as such
term is defined in the Code, now owned or hereafter acquired by any Grantor,
including all right, title and interest that such Grantor may now or hereafter
have in or under any Contract, all payment intangibles, customer lists,
Licenses, Copyrights, Trademarks, Patents, and all applications therefor and
reissues, extensions or renewals thereof, rights in Intellectual Property,
interests in partnerships, joint ventures and other business associations,
licenses, permits, copyrights, trade secrets, proprietary or confidential
information, inventions (whether or not patented or patentable), technical
information, procedures, designs, knowledge, know how, software, data bases,
data, skill, expertise, experience, processes, models, drawings, materials and
records, goodwill (including the goodwill associated with any Trademark or
Trademark License), all rights and claims in or under insurance policies
(including insurance for fire, damage, loss and casualty, whether covering
personal property, real property, tangible rights or intangible rights, all
liability, life, key man and business interruption insurance, and all unearned
premiums), uncertificated securities, choses in action, deposit, checking and
other bank accounts, rights to receive tax refunds and other payments, rights to
receive dividends, distributions, cash, Instruments and other property in
respect of or in exchange for pledged stock and Investment Property, rights of
indemnification, all books and records, correspondence, credit files, invoices
and other papers, including without limitation all tapes, cards, computer runs
and other papers and documents in the possession or under the control of such
Grantor or any computer bureau or service company from time to time acting for
such Grantor.

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(q)               “Goods” means all “goods” as defined in the Code, now owned or
hereafter acquired by any Grantor, wherever located, including embedded software
to the extent included in “goods” as defined in the Code.

(r)                 “Instruments” means all “instruments,” as such term is
defined in the Code, now owned or hereafter acquired by any Grantor, wherever
located, and, in any event, including all certificated securities, all
certificates of deposit, and all promissory notes and other evidences of
indebtedness, other than instruments that constitute, or are a part of a group
of writings that constitute, Chattel Paper.

(s)                “Intellectual Property” means any and all Licenses, Patents,
Copyrights, Trademarks, service marks, trade dress, trade names, domain names,
brand names and certification marks presently owned by any Grantor or (pursuant
to license, sublicense, agreement or permission) used by any Grantor in
connection with such Grantor’s Business.

(t)                 “Inventory” means all “inventory” as such term is defined in
the Code, now owned or hereafter acquired by any Grantor, wherever located, and
in any event including inventory, merchandise, goods and other personal property
that are held by or on behalf of any Grantor for sale or lease or are furnished
or are to be furnished under a contract of service, or that constitute raw
materials, work in process, finished goods returned goods, or materials or
supplies of any kind, nature or description used or consumed or to be used or
consumed in the Business or in the processing, production, packaging, promotion,
delivery or shipping of the same, including other supplies and embedded
software.

(u)               “Investment Property” means all “investment property” as such
term is defined in the Code now owned or hereafter acquired by any Grantor,
wherever located including (i) all securities, whether certificated or
uncertificated, including stocks, bonds, interests in limited liability
companies, partnership interests, treasuries, certificates of deposit, and
mutual fund shares; (ii) all securities entitlements of any Grantor, including
the rights of any Grantor to any securities account and the financial assets
held by a securities intermediary in such securities account and any free credit
balance or other money owing by any securities intermediary with respect to that
account, (iii) all securities accounts of any Grantor; (iv) all commodity
contracts of any Grantor and (v) all commodity accounts held by any Grantor.

(v)               “Letter of Credit Rights” means letter of credit rights as
such term is defined in the Code, now owned or hereafter acquired by any
Grantor, including rights to payment or performance under a letter of credit,
whether or not such Grantor, as beneficiary, has demanded or is entitled to
demand payment or performance.

(w)             “Licenses” means any Copyright License, Patent License,
Trademark License or other license of rights or interests now held or hereafter
acquired by any Grantor.

(x)               “Lien” means any mortgage, pledge, security interest, lien,
claim, encumbrance or other similar restrictions, of any kind or nature
whatsoever.

(y)               “Patent Licenses” means rights under any written agreement now
owned or hereafter acquired by any Grantor granting any right with respect to
any invention on which a Patent (as defined below) is in existence.

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(z)                “Patents” means all of the following in which any Grantor now
holds or hereafter acquires any interest: (i) all letters patent of the United
States or of any other country, all registrations and recordings thereof, and
all applications for letters patent of the United States or of any other
country, including registrations, recordings and applications in the United
States Patent and Trademark Office or in any similar office or agency of the
United States, any State or any other country, and (ii) all reissues,
continuations, continuations-in-part or extensions thereof.

(aa)            “Permitted Liens” means (i) all currently outstanding Liens on
the assets of the Grantor, to the extent, but only to the extent, such Liens are
fully and properly perfected and in existence prior to the date hereof, (ii)
Liens for taxes not yet payable as of the date hereof, and (iii) Liens of
materialmen, mechanics, warehousemen, carriers, or other similar liens arising
in the ordinary course of business and securing obligations which are not
delinquent; and (iv) liens issued in connection with the Series E Preferred
Stock financing in May, 2011.

(bb)           “Person” means an individual, a partnership, a corporation, a
limited liability company, an association, a joint stock company, a trust, a
joint venture, an unincorporated organization, a governmental entity or any
department, agency or political subdivision thereof and any other entity.

(cc)            “Proceeds” means “proceeds,” as such term is defined in the
Code, including (i) any and all proceeds of any insurance, indemnity, warranty
or guaranty payable to any Grantor from time to time with respect to any of the
Collateral, (ii) any and all payments (in any form whatsoever) made or due and
payable to any Grantor 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), (iii) any claim of any Grantor against third parties
(A) for past, present or future infringement of any Patent or Patent License, or
(B) for past, present or future infringement or dilution of any Copyright,
Copyright License, Trademark or Trademark License, or for injury to the goodwill
associated with any Trademark or Trademark License, (iv) any recoveries by any
Grantor against third parties with respect to any litigation or dispute
concerning any of the Collateral including claims arising out of the loss or
nonconformity of, interference with the use of, defects in, or infringement of
rights in, or damage to, Collateral, (v) all amounts collected on, or
distributed on account of, other Collateral, including dividends, interest,
distributions and Instruments with respect to Investment Property and pledged
stock, and (vi) any and all other amounts, rights to payment or other property
acquired upon the sale, lease, license, exchange or other disposition of
Collateral and all rights arising out of Collateral.

(dd)          “Secured Obligations” shall mean the Corporation’s obligation to
redeem the outstanding shares of the Preferred Shares on the Redemption Date (as
defined in the Certificate of Designations) pursuant to Section 16 of the
Certificate of Designations.

(ee)            “Security Interests” means the Liens in and the charges (fixed
or floating, as the case may be) over the Collateral granted hereunder securing
the Secured Obligations.

