Document:

EXHIBIT 10.2

NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE ISSUER. THIS SECURITY AND THE SECURITIES ISSUABLE UPON CONVERSION OF THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT WITH A REGISTERED
BROKER-DEALER OR OTHER LOAN WITH A FINANCIAL INSTITUTION THAT IS AN “ACCREDITED INVESTOR” AS DEFINED IN RULE 501(a) UNDER THE SECURITIES ACT OR OTHER LOAN SECURED BY SUCH SECURITIES.

 

Original Issue Date: October 31, 2005

Original Conversion Price (subject to adjustment herein): $1.00

	
No.________

	
$_______________

SENIOR SECURED CONVERTIBLE DEBENTURE

THIS SENIOR SECURED CONVERTIBLE DEBENTURE is one of a series of duly authorized and issued Senior Secured Convertible Debentures of SendTec Acquisition Corp., a Delaware corporation (the “Issuer”) having a principal place of business at 877 Executive Center Drive West, Suite 300, St. Petersburg, FL 33702, designated as its “Senior Secured Convertible Debentures” (this debenture, the “Debenture” and collectively with the other such series of debentures, the “Debentures”), issued pursuant to the Securities Purchase Agreement by and among the Issuer, RelationServe Media, Inc., a Delaware corporation (the “Company”), each of the Purchasers signatory thereto (the “Purchasers”), and Christiana Corporate Trust
Services, Inc., a Delaware corporation, in its capacity as administrative agent for the Purchasers (together with its successors and assigns in such capacity, the “Agent”), dated as of October 31, 2005, as amended, modified or supplemented from time to time in accordance with its terms (the “Purchase Agreement”).

FOR VALUE RECEIVED, the Issuer promises to pay to ________________________ or its registered assigns (the “Holder”), or shall have paid pursuant to the terms hereunder, the principal sum of $_______________, on October 30, 2009 or such earlier date as this Debenture is required or permitted to be repaid as provided hereunder (the “Maturity Date”), and to pay interest to the Holder on the aggregate unconverted and then outstanding principal amount of this Debenture in accordance with the provisions hereof. This Debenture is subject to the following additional provisions:

 

 

Section 1.            Definitions. For the purposes hereof, in addition to the terms defined elsewhere in this Debenture: (a) capitalized terms not otherwise defined herein have the meanings given to such terms in the Purchase Agreement, and (b) the following terms shall have the following meanings:

“Alternate Consideration” shall have the meaning set forth in Section 5(d).

“Base Conversion Price” shall have the meaning set forth in Section 5(b).

“Business Day” means any day except Saturday, Sunday and any day that shall be a federal legal holiday in the United States or a day on which banking institutions in the State of New York are authorized or required by law or other government action to close.

“Buy-In” shall have the meaning set forth in Section 4(d)(v).

“Change of Control Price” shall have the meaning set forth in Section 6(d).

“Change of Control Put Date” shall have the meaning set forth in Section 6(d).

“Change of Control Put Notice” shall have the meaning set forth in Section 6(d).

“Change of Control Transaction” means the occurrence after the date hereof of any of (i) an acquisition after the date hereof by an individual or legal entity or “group” (as described in Rule 13d-5(b)(1) promulgated under the Exchange Act) of effective control (whether through legal or beneficial ownership of capital stock of the Issuer, by contract or otherwise) of in excess of 33% of the voting securities of the Issuer, or (ii) the Issuer merges into or consolidates with any other Person, or any Person merges into or consolidates with the Issuer and, after giving effect to such transaction, the stockholders of the Issuer immediately prior to such transaction own less than 66% of the aggregate voting power of the Issuer or the successor entity of such transaction, or (iii) the Issuer sells or transfers its assets,
as an entirety or substantially as an entirety, to another Person and the stockholders of the Issuer immediately prior to such transaction own less than 66% of the aggregate voting power of the acquiring entity immediately after the transaction, (iv) a replacement at one time or within a three year period of more than one-half of the members of the Issuer’s board of directors that is not approved by a majority of those individuals who are members of the board of directors on the date hereof (or by those individuals who are serving as members of the board of directors on any date whose nomination to the board of directors was approved by a majority of the members of the board of directors who are members on the date hereof), or (v) the execution by the Issuer of an agreement to which the Issuer is a party or by which it is bound, providing for any of the events set forth above in (i) or (iv). From and after the Consolidation Date, all references to “Issuer” in this definition shall be
deemed to refer to “the Company”.

“Common Stock” means the common stock, par value $0.001 per share, of the Issuer and stock of any other class of securities into which such securities may hereafter have been reclassified or changed into. From and after the Consolidation Date, all references to “Issuer” in this definition shall be deemed to refer to “the Company”. 

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“Consolidation Date” shall have the meaning set forth in the Purchase Agreement.

“Conversion Date” shall have the meaning set forth in Section 4(a).

“Conversion Price” shall have the meaning set forth in Section 4(b).

“Conversion Shares” means the shares of Common Stock issuable upon conversion of this Debenture or as payment of interest in accordance with the terms.

“Debenture Register” shall have the meaning set forth in Section 2(c).

“Dilutive Issuance” shall have the meaning set forth in Section 5(b).

“Dilutive Issuance Notice” shall have the meaning set forth in Section 5(b).

“Effectiveness Period” shall have the meaning given to such term in the Registration Rights Agreement. 

“Event of Default” shall have the meaning set forth in Section 8(a).

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

“Fundamental Transaction” shall have the meaning set forth in Section 5(d).

“Initial Public Offering” means the first firm commitment underwritten public offering of securities of the Issuer pursuant to an effective registration statement under the Securities Act lead by a nationally recognized investment bank (other than a registration statement relating either to the sale of securities to employees of the Issuer pursuant to a stock option, stock purchase or similar plan or an SEC Rule 145 transaction) with gross proceeds to the Issuer of at least $25 million.

“Interest Payment Date” shall have the meaning set forth in Section 2(a).

“IPO Date” shall have the meaning set forth in Section 6(c).

“IPO Put Date” shall have the meaning set forth in Section 6(c).

“IPO Put Notice” shall have the meaning set forth in Section 6(c).

“Late Fees” shall have the meaning set forth in Section 2(d).

“Mandatory Default Amount” shall equal the sum of (A) the greater of: (i) 120% of the principal amount of this Debenture to be prepaid, plus all accrued and unpaid interest thereon, or (ii) the sum of (X) 101% of the then outstanding principal amount of this Debenture and (Y) an amount equal to all interest, including all accrued and unpaid interest thereon, that would have been paid from the last Interest Payment Date through the Maturity Date assuming no redemption of any portion of the principal amount of the 

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Debenture then outstanding, and (B) all other amounts, costs, expenses and liquidated damages due in respect of this Debenture.

“New York Courts” shall have the meaning set forth in Section 10(d).

“Notice of Conversion” shall have the meaning set forth in Section 4(a).

“Original Issue Date” shall mean the date of the first issuance of the Debentures regardless of the number of transfers of any Debenture and regardless of the number of instruments that may be issued to evidence such Debenture. The Original Issue Date shall be the Closing Date, as defined in the Purchase Agreement.

“Permitted Indebtedness” shall include (i) up to $2,000,000 ($3,000,000 from and after the Consolidation Date) for the sole purpose of a working capital credit facility, which may have a second priority security interest in the accounts receivable and inventory of the Issuer and from and after the Consolidation Date, of the Company and its Subsidiaries (subordinate to the security interest of the Holders in such assets), (ii) trade payables and indebtedness consisting of capitalized lease obligations and purchase money indebtedness incurred in connection with acquisition of capital assets and obligations under sale-leaseback arrangements with respect to newly acquired or leased assets (including, but not limited to equipment financing transactions); provided, however, that in the case of subsection (ii) such obligations are not secured by liens on any assets of the Issuer, the Company or its Subsidiaries existing as of the Original Issue Date and may only be secured by the assets so acquired or leased thereafter.

“Person” means a corporation, an association, a partnership, organization, a business, an individual, a government or political subdivision thereof or a governmental agency.

“Quarterly Redemption” shall mean the redemption of this Debenture pursuant to Section 6(a) hereof. 

“Quarterly Redemption Amount” shall mean, as to a Quarterly Redemption, 6.25% of the original principal amount of this Debenture.

“Quarterly Redemption Date” means the 1st day of each November, February, May and August, commencing November 1, 2007. 

“Registration Rights Agreement” means the Registration Rights Agreement, dated as of the Closing Date, to which the Issuer and the original Holder are parties, as amended, modified or supplemented from time to time in accordance with its terms; provided that from and after the Consolidation Date, unless the context otherwise requires, “Registration Rights Agreement” means the Registration Rights Agreement to be executed and delivered on the Consolidation Date as provided in the Purchase Agreement.

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“Registration Statement” means a registration statement meeting the requirements set forth in the Registration Rights Agreement, covering, among other things, the resale of the Conversion Shares and naming the Holder as a “selling stockholder” thereunder.

“Required Purchasers” shall have the meaning set forth in the Purchase Agreement.

