Document:

Unassociated Document

 

INVESTOR RIGHTS AGREEMENT

 

	
 

Dated as of September 28, 2011

 

  

  

  

 

INVESTOR RIGHTS AGREEMENT

 

This Investor Rights Agreement is dated as of September 28, 2011, and is entered into by Resource Holdings, Inc., a Nevada corporation (the “Company”), and West Ventures, LLC (the “Investor”).

 

WHEREAS, pursuant to that certain Common Share Purchase and Revenue Share Agreement between Company and Investor of even date herewith (the “Purchase Agreement”), the Company agreed to enter into Investor Rights Agreement with Investor in accordance with the registration rights and conditions generally set forth therein;

 

NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained, the parties hereto agree as follows:

 

ARTICLE I

 

DEFINITIONS

 

 1.1           Defined Terms.  As used in this Agreement, terms defined in the headings and the recitals shall have their respective assigned meanings, and the following capitalized terms shall have the meanings ascribed to them below:

 

“Affiliate” shall mean any Person who is an “affiliate” of such Person as defined in Rule 12b-2 of the General Rules and Regulations under the Exchange Act.

 

“Agreement” means this Investor Rights Agreement, as the same may be amended, supplemented or otherwise modified from time to time.

 

“Board” shall mean the Board of Directors of the Company.

 

“Business Day” means any day except a Saturday, Sunday or other day on which commercial banks in New York City are authorized or required by law to be closed.

 

“Closing Price” means, with respect to the Common Stock, as of the date of determination:  (a) if the Common Stock is listed on a national securities exchange, the closing price per share of the Common Stock on such officially reported on the principal national securities exchange on which the Common Stock is then listed or admitted to trading; (b) if the Common Stock is not then listed or admitted to trading on any national securities exchange but is designated as a national market system security by FINRA, the last trading price per share of the Common Stock on such date; (c) if there shall have been no trading on such date or if the Common Stock is not designated as a national market system security by FINRA, the average of the reported closing bid and asked prices of the Common Stock on such date as shown by The Nasdaq Stock Market, Inc. (or its successor) and reported by any member firm of The New York Stock Exchange, Inc. selected by the Company; or (d) if none of (a), (b) or (c) is applicable, a market price per share determined in good faith by the Board.  If trading is conducted on a continuous basis on any exchange, then the closing price shall be determined at 4:00 p.m., New York City time.

 

  

  

  

 

“Commission” means the U.S. Securities and Exchange Commission or any similar agency then having jurisdiction to enforce the Securities Act.

 

“Common Stock” means the shares of common stock, $0.001 par value per share, of the Company, as adjusted to reflect any merger, consolidation, recapitalization, reclassification, split-up, stock dividend, rights offering or reverse stock split made, declared or effected with respect to the Common Stock.

 

“Company” has the meaning set forth in the preamble to this Agreement.

 

“Company Indemnitee” has the meaning set forth in Section 2.8(a) hereof.

 

“Exchange Act” means the U.S. Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder, or any similar or successor statute.

 

“Expenses” means all expenses incurred by the Company incident to the Company’s performance of or compliance with its obligations under this Agreement, including, without limitation, all registration, filing, listing, stock exchange and FINRA fees, all fees and expenses of complying with state securities or blue sky laws (including the reasonable fees, disbursements and other charges of counsel for the underwriters in connection with blue sky filings), all of the Company’s word processing, duplicating and printing expenses, messenger, telephone and delivery expenses, the fees, disbursements and other charges of counsel for the Company and of its independent registered public accounting firm, including the expenses incurred in connection with “cold comfort” letters required by or incident to such performance and compliance, the fees and expenses incurred by the Company in connection with the listing of the securities to be registered on each securities exchange or national market system on which similar securities issued by the Company are then listed, any fees and disbursements of underwriters customarily paid by issuers or sellers of securities, the fees and expenses of any special experts retained by the Company in connection with such registration, and the fees and expenses of other persons retained by the Company, but excluding underwriting discounts and commissions and applicable transfer taxes, if any, and any fees and expenses of counsel for any seller of Registrable Securities which discounts, commissions, transfer taxes, fees and expenses shall be borne by the seller or sellers of Registrable Securities in all cases.

 

“FINRA” means the Financial Industry Regulatory Authority, Inc.

 

“Governmental Authority” means (a) the government of any nation, state, city, locality or other political subdivision thereof, (b) any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government, and (c) any corporation or other entity owned or controlled, through stock or capital ownership or otherwise, by any of the foregoing.

 

“Investor” has the meaning set forth in the Preamble hereto.

 

“Investor Information” has the meaning set forth in Section 2.4 hereof.

 

“Investor Indemnitee” has the meaning set forth in Section 2.8(b) hereof.

 

  

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“Loss” and “Losses” have the meanings set forth in Section 2.8(a) hereof.

 

“Market Price” means, on any date of determination, the average of the daily Closing Price of the Registrable Securities during the immediately preceding thirty (30) days on which the national securities exchanges are open for trading.

 

“Offering Documents” has the meaning set forth in Section 2.8(a) hereof.

 

“Person” means any individual, corporation, partnership, firm, joint venture, association, joint stock company, trust, unincorporated organization or other entity.

 

“Public Offering” means a public offering and sale of Common Stock pursuant to an effective registration statement filed under the Securities Act.

 

“Purchase Agreement” has the meaning set forth in the recitals to this Agreement.

 

“Registrable Securities” means (i) the Common Stock issued pursuant to the Purchase Agreement and held by the Investor, (ii) any Common Stock, or any Common Stock issued or issuable (directly or indirectly) upon conversion and/or exercise of any other securities of the Company, acquired by the Investor after the date hereof; and (iii) any Common Stock issued as (or issuable upon the conversion or exercise of any warrant, right, or other security that is issued as) a dividend or other distribution with respect to, or in exchange for or in replacement of, the shares referenced in clauses (i) and (ii) above; provided, however, that a share of Common Stock will cease to be Registrable Securities upon the earliest to occur of the time that (i) such share has been sold under a registration statement effected pursuant hereto or pursuant to Rule 144 promulgated under the Securities Act; (ii) such share, along with all of the other shares held by the Investor, may immediately be sold under Rule 144 in a given ninety (90) day period and the Investor owns less than 1% of the outstanding Common Stock; (iii) such share is eligible for sale under Rule 144(b)(1) without regard to the volume limitations contained in Rule 144(e); or (iv) such share is proposed to be sold or distributed by a person not entitled to registration rights granted by this Agreement.

 

“Securities Act” means the U.S. Securities Act of 1933, as amended, and the rules and regulations thereunder, or any similar or successor statute.

 

 “Subsidiary” shall mean with respect to any Person, any corporation, partnership, association or other business entity of which fifty percent (50%) or more of the total voting power of shares of capital stock entitled (without regard to the occurrence of any contingency) to vote generally in the election of directors, managers or trustees thereof, or fifty percent (50%) or more of the equity interest therein, is at the time owned or controlled, directly or indirectly, by any Person or one or more of the other Subsidiaries of such Person or a combination thereof.

 

1.2           Other Definitional Provisions; Interpretation.

 

(a)           The words “hereof”, “herein”, and “hereunder” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and Section, Subsection and Schedule references are to this Agreement unless otherwise specified.

 

  

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(b)           The headings in this Agreement are included for convenience of reference only and shall not limit or otherwise affect the meaning or interpretation of this Agreement.

 

(c)           The meanings given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms.

 

ARTICLE II

 

REGISTRATION RIGHTS

 

2.1           Securities Act Registration on Request.

 

(a)           Request.  At any time and from time to time after the date hereof, Investor may make a written request to the Company for the registration with the Commission under the Securities Act of all or part of Investor’s Registrable Securities, which request shall specify the number of shares of Registrable Securities to be disposed of by Investor and the proposed plan of distribution therefor.  Upon the receipt of any request for registration made in accordance with the terms of this paragraph, the Company will use its reasonable best efforts to effect, at the earliest practicable date, such registration under the Securities Act of the Registrable Securities which the Company has been so requested to register by Investor, all to the extent necessary to permit the disposition (in accordance with Section 2.1(c) hereof) of the Registrable Securities so to be registered; provided that:

 

  (A)           if the intended method of distribution is an underwritten Public Offering, the Company shall not be required to effect such registration pursuant to this Section 2.1(a) unless such underwriting shall be conducted on a “firm commitment” basis;

 

  (B)           if the Company has previously effected a registration pursuant to this Section 2.1(a) or Section 2.1(g) hereof, the Company shall not be required to effect any registration pursuant to this Section 2.1(a) until a period of 180 days shall have elapsed from the date on which such previous registration ceased to be effective;

 

  (C)           the Company shall not be required to effect any registration to be effected pursuant to this Section 2.1(a) unless the shares of Registrable Securities proposed to be sold in such registration have an aggregate price (calculated based upon the Market Price of such Registrable Securities as of the date of such request) of at least $1,000,000;

 

  (D)           if at the time a demand for registration is made under this Section 2.1(a), the Company is a (1) “well-known seasoned issuer” (as defined in Rule 405 of the Securities Act) or (2) eligible to use Form S-3 for primary offerings pursuant to General Instruction I.B.1 of such form, then in each case the Company’s obligation to file a registration statement under this Section 2.1(a) shall be deemed satisfied if there is a Form S-3 on file pursuant to which Investor shall be entitled to dispose of all its Registrable Securities that it has requested to register; and

 

  

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  (E)           the Company shall not be required to take any action pursuant to this Section 2.1 if it has previously filed and caused to remain effective for the period required by Section 2.1(f) at least two registration statements.