(ff)             “Software” means all “software” as such term is defined in the
Code, now owned or hereafter acquired by any Grantor, other than software
embedded in any category of goods, including all computer programs and all
supporting information provided in connection with a transaction related to any
program.

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(gg)           “Subsidiary” means any corporation, partnership, limited
liability company, joint venture, association or other business entity at least
50% of the outstanding voting stock or voting interests of which is at the time
owned or controlled, directly or indirectly, by any Grantor.

(hh)           “Supporting Obligations” means all supporting obligations as such
term is defined in the Code, including letters of credit and guaranties issued
in support of Accounts, Chattel Paper, Documents, General Intangibles,
Instruments, or Investment Property.

(ii)               “Termination Date” means the date on which all Secured
Obligations are indefeasibly repaid in full, in cash to all Investors.

(jj)               “Trademark License” means rights under any written agreement
now owned or hereafter acquired by any Grantor granting any right to use any
Trademark (as defined below).

(kk)           “Trademarks” means all of the following now owned or hereafter
existing or adopted or acquired by any Grantor: (i) all trademarks, trade names,
corporate names, business names, trade styles, service marks, logos, other
source or business identifiers, prints and labels on which any of the foregoing
have appeared or appear, designs and general intangibles of like nature (whether
registered or unregistered), all registrations and recordings thereof, and all
applications in connection therewith, including registrations, recordings and
applications in the United States Patent and Trademark Office or in any similar
office or agency of the United States, any state or territory thereof, or any
other country or any political subdivision thereof; (ii) all reissues,
extensions or renewals thereof; and (iii) all goodwill associated with or
symbolized by any of the foregoing.

(ll)               “Transaction Documents” shall mean the Purchase Agreement,
the Security Agreement and all other related documents.

(mm)       “Uniform Commercial Code Jurisdiction” means any jurisdiction that
has adopted all or substantially all of Article 9 as contained in the 2000
Official Text of the Uniform Commercial Code, as recommended by the National
Conference of Commissioners on Uniform State Laws and the American Law
Institute, together with any subsequent amendments or modifications to the
Official Text.

2.                  GRANT OF LIEN.

(a)                To secure the prompt and complete payment, performance and
observance of all of the Secured Obligations, each Grantor hereby grants,
assigns, conveys, mortgages, pledges, hypothecates and transfers to the
Investors, a continuing Security Interest and Lien upon all of its right, title
and interest in, to and under all personal property and other assets, whether
now owned by or owing to, or hereafter acquired by or arising in favor of such
Grantor (including under any trade names, styles or derivations thereof), and
whether owned or consigned by or to, or leased from or to, such Grantor, and
regardless of where located (all of which being hereinafter collectively
referred to as the “Collateral”), including:

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(i)                 all Accounts;

(ii)               all Chattel Paper;

(iii)             all Contracts;

(iv)             all Documents;

(v)               all General Intangibles (including payment intangibles and
Software);

(vi)             all Goods (including Inventory, Equipment and Fixtures);

(vii)           all Instruments;

(viii)         all Investment Property;

(ix)             all Deposit Accounts, of any Grantor, including all deposit and
other bank accounts and all deposits therein;

(x)               all money, cash or cash equivalents of any Grantor;

(xi)             all Supporting Obligations and Letter of Credit Rights of any
Grantor;

(xii)           to the extent not otherwise included, all Proceeds, tort claims,
insurance claims and other rights to payments not otherwise included in the
foregoing and products of the foregoing and all accessions to, substitutions and
replacements for, and rents and profits of, each of the foregoing.

(b)               The aforementioned Security Interests are granted as security
only and shall not subject Investors, or any of Investors’ successors or assigns
to, or transfer or in any way affect or modify, any obligation of any Grantor
with respect to any of the Collateral or any transaction connected therewith.

(c)                To secure the prompt and complete payment, performance and
observance of the Secured Obligations and in order to induce Investors and
Investors as aforesaid, each Grantor hereby grants to Investors, for itself and
the benefit of Investors, a right of setoff against the property of such Grantor
held by Investors, consisting of property described above in Section 2(a) now or
hereafter in the possession or custody of or in transit to Investors, for any
purpose, including safekeeping, collection or pledge, for the account of such
Grantor, or as to which such Grantor may have any right or power.

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3.                  INVESTORS’ RIGHTS: LIMITATIONS ON INVESTORS’ OBLIGATIONS.

(a)                It is expressly agreed by each Grantor that, anything herein
to the contrary notwithstanding, each Grantor shall remain liable under each of
its Contracts and each of its Licenses to observe and perform all the conditions
and obligations to be observed and performed by it thereunder. No Investor shall
have any obligation or liability under any Contract or License by reason of or
arising out of this Security Agreement or the granting herein of a Security
Interest thereon or the receipt by any Investor of any payment relating to any
Contract or License pursuant hereto. No Investor shall be required or obligated
in any manner to perform or fulfill any of the obligations of any Grantor under
or pursuant to any Contract or 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 claims, 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.

(b)               Investors may at any time after a Default has occurred,
without prior notice to any Grantor, notify Account Debtors and other Persons
obligated on the Collateral that Investors have a security interest therein, and
that payments shall be made directly to Investors. Upon the request of Investors
after the occurrence of a Default, each Grantor shall so notify Account Debtors
and other Persons obligated on Collateral. Once any such notice has been given
to any Account Debtor or other Person obligated on the Collateral, the affected
Grantor shall not give any contrary instructions to such Account Debtor or other
Person without Investors’ prior written consent.

(c)                Investors may, upon two (2) days prior written notice to
Corporation, in Investors’ own names, in the name of a nominee of Investors or
in the name of any Grantor communicate (by mail, telephone, facsimile or
otherwise) with Account Debtors, parties to Contracts, obligors in respect of
Instruments and obligors in respect of Chattel Paper and/or payment intangibles
to verify with such Persons, to Investors’ satisfaction, the existence, amount
terms of, and any other matter relating to, any such Accounts, Contracts,
Instruments or Chattel Paper and/or payment intangibles.

4.                  REPRESENTATIONS AND WARRANTIES. Each Grantor represents and
warrants that:

(a)                Each Grantor has rights in and the power to transfer each
item of the Collateral upon which it purports to grant a Security Interest
hereunder free and clear of any and all Security Interests other than Permitted
Liens.

(b)               No effective financing statement or Lien instrument or
continuation statement covering all or any part of the Collateral is on file or
of record in any public office, except such as may have been filed (i) by any
Grantor in favor of Investors pursuant to this Security Agreement and (ii) in
connection with any Permitted Liens.