“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

“Subsidiary” shall have the meaning given to such term in the Purchase Agreement.

“Trading Day” means a day on which the Common Stock is traded on a Trading Market, or if the Common Stock is not traded on a Trading Market, it means a Business Day.

“Trading Market” means the following markets or exchanges on which the Common Stock is listed or quoted for trading on the date in question: the Nasdaq SmallCap Market, the American Stock Exchange, the New York Stock Exchange, the Nasdaq National Market or the OTC Bulletin Board.

“Transaction Documents” shall have the meaning set forth in the Purchase Agreement.

“VWAP” means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on a Trading Market, the daily volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the primary Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg Financial L.P. (based on a Trading Day from 9:30 a.m. EST to 4:02 p.m. Eastern Time) using the VAP function; (b) if the Common Stock is not then listed or quoted on the Trading Market and if prices for the Common Stock are then reported in the “Pink Sheets” published by the Pink Sheets, LLC (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so
reported; or (c) in all other cases, the fair market value of a share of Common Stock as determined by a nationally recognized-independent appraiser selected in good faith by Holders holding a majority of the principal amount of Debentures then outstanding.

	
Section 2.

	
Interest.

(a)           Payment of Interest. The Issuer shall pay interest to the Holder on the aggregate unconverted and then outstanding principal amount of this Debenture at the rate of 6% per annum, payable quarterly on February 1, May 1, August 1 and November 1, commencing February 1, 2006, on each Quarterly Redemption Date (as to that principal amount then being redeemed), on each Conversion Date (as to that principal amount then being converted), on each IPO Put Date (as to that principal amount being repurchased), on each Change of Control Put Date (as to that principal amount then being repurchased) and on the Maturity Date (except that, 

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if any such date is not a Business Day, then such payment shall be due on the next succeeding Business Day) (each such date, an “Interest Payment Date”), in cash. 

	
(b)

	
[INTENTIONALLY LEFT BLANK]

(c)           Interest Calculations. Interest shall be calculated on the basis of a 360-day year and shall accrue daily commencing on the Original Issue Date until payment in full of the principal sum, together with all accrued and unpaid interest and other amounts which may become due hereunder, has been made. Interest shall cease to accrue with respect to any principal amount converted, provided that the Issuer in fact delivers the Conversion Shares within the time period required by Section 4(d)(ii). Interest hereunder will be paid to the Person in whose name this Debenture is registered on the records of the Issuer regarding registration and transfers of this Debenture (the “Debenture
Register”). 

(d)          Late Fee. All overdue accrued and unpaid interest to be paid hereunder shall entail a late fee at the rate of 18% per annum (or such lower maximum amount of interest permitted to be charged under applicable law) (“Late Fees”) that will accrue daily from the date such interest is due hereunder through and including the date of payment. 

(e)           Prepayment. Except as otherwise set forth in this Debenture, the Issuer may not prepay any portion of the principal amount of this Debenture without the prior written consent of the Holder. 

	
Section 3.

	
Registration of Transfers and Exchanges. 

(a)           Different Denominations. This Debenture is exchangeable for an equal aggregate principal amount of Debentures of different authorized denominations, as requested by the Holder surrendering the same. No service charge will be made for such registration of transfer or exchange.

(b)          Investment Representations. This Debenture has been issued subject to certain investment representations of the original Holder set forth in the Purchase Agreement and may be transferred or exchanged only in compliance with the Purchase Agreement and applicable federal and state securities laws and regulations. 

(c)           Reliance on Debenture Register. Prior to due presentment to the Issuer for transfer of this Debenture, the Issuer and any agent of either of them may treat the Person in whose name this Debenture is duly registered on the Debenture Register as the owner hereof for the purpose of receiving payment as herein provided and for all other purposes, whether or not this Debenture is overdue, and neither the Issuer nor any such agent shall be affected by notice to the contrary.

	
Section 4.

	
Conversion.

(a)           Voluntary Conversion. At any time after the Original Issue Date until this Debenture is no longer outstanding, this Debenture shall be convertible into shares of Common Stock at the option of the Holder, in whole or in part at any time and from time to time (subject to the limitations on conversion set forth in Section 4(c)). The Holder shall effect conversions by 

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delivering to the Issuer and from and after the Consolidation Date, the Company, the form of Notice of Conversion attached hereto as Annex A (a “Notice of Conversion”), specifying therein the principal amount of this Debenture to be converted and the date on which such conversion is to be effected (a “Conversion Date”). If no Conversion Date is specified in a Notice of Conversion, the Conversion Date shall be the date that such Notice of Conversion is provided hereunder. To effect conversions hereunder, the Holder shall not be required to physically surrender this Debenture to the Issuer unless the entire principal amount of this Debenture plus all accrued and unpaid interest thereon has been so converted. Conversions hereunder shall have the effect of lowering
the outstanding principal amount of this Debenture in an amount equal to the applicable conversion. The Holder and the Issuer shall maintain records showing the principal amount converted and the date of such conversions. The Issuer and from and after the Consolidation Date, the Company, shall deliver any objection to any Notice of Conversion within one Business Day of receipt of such notice. In the event of any dispute or discrepancy, the records of the Issuer shall be controlling and determinative in the absence of manifest error. The Holder and any assignee, by acceptance of this Debenture, acknowledge and agree that, by reason of the provisions of this Section 4(a), following conversion of a portion of this Debenture, the unpaid and unconverted principal amount of this Debenture may be less than the amount stated on the face hereof.

(b)          Conversion Price. The conversion price in effect on any Conversion Date shall be equal to $1.00 (subject to adjustment herein) (the “Conversion Price”).

(c)           Holder’s Restriction on Conversion. This Section 4(c) shall apply only at and during such time as the Issuer or from and after the Consolidation Date, the Company is required to file reports and other documents pursuant to Section 13(a) or 15(d) of the Exchange Act. The Issuer shall not effect or cause the effectuation of any conversion of this Debenture, and the Holder shall not have the right to convert any portion of this Debenture, pursuant to Section 4(a) or otherwise, to the extent that after giving effect to such conversion, the Holder (together with the Holder’s affiliates), as set forth on the applicable Notice of Conversion, would beneficially own in excess of 4.99% of the number of shares of the Common Stock outstanding immediately after
giving effect to such conversion. For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by the Holder and its affiliates shall include the number of shares of Common Stock issuable upon conversion of this Debenture with respect to which the determination of such sentence is being made, but shall exclude the number of shares of Common Stock that would be issuable upon (A) conversion of the remaining, nonconverted portion of this Debenture beneficially owned by the Holder or any of its affiliates and (B) exercise or conversion of the unexercised or nonconverted portion of any other securities of the Issuer or from and after the Consolidation Date, the Company (including, without limitation, any other Debentures or any warrants) subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially owned by the Holder or any of its affiliates. Except as set forth in the preceding sentence, for purposes of this Section 4(c),
beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. To the extent that the limitation contained in this section applies, the determination of whether this Debenture is convertible (in relation to other securities owned by the Holder) and of which a portion of this Debenture is convertible shall be in the sole discretion of such Holder. To ensure compliance with this restriction, the Holder will be deemed to represent to the Issuer and the Company each time it delivers a Notice 

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of Conversion that such Notice of Conversion has not violated the restrictions set forth in this paragraph and the Issuer and the Company shall have no obligation to verify or confirm the accuracy of such determination. In addition, a determination as to any group status as contemplated above shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. For purposes of this Section 4(c), in determining the number of outstanding shares of Common Stock, the Holder may rely on the number of outstanding shares of Common Stock as reflected in (x) the most recent Form 10-QSB, Form 10-KSB, Form 10-Q or Form 10-K, as the case may be, of the Issuer or the Company, as applicable, (y) a more recent public announcement by the Issuer or the Company, as applicable, or (z) any other notice by the Issuer, the Company or the Transfer Agent for the Common
Stock setting forth the number of shares of Common Stock outstanding. Upon the written or oral request of the Holder, the Issuer shall within two Trading Days confirm orally and in writing to the Holder the number of shares of Common Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Issuer and from and after the Consolidation Date, the Company, including this Debenture, by the Holder or its affiliates since the date as of which such number of outstanding shares of Common Stock was reported. The provisions of this Section 4(c) may be waived by the Holder, at the election of the Holder, upon not less than 61 days’ prior notice to the Issuer, and the provisions of this Section 4(c) shall continue to apply until such 61st day (or such later date, as determined by the Holder, as may be specified in such notice of waiver). Notwithstanding the foregoing, (i) if the Issuer
delivers an Optional Redemption Notice in accordance with Section 6(c), then the Holder may elect, on the 10th Trading Day prior to the Optional Redemption Date, to waive the provisions of this Section 4(c) for the period commencing on such 10th Trading Day prior to the Optional Redemption Date and ending on the Optional Redemption Date; (ii) if the Issuer delivers notice of a Change of Control Transaction pursuant to the first sentence of Section 6(d), then the Holder may elect, no earlier than the 10th Trading Day prior to the Change of Control Date to waive the provisions of this Section 4(c) for a period ending on the 30th Trading Day following the Change of Control Date; or (iii) if the Issuer delivers a notice pursuant to Section 5(f)(ii), then the Holder may elect, as of the applicable record or date of the applicable transaction, to waive the provisions of this Section 4(c) for a period ending on the 30th following such record or other applicable date. The provisions of this Section 4(c)
shall be implemented in a manner otherwise than in strict conformity with the terms of this Section 4(c) to correct this paragraph (or any portion hereof) which may be defective or inconsistent with the intended 4.99% beneficial ownership limitation herein contained or to make changes or supplements necessary or desirable to properly give effect to such 4.99% limitation. The limitations contained in this paragraph shall apply to a successor holder of this Debenture. The holders of Common Stock shall be third party beneficiaries of this Section 4(c) and the Issuer and from and after the Consolidation Date, the Company, may not waive this Section 4(c) without the consent of holders of a majority of its Common Stock.

