CASH COLLATERAL AGREEMENT

 

CASH COLLATERAL AGREEMENT, dated as of March 26, 2014 (this "Agreement"), made
by Inventergy, Inc. (the "Pledgor") in favor of Hudson Bay IP Opportunities
Master Fund, LP, in its capacity as collateral agent (in such capacity, the
"Collateral Agent") for the Buyers (as defined below) party to each of the
Securities Purchase Agreements (as defined below).

 

WITNESSETH:

 

WHEREAS, the Pledgor and each party listed as a "Buyer" on the Schedule of
Buyers (as such schedule may be amended, restated or otherwise modified from
time to time) attached thereto, each an "Original Buyer", and collectively, the
"Original Buyers") are parties to a Securities Purchase Agreement, dated as of
May 10, 2013 (as amended, restated, supplemented or otherwise modified from time
to time, the "Original SPA"), pursuant to which the Pledgor sold to the Original
Buyers certain promissory notes (together with any additional notes issued under
the Original SPA from time to time, the "Original Notes");

 

WHEREAS, the Pledgor and each party listed as a "Buyer" on the Schedule of
Buyers (as such schedule may be amended, restated or otherwise modified from
time to time) attached thereto, each a "New Buyer", and collectively, the "New
Buyers", and together with the Original Buyers, each a "Buyer" and collectively,
the "Buyers") are parties to a Securities Purchase Agreement, dated as of March
24, 2014 (as amended, restated, supplemented or otherwise modified from time to
time, the "New SPA", and together with the Original SPA, each a "Securities
Purchase Agreement" and collectively, the "Securities Purchase Agreements"),
pursuant to which the Pledgor shall be required to sell, and the New Buyers
shall purchase or have the right to purchase, certain promissory notes (together
with any additional notes issued under the New SPA from time to time, the "New
Notes", and together with the Original Notes, each a "Note" and collectively,
the "Notes"); and

 

WHEREAS, pursuant to Securities Purchase Agreements and the Notes, the Pledgor
has agreed to deposit into the Pledgor's account number 80001852293 at First
Republic Bank (the "Collateral Account") certain funds as cash collateral and to
execute and deliver to the Collateral Agent a cash collateral agreement,
providing for the pledge to the Collateral Agent, and the grant to the
Collateral Agent, of a security interest in the Collateral Account and all
amounts deposited therein, as collateral security for the obligations of the
Pledgor in respect of the Notes, the Securities Purchase Agreements and the
other obligations related thereto;

 

NOW, THEREFORE, in consideration of the premises and the agreements herein, the
Pledgor hereby, jointly and severally, agrees with the Collateral Agent as
follows:

 

SECTION 1.   Definitions. As used in this Agreement, the following terms shall
have the respective meanings indicated below (such meanings applicable equally
to both the singular and plural forms of such terms):

 

"Cash Collateral" means all cash, and all other property from time to time
deposited in the Controlled Account.

 

 

 

 

"Cash Collateral Event" means (i) a failure by the Pledgor to pay, upon demand,
any Obligation, or (ii) a breach by the Pledgor of any agreement, covenant,
representation or warranty set forth in this Agreement.

 

"Collateral" has the meaning specified therefor in Section 3 hereof.

 

"Controlled Account" means, the Collateral Account or any other bank account of
the Pledgor at the Controlled Account Bank which is the subject of a Controlled
Account Agreement.

 

"Controlled Account Agreement" means that certain deposit account control
agreement, in form and substance reasonably satisfactory to the Collateral
Agent, which is among the Pledgor, the Collateral Agent and the Controlled
Account Bank.

 

"Controlled Account Bank" means First Republic Bank.

 

"Obligations" has the meaning specified therefor in Section 4 hereof.

 

"Termination Date" means the date on which all Obligations and all amounts due
to the Collateral Agent and the Buyers under the Notes and the Securities
Purchase Agreements shall have been satisfied and paid in full in cash.