(c)                This Security Agreement is effective to create a valid and
continuing Security Interest on and, upon the filing of the appropriate
financing statements listed on Schedule I hereto, a perfected Security Interest
in favor of the Investors, on the Collateral with respect to which a Security
Interest may be perfected by filing pursuant to the Code. Such Security Interest
is prior to all other Security Interests, except Permitted Liens that would be
prior to Security Interests in favor of Investors as a matter of law, and is
enforceable as such as against any and all creditors of and purchasers from any
Grantor (other than purchasers and lessees of Inventory in the ordinary course
of business). All action by any Grantor necessary or desirable to protect and
perfect such Security Interest on each item of the Collateral has been duly
taken.

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(d)               Schedule II hereto lists all Instruments, Letter of Credit
Rights and Chattel Paper of each Grantor. All actions by any Grantor necessary
or desirable to protect and perfect the Security Interest of Investors on each
item set forth on Schedule II (including the delivery of all originals thereof
to Investors and the legending of all Chattel Paper as required by Section 5(b)
hereof) has been duly taken. The Security Interest of Investors, on the
Collateral listed on Schedule II hereto is prior to all other Security
Interests, except Permitted Liens that would be prior to the Security Interests
in favor of Investors as a matter of law, and is enforceable as such against any
and all creditors of and purchasers from any Grantor.

(e)                Each Grantor’s name as it appears in official filings in the
state of its incorporation or other organization, the type of entity of each
Grantor (including corporation, partnership, limited partnership or limited
liability company), organizational identification number issued by each
Grantor’s state of incorporation or organization or a statement that no such
number has been issued, each Grantor’s state of organization or incorporation,
the location of each Grantor’s chief executive office, principal place of
business, offices, all warehouses and premises where Collateral is stored or
located, and the locations of its books and records concerning the Collateral
are set forth on Schedule III hereto. Each Grantor has only one state of
incorporation or organization.

(f)                With respect to each Grantor’s Accounts (i) such Accounts
represent bona fide sales of Inventory or rendering of services to Account
Debtors in the ordinary course of each Grantor’s business and are not evidenced
by a judgment, Instrument or Chattel Paper; (ii) there are no setoffs, claims or
disputes existing or asserted with respect thereto and no Grantor has made any
agreement with any Account Debtor for any extension of time for the payment
thereof, any compromise or settlement for less than the full amount thereof, any
release of any Account Debtor from liability therefor, or any deduction
therefrom except a discount or allowance allowed by such Grantor in the ordinary
course of its business for prompt payment and disclosed to Investors; (iii) to
each Grantor’s knowledge, there are no facts, events or occurrences which in any
way impair the validity or enforceability thereof or could reasonably be
expected to reduce the amount payable thereunder as shown on any Grantor’s books
and records and any invoices or statements; (iv) no Grantor has received any
notice of proceedings or actions which are threatened or pending against any
Account Debtor which might result in any adverse change in such Account Debtor’s
financial condition; and (v) no Grantor has knowledge that any Account Debtor is
unable generally to pay its debts as they become due. Further, with respect to
the Accounts (x) the amounts shown on all invoices and statements, which may be
delivered to Investors with respect thereto, are not in any way contingent and
are to the respective Grantor’s knowledge actually and absolutely owing to such
Grantor as indicated thereon; (y) no payments have been or shall be made
thereon; and (z) to each Grantor’s knowledge, all Account Debtors have the
capacity to contract.

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(g)               With respect to any of the Grantor’s Inventory (i) such
Inventory is located at one of the applicable Grantor’s locations set forth on
Schedule III hereto, (ii) no Inventory is now, or shall at any time or times
hereafter be stored at any other location without Investors’ prior consent, and
if Investors gives such consent, each applicable Grantor will concurrently
therewith obtain, to the extent required by the Purchase Agreement, bailee,
landlord and mortgagee agreements, (iii) the applicable Grantor has good,
indefeasible and merchantable title to such Inventory and such Inventory is not
subject to any Lien or Security Interest or document whatsoever except for the
Security Interest granted to Investors, for the benefit of Investors and
Investors, and except for Permitted Liens, (iv) except as specifically disclosed
in the most recent Collateral Report delivered to Investors, such Inventory is
of good and merchantable quality, free from any defects, other than such defects
as are inherent in Inventory of like grade and quality, (v) such Inventory is
not subject to any licensing, patent, royalty, trademark, trade name or
copyright agreements with any third parties which would require any consent of
any third party upon sale or disposition of that Inventory or the payment of any
monies to any third party as a precondition of such sale or other disposition,
and (vi) the completion of manufacture, sale or other disposition of such
Inventory by Investors following a Default shall not require the consent of any
Person and shall not constitute a breach or default under any contract or
agreement to which any Grantor is a party or to which such property is subject.

(h)               No Grantor has any interest in, or title to, any Patent,
Trademark or Copyright except as set forth in Schedule IV hereto. This Security
Agreement is effective to create a valid and continuing Security Interest on
and, upon filing of the Intellectual Property Security Agreement with the United
States Copyright Office and filing of the Intellectual Property Security
Agreement with the United States Patent and Trademark Office, perfected Security
Interests in favor of Investors on each Grantor’s Patents, Trademarks and
Copyrights within the United States and such perfected Security Interests are
enforceable as such as against any and all creditors of and purchasers from any
Grantor. Upon filing of the Intellectual Property Security Agreement with the
United States Copyright Office and filing of the Intellectual Property Security
Agreement with the United State Patent and Trademark Office and the filing of
appropriate financing statements listed on Schedule I hereto, all action
necessary or desirable to protect and perfect Investors’ Security Interest
within the United States on each Grantor’s Patents, Trademarks or Copyrights
under applicable law shall have been duly taken.

5.                  COVENANTS. Each Grantor covenants and agrees with Investors,
for the benefit of Investors, that from and after the date of this Security
Agreement and until the Termination Date:

(a)                Further Assurances: Pledge of Instruments; Chattel Paper.

(i)                 At any time and from time to time, upon the written request
of Investors and at the sole expense of Grantors, each Grantor shall promptly
and duly execute and deliver any and all such further instruments and documents
and take such further actions as Investors may in good faith deem reasonable and
appropriate to obtain the full benefits of this Security Agreement and of the
rights and powers herein granted, including (A) using its commercially
reasonable efforts to secure all consents and approvals necessary or appropriate
for the assignment to or for the benefit of Investors of any License or Contract
held by such Grantor and to enforce the Security Interests granted hereunder;
and (B) filing any financing or continuation statements under the Code with
respect to the Security Interests granted hereunder as to those jurisdictions
that are not Uniform Commercial Code Jurisdictions.

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(ii)               Unless Investors shall otherwise consent in writing (which
consent may be revoked), each Grantor shall deliver to Investors all Collateral
consisting of negotiable Documents, certificated securities, Chattel Paper and
Instruments (in each case, accompanied by stock powers, allonges or other
instruments of transfer executed in blank) promptly after such Grantor receives
the same.

(iii)             Each Grantor shall use its commercially reasonable efforts to
obtain waivers or subordinations of Security Interests from landlords and
mortgagees.