	
(d)

	
Mechanics of Conversion.

(i)            Conversion Shares Issuable Upon Conversion of Principal Amount. The number of shares of Common Stock issuable upon a conversion hereunder shall be determined by the quotient obtained by dividing (x) the outstanding principal amount of this Debenture to be converted by (y) the Conversion Price.

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(ii)          Delivery of Certificate Upon Conversion. Not later than three Trading Days after any Conversion Date, the Issuer will deliver or cause to be delivered to the Holder (A) a certificate or certificates representing the Conversion Shares, which certificate shall be free of restrictive legends and trading restrictions (other than those required by the Purchase Agreement) representing the number of shares of Common Stock being acquired upon the conversion of this Debenture and (B) a bank check in the amount of accrued and unpaid interest. The Issuer shall, if available and if allowed under applicable securities laws, use its best efforts to deliver any certificate or certificates required to be delivered by Issuer under this Section electronically through the Depository Trust
Corporation or another established clearing corporation performing similar functions. 

(iii)         Failure to Deliver Certificates. If in the case of any Notice of Conversion such certificate or certificates are not delivered to or as directed by the applicable Holder by the third Trading Day after a Conversion Date, the Holder shall be entitled by written notice to the Issuer and from and after the Consolidation Date, the Company, at any time on or before its receipt of such certificate or certificates thereafter, to rescind such conversion, in which event the Issuer shall immediately return the certificates representing the principal amount of this Debenture tendered for conversion. 

(iv)         Obligation Absolute; Partial Liquidated Damages. If the Issuer or, from and after the Consolidation Date, the Company, fails for any reason to deliver to the Holder such certificate or certificates pursuant to Section 4(d)(ii) by the third Trading Day after the Conversion Date, the Issuer shall pay to such Holder, in cash, as liquidated damages and not as a penalty, for each $1000 of principal amount being converted, $10 per Trading Day (increasing to $20 per Trading Day after five Trading Days after such damages begin to accrue) for each Trading Day after such third Trading Day until such certificates are delivered. The obligations to issue and deliver the Conversion Shares upon conversion of this Debenture in accordance with the terms hereof are absolute and unconditional,
irrespective of any action or inaction by the Holder to enforce the same, any waiver or consent with respect to any provision hereof, the recovery of any judgment against any Person or any action to enforce the same, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged breach by the Holder or any other Person of any obligation to the Issuer or, from and after the Consolidation Date, the Company, any violation or alleged violation of law by the Holder or any other person, and irrespective of any other circumstance which might otherwise limit such obligation of the Issuer or the Company to the Holder in connection with the issuance of such Conversion Shares; provided, however, such delivery shall not operate as a waiver by the Issuer or the Company of any such action the Issuer or the Company may have against the Holder. In the event the Holder of this Debenture shall
elect to convert any or all of the outstanding principal amount hereof, the Issuer and the Company may not refuse conversion based on any claim that the Holder or any one associated or affiliated with the Holder has been engaged in any violation of law, agreement or for any other reason, unless, an injunction from a court, on notice, restraining and or enjoining conversion of all or part of this Debenture shall have been sought and obtained and the Issuer or the Company posts a surety bond for the benefit of the Holder in the amount of 150% of the principal amount of this Debenture outstanding that is subject to the injunction, which bond shall remain in effect until the completion of arbitration/litigation of the dispute and the proceeds of which shall be payable to such Holder to the extent it obtains judgment. In the absence of an injunction precluding the same, the Issuer shall cause the issuance of the Conversion Shares or, if 

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applicable, cash, upon a properly noticed conversion. Nothing herein shall limit a Holder’s right to pursue actual damages or declare an Event of Default pursuant to Section 8 herein for the Issuer’s or Company’s failure to deliver Conversion Shares within the period specified herein and such Holder shall have the right to pursue all remedies available to it at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief. The exercise of any such rights shall not prohibit the Holder from seeking to enforce damages pursuant to any other Section hereof or under applicable law.

(v)          Compensation for Buy-In on Failure to Timely Deliver Certificates Upon Conversion. In addition to any other rights available to the Holder, if the Issuer or from and after the Consolidation Date, the Company, fails for any reason to deliver to the Holder such certificate or certificates pursuant to Section 4(d)(ii) by the third Trading Day after the Conversion Date, and if after such third Trading Day the Holder is required by its brokerage firm to purchase (in an open market transaction or otherwise) Common Stock to deliver in satisfaction of a sale by such Holder of the Conversion Shares that the Holder anticipated receiving upon such conversion (a “Buy-In”), then the
Issuer or the Company, as applicable, shall (A) pay in cash to the Holder (in addition to any remedies available to or elected by the Holder) the amount by which (x) the Holder’s total purchase price (including brokerage commissions, if any) for the Common Stock so purchased exceeds (y) the product of (1) the aggregate number of shares of Common Stock that such Holder anticipated receiving from the conversion at issue multiplied by (2) the actual sale price of the Common Stock at the time of the sale (including brokerage commissions, if any) giving rise to such purchase obligation and (B) at the option of the Holder, either reissue (if surrendered) this Debenture in a principal amount equal to the principal amount of the Debenture at the time of the attempted conversion or deliver to the Holder the number of shares of Common Stock that would have been issued had the Issuer timely complied with its delivery requirements under Section 4(d)(ii). For
example, if the Holder purchases Common Stock having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted conversion of this Debenture with respect to which the actual sale price of the Conversion Shares at the time of the sale (including brokerage commissions, if any) giving rise to such purchase obligation was a total of $10,000 under clause (A) of the immediately preceding sentence, the Issuer shall be required to pay the Holder $1,000. The Holder shall provide the Issuer and the Company, if applicable, prompt written notice indicating the amounts payable to the Holder in respect of the Buy-In. Notwithstanding anything contained herein to the contrary, if a Holder requires the Issuer to make payment in respect of a Buy-In for the failure to timely deliver certificates hereunder and the Issuer timely pays in full such payment, the Issuer and the Company shall not be required to pay such Holder liquidated damages under Section
4(d)(iv) in respect of the certificates resulting in such Buy-In.

(vi)         Reservation of Shares Issuable Upon Conversion. The Issuer and from and after the Consolidation Date, the Company, covenants that it will at all times reserve and keep available out of its authorized and unissued shares of Common Stock solely for the purpose of issuance upon conversion of this Debenture and payment of interest on this Debenture, each as herein provided, free from preemptive rights or any other contingent purchase rights of persons other than the Holder (and the other holders of the Debentures), not less than such number of shares of the Common Stock as shall (subject to the terms and conditions set forth in the Purchase Agreement) be issuable (taking into account the adjustments and restrictions of Section 5) upon the conversion of the outstanding principal
amount of this 

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Debenture and payment of interest hereunder. The Issuer and from and after the Consolidation Date, the Company, covenants that all shares of Common Stock that shall be so issuable shall, upon issue, be duly and validly authorized, issued and fully paid, nonassessable and registered for public sale in accordance with the Registration Statement.

(vii)        Fractional Shares. Upon a conversion hereunder the Issuer and from and after the Consolidation Date, the Company, shall not be required to issue stock certificates representing fractions of shares of the Common Stock, but may if otherwise permitted, make a cash payment in respect of any final fraction of a share based on the VWAP at such time. If the Issuer or the Company, as applicable, elects not, or is unable, to make such a cash payment, the Holder shall be entitled to receive, in lieu of the final fraction of a share, one whole share of Common Stock.

(viii)       Transfer Taxes. The issuance of certificates for shares of the Common Stock on conversion of this Debenture shall be made without charge to the Holder hereof for any documentary stamp or similar taxes that may be payable in respect of the issue or delivery of such certificate, provided that the Issuer shall not be required to pay any tax that may be payable in respect of any transfer involved in the issuance and delivery of any such certificate upon conversion in a name other than that of the Holder of this Debenture so converted and the Issuer and from and after the Consolidation Date, the Company, shall not be required to issue or deliver such certificates unless or until the person or persons requesting the issuance thereof shall have paid to the Issuer or the Company the amount of
such tax or shall have established to the satisfaction of the Issuer that such tax has been paid.