 

(b)           Registration of Other Securities.  Whenever the Company shall effect a registration pursuant to Section 2.1(a) hereof, no securities other than (i) Registrable Securities and (ii) Common Stock to be sold by the Company for its own account shall be included among the securities covered by such registration unless Investor shall have consented in writing to the inclusion of such other securities.

 

(c)           Registration Statement Form.  Registrations under Section 2.1(a) hereof shall be on Form S-1 or, if permitted by law, Form S-3 (or, in either case, any successor forms thereto) and shall permit the disposition of the Registrable Securities pursuant to an underwritten Public Offering unless Investor determines otherwise, in which case pursuant to the method of disposition determined by Investor.  The Company agrees to include in any such registration statement filed pursuant to Section 2.1(a) hereof all information relating to Investor, including without limitation, any plan of distribution of the Registrable Securities by Investor, which Investor, upon advice of counsel, shall reasonably request.

 

(d)           Effective Registration Statement.  A registration requested pursuant to Section 2.1(a) hereof shall not be deemed to have been effected

 

  (i)            unless a registration statement with respect thereto has become effective by the Commission and remains effective in compliance with the provisions of the Securities Act and the laws of any state or other jurisdiction applicable to the disposition of Registrable Securities covered by such registration statement for the period required by Section 2.1(f);

 

  (ii)           if, after it has become effective, such registration is interfered with by any stop order, injunction or other order or requirement of the Commission or other Governmental Authority or court for any reason other than a violation of applicable law solely by the Investor and has not thereafter become effective; or

 

  (iii)           if, in the case of an underwritten Public Offering, the conditions to closing specified in an underwriting agreement to which the Company is a party are not satisfied or waived other than by reason of any breach or failure by any Investor or are not otherwise waived.

 

The holders of Registrable Securities to be included in a registration statement may at any time terminate a request for registration made pursuant to Section 2.1(a) in accordance with Section 2.1(a)(ii)(D).

 

(e)           Selection of Underwriters.  The underwriter or underwriters of each underwritten Public Offering, if any, of the Registrable Securities to be registered pursuant to Section 2.1(a) hereof shall be an internationally recognized investment bank mutually selected by Investor owning at least a majority of the shares of Registrable Securities to be registered and the Company.

 

  

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(f)           Period of Effectiveness.  The Company agrees to use its reasonable best efforts to keep any registration statement filed pursuant to Section 2.1(a) hereof continuously effective for the period beginning on the date on which such registration statement becomes effective under the Securities Act until the earlier to occur of (i) eighteen (18) months thereafter (plus a number of Business Days equal to the number of Business Days, if any, that such registration statement is not kept effective after the initial date of its effectiveness and prior to eighteen (18) months thereafter pursuant to Section 2.7(b) or otherwise), (ii) the day after the date on which all of the Registrable Securities covered by such registration statement have been sold pursuant to such registration statement or another registration statement and (iii) the first date on which there shall cease to be any Registrable Securities covered by such registration statement.

 

(g)           Shelf Registration.  In connection with any request pursuant to Section 2.1(a), Investor may make a written request that the Company file a shelf registration statement (a “Shelf Registration Statement”) pursuant to Rule 415 promulgated under the Securities Act (a “Shelf Registration”) and any related qualification or compliance with respect to all or part of the Registrable Securities owned by Investor, provided that Investor proposes to sell shares of its Registrable Securities having an aggregate price (calculated based upon the Market Price of such Registrable Securities as of the date of such request) of at least $1,000,000.

 

2.2           Piggyback Registration.  If the Company proposes to register any of its securities under the Securities Act by registration on any forms other than Form S-4 or S-8 (or any successor or similar form(s)), whether or not pursuant to registration rights granted to other holders of its securities and whether or not for sale for its own account, it shall give prompt written notice to Investor of its intention to do so and of Investor’s rights (if any) under this Section 2.2, which notice, in any event, shall be given at least 30 days prior to such proposed registration.  Upon the written request of Investor made within 20 days after the receipt of any such notice (10 days if the Company states in such written notice or gives telephonic notice to the relevant securityholders, with written confirmation to follow promptly thereafter, stating that (i) such registration will be on Form S-3 and (ii) such shorter period of time is required because of a planned filing date), which request shall specify the Registrable Securities intended to be disposed of by Investor, the Company shall, subject to Section 2.5(b) hereof, effect the registration under the Securities Act of all Registrable Securities which the Company has been so requested to register by Investor; provided that:

 

(a)           prior to the effective date of the registration statement filed in connection with such registration, promptly following receipt of notification by the Company from the managing underwriter (if an underwritten Public Offering) of the price at which such securities are to be sold, the Company shall so advise Investor of such price, and Investor shall then have the right, exercisable in its sole discretion, irrevocably to withdraw its request to have its Registrable Securities included in such registration statement, by delivery of written notice of such withdrawal to the Company within five Business Days of its being advised of such price, without prejudice to the rights of any holder or holders of Registrable Securities to include Registrable Securities in any future registration (or registrations) pursuant to this Section 2.2 or to cause such registration to be effected as a registration under Section 2.1(a) hereof;

 

  

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(b)           if at any time after giving written notice of its intention to register any securities and prior to the effective date of the registration statement filed in connection with such registration the Company shall determine for any reason not to register or to delay registration of such securities, the Company may, at its election, give written notice of such determination to Investor and (i) in the case of a determination not to register, shall be relieved of its obligation to register Registrable Securities in connection with such registration (but not from any obligation of the Company to pay the Expenses in connection therewith), without prejudice, however, to the rights of Investor to include Registrable Securities in any future registration (or registrations) pursuant to this Section 2.2 or to cause such registration to be effected as a registration under Section 2.1(a) hereof, and (ii) in the case of a determination to delay registering, shall be permitted to delay registering any Registrable Securities, for the same period as the delay in registering such other securities; and

 

(c)           if such registration was initiated by the Company for its own account and involves an underwritten Public Offering, Investor shall sell its Registrable Securities on the same terms and conditions as those that apply to the Company, and the underwriters of each such underwritten Public Offering shall be a nationally recognized underwriter (or underwriters) selected by the Company.

 

No registration effected under this Section 2.2 shall relieve the Company of its obligation to effect any registration upon request under Section 2.1(a) hereof and no registration effected pursuant to this Section 2.2 shall be deemed to have been effected pursuant to Section 2.1(a) hereof.

 

2.3           Expenses.  The Company shall pay all Expenses in connection with any registration initiated pursuant to Sections 2.1(a) or 2.2 hereof, whether or not such registration shall become effective and whether or not all or any portion of the Registrable Securities originally requested to be included in such registration are ultimately included in such registration.

 

2.4           Registration Procedures.  If and whenever the Company is required to effect any registration under the Securities Act as provided in Sections 2.1(a) or 2.2 hereof, the Company shall, as expeditiously as possible:

 

(a)           prepare and file with the Commission promptly and, in any event on or before the date that is 90 days after the receipt by the Company of the written request from the Investor, the requisite registration statement to effect such registration and thereafter use its reasonable best efforts to cause such registration statement to become and remain effective; provided, however, that the Company may discontinue any registration of its securities that are not shares of Registrable Securities (and, under the circumstances specified in Sections 2.2 and 2.7(b) hereof, its securities that are shares of Registrable Securities) at any time prior to the effective date of the registration statement relating thereto;

 

  

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(b)           prepare and file with the Commission such amendments and supplements to such registration statement and the prospectus used in connection therewith as may be necessary to keep such registration statement effective and to comply with the provisions of the Securities Act and the Exchange Act with respect to the disposition of all Registrable Securities covered by such registration statement until such time as all of such Registrable Securities has been disposed of in accordance with the method of disposition set forth in such registration statement;

 

(c)           furnish to each seller of Registrable Securities covered by such registration statement and each underwriter, if any, such number of copies of such drafts and final conformed versions of such registration statement and of each such amendment and supplement thereto (in each case including all exhibits and any documents incorporated by reference), such number of copies of such drafts and final versions of the prospectus contained in such registration statement (including each preliminary prospectus and any summary prospectus) and any other prospectus filed under Rule 424 under the Securities Act, in conformity with the requirements of the Securities Act, and such other documents, as any Investor or any underwriter may reasonably request in writing;

 

(d)           use its reasonable best efforts (i) to register or qualify all Registrable Securities and other securities, if any, covered by such registration statement under such other securities or blue sky laws of such states or other jurisdictions of the United States of America as the sellers of Registrable Securities covered by such registration statement shall reasonably request in writing, (ii) to keep such registration or qualification in effect for so long as such registration statement remains in effect and (iii) to take any other action that may be necessary or reasonably advisable to enable such sellers to consummate the disposition in such jurisdictions of the securities to be sold by such sellers, except that the Company shall not for any such purpose be required to qualify generally to do business as a foreign corporation in any jurisdiction wherein it would not but for the requirements of this subsection (d) be obligated to be so qualified, to subject itself to taxation in such jurisdiction or to consent to general service of process in any such jurisdiction;

 

(e)           use its reasonable best efforts to cause all Registrable Securities and other securities, if any, covered by such registration statement to be registered with or approved by such other Governmental Authority as may be necessary in the opinion of counsel to the Company and counsel to the seller or sellers of Registrable Securities to enable the seller or sellers thereof to consummate the disposition of such Registrable Securities;