(iv)             Each Grantor that is or becomes the beneficiary of a letter of
credit shall promptly, and in any event within two (2) Business Days after
becoming a beneficiary, notify Investors thereof and enter into a tri party
agreement with Investors and the issuer and/or confirmation bank with respect to
Letter of Credit Rights assigning such Letter of Credit Rights to Investors and
directing all payments thereunder to the Collection Account, all in form and
substance reasonably satisfactory to Investors.

(v)               Each Grantor shall take all steps necessary to grant the
Investors control of all electronic chattel paper in accordance with the Code
and all “transferable records” as defined in each of the Uniform Electronic
Transactions Act and the Electronic Signatures in Global and National Commerce
Act.

(vi)             Each Grantor hereby irrevocably authorizes the Investors at any
time and from time to time to file in any filing office in any Uniform
Commercial Code Jurisdiction any initial financing statements and amendments
thereto that (A) indicate that the Collateral (x) constitutes all assets of such
Grantor or words of similar effect, regardless of whether any particular asset
comprised in the Collateral falls within the scope of Article 9 of the Code of
such jurisdiction, or (y) as being of an equal or lesser scope or with greater
detail, and (B) contain any other information required by part 5 of Article 9 of
the Code for the sufficiency or filing office acceptance of any financing
statement or amendment, including (xx) whether such Grantor is an organization,
the type of organization and any organization identification number issued to
such Grantor, and (yy) in the case of a financing statement filed as a fixture
filing or indicating Collateral as as-extracted collateral or timber to be cut,
a sufficient description of real property to which the Collateral relates. Each
Grantor agrees to furnish any such information to the Investors promptly upon
request. Each Grantor also ratifies its authorization for the Investors to have
filed in any Uniform Commercial Code Jurisdiction any initial financing
statements or amendments thereto if filed prior to the date hereof.

(vii)           Each Grantor shall promptly, and in any event within ten (10)
Business Days after the same is acquired by it, notify Investors of any
commercial tort claim (as defined in the Code) acquired by it and unless
otherwise consented by Investors, such Grantor shall enter into a supplement to
this Security Agreement, granting to Investors a Security Interest in such
commercial tort claim.

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(b)               Maintenance of Records. Each Grantor shall keep and maintain,
at their own cost and expense, satisfactory and complete records of the
Collateral, including a record of any and all payments received and any and all
credits granted with respect to the Collateral and all other dealings with the
Collateral. Each Grantor shall mark their books and records pertaining to the
Collateral to evidence this Security Agreement and the Security Interests
granted hereby.

(c)                Covenants Regarding Patent, Trademark and Copyright
Collateral.

(i)                 Each Grantor shall notify Investors immediately if they know
or have reason to know that any application or registration relating to any
Patent, Trademark or Copyright (now or hereafter existing) may become abandoned
or dedicated, or of any materially adverse determination or development
(including the institution of, or any such determination or development in, any
proceeding in the United States Patent and Trademark Office, the United States
Copyright Office or any court) regarding any Grantor’s ownership of any Patent,
Trademark or Copyright, its right to register the same, or to keep and maintain
the same.

(ii)               If any Grantor, either by itself or through any agent,
employee, licensee or designee, files an application for the registration of any
Patent, Trademark or Copyright with the United States Patent and Trademark
Office, the United States Copyright Office or any similar office or agency,
Grantor shall provide Investors with written notice thereof within a reasonable
time thereafter, but in any event within ten (10) Business Days from the date of
filing, and, upon request of Investors, Grantor shall execute and deliver an
amendment to the Intellectual Property Security Agreement as Investors may
request to evidence Investors’ Security Interest on such Patent, Trademark or
Copyright, and the General Intangibles of such Grantor relating thereto or
represented thereby.

(iii)             Each Grantor shall take all commercially reasonable actions
necessary or requested by Investors to maintain and pursue each application, to
obtain the relevant registration and to maintain the registration of each of the
Patents, Trademarks and Copyrights (now or hereafter existing), including the
filing of applications for renewal, affidavits of use, affidavits of
noncontestability and opposition and interference and cancellation proceedings.

(iv)             In the event that any of the Patent, Trademark or Copyright
Collateral is infringed upon, or misappropriated or diluted by a third party,
such Grantor shall comply with Section 5(a)(vii) of this Security Agreement.
Such Grantor shall, unless such Grantor shall reasonably determine that such
Patent, Trademark or Copyright Collateral is in no way material to the conduct
of its business or operations, promptly sue for infringement, misappropriation
or dilution and to recover any and all damages for such infringement,
misappropriation or dilution, and shall take such other actions as are
reasonable and appropriate under the circumstances to protect such Patent,
Trademark or Copyright Collateral.

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(d)               Indemnification.

(i)                 Each Grantor shall, jointly and not severally, indemnify
Investors from and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, costs of settlement, suits, costs,
expenses or disbursements of any kind whatsoever (including, without limitation,
reasonable fees and disbursements of counsel to the Investors) (collectively,
“Losses”), which may at any time (including, without limitation, at any time
following the payment of the Secured Obligations) be imposed on, incurred by,
asserted against or due and owing to the Investors in any way relating to or
arising out of actions taken or omitted to be taken by the Investors all of
which Losses shall periodically be reimbursed as incurred; provided that no
Grantor shall be liable for the payment of any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, costs of
settlement, suits, costs, expenses or disbursements directly resulting from the
gross negligence or willful misconduct of the Investors as finally determined by
a court of competent jurisdiction.

(ii)               In any suit, proceeding or action brought by Investors
relating to any Collateral for any sum owing with respect thereto or to enforce
any rights or claims with respect thereto, each Grantor will save, indemnify and
keep Investors harmless from and against all Losses suffered by reason of any
defense, setoff, counterclaim, recoupment or reduction of liability whatsoever
of the Account Debtor or other Person obligated on the Collateral, arising out
of a breach by any Grantor of any obligation thereunder or arising out of any
other agreement, indebtedness or liability at any time owing to, or in favor of,
such obligor or its successors from such Grantor, except in the case of
Investors, to the extent such expense, loss, or damage is attributable solely to
the gross negligence or willful misconduct of Investors (in its capacity as
such) as finally determined by a court of competent jurisdiction. All such
obligations of any Grantor shall be and remain enforceable against and only
against such Grantor(s) and shall not be enforceable against Investors.

(iii)             The agreements in this Section 5(d) shall survive (x) the
payment of the Secured Obligations and all other amounts payable under the
Transaction Documents and the termination of the Transaction Documents.

(iv)             Each Grantor shall have the right, but not the obligation, to
conduct the defense of any action or claim and all negotiations for the
settlement or compromise thereof; provided that (i) any settlement negotiated by
any Grantor involves no cost or liability to Investors and includes an
unconditional release of Investors from all liability with respect to such claim
or action, (ii) Investors shall have the right to retain their own counsel, with
the fees and expenses to be paid by Grantors, if in Investors’ reasonable
judgment there exists any actual or potential conflict of interest between
Investors and any Grantor and (iii) if no such conflict exists, Investors shall
have the right at any time to participate in and join the defense of any action
or claim at Investors’ expense.