	
Section 5.

	
Certain Adjustments.

(a)           Stock Dividends and Stock Splits. If the Issuer or the Company at any time while this Debenture is outstanding: (A) pays a stock dividend or otherwise makes a distribution or distributions on shares of Common Stock or any other equity or equity equivalent securities payable in shares of Common Stock (which, for avoidance of doubt, shall not include any shares of Common Stock issued pursuant to this Debenture), (B) subdivides outstanding shares of Common Stock into a larger number of shares, (C) combines (including by way of reverse stock split) outstanding shares of Common Stock into a smaller number of shares, or (D) issues by reclassification of shares of Common Stock any shares of capital stock of the Issuer, or the Company, as applicable, then the Conversion Price
shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding immediately before such event and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event. Any adjustment made pursuant to this Section shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification or if such adjustment is made prior to the Consolidation Date in respect of the Company, such adjustment shall be effective on the Consolidation Date.

(b)          Subsequent Equity Sales. If the Issuer at any time while this Debenture is outstanding, shall offer, sell, grant any option to purchase or offer, sell or grant any right to reprice its securities, or otherwise dispose of or issue (or announce any offer, sale, grant or any option to purchase or other disposition) any Common Stock or Common Stock Equivalents 

11

 

entitling any Person to acquire shares of Common Stock, at an effective price per share less than the then Conversion Price (such lower price, the “Base Conversion Price” and such issuances collectively, a “Dilutive Issuance”), as adjusted hereunder (if the holder of the Common Stock or Common Stock Equivalents so issued shall at any time, whether by operation of purchase price adjustments, reset provisions, floating conversion, exercise or exchange prices or otherwise, or due to warrants, options or rights per share which is issued in connection with such issuance, be entitled to receive shares of Common Stock at an effective price per share which is less than the Conversion Price, such issuance shall be deemed to have occurred for less than the Conversion Price on such date of the Dilutive Issuance), then
the Conversion Price shall be reduced to equal the Base Conversion Price. Such adjustment shall be made whenever such Common Stock or Common Stock Equivalents are issued. Notwithstanding the foregoing, no adjustment will be made under this Section 5(b) in respect of an Exempt Issuance. The Issuer shall notify the Holder in writing, no later than the Business Day following the issuance of any Common Stock or Common Stock Equivalents subject to this section, indicating therein the applicable issuance price, or applicable reset price, exchange price, conversion price and other pricing terms (such notice, the “Dilutive Issuance Notice”). For purposes of clarification, whether or not the Issuer provides a Dilutive Issuance Notice pursuant to this Section 5(b), upon the occurrence of any Dilutive Issuance, after the date of such Dilutive Issuance the Holder is entitled to receive the number of Conversion Shares based upon the Base Conversion Price,
regardless of whether the Holder accurately refers to the Base Conversion Price in the Notice of Conversion. 

(c)           Pro Rata Distributions. If the Issuer or the Company at any time while this Debenture is outstanding shall distribute to all holders of Common Stock (and not to the holders of the Debenture) evidences of its indebtedness or assets (including cash and cash or stock dividends) or rights or warrants to subscribe for or purchase any security, then in each such case the Conversion Price shall be adjusted by multiplying such Conversion Price in effect immediately prior to the record date fixed for determination of stockholders entitled to receive such distribution by a fraction of which the denominator shall be the VWAP determined as of the record date mentioned above, and of which the numerator shall be such VWAP on such record date less the then fair market value at such
record date of the portion of such assets or evidence of indebtedness so distributed applicable to one outstanding share of the Common Stock as determined by the Board of Directors in good faith. In either case the adjustments shall be described in a statement provided to the Holder of the portion of assets or evidences of indebtedness so distributed or such subscription rights applicable to one share of Common Stock. Such adjustment shall be made whenever any such distribution is made and shall become effective immediately after the record date mentioned above or if such adjustment is made prior to the Consolidation Date in respect of the Company, such adjustment shall be effective on the Consolidation Date.

(d)          Fundamental Transaction. If, at any time while this Debenture is outstanding, (A) the Issuer or from and after the Consolidation Date, the Company, effects any merger or consolidation of Issuer or the Company, as applicable, with or into another Person, (B) the Issuer or from and after the Consolidation Date, the Company, effects any sale of all or substantially all of its assets in one or a series of related transactions, (C) any tender offer or exchange offer (whether by the Issuer or from and after the Consolidation Date, the Company, or another Person) is completed pursuant to which holders of Common Stock are permitted to tender or exchange their shares for other securities, cash or property, or (D) the Issuer or from 

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and after the Consolidation Date, the Company, effects any reclassification of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property (in any such case, a “Fundamental Transaction”), then upon any subsequent conversion of this Debenture, the Holder shall have the right to receive, for each Conversion Share that would have been issuable upon such conversion immediately prior to the occurrence of such Fundamental Transaction, the same kind and amount of securities, cash or property as it would have been entitled to receive upon the occurrence of such Fundamental Transaction if it had been, immediately prior to such Fundamental Transaction, the holder of one share of Common Stock (the “Alternate Consideration”). For purposes of any such conversion, the determination of the Conversion Price shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one share of Common Stock in such Fundamental Transaction, and the Conversion Price shall be apportioned among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration. If holders of Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the Holder shall be given the same choice as to the Alternate Consideration it receives upon any conversion of this Debenture following such Fundamental Transaction. To the extent necessary to effectuate the foregoing provisions, any successor to the Issuer or from and after the Consolidation Date, the Company, or surviving entity in such Fundamental Transaction shall issue to the
Holder a new debenture consistent with the foregoing provisions and evidencing the Holder’s right to convert such debenture into Alternate Consideration. The terms of any agreement pursuant to which a Fundamental Transaction is effected shall include terms requiring any such successor or surviving entity to comply with the provisions of this paragraph (d) and insuring that this Debenture (or any such replacement security) will be similarly adjusted upon any subsequent transaction analogous to a Fundamental Transaction.

(e)           Calculations. All calculations under this Section 5 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be. For purposes of this Section 5, the number of shares of Common Stock deemed to be issued and outstanding as of a given date shall be the sum of the number of shares of Common Stock (excluding treasury shares, if any) issued and outstanding.

	
(f)

	
Notice to the Holder.

(i)            Adjustment to Conversion Price. Whenever the Conversion Price is adjusted pursuant to any of this Section 5, the Issuer shall promptly mail to each Holder a notice setting forth the Conversion Price after such adjustment and setting forth a brief statement of the facts requiring such adjustment. If the Issuer or from and after the Consolidation Date, the Company, issues a variable rate security, despite the prohibition thereof in the Purchase Agreement, the Issuer or the Company, as applicable, shall be deemed to have issued Common Stock or Common Stock Equivalents at the lowest possible conversion or exercise price at which such securities may be converted or exercised in the case of a Variable Rate Transaction (as defined in the Purchase Agreement).

(ii)          Notice to Allow Conversion by Holder. If (A) the Issuer or from and after the Consolidation Date, the Company, shall declare a dividend (or any other distribution) on the Common Stock; (B) the Issuer or from and after the Consolidation Date, the 

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Company, shall declare a special nonrecurring cash dividend on or a redemption of the Common Stock; (C) the Issuer or from and after the Consolidation Date, the Company, shall authorize the granting to all holders of the Common Stock rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights; (D) the approval of any stockholders of the Issuer or from and after the Consolidation Date, the Company, shall be required in connection with any reclassification of the Common Stock, any consolidation or merger to which the Issuer or the Company, as applicable, is a party, any sale or transfer of all or substantially all of the assets of the Issuer or the Company, as applicable, of any compulsory share exchange whereby the Common Stock is converted into other securities, cash or property; (E) the Issuer and from and after the Consolidation Date, the Company, shall authorize the
voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Issuer or the Company, as applicable; then, in each case, the Issuer or the Company, as applicable, shall cause to be filed at each office or agency maintained for the purpose of conversion of this Debenture, and shall cause to be mailed to the Holder at its last addresses as it shall appear upon the stock books of the Issuer or the Company, as applicable, at least 20 calendar days prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of the Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the date on which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become
effective or close, and the date as of which it is expected that holders of the Common Stock of record shall be entitled to exchange their shares of the Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or share exchange; provided, that the failure to mail such notice or any defect therein or in the mailing thereof shall not affect the validity of the corporate action required to be specified in such notice. Subject to the provisions of this Debenture, the Holder is entitled to convert this Debenture during the 20-day period commencing the date of such notice to the effective date of the event triggering such notice. 

	
Section 6.

	
Redemptions and Puts.