 

(f)           use its reasonable best efforts to obtain and, if obtained, furnish to each seller of Registrable Securities, and each such seller’s underwriters, if any, a signed

 

  (i)           opinion of counsel for the Company, dated the effective date of such registration statement (and, if such registration involves an underwritten Public Offering, dated the date of the closing under the underwriting agreement and addressed to the underwriters), reasonably satisfactory (based on the customary form and substance of opinions of issuers’ counsel customarily given in such an offering) in form and substance to such seller, and

 

  

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  (ii)           “cold comfort” letter, dated the effective date of such registration statement (and, if such registration involves an underwritten Public Offering, dated the date of the closing under the underwriting agreement and addressed to the underwriters) and signed by the independent registered public accounting firm who have certified the Company’s financial statements included or incorporated by reference in such registration statement, reasonably satisfactory (based on the customary form and substance of “cold comfort” letters of issuers’ independent registered public accounting firm customarily given in such an offering) in form and substance to such seller,

 

in each case of clauses (i) and (ii) above, covering substantially the same matters with respect to such registration statement (and the prospectus included therein) and, in the case of the independent registered public accounting firm’s comfort letter, with respect to events subsequent to the date of such financial statements, as are customarily covered in opinions of issuer’s counsel and in the independent registered public accounting firm’s comfort letters delivered to underwriters in underwritten Public Offerings of securities;

 

(g)           notify each seller of Registrable Securities and other securities covered by such registration statement, if any, at any time when a prospectus relating thereto is required to be delivered under the Securities Act, upon discovery that, or upon the happening of any event as a result of which, the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances under which they were made, and, at the written request of any such seller of Registrable Securities, promptly prepare and furnish to it a reasonable number of copies of a supplement to or an amendment of such prospectus as may be necessary so that, as thereafter delivered to the purchasers of such securities, such prospectus, as supplemented or amended, shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances under which they were made;

 

(h)           use its reasonable best efforts to obtain the withdrawal of any order suspending the effectiveness of a registration statement relating to the Registrable Securities at the earliest possible moment;

 

(i)           otherwise comply with all applicable rules and regulations of the Commission and any other Governmental Authority having jurisdiction over the offering, and make available to its security holders, as soon as reasonably practicable, an earning statement covering the period of at least twelve months, but not more than eighteen months, beginning with the first full calendar month after the effective date of such registration statement, which earning statement shall satisfy the provisions of Section 11(a) of the Securities Act and Rule 158 promulgated thereunder, and furnish to each seller of Registrable Securities and to the managing underwriter, if any, at least ten days prior to the filing thereof a copy of any amendment or supplement to such registration statement or prospectus;

 

  

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(j)           use its reasonable best efforts to cause all Registrable Securities covered by a registration statement (i) to be listed on a national securities exchange on which similar securities issued by the Company are then listed, if the listing of such Registrable Securities is then permitted under the rules of such exchange, or (ii) if the Company is not permitted pursuant to clause (i) above to list Registrable Securities on a national securities exchange, use its reasonable best efforts to secure designation of all Registrable Securities as a “national market system security” within the meaning of Rule 600(b)(46) of Regulation NMS or, failing that, to secure authorization for the Registrable Securities and, without limiting the generality of the foregoing, to arrange for at least three (3) market makers to register with FINRA as such with respect to such Registrable Securities;

 

(k)           provide a transfer agent and registrar for the Registrable Securities covered by a registration statement no later than the effective date thereof;

 

(l)           enter into such agreements (including an underwriting agreement in customary form) and, subject to Section 2.7(c), take such other actions as Investor holding a majority of the shares of Registrable Securities covered by such registration statement shall reasonably request in order to expedite or facilitate the disposition of such Registrable Securities, including customary indemnification;

 

(m)           if requested by the managing underwriter(s) or Investor holding a majority of the shares of Registrable Securities being sold in connection with an underwritten Public Offering, promptly incorporate in a prospectus supplement or post-effective amendment such information as the managing underwriter(s) and Investor of a majority of the Registrable Securities being sold agree should be included therein relating to the plan of distribution with respect to such Registrable Securities, including without limitation, information with respect to the number of shares of Registrable Securities being sold to such underwriters, the purchase price being paid therefore by such underwriters and with respect to any other terms of the underwritten Public Offering of the Registrable Securities to be sold in such offering; and make all required filings of such prospectus supplement or post-effective amendment as soon as notified of the matters to be incorporated in such prospectus supplement or post-effective amendment; and

 

(n)           if requested by Investor holding a majority of the shares of Registrable Securities being sold, cooperate with such Investor and the managing underwriter(s), if any, to facilitate the timely preparation and delivery of certificates representing Registrable Securities to be sold and not bearing any restrictive legends; and enable such Registrable Securities to be in such share amounts and registered in such names as the managing underwriter(s) or, if none, Investor holding a majority of the shares of Registrable Securities being sold, may request at least three Business Days prior to any sale of Registrable Securities to the underwriters.

 

As a condition to the obligations of the Company to complete any registration pursuant to this Agreement with respect to the Registrable Securities of Investor, Investor must furnish to the Company in writing such information (the “Investor Information”) regarding itself, the Registrable Securities held by it and the intended methods of disposition of the Registrable Securities held by it as is necessary to effect the registration of Investor’s Registrable Securities and is requested in writing by the Company.  At least 30 days prior to the first anticipated filing date of a registration statement for any registration under this Agreement, the Company will notify in writing Investor of Investor Information which the Company is requesting from that Investor whether or not Investor has elected to have any of its Registrable Securities included in the registration statement.  If, within ten days prior to the anticipated filing date, the Company has not received the requested Investor Information from Investor, then the Company may file the registration statement without including Registrable Securities of that Investor.

 

  

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Investor agrees that, as of the date that a final prospectus is made available to it for distribution to prospective purchasers of Registrable Securities, it shall cease to distribute copies of any preliminary prospectus prepared in connection with the offer and sale of such Registrable Securities.  Investor further agrees that, upon receipt of any notice from the Company of the happening of any event of the kind described in subsection (g) of this Section 2.4, Investor shall forthwith discontinue Investor’s disposition of Registrable Securities pursuant to the registration statement relating to such Registrable Securities until Investor’s receipt of the copies of the supplemented or amended prospectus contemplated by subsection (g) of this Section 2.4 and, if so directed by the Company, shall deliver to the Company (at the Company’s expense) all copies, other than permanent file copies, then in Investor’s possession of the prospectus relating to such Registrable Securities current at the time of receipt of such notice.  If any event of the kind described in subsection (g) of this Section 2.4 occurs and such event is the fault solely of Investor or Investor due to the inaccuracy of Investor Information provided by Investor(s) for inclusion in the registration statement, Investor (or Investor) shall pay all Expenses attributable to the preparation, filing and delivery of any supplemented or amended prospectus contemplated by subsection (g) of this Section 2.4.

 

2.5           Underwritten Offerings.

 

(a)           Requested Underwritten Offerings.  If requested by the underwriters in connection with a request for a registration under Section 2.1 hereof that is a firm commitment underwritten Public Offering, the Company and Investor shall enter into a firm commitment underwriting agreement with such underwriters for such offering, such agreement to be reasonably satisfactory in substance and form to the Company and Investor owning at least a majority of the Registrable Securities that is included in such registration and to contain such representations and warranties by the Company and such Investor and such other terms as are customary in agreements of that type, including, without limitation, indemnification and contribution to the effect and to the extent provided in Section 2.8 hereof.

 

(b)           Piggyback Underwritten Offerings; Priority.

 

  (i)           If the Company proposes to register any of its securities under the Securities Act for its own account as contemplated by Section 2.2 hereof and such securities are to be distributed by or through one or more underwriters, and if the managing underwriter of such underwritten Public Offering shall advise the Company in writing (with a copy to Investor) that if all the Registrable Securities requested to be included in such registration were so included, in its opinion, the number and type of securities proposed to be included in such registration would exceed the number and type of securities which could be sold in such offering within a price range acceptable to the Company (such writing to state the basis of such opinion and the approximate number and type of securities which may be included in such offering without such effect), then the Company shall include in such registration pursuant to Section 2.2, to the extent of the number and type of securities which the Company is so advised can be sold in such offering, (i) first, securities that the Company proposes to issue and sell for its own account, (ii) second, Registrable Securities requested to be registered by Investor pursuant to Section 2.2 hereof, and (iii) third, other securities, if any.

 

  

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  (ii)           In the case of any other registration contemplated by Section 2.2 involving an underwritten Public Offering, if the managing underwriter of such underwritten Public Offering shall advise the Company in writing (with a copy to Investor) that if all Registrable Securities requested to be included in such registration were so included, in its opinion, the number and type of securities proposed to be included in such registration would exceed the number and type of securities which would be sold in such offering within a price range stated to such managing underwriter by Investor owning at least a majority of the shares of Registrable Securities requested to be included in such registration to be acceptable to such Investor (such writing to state the basis of such opinion and the approximate number and type of securities which may be included in such offering without such effect), then the Company shall include in such registration pursuant to Section 2.2, to the extent of the number and type of securities which the Company is so advised can be sold in such offering, (i) first, Registrable Securities requested to be registered by Investor pursuant to Section 2.2 hereof, (ii) second, securities that the Company proposed to issue and sell for its own account and (iii) third, other securities.