(e)                Compliance with Terms of Accounts, etc. In all material
respects, each Grantor will perform and comply with all obligations in respect
of the Collateral and all other agreements to which it is a party or by which it
is bound relating to the Collateral.

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(f)                Limitation on Liens on Collateral. No Grantor will create,
permit or suffer to exist, and each Grantor will defend the Collateral against,
and take such other action as is necessary to remove, any Liens or Security
Interests on the Collateral except Permitted Liens, and will defend the right,
title and interest of Investors in and to any of such Grantor’s rights under the
Collateral against the claims and demands of all Persons whomsoever.

(g)               Limitations on Disposition. No Grantor will sell, license,
lease, transfer or otherwise dispose of any of the Collateral or any interest
therein, or attempt or contract to do so, except as done in the ordinary course
of such Grantor’s business.

(h)               Further Identification of Collateral. Each Grantor will, if so
requested by Investors, furnish to Investors, as often as Investors reasonably
request, statements and schedules further identifying and describing the
Collateral and such other reports in connection with the Collateral as Investors
may reasonably request, all in such detail as Investors may specify.

(i)                 Notices. Each Grantor will advise Investors promptly, in
reasonable detail, (i) of any Security Interest or claim made or asserted
against any of the Collateral, and (ii) of the occurrence of any other event
which would have a material adverse effect on the aggregate value of the
Collateral or on the Security Interest created hereunder.

(j)                 Terminations; Amendments Not Authorized. Each Grantor
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 Investors and agrees that it will not do so
without the prior written consent of Investors, subject to such Grantor’s rights
under Section 9-509(d)(2) of the Code.

6.                  INVESTORS APPOINTMENT AS ATTORNEY-IN-FACT.

Each Grantor shall execute and deliver to Investors a power of attorney (the
“Power of Attorney”) substantially in the form attached hereto as Exhibit A. The
power of attorney granted pursuant to the Power of Attorney is a power coupled
with an interest and shall be irrevocable until the Termination Date. The powers
conferred on Investors, for the benefit of Investors and Investors, under the
Power of Attorney are solely to protect Investors’ interests (for the benefit of
Investors and Investors) in the Collateral and shall not impose any duty upon
Investors to exercise any such powers. Investors agrees that (a) except for the
powers granted in clause (h) of the Power of Attorney, it shall not exercise any
power or authority granted under the Power of Attorney unless a Default has
occurred and is continuing, and (b) Investors shall account for any moneys
received by Investors in respect of any foreclosure on or disposition of
Collateral pursuant to the Power of Attorney provided that Investors shall not
have any duty as to any Collateral, and Investors shall be accountable only for
amounts that they actually receive as a result of the exercise of such powers.
INVESTORS, THEIR RESPECTIVE AFFILIATES, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS
OR REPRESENTATIVES SHALL NOT BE RESPONSIBLE TO ANY GRANTOR FOR ANY ACT OR
FAILURE TO ACT UNDER ANY POWER OF ATTORNEY OR OTHERWISE, EXCEPT IN RESPECT OF
DAMAGES ATTRIBUTABLE SOLELY TO THEIR OWN GROSS NEGLIGENCE OR WILLFUL MISCONDUCT
AS FINALLY DETERMINED BY A COURT OF COMPETENT JURISDICTION, NOR FOR ANY
PUNITIVE, EXEMPLARY, INDIRECT OR CONSEQUENTIAL DAMAGES.

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7.                  REMEDIES: RIGHTS UPON DEFAULT.

(a)                In addition to all other rights and remedies authorized or
granted to it under this Security Agreement, the Purchase Agreement, the Notes
and under any other instrument or agreement securing, evidencing or relating to
any of the Secured Obligations, if any Default shall have occurred and be
continuing, Investors may exercise all rights and remedies of a secured party
under the Code (whether or not in effect in the jurisdiction where such rights
are exercised). Without limiting the generality of the foregoing, each Grantor
expressly agrees that in any such event Investors, without demand of performance
or other demand, advertisement or notice of any kind (except the notice
specified below of time and place of public or private sale) to or upon such
Grantor or any other Person (all and each of which demands, advertisements and
notices are hereby expressly waived to the maximum extent permitted by the Code
and other applicable law), may forthwith enter upon the premises of such Grantor
where any Collateral is located through self-help, without judicial process,
without first obtaining a final judgment or giving such Grantor or any other
Person notice and opportunity for a hearing on Investors’ claim or action and
may collect, receive, assemble, process, appropriate and realize upon the
Collateral, or any part thereof, and, following the delivery of notice to
Grantor may forthwith sell, lease, license, assign, give an option or options to
purchase, or sell or otherwise dispose of and deliver said Collateral (or
contract to do so), or any part thereof, in one or more parcels at a public or
private sale or sales, at any exchange at such prices as it may deem acceptable,
for cash or on credit or for future delivery without assumption of any credit
risk. Investors shall have the right upon any such public sale or sales and, to
the extent permitted by law, upon any such private sale or sales, to purchase
for the benefit of Investors, the whole or any part of said Collateral so sold,
free of any right or equity of redemption, which equity of redemption each
Grantor hereby releases. Such sales may be adjourned and continued from time to
time with or without notice. Investors shall have the right to conduct such
sales on any Grantor’s premises or elsewhere and shall have the right to use any
Grantor’s premises without charge for such time or times as Investors deems
necessary or advisable.

If any Default shall have occurred and be continued, each Grantor further
agrees, at Investors’ request, to assemble the Collateral and make it available
to Investors at a place or places designated by Investors which are reasonably
convenient to Investors and such Grantor, whether at such Grantor’s premises or
elsewhere. Until Investors are able to effect a sale, lease, or other
disposition of Collateral, Investors shall have the right to hold or use
Collateral, or any part thereof, to the extent that it deems appropriate for the
purpose of preserving Collateral or its value or for any other purpose deemed
appropriate by Investors. Investors shall have no obligation to any Grantor to
maintain or preserve the rights of such Grantor as against third parties with
respect to Collateral while Collateral is in the possession of Investors.
Investors may, if they so elect, seek the appointment of a receiver or keeper to
take possession of Collateral and to enforce any of Investors’ remedies (for the
benefit of Investors and Investors), with respect to such appointment without
prior notice or hearing as to such appointment. Investors shall apply the net
proceeds of any such collection, recovery, receipt, appropriation, realization
or sale to the Secured Obligations as provided in the Purchase Agreement, and
only after so paying over such net proceeds, and after the payment by Investors
of any other amount required by any provision of law, need Investors account for
the surplus, if any, to any Grantor. To the maximum extent permitted by
applicable law, each Grantor waives all claims, damages, and demands against
Investors or any Investor arising out of the repossession, retention or sale of
the Collateral except such as arise solely out of the gross negligence or
willful misconduct of Investors or such Investor as finally determined by a
court of competent jurisdiction. Each Grantor agrees that ten (10) days prior
notice by Investors of the time and place of any public sale or of the time
after which a private sale may take place is reasonable notification of such
matters. Each Grantor shall remain liable for any deficiency if the proceeds of
any sale or disposition of the Collateral are insufficient to pay all Secured
Obligations, including any reasonable attorneys’ fees and other expenses
incurred by Investors or any Investor to collect such deficiency.