(a)           Quarterly Redemption. On each Quarterly Redemption Date, the Issuer shall redeem the Quarterly Redemption Amount plus accrued but unpaid interest, the sum of all liquidated damages and any other amounts then owing to such Holder in respect of this Debenture (the “Quarterly Redemption”). The Quarterly Redemption Amount due on each Quarterly Redemption Date shall be paid in cash only. The Holder may convert, pursuant to Section 4(a), any principal amount of this Debenture subject to a Quarterly Redemption at any time prior to the close of business on the last Trading Day prior to the Quarterly Redemption Date. Unless otherwise indicated by the Holder in the
applicable Notice of Conversion, any principal amount of this Debenture converted during the 15 Trading Days prior to the Quarterly Redemption Date until the date the Quarterly Redemption Amount is paid in full shall be first applied to the Quarterly Redemption Amount.

(b)          Redemption Procedure. The Issuer shall send a notice to all Holders of each Quarterly Redemption not less than 15 nor more than 20 Trading Days prior to the Quarterly Redemption Date. The payment of cash pursuant to a Quarterly Redemption shall be made on the Quarterly Redemption Date. If any portion of the cash payment for a Quarterly Redemption shall not be paid by the Issuer by the respective due date, interest shall accrue 

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thereon at the rate of 18% per annum (or the maximum rate permitted by applicable law, whichever is less) until the payment of the Quarterly Redemption Amount plus all amounts owing thereon is paid in full. Alternatively, if any portion of the Quarterly Redemption Amount remains unpaid after such date, the Holders subject to such redemption may elect, by written notice to the Issuer given at any time thereafter, to invalidate ab initio such redemption, notwithstanding anything herein contained to the contrary. Notwithstanding anything to the contrary in this Section 6, the Issuer’s determination to redeem in cash shall be applied among the Holders of Debentures ratably. The Holder may elect to convert the outstanding principal amount of the Debenture pursuant to
Section 4 prior to actual payment in cash for any redemption under this Section 6 by fax delivery of a Notice of Conversion to the Issuer.

(c)           IPO Put. To the extent practical, the Issuer shall give the Holders not less than 60 days prior written notice of a Initial Public Offering. Upon the occurrence of a Initial Public Offering (the date of the closing thereof being the “IPO Date”), at any time during the 60 days beginning on the IPO Date the Holder of this Debenture may require the Issuer to repurchase this Debenture, in whole or in part in integral multiples of $1,000, in cash at 200% of the principal amount to be repurchased plus accrued and unpaid interest to the repurchase date (the “IPO Put Date”), by delivering written notice thereof to the Issuer (an “IPO Put
Notice”), which notice shall indicate the principal amount of the Debenture that the Holder is electing to have redeemed by the Issuer. Upon the Issuer’s receipt of an IPO Put Notice(s) from any other Holders, the Issuer shall promptly, but in no event later than one Business Day following such receipt, notify the Holder of the Issuer’s receipt thereof. The Issuer shall deliver the IPO Price simultaneously with the closing of the Initial Public Offering if the IPO Put Notice is received prior to the consummation of such Initial Public Offering and within five Business Days after the Issuer’s receipt of such notice otherwise. Payments provided for in this Section 6(c) shall have priority to payments to Issuer stockholders, if any, in connection with any Initial Public Offering. 

(d)          Change of Control Put. To the extent practical, the Issuer shall give the Holders not less than 30 days prior written notice of a Change of Control Transaction. Upon the occurrence of a Change of Control Transaction (the date of such occurrence being the “Change of Control Date”), at any time during the 60 days beginning on the Change of Control Date the Holder of this Debenture may require the Issuer to repurchase this Debenture, in whole or in part in integral multiples of $1,000, in cash at the Change of Control Price determined pursuant to this Section 6(d) plus accrued and unpaid interest to the repurchase date (the “Change of Control Put
Date”), by delivering written notice thereof to the Issuer (a “Change of Control Put Notice”), which notice shall indicate the principal amount of the Debenture that the Holder is electing to have redeemed by the Issuer. Upon the Issuer’s receipt of a Change of Control Put Notice(s) from any other Holders, the Issuer shall promptly, but in no event later than one Business Day following such receipt, notify the Holder of the Issuer’s receipt thereof. The Issuer shall deliver the Change of Control Price simultaneously with the consummation of the Change of Control if the Change of Control Put Notice is received prior to the consummation of such Change of Control and within five Business Days after the Issuer’s receipt of such notice otherwise. Payments provided for in this Section 6(d) shall have priority to payments to Issuer or Company stockholders, as
applicable, in connection with a Change of Control. The “Change of Control Price” shall be 200% of the principal amount to be repurchased.

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Section 7.            Negative Covenants. So long as any portion of this Debenture is outstanding, the Issuer will not and from and after the Consolidation Date, the Company will not, and will not permit any of its Subsidiaries to, directly or indirectly:

(a)           enter into, create, incur, assume, guarantee or suffer to exist any indebtedness for borrowed money of any kind, including but not limited to, a guarantee, but excluding Permitted Indebtedness;

(b)          enter into, create, incur, assume or suffer to exist any liens of any kind, on or with respect to any of its property or assets now owned or hereafter acquired or any interest therein or any income or profits therefrom except in connection with Permitted Indebtedness;

(c)           amend its certificate of incorporation, bylaws or other charter documents so as to materially and adversely affect any rights of the Holder;

(d)          repay, repurchase or offer to repay, repurchase or otherwise acquire more than a de minimis number of shares of Common Stock or Common Stock Equivalents other than to the extent permitted or required under this Debenture or the Transaction Documents;

	
 

	
(e)

	
enter into any agreement with respect to any of the foregoing; or

	
 

	
(f)

	
pay cash dividends or distributions on any equity securities.

	
 

	
Section 8.

	
Events of Default. 

	
 

					

(a)           “Event of Default”, wherever used herein, means any one of the following events (whatever the reason and whether it shall be voluntary or involuntary or effected by operation of law or pursuant to any judgment, decree or order of any court, or any order, rule or regulation of any administrative or governmental body):

(i)            any default in the payment of (A) the principal amount of, or (B) interest (including Late Fees) on, or (C) liquidated damages in respect of, any Debenture, as and when the same shall become due and payable (whether on an Interest Payment Date, Quarterly Redemption Date (whether pursuant to Section 6(a) or Section 8(b)), a Conversion Date or the Maturity Date or by acceleration or otherwise), which default, solely in the case of an interest payment or other default under clause (B) above, is not cured within five Trading Days;

(ii)          the Issuer or from and after the Consolidation Date, the Company, shall fail to observe or perform any other covenant or agreement contained in this Debenture or any other Debenture (other than a breach by the Issuer or the Company, as applicable, of its obligations to deliver shares of Common Stock to the Holder upon conversion, which breach is addressed in clause (x) below) which failure is not cured, if possible to cure, within the earlier to occur of (A) five Trading Days after written notice of such default sent by the Agent (acting upon instructions from the Required Purchasers) and (B) ten Trading Days after the Issuer or the Company, as applicable, shall become or should have become aware of such failure;

(iii)         a default or event of default (subject to any grace or cure period provided for in the applicable agreement, document or instrument) shall occur under (A) any of the Transaction Documents, or (B) any other material agreement, lease, document or instrument 

16

 

to which the Issuer or from and after the Consolidation Date, the Company, is bound, where such default or event of default is not cured, if possible to cure, within the earlier to occur of (A) five Trading Days after written notice of such default sent by the Agent (acting upon instructions from the Required Purchasers) and (B) ten Trading Days after the Issuer or the Company, as applicable, shall become or should have become aware of such failure;

(iv)         any representation or warranty made herein, in any other Transaction Document, in any written statement pursuant hereto or thereto, or in any other report, financial statement or certificate made or delivered to the Agent, the Holder or any other holder of Debentures by the Issuer or the Company, as applicable, shall be untrue or incorrect in any material respect as of the date when made or deemed made;

(v)          (1) the Issuer or from and after the Consolidation Date, the Company or any of its Subsidiaries, shall commence a case, as debtor, a case under any applicable bankruptcy or insolvency laws as now or hereafter in effect or any successor thereto, or the Issuer, or from and after the Consolidation Date, the Company or any Subsidiary commences any other proceeding under any reorganization, arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction whether now or hereafter in effect relating to the Issuer; or (2) there is commenced a case against the Issuer, or from and after the Consolidation Date, the Company or any Subsidiary, under any applicable bankruptcy or insolvency laws, as now or hereafter in effect or any successor thereto
which remains undismissed for a period of 60 days; or (3) the Issuer, or from and after the Consolidation Date, the Company or any Subsidiary is adjudicated by a court of competent jurisdiction insolvent or bankrupt or any order of relief or other order approving any such case or proceeding is entered; or (4) the Issuer, or from and after the Consolidation Date, the Company or any Subsidiary suffers any appointment of any custodian or the like for it or any substantial part of its property that continues undischarged or unstayed for a period of 60 days; or (5) the Issuer, or from and after the Consolidation Date, the Company or any Subsidiary makes a general assignment for the benefit of creditors; or (6) the Issuer, or from and after the Consolidation Date, the Company or any Subsidiary shall fail to pay, or shall state that it is unable to pay, or shall be unable to pay, its debts generally as they become due; or (7) the Issuer, or from and after the Consolidation Date, the Company or any Subsidiary
thereof shall call a meeting of its creditors with a view to arranging a composition, adjustment or restructuring of its debts; or (8) the Issuer, or from and after the Consolidation Date, the Company or any Subsidiary shall by any act or failure to act expressly indicate its consent to, approval of or acquiescence in any of the foregoing; or (9) any corporate or other action is taken by the Issuer or from and after the Consolidation Date, the Company or any Subsidiary for the purpose of effecting any of the foregoing;