 

SECTION 2.   Controlled Account. The Controlled Account Bank shall establish and
maintain a Controlled Account Agreement with the Collateral Agent and the
Pledgor, in form and substance reasonably acceptable to the Collateral Agent.
The Controlled Account Agreement shall provide, among other things, that (a) the
Controlled Account Bank will comply with any instructions originated by the
Collateral Agent directing the disposition of the funds in such Controlled
Account without further consent by the Pledgor, (b) the Controlled Account Bank
has no rights of setoff or recoupment or any other claim against the applicable
Controlled Account other than for payment of its service fees and other charges
directly related to the administration of such Controlled Account and for
returned checks or other items of payment, and (c) the Controlled Account shall
be under the sole dominion and control of the Collateral Agent and the Pledgor
will have no right to give any instructions on the Controlled Account without
the prior written consent of the Collateral Agent.

 

SECTION 3.   Security Interest. As collateral security for the due and punctual
payment of all of the Obligations (as defined in Section 4 below), the Pledgor
hereby pledges and assigns to the Collateral Agent, and grants to the Collateral
Agent, a continuing security interest in and lien on, all of the Pledgor's
right, title and interest in and to the following (all being collectively
referred to herein as the "Collateral"): (i) the Controlled Account, (ii) the
Cash Collateral and all certificates and instruments, if any, from time to time
representing or evidencing the Collateral; (ii) all cash, instruments, and other
property from time to time received or otherwise distributed in respect of or in
exchange for any or all of the then existing Collateral; (iii) any deposit
account into which the Cash Collateral has been deposited, including, without
limitation, the Controlled Account; and (iv) to the extent not described above,
all proceeds of any and all of the foregoing Collateral.

 

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SECTION 4.   Obligations. The security interest created hereby in the Collateral
constitutes continuing collateral security for all of the following obligations,
whether now existing or hereafter incurred (the "Obligations"):

 

(a)      the payment by the Pledgor, when due, of all obligations, interest
thereon and all fees, commissions, charges, expense reimbursements,
indemnifications and other amounts payable to the Collateral Agent and the
Buyers under or in respect of this Agreement, the Notes and the Securities
Purchase Agreements in accordance with the terms thereof;

 

(b)      the due performance and observance by the Pledgor in all material
respects of all of its other obligations from time to time existing under or in
respect of this Agreement, the Notes and the Securities Purchase Agreements.

 

SECTION 5.   Application of Cash Collateral Account. All Collateral shall remain
in the Controlled Account until the Termination Date; provided, however, that
the Collateral Agent may, as and when any Obligation shall become due or during
the continuance of a Cash Collateral Event, direct the Controlled Account Bank
to remit to the Collateral Agent all or part of the Collateral to satisfy
payment of all Obligations then payable.

 

SECTION 6.   Representations and Warranties. The Pledgor hereby represents and
warrants as follows:

 

(a)      Organization, Good Standing, Etc. The Pledgor (i) is a corporation,
duly organized, validly existing and in good standing under the laws of the
state or jurisdiction of its organization, (ii) has all requisite power to carry
on its business as now conducted and as presently contemplated, and (iii) has
all requisite power to execute, deliver and perform this Agreement, and to
consummate the transactions contemplated hereby.

 

(b)      Authorization, Etc. The execution, delivery and performance by the
Pledgor of this Agreement, (i) has been duly authorized by all necessary action,
and (ii) does not and will not contravene the Pledgor's charter or by-laws or
any applicable law or any contractual restriction binding on or otherwise
affecting the Pledgor or any of its properties, and (iii) does not result in the
creation of any lien, security interest or other charge or encumbrance (except
as provided in or contemplated by this Agreement) upon or with respect to any of
its properties.

 

(c)      Governmental and other Approvals. No authorization or approval or other
action by, and no notice to or filing with, any governmental authority or any
other person or entity is required for (i) the due execution, delivery and
performance by the Pledgor of this Agreement, (ii) the grant by the Pledgor, or
the perfection, of the security interest purported to be created hereby in the
Collateral, or (iii) the exercise by the Collateral Agent of any of its rights
and remedies hereunder.