 

Any Investor may withdraw its request to have all or any portion of its Registrable Securities included in any such offering by notice to the Company within 10 days after receipt of a copy of a notice from the managing underwriter pursuant to this Section.

 

(c)           Investor to be Parties to Underwriting Agreement.  The holders of Registrable Securities to be distributed by underwriters in an underwritten Public Offering contemplated by subsections (a) or (b) of this Section shall be parties to the underwriting agreement between the Company and such underwriters and any Investor, at its option, may reasonably require that any or all of the representations and warranties by, and the other agreements on the part of, the Company to and for the benefit of such underwriters shall also be made to and for the benefit of Investor and that any or all of the conditions precedent to the obligations of such underwriters under such underwriting agreement be conditions precedent to the obligations of Investor.  No Investor shall be required to make any representations or warranties to or agreements with the Company or the underwriters other than representations, warranties or agreements regarding Investor, Investor’s Registrable Securities and Investor’s intended method of distribution.

 

(d)           Holdback Agreements.  Investor agrees, unless otherwise agreed to by the managing underwriter for any underwritten Public Offering pursuant to this Agreement, not to effect any sale or distribution of any equity securities of the Company or securities convertible into or exchangeable or exercisable for equity securities of the Company, including any sale under Rule 144 under the Securities Act, during the 10 days prior to the date on which an underwritten registration of Registrable Securities pursuant to Section 2.1 or 2.2 hereof has become effective and until 90 days after the effective date of such underwritten registration, except as part of such underwritten registration or to the extent that Investor is prohibited by applicable law from agreeing to withhold securities from sale or is acting in its capacity as a fiduciary or an investment adviser.  Without limiting the scope of the term “fiduciary,” a holder shall be deemed to be acting as a fiduciary or an investment adviser if its actions or the securities proposed to be sold are subject to the Employee Retirement Income Security Act of 1974, as amended, the Investment Company Act of 1940, as amended, or the Investment Advisers Act of 1940, as amended, or if such securities are held in a separate account under applicable insurance law or regulation.

 

  

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The Company agrees (i) not to effect any Public Offering or distribution of any equity securities of the Company, or securities convertible into or exchangeable or exercisable for equity securities of the Company, during the 10 days prior to the date on which any underwritten registration pursuant to Section 2.1 has become effective and until 90 days after the effective date of such underwritten registration, except as part of such underwritten registration, and (ii) to cause each holder of any equity securities, or securities convertible into or exchangeable or exercisable for equity securities, in each case, acquired from the Company at any time on or after the date of this Agreement (other than in a Public Offering), to agree not to effect any Public Offering or distribution of such securities during such period.

 

2.6           Preparation; Reasonable Investigation.

 

(a)           Registration Statements.  In connection with the preparation and filing of each registration statement under the Securities Act pursuant to this Agreement, the Company shall (i) give representatives (designated to the Company in writing) of Investor, the underwriters, if any, and one firm of counsel, one firm of accountants and one firm of other agents retained on behalf of all underwriters and one firm of counsel, one firm of accountants and one firm of other agents retained on behalf of Investor (as a group), the reasonable opportunity to participate in the preparation of such registration statement, each prospectus included therein or filed with the Commission, and each amendment thereof or supplement thereto, (ii) upon reasonable advance notice to the Company, give each of them such reasonable access to all financial and other records, corporate documents and properties of the Company and its subsidiaries, as shall be necessary, in the reasonable opinion of Investor’s and such underwriters’ counsel, to conduct a reasonable due diligence investigation for purposes of the Securities Act, and (iii) upon reasonable advance notice to the Company, provide such reasonable opportunities to discuss the business of the Company with its officers, directors, employees and the independent public accounting firm who have certified its financial statements as shall be necessary, in the reasonable opinion of Investor’s and such underwriters’ counsel, to conduct a reasonable due diligence investigation for purposes of the Securities Act.

 

(b)           Confidentiality.  Investor shall maintain the confidentiality of any confidential information received from or otherwise made available by the Company to Investor.  Information that (i) is or becomes available to Investor from a public source other than as a result of a disclosure by Investor or any of its Affiliates, (ii) is disclosed to Investor by a third-party source who Investor reasonably believes is not bound by an obligation of confidentiality to the Company, (iii) is or becomes required to be disclosed by Investor by law, including by court order, or (iv) is independently developed by Investor, shall not be deemed to be confidential information for purposes of this Agreement.  The Investor shall not grant access, and the Company shall not be required to grant access, to information under this Section 2.6 to any Person who will not agree to maintain the confidentiality (to the same extent Investor is required to maintain confidentiality) of any confidential information received from or otherwise made available to it by the Company or Investor under this Agreement.

 

  

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2.7           Postponements.

 

(a)           If the Company shall fail to file any registration statement to be filed pursuant to a request for registration under Section 2.1(a) hereof, the Investor(s) requesting such registration shall have the right to withdraw the request for registration.  Any such withdrawal shall be made by giving written notice to the Company within 20 days after, in the case of a request pursuant to Section 2.1(a) hereof, the date on which a registration statement would otherwise have been required to have been filed with the Commission under clause (i) of Section 2.4(a) hereof (i.e., 20 days after the date that is 90 days after the receipt by the Company of the written request from the Investor(s)).  In the event of such withdrawal, the request for registration shall not be counted for purposes of determining the number of registrations to which Investor are entitled pursuant to Section 2.1 hereof.  The Company shall pay all Expenses incurred in connection with a request for registration withdrawn pursuant to this paragraph.

 

(b)           The Company shall not be obligated to file any registration statement, or file any amendment or supplement to any registration statement, and may suspend any Investor’s rights to make sales pursuant to any effective registration statement, at any time (but not to exceed one time in any twelve-month period) when the Company, in the good faith judgment of the Board, reasonably believes that the filing thereof at the time requested, or the offering of securities pursuant thereto, would adversely affect a pending or proposed Public Offering of the Company’s securities, a material financing, or a material acquisition, merger, recapitalization, consolidation, reorganization or similar transaction, or negotiations, discussions or pending proposals with respect thereto.  The filing of a registration statement, or any amendment or supplement thereto, by the Company cannot be deferred, and Investor’s rights to make sales pursuant to an effective registration statement cannot be suspended, pursuant to the provisions of the preceding sentence, for more than ten days after the abandonment or consummation of any of the foregoing proposals or transactions or for more than 120 days after the date of the Board’s determination referenced in the preceding sentence.  If the Company suspends Investor’s rights to make sales pursuant hereto, the applicable registration period shall be extended by the number of days of such suspension.

 

(c)           If a Shelf Registration Statement has been filed, becomes effective and remains effective under Section 2.1(g), then the Company shall be entitled to postpone any demand registration pursuant to Section 2.1(a) or underwritten Public Offering requested by Investor for a period not exceeding 90 days from the date of such request if, in the reasonable opinion of the Company’s management acting in good faith, the filing of the registration statement or underwritten Public Offering and all obligations arising out of such actions are not in the best interests of the Company at that time; provided, however, if Investor disagrees with such determination, it shall notify the Company in writing of such disagreement and the Chairman of the Audit Committee shall make the determination, which shall be final and binding upon the parties.  It being understood that the Company shall only be entitled to such postponement under this Section 2.7(c) once every 180 days.

 

  

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2.8           Indemnification by the Company.

 

(a)           In connection with any registration statement filed by the Company pursuant to Section 2.1 or 2.2 hereof, to the fullest extent permitted by law the Company shall, and hereby agrees to, indemnify and hold harmless, Investor and seller of any Registrable Securities covered by such registration statement and each other Person who participates as an underwriter in the offering or sale of such securities and each other Person, if any, who controls (within the meaning of the Exchange Act) Investor or seller or any such underwriter, and their respective shareholders, members, directors, officers, employees, partners, agents and Affiliates (each, a “Company Indemnitee” for purposes of this Section 2.8(a)), against any losses, claims, damages, liabilities (or actions or proceedings, whether commenced or threatened, in respect thereof and whether or not such indemnified party is a party thereto), joint or several, and expenses, including, without limitation, the reasonable fees, disbursements and other charges of legal counsel and reasonable costs of investigation, to which such Company Indemnitee may become subject under the Securities Act or otherwise (collectively, a “Loss” or “Losses”), insofar as such Losses arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in any registration statement under which such securities were registered or otherwise offered or sold under the Securities Act or otherwise, any preliminary prospectus, final prospectus or summary prospectus related thereto, or any amendment or supplement thereto (collectively, “Offering Documents”), or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein in the light of the circumstances in which they were made not misleading, or any violation by the Company of any federal or state law, rule or regulation applicable to the Company and relating to action required of or inaction by the Company in connection with any such registration; provided that, the Company shall not be liable in any such case to the extent that any such Loss arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in such Offering Documents in reliance upon and in conformity with information furnished to the Company in a writing duly executed by such Company Indemnitee specifically stating that it is expressly for use therein; and provided, further, that the Company shall not be liable to any Person who participates as an underwriter in the offering or sale of Registrable Securities or any other person, if any, who controls (within the meaning of the Exchange Act) such underwriter, in any such case to the extent that any such Loss arises out of such Person’s failure to send or give a copy of the final prospectus (including any documents incorporated by reference therein), as the same may be then supplemented or amended, to the Person asserting an untrue statement or alleged untrue statement or omission or alleged omission at or prior to the written confirmation of the sale of Registrable Securities to such Person if such statement or omission was corrected in such final prospectus.  Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such Company Indemnitee and shall survive the transfer of such securities by such Company Indemnitee.