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(b)               Except as otherwise specifically provided herein, each Grantor
hereby waives presentment, demand, protest or any notice (to the maximum extent
permitted by applicable law) of any kind in connection with this Security
Agreement or any Collateral.

(c)                To the extent that applicable law imposes duties on the
Investors to exercise remedies in a commercially reasonable manner, each Grantor
acknowledges and agrees that it is not commercially unreasonable for the
Investors (i) to fail to incur expenses reasonably deemed significant by the
Investors to prepare Collateral for disposition or otherwise to complete raw
material or work in process into finished goods or other finished products for
disposition, (ii) to fail to obtain third party consents for access to
Collateral to be disposed of, or to obtain or, if not required by other law, to
fail to obtain governmental or third party consents for the collection or
disposition of Collateral to be collected or disposed of, (iii) to fail to
exercise collection remedies against Account Debtors or other Persons obligated
on Collateral or to remove Security Interests on or any adverse claims against
Collateral, (iv) to exercise collection remedies against Account Debtors and
other Persons obligated on Collateral directly or through the use of collection
agencies and other collection specialists, (v) to advertise dispositions of
Collateral through publications or media of general circulation, whether or not
the Collateral is of a specialized nature, (vi) to contact other Persons,
whether or not in the same business as the Grantor, for expressions of interest
in acquiring all or any portion of such Collateral, (vii) to hire one or more
professional auctioneers to assist in the disposition of Collateral, whether or
not the Collateral is of a specialized nature, (viii) to dispose of Collateral
by utilizing internet sites that provide for the auction of assets of the types
included in the Collateral or that have the reasonable capacity of doing so, or
that match buyers and sellers of assets, (ix) to dispose of assets in wholesale
rather than retail markets, (x) to disclaim disposition warranties, such as
title, possession or quiet enjoyment, (xi) to purchase insurance or credit
enhancements to insure the Investors against risks of loss, collection or
disposition of Collateral or to provide to the Investors a guaranteed return
from the collection or disposition of Collateral, or (xii) to the extent deemed
appropriate by the Investors, to obtain the services of other brokers,
investment bankers, consultants and other professionals to assist the Investors
in the collection or disposition of any of the Collateral. Each Grantor
acknowledges that the purpose of this Section 7(c) is to provide non-exhaustive
indications of what actions or omissions by the Investors would not be
commercially unreasonable in the Investors’ exercise of remedies against the
Collateral and that other actions or omissions by the Investors shall not be
deemed commercially unreasonable solely on account of not being indicated in
this Section 7(c). Without limitation upon the foregoing, nothing contained in
this Section 7(c) shall be construed to grant any rights to any Grantor or to
impose any duties on Investors that would not have been granted or imposed by
this Security Agreement or by applicable law in the absence of this
Section 7(c).

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(d)               The Investors shall not be required to make any demand upon,
or pursue or exhaust any of their rights or remedies against, any Grantor, any
other obligor, guarantor, pledgor or any other Person with respect to the
payment of the Secured Obligations or to pursue or exhaust any of their rights
or remedies with respect to any Collateral therefor or any direct or indirect
guarantee thereof. The Investors shall not be required to marshal the Collateral
or any guarantee of the Secured Obligations or to resort to the Collateral or
any such guarantee in any particular order, and all of its and their rights
hereunder shall be cumulative. To the extent it may lawfully do so, each Grantor
absolutely and irrevocably waives and relinquishes the benefit and advantage of,
and covenants not to assert against the Investors or any Investor, any
valuation, stay, appraisement, extension, redemption or similar laws and any and
all rights or defenses it may have as a surety now or hereafter existing which,
but for this provision, might be applicable to the sale of any Collateral made
under the judgment, order or decree of any court, or privately under the power
of sale conferred by this Security Agreement, or otherwise.

8.                  GRANT OF LICENSE TO USE INTELLECTUAL PROPERTY COLLATERAL.
For the purpose of enabling Investors to exercise rights and remedies under
Section 7 hereof (including, without limiting the terms of Section 7 hereof, in
order to take possession of, hold, preserve, process, assemble, prepare for
sale, market for sale, sell or otherwise dispose of Collateral) at such time as
Investors shall be lawfully entitled to exercise such rights and remedies, each
Grantor hereby grants to Investors, to the extent that it may lawfully do so,
for the benefit of Investors, an irrevocable, nonexclusive license (exercisable
without payment of royalty or other compensation to such Grantor) to use,
license or sublicense any Intellectual Property now owned or hereafter acquired
by such Grantor, 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.

9.                  LIMITATION ON INVESTORS’S AND INVESTORS’ DUTY IN RESPECT OF
COLLATERAL. Each Investor shall use reasonable care with respect to the
Collateral in its possession or under its control. No Investor shall have any
other duty as to any Collateral in its possession or control or in the
possession or control of any agent or nominee of Investors or such Investor, or
any income thereon or as to the preservation of rights against prior parties or
any other rights pertaining thereto.

10.              REINSTATEMENT. This Security Agreement shall remain in full
force and effect and continue to be effective should any petition be filed by or
against any Grantor for liquidation or reorganization, should any Grantor become
insolvent or make an assignment for the benefit of any creditor or creditors or
should a receiver or trustee be appointed for all or any significant part of any
Grantor’s assets, and shall continue to be effective or be reinstated, as the
case may be, if at any time payment and performance of the Secured Obligations,
or any part thereof, is, pursuant to applicable law, rescinded or reduced in
amount, or must otherwise be restored or returned by any obligee of the Secured
Obligations, whether as a “voidable preference,” “fraudulent conveyance,” or
otherwise, all as though such payment or performance had not been made. In the
event that any payment, or any part thereof, is rescinded, reduced, restored or
returned, the Secured Obligations shall be reinstated and deemed reduced only by
such amount paid and not so rescinded, reduced, restored or returned.

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11.              NOTICES. Except as otherwise provided herein, whenever it is
provided herein that any notice, demand, request, consent, approval, declaration
or other communication shall or may be given to or served upon any of the
parties by any other party, or whenever any of the parties desires to give and
serve upon any other party any communication with respect to this Security
Agreement, each such notice, demand, request, consent, approval, declaration or
other communication shall be in writing and shall be given in the manner, and
deemed received, as provided for in the Notes.