(vi)         the Issuer or from and after the Consolidation Date, the Company or any of its Subsidiaries, shall default in any of its material obligations under any mortgage, credit agreement or other facility, indenture agreement, factoring agreement or other instrument under which there may be issued, or by which there may be secured or evidenced, any indebtedness for borrowed money or money due under any long term leasing or factoring arrangement of any of them in an amount exceeding $75,000 ($150,000 in the case of the Company), whether such indebtedness now exists or shall hereafter be created and such default shall result in such indebtedness becoming or being declared due and payable prior to the date on which it would otherwise become due and payable; 

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(vii)        from and after the Consolidation Date, the Common Stock shall not be eligible for quotation on or quoted for trading on a Trading Market and shall not again be eligible for and quoted or listed for trading thereon within seven Trading Days;

(viii)       from and after the Consolidation Date, a Registration Statement shall not have been declared effective by the Commission on or prior to the 120th calendar day after the Consolidation Date; 

(ix)          if, during the Effectiveness Period (as defined in the Registration Rights Agreement), the effectiveness of the Registration Statement lapses for any reason or the Holder shall not be permitted to resell Registrable Securities (as defined in the Registration Rights Agreement) under the Registration Statement, in either case, for more than 10 consecutive Trading Days or 15 non-consecutive Trading Days during any 12 month period; provided, however, that in the event that registrant thereof, is negotiating a Fundamental Transaction and in the written opinion of counsel to such registrant, the Registration Statement would be required to be amended to include information concerning such transactions or the
parties thereto that is not available or may not be publicly disclosed at the time, the registrant thereof shall be permitted an additional 10 consecutive Trading Days or 15 non-consecutive Trading Days during any 12 month period relating to such an event; and

(x)           the Issuer or from and after the Consolidation Date, the Company, shall fail for any reason within its control to deliver certificates to a Holder prior to the seventh Trading Day after a Conversion Date pursuant to and in accordance with Section 4(d) or Section 6(c) or the Issuer or the Company, as applicable, shall provide notice to the Holder, including by way of public announcement, at any time, of its intention not to comply with requests for conversions of any Debentures in accordance with the terms hereof.

Within two Business Days after the occurrence of any Event of Default, the Issuer shall deliver written notice thereof via facsimile and overnight courier to the Agent and the Holders.

(b)          Declaration of Event of Default; Remedies. If any Event of Default occurs, the Agent, upon receiving the written elections of the Required Purchasers, may declare such Event of Default and may elect that the full principal amount of this Debenture and the other outstanding Debentures, together with interest and other amounts owing in respect thereof shall (i) become immediately due and payable in cash in an aggregate amount equal to the Mandatory Default Amount or (ii) remain outstanding and continue to be paid in the ordinary course except that the Quarterly Redemption Amount with respect to all outstanding Debentures shall become 12% of the original principal amount of all Debentures. Commencing five days after the occurrence of any Event of Default that results in the
eventual acceleration of this Debenture, the interest rate on this Debenture shall accrue at the rate of 18% per annum, or such lower maximum amount of interest permitted to be charged under applicable law. Upon the payment in full of the Mandatory Default Amount on this entire Debenture, the Holder shall promptly surrender this Debenture to or as directed by the Issuer. Neither the Agent nor any Holder need provide, and the Issuer and from and after the Consolidation Date, the Company, hereby waive any presentment, demand, protest or other notice of any kind, and the Agent may immediately and without expiration of any grace period enforce any and all of its rights and remedies hereunder and under any Security Document and all other remedies available to it under applicable law. No rescission or annulment of any Event of Default by the Agent (acting 

18

 

upon instructions of the Required Purchasers) shall affect any subsequent Event of Default or impair any right consequent thereon.

Section 9.            Security Interest. The Debentures are ratably secured by the STAC Security Agreement dated as of October 31, 2005 between the Issuer and the Agent (together with all amendments and supplements thereto, the “Security Agreement”) and by the related financing statements and certain other instruments as provided in the Security Agreement. Reference is hereby made to the Security Agreement for a description of the collateral thereby pledged and assigned, the nature and extent of the security for the Debentures, and the rights of the Agent, on behalf of the Holders, in respect of such security and otherwise.

Section 10.         Consolidation. Upon the achievement or satisfaction of the Consolidation Milestones and the effectiveness of the Consolidation on the Consolidation Date (as each of those terms is defined and described in the Purchase Agreement), the terms and conditions of this Debenture shall automatically and without any further action on the part of the Issuer, the Company, any Holder or the Agent, be amended, modified and/or supplemented in accordance with the terms of Appendix A to this Debenture. Reference is hereby made to the Purchase Agreement for additional information relating to the Consolidation and related transactions.

Section 11.         Concerning the Agent. The rights and obligations of the Agent under this Debenture are subject to the terms and conditions of the Purchase Agreement and in particular Section 4.20 thereof. Reference is hereby made to the Purchase Agreement for additional information relating to those rights and obligations.

	
Section 12.

	
Miscellaneous. 

(a)           Notices. Any and all notices or other communications or deliveries to be provided by the Holder hereunder, including, without limitation, any Notice of Conversion, shall be in writing and delivered personally, by facsimile, sent by a nationally recognized overnight courier service, addressed to the Issuer, at the address set forth above, facsimile number 727-576-7790 Attn: Chief Executive Officer, and from and after the Consolidation Date, to the Company, at 6700 North Andrews Avenue, Fort Lauderdale, Florida 33309, facsimile number: 954-202-6002, Attn: Chief Executive Officer, or such other address or facsimile number as the Issuer or the Company may specify for such purposes
by notice to the Holder delivered in accordance with this Section; and all notices or other communications or deliveries to be provided hereunder shall be in writing and delivered personally, by facsimile, or sent by a nationally recognized overnight courier service addressed to each Holder at the facsimile telephone number or address of such Holder appearing on the books of the Issuer, or if no such facsimile telephone number or address appears, at the principal place of business of the Holder. Copies of any and all notices or other communications by the Holder, the Issuer or the Company hereunder shall also be delivered to the Agent personally, by facsimile, or sent by a nationally recognized overnight courier service at 1314 King Street, Wilmington, Delaware 19801, facsimile number: 302-421-9015, or to such other address or facsimile number as the Agent may specify for such purposes by notice to the Holders, the Issuer and the Company delivered in accordance with this Section. Any notice or other
communication or deliveries hereunder shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile telephone number specified in this Section prior to 5:30 p.m. (New York City time), (ii) the date after the date of transmission, if 

19

 

such notice or communication is delivered via facsimile at the facsimile telephone number specified in this Section later than 5:30 p.m. (New York City time) on any date and earlier than 11:59 p.m. (New York City time) on such date, (iii) the second Business Day following the date of mailing, if sent by nationally recognized overnight courier service, or (iv) upon actual receipt by the party to whom such notice is required to be given.

(b)          Absolute Obligation. Except as expressly provided herein, no provision of this Debenture shall alter or impair the obligation of the Issuer, which is absolute and unconditional, to pay the principal of, interest and liquidated damages (if any) on, this Debenture at the time, place, and rate, and in the coin or currency, herein prescribed. This Debenture is a direct debt obligation of the Issuer. This Debenture ranks pari passu with all other Debentures now or hereafter issued under the terms set forth herein. 

(c)           Lost or Mutilated Debenture. If this Debenture shall be mutilated, lost, stolen or destroyed, the Issuer shall execute and deliver, in exchange and substitution for and upon cancellation of a mutilated Debenture, or in lieu of or in substitution for a lost, stolen or destroyed Debenture, a new Debenture for the principal amount of this Debenture so mutilated, lost, stolen or destroyed but only upon receipt of evidence of such loss, theft or destruction of such Debenture, and of the ownership hereof, and indemnity, if requested, all reasonably satisfactory to the Issuer.

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

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(e)           Waiver. Any waiver by the Issuer or the Holder of a breach of any provision of this Debenture shall not operate as or be construed to be a waiver of any other breach of such provision or of any breach of any other provision of this Debenture. The failure of any party to insist upon strict adherence to any term of this Debenture on one or more occasions shall not be considered a waiver or deprive that party of the right thereafter to insist upon strict adherence to that term or any other term of this Debenture. Any waiver must be in writing.