 

(d)      Enforceability of Agreement. This Agreement is a legal, valid and
binding obligation of the Pledgor, enforceable against the Pledgor in accordance
with its terms, except as may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws.

 

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(e)      Security Interest. This Agreement creates a legal, valid and
enforceable security interest in favor of the Collateral Agent in the
Collateral, as security for the Obligations. Such security interest is a
perfected, first priority security interest, and all action necessary to perfect
and protect such security interest has been duly taken.

 

(f)      Legal Ownership. The Pledgor is and will be at all times the legal and
beneficial owner of the Collateral and has and will at all times have good and
marketable title thereto, free and clear of any lien, security interest, or
other charge or encumbrance, except for the security interest created by this
Agreement.

 

SECTION 7.   Covenants of the Pledgor.

 

(a)      The Pledgor agrees that it will not, without the prior written consent
of the Collateral Agent, (i) sell, assign (by operation of law or otherwise), or
otherwise dispose of any interest in the Collateral, or (ii) create or suffer to
exist any lien, claim, security interest, charge or other encumbrance upon or
with respect to any Collateral, except for the security interest purported to be
created in the Collateral by this Agreement; provided, that, subject to any
restrictions or requirements in the Notes and the Securities Purchase
Agreements, no separate consent shall be required from the Collateral Agent for
the Pledgor to engage in any merger or reorganization transaction that is
otherwise permitted under or consented to pursuant to the terms of the Notes and
the Securities Purchase Agreements, to the extent that any such merger or
reorganization will not result or reasonably be expected to result in the
impairment in any manner of the Collateral Agent’s rights or priority in respect
of the Collateral.

 

(b)      The Pledgor will not, without the prior written consent of the
Collateral Agent, cancel, terminate, amend, modify or waive any provision of any
agreement, document or other instrument constituting Collateral, or enter into
any agreement or permit to exist any restriction with respect to any Collateral
other than pursuant hereto.

 

(c)      The Pledgor will, at the Pledgor's expense, defend the Collateral
Agent's right, title and security interest in and to the Collateral against the
claims of any person or entity.

 

(d)      The Pledgor will not take or fail to take any action that would in any
manner impair the enforceability of the Collateral Agent's security interest in
any Collateral.

 

(e)      The Pledgor will, at the Pledgor's expense, promptly deliver to the
Collateral Agent a copy of each notice or other communication received by it in
respect of the Collateral.

 

SECTION 8.   Additional Provisions Concerning the Collateral.

 

(a)      The Pledgor will at its expense, at any time and from time to time,
promptly execute and deliver all further instruments and documents and take all
further action that may be necessary or desirable or that the Collateral Agent
may request in order (i) to perfect and protect, or maintain the perfection of,
the security interest and lien purported to be created hereby; (ii) to enable
the Collateral Agent to exercise and enforce its rights and remedies hereunder
in respect of the Collateral; or (ii) otherwise to effect the purposes of this
Agreement. If the Pledgor fails to perform any agreement or obligation contained
herein, the Collateral Agent itself may perform or cause performance of such
agreement or obligation, and the expenses of the Collateral Agent incurred in
connection therewith shall be jointly and severally payable to the Collateral
Agent by the Pledgor pursuant to Section 11 hereof.

 

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(b)      The Pledgor hereby (i) authorizes the Collateral Agent at any time and
from time to time to file, without the signature of the Pledgor where permitted
by law, one or more financing or continuation statements, and amendments
thereto, relating to the Collateral and (ii) ratifies such authorization to the
extent that the Collateral Agent has filed any such financing statements,
continuation statements, or amendments thereto, prior to the date hereof.

 

(c)      The Pledgor hereby irrevocably appoints the Collateral Agent as the
Pledgor's attorney-in-fact, with full authority in the place and stead of the
Pledgor and in the name of the Pledgor or otherwise, from time to time until the
Termination Date in the Collateral Agent's discretion to take any action and to
execute any instrument which the Collateral Agent, in its sole discretion, may
deem necessary or advisable to accomplish the purposes of this Agreement solely
with respect to the Collateral, including, without limitation, to receive,
indorse and collect all instruments made payable to the Pledgor representing any
dividend, payment of principal, interest, redemption price, purchase price or
other distribution or payment in respect of any Collateral and to give full
discharge for the same.