12.              EXPENSES. Each Grantor hereby agrees to pay all reasonable fees
and expenses of Investors in connection with the performance of their duties
under the Purchase Agreement or this Security Agreement.

13.              SEVERABILITY. Whenever possible, each provision of this
Security Agreement shall be interpreted in a manner as to be effective and valid
under applicable law, but if any provision of this Security Agreement shall be
prohibited by or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity without invalidating
the remainder of such provision or the remaining provisions of this Security
Agreement. This Security Agreement is to be read, construed and applied together
with the Purchase Agreement and the Notes which, taken together, set forth the
complete understanding and agreement of Investors and each Grantor with respect
to the matters referred to herein and therein.

14.              NO WAIVER; CUMULATIVE REMEDIES. Investors shall not by any act,
delay, omission or otherwise be deemed to have waived any of its rights or
remedies hereunder, and no waiver shall be valid unless in writing, signed by
Investors and then only to the extent therein set forth. A waiver by Investors
of any right or remedy hereunder on any one occasion shall not be construed as a
bar to any right or remedy which Investors would otherwise have had on any
future occasion. Neither failure to exercise nor any delay in exercising on the
part of Investors, any right, power or privilege hereunder, shall operate as a
waiver thereof, nor shall any single or partial exercise of any right, power or
privilege hereunder preclude any other or future exercise thereof or the
exercise of any other right, power or privilege. 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. None of the
terms or provisions of this Security Agreement may be waived, altered, modified
or amended except by an instrument in writing, duly executed by Investors and
each Grantor.

15.              LIMITATION BY LAW. All rights, remedies and powers provided in
this Security Agreement may be exercised only to the extent that the exercise
thereof does not violate any applicable provision of law, and all the provisions
of this Security Agreement are intended to be subject to all applicable
mandatory provisions of law that may be controlling and to be limited to the
extent necessary so that they shall not render this Security Agreement invalid,
unenforceable, in whole or in part, or not entitled to be recorded, registered
or filed under the provisions of any applicable law.

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16.              TERMINATION OF THIS SECURITY AGREEMENT. Subject to Section 10
hereof, this Security Agreement shall terminate upon the Termination Date.

17.              SUCCESSORS AND ASSIGNS. This Security Agreement and all
obligations of each Grantor hereunder shall be binding upon the successors and
assigns of each Grantor (including any debtor-in-possession on behalf of such
Grantor) and shall, together with the rights and remedies of Investors, for the
benefit of Investors, hereunder, inure to the benefit of Investors, all future
holders of any instrument evidencing any of the Secured Obligations and their
respective successors and assigns. No sales of participations, other sales,
assignments, transfers or other dispositions of any agreement governing or
instrument evidencing the Secured Obligations or any portion thereof or interest
therein shall in any manner affect the Security Interest granted to Investors,
for the benefit of Investors hereunder. No Grantor may assign, sell, hypothecate
or otherwise transfer any interest in or obligation under this Security
Agreement.

18.              COUNTERPARTS. This Security Agreement may be executed in any
number of separate counterparts, each of which shall collectively and separately
constitute one agreement.

19.              GOVERNING LAW. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN THE
NOTES, IN ALL RESPECTS, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND
PERFORMANCE, THIS SECURITY AGREEMENT AND THE OBLIGATIONS ARISING HEREUNDER SHALL
BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED IN THAT STATE, AND
ANY APPLICABLE LAWS OF THE UNITED STATES OF AMERICA. EACH GRANTOR HEREBY
CONSENTS AND AGREES THAT THE STATE OR FEDERAL COURTS LOCATED IN NEW YORK COUNTY,
CITY OF NEW YORK, NEW YORK, SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR AND
DETERMINE ANY CLAIMS OR DISPUTES BETWEEN ANY GRANTOR AND INVESTORS PERTAINING TO
THIS SECURITY AGREEMENT OR ANY OF THE OTHER TRANSACTION DOCUMENTS OR TO ANY
MATTER ARISING OUT OF OR RELATING TO THIS SECURITY AGREEMENT OR ANY OF THE OTHER
TRANSACTION DOCUMENTS, PROVIDED, THAT INVESTORS AND EACH GRANTOR ACKNOWLEDGE
THAT ANY APPEALS FROM THOSE COURTS MAY HAVE TO BE HEARD BY A COURT LOCATED
OUTSIDE OF NEW YORK COUNTY, AND, PROVIDED, FURTHER, NOTHING IN THIS AGREEMENT
SHALL BE DEEMED OR OPERATE TO PRECLUDE INVESTORS FROM BRINGING SUIT OR TAKING
OTHER LEGAL ACTION IN ANY OTHER JURISDICTION TO REALIZE ON THE COLLATERAL OR ANY
OTHER SECURITY FOR THE SECURED OBLIGATIONS, OR TO ENFORCE A JUDGMENT OR OTHER
COURT ORDER IN FAVOR OF INVESTORS. EACH GRANTOR EXPRESSLY SUBMITS AND CONSENTS
IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH
COURT, AND EACH GRANTOR HEREBY WAIVES ANY OBJECTION WHICH IT MAY HAVE BASED UPON
LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS AND HEREBY
CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED
APPROPRIATE BY SUCH COURT. EACH GRANTOR HEREBY WAIVES PERSONAL SERVICE OF THE
SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND
AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINTS AND OTHER PROCESS MAY BE MADE BY
REGISTERED OR CERTIFIED MAIL ADDRESSED TO SUCH GRANTOR AT THE ADDRESS SET FORTH
IN THE PURCHASE AGREEMENT AND THAT SERVICE SO MADE SHALL BE DEEMED COMPLETED
UPON THE EARLIER OF ACTUAL RECEIPT THEREOF OR THREE (3) DAYS AFTER DEPOSIT IN
THE U.S. MAILS, PROPER POSTAGE PREPAID.

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20.              WAIVER OF JURY TRIAL. BECAUSE DISPUTES ARISING IN CONNECTION
WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED
BY AN EXPERIENCED AND EXPERT PERSON AND THE PARTIES WISH APPLICABLE STATE AND
FEDERAL LAWS TO APPLY (RATHER THAN ARBITRATION RULES), THE PARTIES DESIRE THAT
DISPUTES ARISING HEREUNDER OR RELATING HERETO BE RESOLVED BY A JUDGE APPLYING
SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS
OF THE JUDICIAL SYSTEM AND OF ARBITRATION, THE PARTIES HERETO WAIVE ALL RIGHT TO
TRIAL BY JURY IN ANY ACTION, SUIT OR PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE,
WHETHER SOUNDING IN CONTRACT, TORT, OR OTHERWISE, AMONG INVESTORS, AND ANY
GRANTOR ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE
RELATIONSHIP ESTABLISHED IN CONNECTION WITH, THIS SECURITY AGREEMENT OR ANY OF
THE OTHER TRANSACTION DOCUMENTS OR THE TRANSACTIONS RELATED HERETO OR THERETO.