(f)           Severability. If any provision of this Debenture is found to be invalid, illegal or unenforceable, the balance of this Debenture shall remain in effect, and if any provision is inapplicable to any person or circumstance, it shall nevertheless remain applicable to all other persons and circumstances. If it shall be found that any interest or other amount deemed interest due hereunder violates applicable laws governing usury, the applicable rate of interest due hereunder shall automatically be lowered to equal the maximum permitted rate of interest. The Issuer covenants (to the extent that it may lawfully do so) that it shall not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law or other
law which would prohibit or forgive the Issuer from paying all or any portion of the principal of or interest on this Debenture as contemplated herein, wherever enacted, now or at any time hereafter in force, or which may affect the covenants or the performance of this Debenture, and the Issuer (to the extent it may lawfully do so) hereby expressly waives all benefits or advantage of any such law, and covenants that it will not, by resort to any such law, hinder, delay or impede the execution of any power herein granted to the Holder, but will suffer and permit the execution of every such power as though no such law has been enacted.

(g)           Next Business Day. Whenever any payment or other obligation hereunder shall be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day.

(h)          Headings. The headings contained herein are for convenience only, do not constitute a part of this Debenture and shall not be deemed to limit or affect any of the provisions hereof.

(i)            Assumption. Any successor to the Issuer or surviving entity in a Fundamental Transaction shall, if this Debenture remains outstanding after such Fundamental Transaction, (i) assume in writing all of the obligations of the Issuer under this Debenture and the other Transaction Documents pursuant to written agreements in form and substance satisfactory to the Holder (such approval not to be unreasonably withheld or delayed) prior to such Fundamental Transaction and (ii) to issue to the Holder a new debenture of such successor entity evidenced by a written instrument substantially similar in form and substance to this Debenture, including, without limitation, having a principal amount and interest rate equal to the principal amounts and the interest rates of the
Debentures held by the Holder and having similar ranking to this Debenture, and satisfactory to the Holder (any such approval not to be unreasonably withheld or delayed). The provisions of this Section 12(i) shall apply similarly and equally to successive Fundamental Transactions and shall be applied without regard to any limitations of this Debenture.

 

[Signature Page Follows]

21

 

 

IN WITNESS WHEREOF, the Issuer has caused this Debenture to be duly executed by a duly authorized officer as of the date first above indicated.

 

 

	
SENDTEC ACQUISITION CORP.

 

 

	
By:__________________________________

Name:

Title:

 

 

RelationServe Media, Inc. (the “Company”), a Delaware corporation, agrees, effective from and after the Consolidation Date only, to be bound by all provisions of this Debenture, jointly and severally with the Issuer, and in particular to comply with all provisions relating to issuance of shares of Common Stock of the Company as payment of interest on the Debentures and conversion of the Debentures into shares of Common Stock of the Company, including without limitation the provisions of Sections 2, 4, 5 and 6.

 

	
RELATIONSERVE MEDIA, INC.

 

 

	
By:__________________________________

Name:

Title:

 

 

22

 

SENDTEC ACQUISITION CORP.

SENIOR SECURED CONVERTIBLE DEBENTURE

 

APPENDIX A

Effective automatically at 5 p.m. (New York City time) on the Consolidation Date, the following terms will apply to the foregoing Debenture as if set forth in full therein:

	
1.

	
Section 1 shall be amended to add the following definitions:

“Corporate Milestones” means, as of a date in question, (i) all of the outstanding Common Stock is listed for trading on the Nasdaq SmallCap Market, the New York Stock Exchange or the Nasdaq National Market and (ii) for 20 of the 30 consecutive Trading Days immediately prior to such date, which 30 consecutive Trading Day period shall not have commenced until after the Effective Date, (A) the average daily trading volume of the Common Stock on such market or exchange shall be equal to at least $750,000 and (B) the VWAP shall equal or exceed 200% of the Market Price. 

“Equity Conditions” shall mean, during the period in question, (i) the Company and the Issuer shall have duly honored all conversions and redemptions and puts, if any, scheduled to occur or occurring by virtue of one or more Notice of Conversions of the Holder or other appropriate notice, (ii) all liquidated damages and other amounts owing to the Holder in respect of this Debenture shall have been paid; (iii) there is an effective Registration Statement pursuant to which the Holder is permitted to utilize the prospectus thereunder to resell all of the shares issuable pursuant to the Transaction Documents (and the Company believes, in good faith, that such effectiveness will continue uninterrupted for the foreseeable future), (iv) the Common Stock is trading on the Trading Market and all of the shares of Common Stock issuable
pursuant to the Transaction Documents are listed for trading on a Trading Market (and the Company believes, in good faith, that trading of the Common Stock on a Trading Market will continue uninterrupted for the foreseeable future), (v) there is a sufficient number of authorized but unissued and otherwise unreserved shares of Common Stock for the issuance of all of the shares of Common Stock issuable pursuant to the Transaction Documents, (vi) there is then existing no Event of Default or event that, with the passage of time or the giving of notice, would constitute an Event of Default, (vii) the issuance of the shares in question (or, in the case of a redemption, the shares issuable upon conversion in full of the principal amount of the Debentures being redeemed) to the Holder would not violate the limitations set forth in Section 4(c) and (viii) no public announcement of a pending or proposed Fundamental Transaction or Change of Control Transaction has occurred that has not been
consummated.

“Interest Conversion Rate” means the lesser of (a) the Conversion Price and (b) 93% of the lesser of (i) the average of the VWAPs for the five Trading Days immediately prior to the applicable Interest Payment Date or (ii) the average of the VWAPs for the five Trading Days immediately prior to the date the applicable Interest Conversion Shares are issued and delivered if after the Interest Payment Date.

A-1

 

 

“Interest Conversion Shares” shall have the meaning set forth in Section 2(a).

“Interest Make-whole Quantity” means, with respect to any Interest Payment Date for which the Company elects to pay interest in shares of Common Stock as provided in Section 2, a number of shares of Common Stock equal to the difference between (i) the Interest Share Amount for such Interest Payment Date divided by the applicable Interest Make-whole Rate, minus (ii) the actual number of Interest Conversion Shares paid on the Interest Payment Date. 

“Interest Make-whole Rate” means, with respect to any Interest Payment Date for which the Company elects to pay interest in shares of Common Stock as provided in Section 2, the average of the VWAPs for the ten Trading Days immediately following such Interest Payment Date.

“Interest Make-whole Trigger” means, with respect to any Interest Payment Date for which the Company elects to pay interest in shares of Common Stock as provided in Section 2, that the Interest Conversion Rate used to determine such Interest Conversion Shares exceeds the related Interest Make-whole Rate.

“Interest Notice Period” shall have the meaning set forth in Section 2(a).

“Interest Share Amount” shall have the meaning set forth in Section 2(a).

“Market Price” means the closing bid price for the Common Stock of the Company on the principal Trading Market on the Original Issue Date.

“Optional Redemption Date” shall have the meaning set forth in Section 6(c) hereof.

“Optional Redemption Notice” shall have the meaning set forth in Section 6(c) hereof.

“Optional Redemption Price” shall mean the sum of (i) the then outstanding principal amount of this Debenture, (ii) accrued but unpaid interest through the Optional Redemption Date, (iii) the interest payments, not yet accrued, but that would be payable through the Maturity Date, and (iv) all liquidated damages and other amounts due in respect of the Debenture.

“Qualified Offering” means a private or public offering of Common Stock or Common Stock Equivalents where the gross proceeds to the Company equal or exceed $25 million and the effective price per share equals or exceeds twice the Conversion Price.

	
2.

	
Sections 2(a) - (d) are amended to read in their entirety as follows:

	
Section 2.1

	
Interest.

	
 

				

(a)           Payment of Interest in Cash or Kind. The Issuer shall pay interest to the Holder on the aggregate unconverted and then outstanding principal amount of this Debenture at 

A-2

 

the rate of 6% per annum, payable quarterly on February 1, May 1, August 1 and November 1, commencing February 1, 2006, on each Quarterly Redemption Date (as to that principal amount then being redeemed), on each Conversion Date (as to that principal amount then being converted), on each Optional Redemption Date (as to that principal amount being redeemed), on each Change of Control Put Date (as to that principal amount then being repurchased) and on the Maturity Date (except that, if any such date is not a Business Day, then such payment shall be due on the next succeeding Business Day) (each such date, an “Interest Payment Date”), in cash or except in the case of interest paid on the Optional Redemption Date or any change of Control Put Date, shares of Common Stock at the Interest Conversion Rate, or a combination thereof (the amount of any interest to be paid in
shares, the “Interest Share Amount”); provided, however, payment in shares of Common Stock may only occur if during the 20 Trading Days immediately prior to the applicable Interest Payment Date (the “Interest Notice Period”) and through and including the date such shares of Common Stock are issued to the Holder: (x) all of the Equity Conditions, unless waived by the Agent (in accordance with instructions from the Required Purchasers) in writing, have been met, (y) the average daily trading volume of the Common Stock on such market or exchange shall be equal to at least $400,000 and (z) the Issuer shall have given the Holder notice in accordance with the notice requirements set forth below. On an Interest Payment Date, the number of shares to be delivered, if any, shall equal the quotient of (x)
the applicable Interest Share Amount divided by (y) the then Interest Conversion Rate (the “Interest Conversion Shares”). Not more than five Trading Days prior to the commencement of an Interest Notice Period for which the Company is electing to deliver Interest Conversion Shares, the Company shall deliver to the Holder’s account with The Depository Trust Company a number of shares of Common Stock to be applied against such Interest Share Amount equal to the quotient of (x) the applicable Interest Share Amount divided by (y) the then Conversion Price (the “Preliminary Interest Conversion Shares”) and on the applicable Interest Payment Date, the Company shall deliver the difference, if any, between the Interest Conversion Shares and the Preliminary Interest Conversion Shares to the Holder’s Account with The Depository Trust Company. If there is an Interest Make-whole Trigger for
any Interest Payment Date for which the Company has delivered Interest Conversion Shares, the Issuer shall pay to the Holder not later than the 15th Trading Day after such Interest Payment Date, the number of shares of Common Stock equal to the applicable Interest Make-whole Quantity. 