 

  

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(b)           Indemnification by the Offerors and Sellers.  In connection with any registration statement filed by the Company pursuant to Section 2.1 or 2.2 hereof in which Investor has registered for sale Registrable Securities, Investor or seller of Registrable Securities shall, and hereby agrees to, indemnify and hold harmless to the fullest extent permitted by law the Company and each of its directors, officers, employees, agents, partners, shareholders, Affiliates and each other Person, if any, who controls (within the meaning of the Exchange Act) the Company and each other seller and such seller’s employees, directors, officers, shareholders, members, partners, agents and Affiliates (each, an “Investor Indemnitee” for purposes of this Section 2.8(b)), against all Losses insofar as such Losses arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in any Offering Documents (or any document incorporated by reference therein) or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein in the light of circumstances in which they were made not misleading, if such untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with information furnished to the Company in a writing duly executed by Investor or seller of Registrable Securities specifically stating that it is expressly for use therein; provided, however, that the liability of such indemnifying party under this Section shall be limited to the amount of the net proceeds (after giving effect to underwriting discounts and commissions) received by such indemnifying party in the sale of Registrable Securities giving rise to such liability.  Such indemnity shall remain in full force and effect, regardless of any investigation made by or on behalf of Investor Indemnitee, and shall survive the transfer of such securities by such indemnifying party.

 

(c)           Notices of Losses, etc.  Promptly after receipt by an indemnified party of written notice of the commencement of any action or proceeding involving a Loss referred to in the preceding subsections of this Section, such indemnified party will, if a claim in respect thereof is to be made against an indemnifying party, give written notice to the latter of the commencement of such action; provided, however, that the failure of any indemnified party to give notice as provided herein shall not relieve the indemnifying party of its obligations under the preceding subsections of this Section except to the extent that the indemnifying party is materially and actually prejudiced by such failure to give notice.  In case any such action is brought against an indemnified party, the indemnifying party shall be entitled to participate in and, unless in such indemnified party’s reasonable judgment a conflict of interest between such indemnified and indemnifying parties may exist in respect of such Loss, to assume and control the defense thereof, in each case at its own expense, jointly with any other indemnifying party similarly notified, to the extent that it may wish, with counsel reasonably satisfactory to such indemnified party, and after its assumption of the defense thereof, the indemnifying party shall not be liable to such indemnified party for any legal or other expenses subsequently incurred by the latter in connection with the defense thereof other than reasonable costs of investigation, unless in such indemnified party’s reasonable judgment a conflict of interest between such indemnified and indemnifying parties arises in respect of such claim after the assumption of the defense thereof.  No indemnifying party shall be liable for any settlement of any such action or proceeding effected without its written consent.  No indemnifying party shall, without the consent of the indemnified party, consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect of such Loss or which requires action on the part of such indemnified party or otherwise subjects the indemnified party to any obligation or restriction to which it would not otherwise be subject.

 

  

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(d)           Contribution.  If the indemnification provided for in this Section shall for any reason be unavailable to an indemnified party under subsection (a) or (b) of this Section in respect of any Loss, then, in lieu of the amount paid or payable under subsection (a) or (b) of this Section, the indemnified party and the indemnifying party under subsection (a) or (b) of this Section shall contribute to the aggregate Losses (including legal or other expenses reasonably incurred in connection with investigating the same) (i) in such proportion as is appropriate to reflect the relative fault of the Company and the prospective sellers of Registrable Securities covered by the registration statement which resulted in such Loss or action in respect thereof, with respect to the statements, omissions or action which resulted in such Loss or action in respect thereof, as well as any other relevant equitable considerations, or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as shall be appropriate to reflect the relative benefits received by the Company, on the one hand, and such prospective sellers, on the other hand, from their sale of Registrable Securities; provided that, for purposes of this clause (ii), the relative benefits received by the prospective sellers shall be deemed not to exceed the amount received by such sellers.  No Person guilty of fraudulent misrepresentation (within the meaning of Section 10(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation.  The obligations, if any, of the selling holders of Registrable Securities to contribute as provided in this subsection (d) are several in proportion to the relative value of their respective Registrable Securities covered by such registration statement and not joint.  In addition, no Person shall be obligated to contribute hereunder any amounts in payment for any settlement of any action or Loss effected without such Person’s consent.

 

(e)           Other Indemnification.  The Company shall, in connection with any registration statement filed by the Company pursuant to Section 2.1(a) or 2.2, and Investor who has registered for sale Registrable Securities shall, with respect to any required registration or other qualification of securities under any federal or state law or regulation of any Governmental Authority other than the Securities Act, indemnify Investor Indemnitees and Company Indemnitees, respectively, against Losses, or, to the extent that indemnification shall be unavailable to Investor Indemnitee or Company Indemnitee, contribute to the aggregate Losses of Investor Indemnitee or Company Indemnitee in a manner similar to that specified in the preceding subsections of this Section (with appropriate modifications).

 

(f)           Indemnification Payments.  The indemnification and contribution required by this Section 2.8 shall be made by periodic payments of the amount thereof during the course of any investigation or defense, as and when any Loss is incurred and is due and payable.

 

2.9           Registration Rights to Others.  If the Company shall at any time hereafter provide to any holder of any securities of the Company rights with respect to the registration of such securities under the Securities Act, such rights shall not be in conflict with or adversely affect any of the rights provided to the holders of Registrable Securities in, or conflict (in a manner that adversely affects holders of Registrable Securities) with any other provisions included in, this Agreement.  To the extent the Company provides any right to others that are more favorable than those provided for herein, the Company shall be required to make appropriate modifications to this Agreement to ensure that Investor (for so long as Investor, together with its Affiliates, owns 10% or more of the outstanding Common Stock or for so long as Investor is an Affiliate of the Company by virtue of a representative of Investor serving on the Company’s Board) will have the benefit of terms that are at least as favorable as those provided to such other persons.

 

2.10           Adjustments Affecting Registrable Securities.  Without the written consent of the Investor, the Company shall not effect or permit to occur any combination, subdivision or reclassification of Registrable Securities that would materially adversely affect the ability of Investor to include such Registrable Securities in any registration of its securities under the Securities Act contemplated by this Agreement or the marketability of such Registrable Securities under any such registration or other offering.

 

  

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2.11           Rule 144 and Rule 144A.  The Company shall take all actions reasonably necessary to enable Investor to sell Registrable Securities without registration under the Securities Act within the limitation of the exemptions provided by (a) Rule 144 under the Securities Act, as such Rule may be amended from time to time, (b) Rule 144A under the Securities Act, as such Rule may be amended from time to time, or (c) any similar rules or regulations hereafter adopted by the Commission, including, without limiting the generality of the foregoing, filing on a timely basis all reports required to be filed under the Exchange Act.  Upon the written request of any Investor, the Company shall deliver to Investor a written statement as to whether it has complied with such requirements.

 

2.12           Nominees for Beneficial Owners.  In the event that any Registrable Securities are held by a nominee for the beneficial owner thereof, the beneficial owner thereof may, at its election in writing delivered to the Company, be treated as Investor of such Registrable Securities for purposes of any request or other action by any Investor or Investor pursuant to this Agreement or any determination of the number or percentage of shares of Registrable Securities held by any Investor or Investor contemplated by this Agreement.  If the beneficial owner of any Registrable Securities so elects, the Company may require assurances reasonably satisfactory to it of such owner’s beneficial ownership of such Registrable Securities.

 

2.13           Calculation of Percentage or Number of Shares of Registrable Securities.  For purposes of this Agreement, all references to a percentage or number of shares of Registrable Securities or Common Stock shall be calculated based upon the number of shares of Registrable Securities or Common Stock, as the case may be, outstanding at the time such calculation is made and shall exclude any Registrable Securities or Common Stock, as the case may be, owned by the Company or any Subsidiary of the Company.  For the purposes of calculating any percentage or number of shares of Registrable Securities or Common Stock as contemplated by the previous sentence, the terms “Investor” shall include all Affiliates thereof owning any shares of Registrable Securities or Common Stock.

 

2.14           Termination of Registration Rights.  The Company’s obligations under Sections 2.1 and 2.2 hereof to register Common Stock for sale under the Securities Act with respect to any Investor shall terminate on the first date on which no shares of Registrable Securities are held by Investor.

 

ARTICLE III

 

MISCELLANEOUS

 

3.1           Injunctive Relief.  The Investor and the Company acknowledge and agree that a violation of any of the terms of this Agreement will cause Investor irreparable injury for which adequate remedy at law is not available.  Accordingly, it is agreed that each of the Company and Investor shall be entitled to an injunction, restraining order or other equitable relief to prevent breaches of the provisions of this Agreement and to enforce specifically the terms and provisions hereof in any court of competent jurisdiction in the United States or any state thereof, in addition to any other remedy to which it may be entitled at law or equity.

 

  

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3.2           Amendments; Entire Agreement.  This Agreement may be amended and the Company may take action herein prohibited, or omit to perform any act herein required to be performed by it, if, but only if, the Company has obtained the written consent of Investor.  This Agreement, the Purchase Agreement, Senior Secured Note Agreement between Company and Investor dated as of the date hereof,  and the documents ancillary to each of the foregoing constitute the entire agreement between the parties and supersedes all other prior agreements and understandings, both written and oral, among some or all of the parties with respect to the subject matter hereof.

 

3.3           Severability.  Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be held to be prohibited by or invalid under applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement.