 

SECTION 9.   Intentionally Deleted.

 

SECTION 10.   Remedies Upon Default. If any Cash Collateral Event shall have
occurred and be continuing:

 

(a)      The Collateral Agent may exercise in respect of the Collateral, in
addition to other rights and remedies provided for herein or otherwise available
to it, all of the rights and remedies of a secured party on default under the
Uniform Commercial Code then in effect in the State of New York.

 

(b)      Any Collateral may be applied (after payment of any amounts payable to
the Collateral Agent hereunder, under Section 11 hereof or otherwise) by the
Collateral Agent to pay or to provide for the future payment of all or any part
of the Obligations in such order as the Collateral Agent may elect.

 

SECTION 11.   Indemnity and Expenses.

 

(a)      The Pledgor agrees to defend, protect, indemnify and hold harmless the
Collateral Agent from and against any and all claims, losses, damages,
liabilities, obligations, penalties, fees, reasonable costs and expenses
(including, without limitation, reasonable attorneys' fees, costs, expenses and
disbursements) incurred by the Collateral Agent to the extent that they arise
out of or otherwise result from or relate to or are in connection with this
Agreement (including, without limitation, enforcement of this Agreement), except
claims, losses or liabilities resulting solely and directly from the Collateral
Agent's gross negligence or willful misconduct, as determined by a final
judgment of a court of competent jurisdiction.

 

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(b)      The Pledgor agrees to pay to the Collateral Agent upon demand (and
authorizes the Collateral Agent in its sole discretion to apply the Collateral
against) the amount of any and all costs and expenses, including the reasonable
fees, costs, expenses and disbursements of counsel for the Collateral Agent and
of any experts and agents (including, without limitation, any collateral trustee
which may act as agent of the Collateral Agent), which the Collateral Agent may
incur in connection with (i) the administration, amendment, waiver or other
modification or termination of this Agreement, (ii) the custody, preservation,
use or operation of, or the sale of, collection from, or other realization upon,
any Collateral, (iii) the exercise or enforcement of any of the rights or
remedies of the Collateral Agent hereunder, or (iv) the failure by the Pledgor
to perform or observe any of the provisions hereof.

 

SECTION 12.   Notices, Etc. All notices and other communications provided for
hereunder shall be in writing and shall be mailed, telecopied or delivered, if
to the Pledgor, to it at the address listed below its signature hereto, and if
to the Collateral Agent, to it at its address specified under its signature
hereto. All such notices and other communications shall be effective (i) if
mailed, when received or three Business Days after mailing, whichever occurs
first, (ii) if telecopied, when transmitted and confirmation is received or
(iii) if delivered, upon delivery.

 

SECTION 13.   Continuing Security Interest; Termination.

 

(a)      This Agreement shall create a continuing security interest in the
Collateral and shall (i) remain in full force and effect until the Termination
Date irrespective of (w) any lack of validity or enforceability of the Notes or
the Securities Purchase Agreements, (x) any change in the time, manner or place
of payment of, or in any other term in respect of, all or any of the
Obligations, or any other amendment or waiver of or any consent to departure
from the Notes or the Securities Purchase Agreements, (y) any exchange or
release of, or non-perfection of any lien on or security interest in, any
collateral for any of the Obligations or (z) any other circumstance which might
otherwise constitute a defense available to, or a discharge of, the Pledgor or
any other person or entity in respect of the Obligations, and (ii) be binding on
the Pledgor and its successors and assigns and inure, together with all rights
and remedies of the Collateral Agent hereunder and its successors, transferees
and assigns. None of the rights or obligations of the Pledgor hereunder may be
assigned or otherwise transferred except as consented to in writing by the
Collateral Agent.