21.              SECTION TITLES. The Section titles contained in this Security
Agreement are and shall be without substantive meaning or content of any kind
whatsoever and are not a part of the agreement between the parties hereto.

22.              NO STRICT CONSTRUCTION. The parties hereto have participated
jointly in the negotiation and drafting of this Security Agreement. In the event
an ambiguity or question of intent or interpretation arises, this Security
Agreement shall be construed as if drafted jointly by the parties hereto and no
presumption or burden of proof shall arise favoring or disfavoring any party by
virtue of the authorship of any provisions of this Security Agreement.

23.              ADVICE OF COUNSEL. Each of the parties represents to each other
party hereto that it has discussed this Security Agreement and, specifically,
the provisions of Section 19 and Section 20, with its counsel.

24.              BENEFIT OF SUCCESSORS. All Security Interests granted or
contemplated hereby shall be for the benefit of Investors and Investors’
successors and assigns, and all proceeds or payments realized from Collateral in
accordance herewith shall be applied to the Secured Obligations in accordance
with the terms of the Notes.

[END OF TEXT. SIGNATURE PAGE FOLLOWS.]

20

 

 

 

IN WITNESS WHEREOF, each of the parties hereto has caused this Security
Agreement to be executed and delivered by its duly authorized officer as of the
date first set forth above.

 

STRATUS MEDIA GROUP, INC.

 

 

By: /s/Jerold Rubinstein

Name: Jerold Rubinstein

Title: Chief Executive Officer

 

 

PRO SPORTS & ENTERTAINMENT, INC.

 

 

By: /s/John Moynahan

Name: John Moynahan

Title: Senior Vice President

 

 

STRATUS REWARDS, LLC

 

 

By: /s/Jerold Rubinstein

Name: Jerold Rubinstein

Title: Owner

 

 

PROELITE, INC.

 

 

By: /s/Jerold Rubinstein

Name: Jerold Rubinstein

Title: Chief Executive Officer

 

     

INVESTOR

/s/ Sol Barer

Name: Sol Barer

 

21

 

 

SCHEDULE I

to

SECURITY AGREEMENT

FILING JURISDICTIONS

 

Delaware Secretary of State

 

Nevada Secretary of State

 

California Secretary of State

 

United States Patent and Trademark Office

 

United States Copyright Office

 

 

 

 

 

 

22

 

 

 

SCHEDULE II

to

SECURITY AGREEMENT

 

INSTRUMENTS
CHATTEL PAPER
AND
LETTER OF CREDIT RIGHTS

 

 

None.

 

 

 

 

 

 

23

 

 

 

SCHEDULE III

to

SECURITY AGREEMENT

 

SCHEDULE OF OFFICES, LOCATIONS OF COLLATERAL
AND RECORDS CONCERNING COLLATERAL

I. Each Grantor’s official name:

1.Stratus Media Group, Inc.

2.Pro Sports & Entertainment, Inc.

3.Stratus Rewards, LLC

4.ProElite, Inc.

II.Type of entity (e.g. corporation, partnership, business trust, limited
partnership, limited liability company):

1.corporation

2.corporation

3.limited liability company

4.corporation

III.Organizational identification number issued by Grantor’s state of
incorporation or organization or a statement that no such number has been
issued:

1.Entity Number: C144-1995

2.Entity Number: C2096886

3.File Number: 3675419

4.File Number: 0100511217

IV.State of Incorporation or Organization:

1.Nevada

2.California

3.Delaware

4.New Jersey

24

 

V.Chief Executive Office and principal place of business:

1.1800 Century Park East, 6th Floor, Los Angeles, CA 90067

2.1800 Century Park East, 6th Floor, Los Angeles, CA 90067

3.1800 Century Park East, 6th Floor, Los Angeles, CA 90067

VI.Corporate Offices:

1.1800 Century Park East, 6th Floor, Los Angeles, CA 90067

2.1800 Century Park East, 6th Floor, Los Angeles, CA 90067

3.1800 Century Park East, 6th Floor, Los Angeles, CA 90067

4.1800 Century Park East, 6th Floor, Los Angeles, CA 90067

VII.Warehouses:

1.None

2.None

3.None

4.None

VIII.Other Premises at which Collateral is Stored or Located:

1.None

2.None

3.None

4.None

IX.Locations of Records Concerning Collateral: 1800 Century Park East, 6th
Floor, Los Angeles, CA 90067

1.1800 Century Park East, 6th Floor, Los Angeles, CA 90067

2.1800 Century Park East, 6th Floor, Los Angeles, CA 90067

3.1800 Century Park East, 6th Floor, Los Angeles, CA 90067

4.1800 Century Park East, 6th Floor, Los Angeles, CA 90067

25

 

SCHEDULE IV

to

SECURITY AGREEMENT

 

PATENTS, TRADEMARKS AND COPYRIGHTS

Trademark Registration No. Serial No. Status/Prosecution Classes of
Goods/Services Action STRATUS REWARDS 3,225,387 76523353 Registered 10/16/2007
International Class 35 - Business/Advertising  - (words only) for “providing
incentive award program to airline passengers in which purchase points may be
redeemed for merchandise LIVE: Declarations of Continued Use and of
Incontestability to be filed by 04/07/2013. Must also assign ownership from
Avacus to Pro Sports. CLUB 360° 3,534,409 76/582093 Registered 11/18/2008
International Classes 39/ (words only) for “air transportation services
featuring a bonus incentive program” LIVE: Declarations of Continued Use and of
Incontestability to be filed by 11/18/2013. Must also assign ownership from
Avacus to Pro Sports. CLUB 360° 3,177,435 76/582092 Registered 11/28/2006
International Class 35   - Business/Advertising  - (words only) for “incentive
awards programs, whereby purchase points may be redeemed for merchandise” LIVE:
Declarations of Continued Use and of Incontestability to be filed by 11/18/2012.
Must also assign ownership from Avacus to Pro Sports. LIVING AT ALTITUDE
3,197,284 78375767 Registered 01/09/07 International Class 35 -
Business/Advertising  - (words only) for “providing incentive award program to
airline passengers in which purchase points may be redeemed for merchandise
LIVE: Declarations of Continued Use and of Incontestability to be filed by
1/09/2013. Must also assign ownership from Avacus to Pro Sports. LIVING AT
ALTITUDE 3,477,898 78362183 Registered 07/29/08 International Class 41 -
Education/Enternmenty  - (words only) for “providing incentive award program to
airline passengers in which purchase points may be redeemed for merchandise
LIVE: Declarations of Continued Use and of Incontestability to be filed by
7/29/2014. Must also assign ownership from Avacus to Pro Sports.

 

 

26

 

EXHIBIT A

POWER OF ATTORNEY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

27