 

3.4           Successors and Assigns.  The provisions of this Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors, each of which successors shall agree in a writing in form and substance reasonably satisfactory to the Company to become a party hereto and be bound to the same extent as the parties hereto hereby.  This Agreement, and any and all rights, duties and obligations hereunder, shall not be assigned or transferred by any Investor without the prior written consent of the Company, except for transfers to the Affiliates, heirs, executors and administrators of Investor.  Any purported assignment in violation of this provision shall be null and void ab initio.

 

3.5           Notices.  All notices, requests and demands to or upon the respective parties hereto to be effective shall be in writing (including by telecopy), and, unless otherwise expressly provided herein, shall be deemed to have been duly given or made when delivered by hand, or two Business Days after being delivered to a recognized courier (whose stated terms of delivery are two Business Days or less to the destination of such notice), or, in the case of telecopy notice, when received, addressed as set forth on Schedule A hereto to the parties hereto, or to such other address as may be hereafter notified by the respective parties hereto.

 

3.6           Counterparts.  This Agreement may be executed in two or more counterparts, and by different parties on separate counterparts each of which shall be deemed an original, but all of which shall constitute one and the same instrument.

 

3.7           Governing Law; Consent to Jurisdiction.  This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of New York applicable to contracts made and to be performed therein.  The parties hereto irrevocably submit to the exclusive jurisdiction of any state or federal court sitting in the County of New York, in the State of New York over any action or proceeding arising out of or relating to this Agreement or the transaction contemplated hereby to the fullest extent they may effectively do so under applicable law, the parties hereto irrevocably waive and agree not to assert, by way of motion, as a defense or otherwise, (a) any claim that they are not subject to the jurisdiction of any such court, (b) any objection that they may now or hereafter have to the laying of the venue of any such action or proceeding brought in any such court and (c) any claim that any such action or proceeding brought in any such court has been brought in an inconvenient forum.

 

  

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3.8           Waiver of July Trial.  Each party acknowledges and agrees that any controversy which may arise under this Agreement is likely to involve complicated and difficult issues and, therefore, each such party irrevocably and unconditionally waives any right it may have to a trial by jury in respect of any action or proceeding arising out of or relating to this Agreement or the transactions contemplated hereby.

 

[remainder of this page intentionally left blank; signature pages follow]

 

  

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IN WITNESS WHEREOF, the parties hereto have executed this Investor Rights Agreement as of the date first above written.

 

	  	
COMPANY:

	  
	  	  	  	  
	  	  	
RESOURCE HOLDINGS, INC.

	  	  	  	  
	  	  	
By:

	/s/ Michael Campbell
	  	  	  	
Name:  Michael Campbell

	  	  	  	
Title:    President

	  	  	  	  
	  	
INVESTOR:

	  
	  	  	  	  
	  	  	
WEST VENTURES, LLC

	  	  	  	  
	  	  	
By:

	/s/ Ari Hirt
	  	  	  	
Name:  Ari Hirt

	  	  	  	
Title:    Portfolio Manager

  

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SCHEDULE A

 

NOTICES

 

if to West Ventures, LLC, to:

 

152 West 57th Street, 54th Floor

New York, NY  10019

Phone:  212-581-0500

Fax:  212-581-0002

Attn: Ari Hirt

Email: ahirt@platinumlp.com

 

with a copy to:

 

DLA Piper LLP (US)

1201 West Peachtree Street, Suite 2800

Atlanta, GA 30309

Attn: Brian M. Gordon

Fax: (404) 682-7819

 

if to the Company, to:

 

Resource Holdings, Inc.

11753 Willard Avenue

Tustin, CA. 92782

Fax:

with a copy to:

 

Pryor Cashman LLP

7 Times Square

New York, NY  10036-6569

Attn:  Eric M. Hellige

Fax:  (212) 798-6380Unassociated Document

EXECUTION VERSION

SECURITY AGREEMENT

This SECURITY AGREEMENT, dated as of September 28, 2011, is entered into by and among RESOURCE HOLDINGS, INC., a Nevada corporation (the “Grantor”), and WEST VENTURES, LLC, (together with its successors and permitted assigns, “Purchaser”).

 

WITNESSTH:

WHEREAS, Grantor and Purchaser have entered into that certain Senior Secured Note Agreement dated as of the date hereof (including all annexes, exhibits and schedules thereto, as from time to time amended, restated, supplemented or otherwise modified, the “Senior Secured Note Agreement”);

 

WHEREAS, REGINALDO LUIZ DE ALMEIDA FERREIRA – ME, a Brazilian sole proprietorship company (“Reginaldo”), as pledgor, Grantor and Purchaser as pledgees, have entered into that certain First and Second Lien Pledge Agreement of Movable Assets Derived From Mining Activities dated as of the date hereof, and Reginaldo, Purchaser and Grantor have entered into that certain Equipment Pledge Agreement dated as of the date hereof (collectively, the “Brazil Security Agreements”);

 

WHEREAS, in order to induce Purchaser to enter into the Senior Secured Note Agreement and other Senior Note Documents and to induce Purchaser to purchase the Note as provided for in the Senior Secured Note Agreement, the proceeds of which will be used in part to finance Reginaldo’s business relating to the Mine pursuant to that Loan Agreement dated as of September [__], 2011 between Grantor and Reginaldo (the “Brazil Loan Agreement”) has agreed to grant a continuing first priority Lien on the Collateral (as hereinafter defined) to secure the Obligations;

 

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.

 

	
  

	
(a)

	
All capitalized terms used but not otherwise defined herein have the meanings given to them in the Senior Secured Note Agreement.  All other terms contained in this Security Agreement, unless the context indicates otherwise, have the meanings provided for by the Code to the extent the same are used or defined therein.

 

	
  

	
(b)

	
“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 Obligations, Grantor hereby grants, assigns, conveys, mortgages, pledges, hypothecates and transfers to Purchaser, a 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 Grantor (including under any trade names, styles or derivations thereof), and whether owned or consigned by or to, or leased from or to, Grantor, and regardless of where located (all of which being hereinafter collectively referred to as the “Collateral”), including, without limitation, the following:

 

  

  

  

 

	
  

	
(i)

	
all Accounts;

 

	
  

	
(ii)

	
all Chattel Paper;

 

	
  

	
(iii)

	
all Documents;

 

	
  

	
(iv)

	
all General Intangibles (including payment intangibles and Software);

 

	
  

	
(v)

	
all Goods (including Inventory, Equipment and Fixtures);

 

	
  

	
(vi)

	
all Instruments;

 

	
  

	
(vii)

	
all Investment Property;

 

	
  

	
(viii)

	
all Deposit Accounts, of Grantor, including the RHI Control Account, RHI Deposit Accounts, all lockbox and lockbox accounts and all other bank accounts and all deposits therein;

 

	
  

	
(ix)

	
all contract rights of Grantor, including but not limited to all rights under the Brazil Loan Agreement and Brazil Security Documents,

 

	
  

	
(x)

	
all money, cash or cash equivalents of Grantor;

 

	
  

	
(xi)

	
all Supporting Obligations of Grantor;

 

	
  

	
(xii)

	
all Commercial Tort Claims that any Debtor has filed in any judicial, administrative or arbitration proceeding or for which it may elect to file a claim or suit; and

 

	
  

	
(xiii)

	
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)

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

 

  

- 2 -

  

 

	
  

	
3.

	
PURCHASER’S RIGHTS: LIMITATIONS ON PURCHASER’S OBLIGATIONS.

 

	
  

	
(a)

	
It is expressly agreed by Grantor that, anything herein to the contrary notwithstanding, Grantor shall remain liable under each of its contracts to observe and perform all the conditions and obligations to be observed and performed by it thereunder.  Purchaser shall not have any obligation or liability under any contract by reason of or arising out of this Security Agreement or the granting herein of a Lien thereon or the receipt by Purchaser of any payment relating to any contract pursuant hereto.  Purchaser shall not be required or obligated in any manner to perform or fulfill any of the obligations of Grantor under or pursuant to any contract, 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 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)

	
Purchaser may at any time after an Event of Default has occurred and is continuing (beyond any applicable cure or grace period) without prior notice to Grantor, notify all Persons obligated on the Collateral ("Account Debtor Parties") that Purchaser has a security interest therein, and that payments shall be made directly to Purchaser.  Once any such notice has been given to any Account Debtor Party or other Person obligated on the Collateral, Grantor shall not give any contrary instructions to such Account Debtor Party or other Person without Purchaser’s prior written consent (which consent shall not be unreasonably withheld or delayed so long as no Event of Default has occurred and is continuing).

 

	
  

	
(c)

	
Purchaser may at any time after an Event of Default has occurred and is continuing (beyond any applicable cure or grace period) in Purchaser’s own name, in the name of a nominee of Purchaser or in the name of Grantor, communicate (by mail, telephone, facsimile or otherwise) with Account Debtor Parties, parties to contracts and obligors in respect of Instruments to verify with such Persons, to Purchaser’s satisfaction, the existence, amount terms of, and any other matter relating to, Accounts, Instruments, Chattel Paper and/or payment intangibles.  If an Event of Default shall have occurred and be continuing, Grantor, at its own expense, shall cause the independent certified public accountants then engaged by Grantor to prepare and deliver to Purchaser at any time and from time to time promptly upon Purchaser’s request the following reports with respect to Grantor: (i) a reconciliation of all Accounts; and (ii) an aging of all Accounts.

 

	
  

	
4.