 

(b)      Upon the Termination Date, (i) this Agreement and the security interest
created hereby shall terminate and all rights to the Collateral shall revert to
the Pledgor, and (ii) the Collateral Agent will, upon the Pledgor's request and
at the Pledgor's expense, without any representation, warranty or recourse
whatsoever, (A) return to the Pledgor (or whomsoever shall be lawfully entitled
to receive the same or as a court of competent jurisdiction shall direct) such
of the Collateral as shall not have been applied pursuant to the terms hereof
and (B) execute and deliver to the Pledgor such documents as the Pledgor shall
reasonably request in writing to evidence such termination.

 

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SECTION 14.   Miscellaneous.

 

(a)      No amendment of any provision of this Agreement shall be effective
unless it is in writing and signed by the Pledgor and the Collateral Agent, and
no waiver of any provision of this Agreement, and no consent to any departure by
the Pledgor therefrom, shall in any event be effective unless the same shall be
in writing and signed by the Collateral Agent, and then such waiver or consent
shall be effective only in the specific instance and for the specific purpose
for which given.

 

(b)      No failure on the part of the Collateral Agent to exercise, and no
delay in exercising, any right hereunder shall operate as a waiver thereof; nor
shall any single or partial exercise of any such right preclude any other or
further exercise thereof or the exercise of any other right. The rights and
remedies of the Collateral Agent provided herein are cumulative and are in
addition to, and not exclusive of, any rights or remedies provided by law. The
rights of the Collateral Agent under this Agreement are not conditional or
contingent on any attempt by the Collateral Agent to exercise any of its rights
against such party or against any other person.

 

(c)      Any provision of this Agreement which is prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining portions
hereof or affecting the validity or enforceability of such provision in any
other jurisdiction.

 

(d)      This Agreement shall be governed by and construed in accordance with
the law of the State of New York.

 

(e)      THE PLEDGOR AND THE COLLATERAL AGENT HEREBY IRREVOCABLY WAIVES ALL
RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED
ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR
THE ACTIONS OF THE COLLATERAL AGENT IN THE NEGOTIATION, ADMINISTRATION,
PERFORMANCE OR ENFORCEMENT THEREOF.

 

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SECTION 15.   Waiver. To the extent permitted by applicable law or otherwise
explicitly provided in the Transaction Documents (as defined in the New SPA),
the Pledgor hereby waives (a) promptness and diligence, (b) notice of acceptance
and notice of the incurrence of any Obligation by the Pledgor, (c) notice of any
actions taken by the Collateral Agent or any other person under the Notes, the
Securities Purchase Agreements or any other agreement, document or instrument
relating thereto, (d) all other notices, demands and protests, and all other
formalities of every kind in connection with the enforcement of the Obligations,
the omission of or delay in which, but for the provisions of this Section 15,
might constitute grounds for relieving the Pledgor of any of its obligations
hereunder and (e) any requirement that the Collateral Agent protect, secure,
perfect or insure any security interest or other lien on any property subject
thereto or exhaust any right or take any action against the Pledgor or any other
person or any collateral; provided, however, that the Collateral Agent will
endeavor to provide prompt notice to the Pledgor after any action is taken by
the Collateral Agent under the Notes, the Securities Purchase Agreements or any
other agreement, document or instrument relating thereto.

 

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Signature Page, Cash Collateral Agreement

 

IN WITNESS WHEREOF, the Pledgor has caused this Agreement to be duly executed
and delivered, as of the date first above written.

 

  INVENTERGY, INC.       By:    /s/ Joseph Beyers     Name: Joseph Beyers    
Title: Chairman and Chief Executive Officer           Address for notices:    
19995 Stevens Creek Blvd., Suite 100     Cupertino, CA 95014

 

ACCEPTED AND AGREED:       HUDSON BAY IP OPPORTUNITIES MASTER FUND, LP,      
By: /s/ Yoav Roth     Name: Yoav Roth     Title: Authorized Signatory      
Address for notices:   777 Third Avenue, 30th Floor   New York, NY 10017