	
REPRESENTATIONS AND WARRANTIES.  Grantor represents and warrants that:

 

	
  

	
(a)

	
Grantor has rights in and the power to transfer each item of the Collateral upon which it purports to grant a Lien hereunder free and clear of any and all Liens.

 

	
  

	
(b)

	
No effective security agreement, financing statement, equivalent security 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 by Grantor in favor of Purchaser pursuant to this Security Agreement or the other Senior Note Documents.

 

	
  

	
(c)

	
This Security Agreement is effective to create a valid and continuing Lien on and, upon the filing of the appropriate financing statements listed on Schedule I hereto, a perfected Lien in favor of Purchaser on the Collateral with respect to which a Lien may be perfected by filing pursuant to the Code.  Such Lien is prior to all other Liens and is enforceable as such as against any and all creditors of and purchasers from Grantor.  All actions by Grantor requested by Purchaser to protect and perfect such Lien on each item of the Collateral have been duly taken.

 

  

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(d)

	
Schedule 11 and Schedule 15 of that certain Perfection Certificate delivered by the Grantor to Purchaser as of the date hereof (the “Perfection Certificate”) hereto lists all Instruments, Letter of Credit Rights and Chattel Paper of Grantor.  All action by Grantor requested by Purchaser to protect and perfect the Lien of Purchaser on each item set forth on such schedules (including the delivery of all originals thereof to Purchaser and the legending of all Chattel Paper as required by Section 5(b) hereof) has been duly taken.  Upon possession of the Collateral listed on such schedules hereto by Purchaser, the Lien of Purchaser on the Collateral listed on such schedules is prior to all other Liens, and is enforceable as such against any and all creditors of and purchasers from Grantor.

 

	
  

	
(e)

	
Grantor’s name as it appears in official filings in the state of its incorporation or other organization, the type of entity of Grantor (including corporation, partnership, limited partnership or limited liability company), organizational identification number issued by Grantor’s state of incorporation or organization or a statement that no such number has been issued, Grantor’s state of organization or incorporation, the location of 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 1(a) and Schedules 2(a) – (e) of the Perfection Certificate.  Grantor has only one state of incorporation or organization.

 

	
  

	
(f)

	
With respect to the Accounts, (i) they represent bona fide Accounts in the ordinary course of Grantor’s business and are not evidenced by a judgment, Instrument or Chattel Paper and have not been reconveyed or reassigned to any or any other Person; (ii) there are no setoffs, recoupments, counterclaims, defenses, claims or disputes existing or asserted with respect thereto and Grantor has not made any agreement with any Account Debtor Party 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 Party from liability therefor, or any deduction therefrom except in the ordinary course of its business and consistent with Grantor’s past practices, as disclosed in writing to Purchaser; (iii) to 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 materially reduce the aggregate amount payable thereunder as shown on Grantor’s books and records and any invoices and statements; (iv) Grantor has not received any notice of proceedings or actions which are threatened or pending against any Account Debtor Party obligated on any Accounts which might result in any adverse change in such Account Debtor Party’s financial condition; and (v) Grantor has no knowledge that any Account Debtor Party 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 Purchaser are actually and absolutely owing to Grantor as indicated thereon and are not in any way contingent; and (y) to Grantor’s knowledge, all Account Debtor Parties have the capacity to contract.

 

  

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(g)

	
Grantor has no interest in, or title to, any Patent.  Grantor has no interest in, or title to, any Trademark or Copyright.  This Security Agreement is effective to create a valid and continuing Lien on and, upon filing of the Copyright Security Agreements with the United States Copyright Office and filing of the Trademark Security Agreements with the United State Patent and Trademark Office, perfected Liens in favor of Purchaser on Grantor’s Trademarks and Copyrights and such perfected Liens are enforceable as such as against any and all creditors of and purchasers from Grantor.  Upon filing of the Copyright Security Agreements with the United States Copyright Office and filing of the Trademark Security Agreements 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 Purchaser’s Lien on Grantor’s Trademarks or Copyrights shall have been duly taken.

 

	
  

	
5.

	
COVENANTS.  Grantor covenants and agrees with Purchaser 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 Purchaser and at the sole expense of Grantor, Grantor shall promptly and duly execute and deliver any and all such further instruments and documents and take such further actions as Purchaser may deem reasonably desirable 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 Purchaser of any License or contract held by Grantor and to enforce the security interests granted hereunder; and (B) filing any financing or continuation statements under the Code with respect to the Liens granted hereunder or under any other Senior Note Document as to those jurisdictions that are not Uniform Commercial Code jurisdictions.

 

	
  

	
(ii)

	
Unless Purchaser shall otherwise consent in writing (which consent may be revoked), Grantor shall deliver to Purchaser 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 Credit Party receives the same.

 

	
  

	
(iii)

	
Grantor shall, in accordance with the terms of the Senior Secured Note Agreement, obtain or use its commercially reasonable efforts to obtain waivers or subordinations of Liens from landlords and mortgagees.

 

	
  

	
(iv)

	
In accordance with the Senior Secured Note Agreement, Grantor shall obtain a pledged account, lockbox or similar agreement with each bank or financial institution holding a Deposit Account and the bank or financial institution holding the Disbursement Account for Grantor.

 

	
  

	
(v)

	
Grantor that is or becomes the beneficiary of a letter of credit shall promptly, and in any event within five (5) Business Days after becoming a beneficiary, notify Purchaser thereof and shall use its commercially reasonable efforts to enter into a tri-party agreement with Purchaser and the issuer and/or confirmation bank with respect to Letter-of-Credit Rights assigning such Letter-of-Credit Rights to Purchaser and directing all payments thereunder to the Collection Account, all in form and substance reasonably satisfactory to Purchaser.

 

  

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(vi)

	
Grantor shall take all steps reasonably necessary to grant the Purchaser 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.

 

	
  

	
(vii)

	
Grantor hereby irrevocably authorizes Purchaser 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 the Collateral (i) as all assets of 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 or such jurisdiction, or (ii) 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 (i) whether Grantor is an organization, the type of organization and any organization identification number issued to Grantor, and (ii) 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.  Grantor agrees to furnish any such information to Purchaser promptly upon request.  Grantor also ratifies its authorization for Purchaser to have filed in any Uniform Commercial Code jurisdiction any initial financing statements or amendments thereto if filed prior to the date hereof.

 

	
  

	
(viii)

	
Grantor shall promptly, and in any event within five (5) Business Days prior to the commencement of any action with respect thereto, notify Purchaser of any commercial tort claim (as defined in the Code) acquired by it and unless otherwise consented by Purchaser, Grantor shall enter into a supplement to this Security Agreement, granting to Purchaser a Lien in such commercial tort claim.

 

	
  

	
(b)

	
Maintenance of Records.  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.  Grantor shall mark their books and records pertaining to the Collateral to evidence this Security Agreement and the Liens granted hereby.  If Grantor retains possession of any Chattel Paper or Instruments with Purchaser’s consent, such Chattel Paper and Instruments shall be marked with the following legend: “This writing and the obligations evidenced or secured hereby are subject to the security interest of West Ventures, LLC.”

 

	
  

	
(c)

	
[Reserved]

 

	
  

	
(d)

	
Indemnification.  In any suit, proceeding or action brought by Purchaser relating to any Collateral for any sum owing with respect thereto or to enforce any rights or claims with respect thereto, Grantor will save, indemnify and keep Purchaser harmless from and against all expense (including reasonable attorneys’ fees and expenses), loss or damage suffered by reason of any defense, setoff, counterclaim, recoupment or reduction of liability whatsoever of the Account Debtor Party or other Person obligated on the Collateral, arising out of a breach by 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 Grantor, except in the case of Purchaser, to the extent such expense, loss, or damage is attributable solely to the gross negligence or willful misconduct of Purchaser as finally determined by a court of competent jurisdiction. All such obligations of Grantor shall be and remain enforceable against and only against Grantor and shall not be enforceable against Purchaser.

 

  

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(e)

	
Compliance with Terms of Accounts, etc.  In all material respects, 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.

 

	
  

	
(f)

	
Limitation on Liens on Collateral.  Grantor will not create, permit or suffer to exist, and Grantor will defend the Collateral against, and take such other action as is necessary to remove, any Lien on the Collateral, and will defend the right, title and interest of Purchaser in and to any of Grantor’s rights under the Collateral against the claims and demands of all Persons whomsoever.

 

	
  

	
(g)

	
Limitations on Disposition.  Grantor will not sell, license, lease, transfer or otherwise dispose of any of the Collateral, or attempt or contract to do so except as permitted by the Senior Secured Note Agreement.

 

	
  

	
(h)

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

 

	
  

	
(i)

	
Notices.  Grantor will advise Purchaser promptly, in reasonable detail, (i) of any Lien (other than Permitted Encumbrances) 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 Liens created hereunder or under any other Senior Note Document.

 

	
  

	
(j)

	
Good Standing Certificates.  If requested by Purchaser, Grantor shall provide to Purchaser a certificate of good standing from its state of incorporation or organization.

 

	
  

	
(k)

	
No Reincorporation.  Without limiting the prohibitions on mergers involving the Grantor contained in the Senior Secured Note Agreement, Grantor shall not reincorporate or reorganize itself under the laws of any jurisdiction other than the jurisdiction in which it is incorporated or organized as of the date hereof without the prior written consent of Purchaser.

 

	
  

	
(l)

	
Terminations; Amendments Not Authorized.  Grantor acknowledges that it is not authorized to file any financing statement or amendment or termination statement with respect to any financing statement filed by Purchaser against Grantor without the prior written consent of Purchaser and agrees that it will not do so without the prior written consent of Purchaser, subject to Grantor's rights under Section 9-509(d)(2) of the Code.

 

	
  

	
6.

	
[Reserved.]

 

  

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7.

	
REMEDIES:  RIGHTS UPON DEFAULT.

 

	
  

	
(a)

	
In addition to all other rights and remedies granted to it under this Security Agreement, the Senior Secured Note Agreement, the other Senior Note Documents and under any other instrument or agreement securing, evidencing or relating to any of the Obligations, if any Event of Default shall have occurred and be continuing (beyond any applicable cure or grace period), Purchaser may exercise all rights and remedies of a secured party under the Code.  Without limiting the generality of the foregoing, Grantor expressly agrees that in any such event Purchaser, without notice except as specified below and without any obligation to prepare or process the Collateral for sale, (i) sell the Collateral or any part thereof in one or more parcels at public or private sale, at any of Purchaser’s offices or elsewhere, for cash, on credit or for future delivery, and at such price or prices and upon such other terms as the Purchaser may deem commercially reasonable and/or (ii) lease, license or dispose of the Collateral or any part thereof upon such terms as the Purchaser may deem commercially reasonable.  To the extent deemed appropriate by the Purchaser, Purchaser may, at the sole cost of the Guarantors, obtain the services of brokers, investment bankers, consultants and other professionals to assist Purchaser in the collection or disposition of any of the Collateral.  Grantor agrees that, to the extent notice of sale or any other disposition of the Collateral shall be required by law, at least ten (10) days’ notice to Grantor of the time and place of any public sale or the time after which any private sale or other disposition of the Collateral is to be made shall constitute reasonable notification.  Purchaser shall not be obligated to make any sale or other disposition of Collateral regardless of notice of sale having been given.  Purchaser may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned.  Grantor hereby waives any claims against the Purchaser arising by reason of the fact that the price at which the Collateral may have been sold at a private sale was less than the price which might have been obtained at a public sale or was less than the aggregate amount of the Obligations.  Grantor hereby acknowledges that (a) any such sale of the Collateral by Purchaser shall be made without warranty, (b) Purchaser may specifically disclaim any warranties of title, possession, quiet enjoyment or the like, and (c) such actions set forth in clauses (a) and (b) above shall not adversely effect the commercial reasonableness of any such sale of the Collateral.

 

If any Event of Default shall have occurred and be continuing (beyond any applicable grace or cure period), Grantor further agrees, at Purchaser’s request, to assemble the Collateral and make it available to Purchaser at a place or places designated by Purchaser which are reasonably convenient to Purchaser and Grantor, whether at Grantor’s premises or elsewhere.  Until Purchaser is able to effect a sale, lease, or other disposition of Collateral, Purchaser 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 Purchaser.  Purchaser shall have no obligation to Grantor to maintain or preserve the rights of Grantor as against third parties with respect to Collateral while Collateral is in the possession of Purchaser.  Purchaser may, if it so elects, seek the appointment of a receiver or keeper to take possession of Collateral and to enforce any of Purchaser’s remedies, with respect to such appointment without prior notice or hearing as to such appointment.  Purchaser shall apply the net proceeds of any such collection, recovery, receipt, appropriation, realization or sale to the Obligations as provided in the Senior Secured Note Agreement, and only after so paying over such net proceeds, and after the payment by Purchaser of any other amount required by any provision of law, need Purchaser account for the surplus, if any, to Grantor.  To the maximum extent permitted by applicable law, Grantor waives all claims, damages, and demands against Purchaser 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 Purchaser as finally determined by a court of competent jurisdiction.  Grantor shall remain liable for any deficiency if the proceeds of any sale or disposition of the Collateral are insufficient to pay all Obligations, including any reasonable out-of-pocket attorneys’ fees and other expenses incurred by Purchaser to collect such deficiency.

 

  

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(b)

	
Except as otherwise specifically provided herein, 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)

	
Purchaser shall not be required to make any demand upon, or pursue or exhaust any of its rights or remedies against, Grantor, any other obligor, guarantor, pledgor or any other Person with respect to the payment of the 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.  Purchaser shall not be required to marshal the Collateral or any guarantee of the Obligations or to resort to the Collateral or any such guarantee in any particular order, and all of its and its rights hereunder or under any other Senior Note Document shall be cumulative.  To the extent it may lawfully do so, Grantor absolutely and irrevocably waives and relinquishes the benefit and advantage of, and covenants not to assert against Purchaser, 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 Purchaser 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 Purchaser shall be lawfully entitled to exercise such rights and remedies, Grantor hereby grants to Purchaser, an irrevocable, nonexclusive license (exercisable without payment of royalty or other compensation to Grantor) to use, license or sublicense any Intellectual Property now owned or hereafter acquired by 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 PURCHASER’S DUTY IN RESPECT OF COLLATERAL.  Purchaser shall use reasonable care with respect to the Collateral in its possession or under its control.  Purchaser shall not 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 Purchaser, 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 Grantor for liquidation or reorganization, should 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 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 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 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 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 Senior Secured Note Agreement.

 

	
  

	
12.

	
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 Senior Secured Note Agreement and the other Senior Note Documents which, taken together, set forth the complete understanding and agreement of Purchaser and Grantor with respect to the matters referred to herein and therein.

 

	
  

	
13.

	
NO WAIVER; CUMULATIVE REMEDIES.  Purchaser 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 Purchaser and then only to the extent therein set forth.  A waiver by Purchaser of any right or remedy hereunder on any one occasion shall not be construed as a bar to any right or remedy which Purchaser would otherwise have had on any future occasion.  No failure to exercise nor any delay in exercising on the part of Purchaser, 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 Purchaser and Grantor.

 

	
  

	
14.

	
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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15.

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

 

	
  

	
16.

	
SUCCESSORS AND ASSIGNS.  This Security Agreement and all obligations of Grantor hereunder shall be binding upon the successors and assigns of Grantor (including any debtor-in-possession on behalf of Grantor) and shall, together with the rights and remedies of Purchaser, hereunder, inure to the benefit of Purchaser, all future holders of any instrument evidencing any of the 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 Obligations or any portion thereof or interest therein shall in any manner impair the Lien granted to Purchaser hereunder.  Grantor may not assign, sell, hypothecate or otherwise transfer any interest in or obligation under this Security Agreement.

 

	
  

	
17.

	
COUNTERPARTS.  This Security Agreement may be authenticated in any number of separate counterparts, each of which shall collectively and separately constitute one agreement.  This Security Agreement may be authenticated by manual signature, facsimile or, if approved in writing by Purchaser, electronic means, all of which shall be equally valid.

 

	
  

	
18.

	
GOVERNING LAW.  EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN ANY OF THE SENIOR NOTE DOCUMENTS, 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.  GRANTOR HEREBY CONSENTS AND AGREES THAT THE STATE OR FEDERAL COURTS LOCATED NEW YORK COUNTY, CITY OF NEW YORK, STATE OF NEW YORK, SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN GRANTOR AND PURCHASER PERTAINING TO THIS SECURITY AGREEMENT OR ANY OF THE OTHER SENIOR NOTE DOCUMENTS OR TO ANY MATTER ARISING OUT OF OR RELATING TO THIS SECURITY AGREEMENT OR ANY OF THE OTHER SENIOR NOTE DOCUMENTS, PROVIDED, THAT PURCHASER AND 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 PURCHASER FROM BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN ANY OTHER JURISDICTION TO REALIZE ON THE COLLATERAL OR ANY OTHER SECURITY FOR THE OBLIGATIONS, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF PURCHASER.  GRANTOR EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND 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.  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 GRANTOR AT THE ADDRESS SET FORTH ON ANNEX I TO THE SENIOR SECURED NOTE 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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19.

	
WAIVER OF JURY TRIAL.  TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, 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 PURCHASER AND 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 SENIOR NOTE DOCUMENTS OR THE TRANSACTIONS RELATED HERETO OR THERETO.

 

	
  

	
20.

	
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.

 

	
  

	
21.

	
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.

 

	
  

	
22.

	
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 18 and Section 19, with its counsel.

 

	
  

	
23.

	
BENEFIT OF PURCHASER.  All Liens granted or contemplated hereby shall be for the benefit of Purchaser, and all proceeds or payments realized from Collateral in accordance herewith shall be applied to the Obligations in accordance with the terms of the Senior Secured Note Agreement.

 

[Signature Pages Follow]

 

  

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Witness the due execution hereof by the respective duly authorized officers of the undersigned as of the date first written above.

	  	
RESOURCE HOLDINGS, INC.

	  	  	  
	  	
By:

	/s/ Michael Campbell
	  	  	 
	  	
Name:

	Michael Campbell  
	  	  	  
	  	
Title:

	President
	  	  	  
	  	
WEST VENTURES, LLC

	  	  	  
	  	
By:

	/s/ Ari Hirt
	  	  	  
	  	
Name:

	 
Ari Hirt

	  	  	  
	  	
Title:

	 
Portfolio Manager

 

[SIGNATURE PAGE TO SECURITY AGREEMENT]

  

  

  

  

 

SCHEDULE I

to

SECURITY AGREEMENT

FILING JURISDICTIONS

	
Grantor’s Name

	
Filing Jurisdiction

	
Resource Holdings, Inc.

	
Nevada

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