(b)          Issuer’s Election to Pay Interest in Kind. Subject to the terms and conditions herein, the decision whether to pay interest hereunder in shares of Common Stock or cash shall be at the discretion of the Company. Prior to the commencement of an Interest Notice Period, the Issuer and the Company shall provide the Holder with ten days’ written notice of their election to pay interest hereunder on the applicable Interest Payment Date either in cash, shares of Common Stock (if permitted) or a combination thereof (they may indicate in such notice that the election contained in such notice shall continue for later periods until revised) and the Interest Share Amount as to the applicable Interest Payment Date. During any Interest Notice Period, the Company’s election
(whether specific to an Interest Payment Date or continuous) shall be irrevocable as to such Interest Payment Date. Subject to the aforementioned conditions, failure to timely provide such written notice shall be deemed an election to pay the interest on such Interest Payment Date in cash. At any time the Issuer and the Company deliver a notice to the Holder electing to pay the interest in shares of Common Stock, the Company shall file a prospectus supplement pursuant to Rule 424 disclosing such election. 

A-3

 

 

(c)           Interest Calculations. Interest shall be calculated on the basis of a 360-day year and shall accrue daily commencing on the Original Issue Date until payment in full of the principal sum, together with all accrued and unpaid interest and other amounts which may become due hereunder, has been made. Payment of interest in shares of Common Stock (other than the Interest Conversion Shares issued prior to an Interest Notice Period) shall otherwise occur pursuant to Section 4(d)(ii) and only for purposes of the payment of interest in shares, the Interest Payment Date shall be deemed the Conversion Date. Interest shall cease to accrue with respect to any principal amount converted, provided that the Company in fact delivers the Conversion Shares within the time period required
by Section 4(d)(ii). Interest hereunder will be paid to the Person in whose name this Debenture is registered on the records of the Issuer regarding registration and transfers of this Debenture (the “Debenture Register”). Except as otherwise provided herein, if at any time the Issuer pays interest partially in cash and partially in shares of Common Stock to the holders of the Debentures, then such payment shall be distributed ratably among the holders of the Debentures based on their (or predecessors’) initial purchases of Debentures pursuant to the Purchase Agreement.

(d)          Late Fee. All overdue accrued and unpaid interest to be paid hereunder shall entail a late fee at the rate of 18% per annum (or such lower maximum amount of interest permitted to be charged under applicable law) (“Late Fees”) that will accrue daily from the date such interest is due hereunder through and including the date of payment. Notwithstanding anything to the contrary contained herein, if on any Interest Payment Date the Issuer and the Company have elected to pay interest in Common Stock and are not able to pay accrued interest in the form of Common Stock because it does not then satisfy the conditions for payment in the form of Common Stock set forth above, then, at the option of the Holder, the Issuer, in lieu
of delivering either shares of Common Stock pursuant to this Section 2 or paying the regularly scheduled cash interest payment, shall deliver on the applicable Interest Payment Date, an amount in cash equal to the product of the number of shares of Common Stock otherwise deliverable to the Holder in connection with the payment of interest due on such Interest Payment Date and the highest VWAP during the period commencing on the Interest Payment Date and ending on the Trading Day prior to the date such payment is made. If any Interest Conversion Shares are issued to the Holder in connection with an Interest Payment Date and are not applied against an Interest Share Amount, then the Holder shall promptly return such excess shares to the Issuer.

3.            The Conversion Price set forth in Section 4(b) shall be $1.50 (subject to adjustment as provided herein, with such first adjustment, if any, to be calculated from the Original Issue Date to the Consolidation Date).

	
4.

	
Section 4(d)(ii) is amended to read in its entirety as follows:

(ii)          Delivery of Certificate Upon Conversion. Not later than three Trading Days after any Conversion Date, the Company will deliver or cause to be delivered to the Holder (A) a certificate or certificates representing the Conversion Shares, which certificate shall be free of restrictive legends and trading restrictions (other than those required by the Purchase Agreement) representing the number of shares of Common Stock being acquired upon the conversion of this Debenture (including, if the Issuer and the Company have given continuous notice pursuant to Section 2(b) for payment of interest in shares of Common Stock at least 20 Trading Days prior to the date on which the Conversion Notice is delivered to the 

A-4

 

Company, shares of Common Stock representing the payment of accrued interest otherwise determined pursuant to Section 2(a) but assuming that the Interest Payment Period is the 20 Trading Days period immediately prior to the date on which the Conversion Notice is delivered to the Company and excluding for such issuance the condition that the Company deliver Interest Conversion Shares as to such interest payment) and (B) a bank check in the amount of accrued and unpaid interest not otherwise paid in Interest Conversion Shares (if the Company is required to pay accrued interest in cash). The Company shall, if available and if allowed under applicable securities laws, use its best efforts to deliver any certificate or certificates required to be delivered by the Company under this Section electronically through the Depository Trust Corporation or another established clearing corporation performing similar functions.

	
5.

	
Section 5(b) is amended to read in its entirety as follows:

(b)          Subsequent Equity Sales. If the Company or any Subsidiary thereof, as applicable, at any time while this Debenture is outstanding, shall offer, sell, grant any option to purchase or offer, sell or grant any right to reprice its securities, or otherwise dispose of or issue (or announce any offer, sale, grant or any option to purchase or other disposition) any Common Stock or Common Stock Equivalents entitling any Person to acquire shares of Common Stock, at an effective price per share less than the then Conversion Price (such lower price, the “Base Conversion Price” and such issuances collectively, a “Dilutive Issuance”), as adjusted hereunder (if the holder of
the Common Stock or Common Stock Equivalents so issued shall at any time, whether by operation of purchase price adjustments, reset provisions, floating conversion, exercise or exchange prices or otherwise, or due to warrants, options or rights per share which is issued in connection with such issuance, be entitled to receive shares of Common Stock at an effective price per share which is less than the Conversion Price, such issuance shall be deemed to have occurred for less than the Conversion Price on such date of the Dilutive Issuance), then (i) if such issuance occurs during the period from the Original Issue Date until the later of (A) the 18 month anniversary of the Consolidation Date and (B) the closing date of a Qualified Offering, the Conversion Price shall be reduced to equal the Base Conversion Price, and (ii) if such issuance occurs thereafter until this Debenture is no longer outstanding, the Conversion Price shall be reduced and only reduced by multiplying the Conversion Price by a
fraction, the numerator of which is the number of shares of Common Stock issued and outstanding immediately prior to the Dilutive Issuance plus the number of shares of Common Stock which the offering price for such Dilutive Issuance would purchase at the then Conversion Price, and the denominator of which shall be the sum of the number of shares of Common Stock issued and outstanding immediately prior to the Dilutive Issuance plus the number of shares of Common Stock so issued or issuable in connection with the Dilutive Issuance (such fractional result, the “Average Conversion Price”). Such adjustment shall be made whenever such Common Stock or Common Stock Equivalents are issued. Notwithstanding the foregoing, no adjustment will be made under this Section 5(b) in respect of an Exempt Issuance. The Issuer shall notify the Holder in writing, no later than the Business Day following the issuance of any Common Stock or Common Stock Equivalents
subject to this section, indicating therein the applicable issuance price, or applicable reset price, exchange price, conversion price and other pricing terms (such notice, the “Dilutive Issuance Notice”). For purposes of clarification, whether or not the Issuer provides a Dilutive Issuance Notice pursuant to this Section 5(b), upon the occurrence of any Dilutive Issuance, after the date of such Dilutive Issuance the Holder is entitled to receive the number of Conversion Shares based upon the Base Conversion Price or the Average Conversion 

A-5

 

Price, as applicable, regardless of whether the Holder accurately refers to the Base Conversion Price or the Average Conversion Price, as applicable, in the Notice of Conversion. 

	
6.

	
Section 6(c) is amended to read in its entirety as follows:

(c)           Optional Redemption. Notwithstanding anything herein to the contrary, after the first anniversary of the Consolidation Date, the Issuer may redeem the then outstanding principal amount of all the Debentures then outstanding in whole and not in part at the Optional Redemption Price; provided that as of the date the Issuer provides notice of such optional redemption (the “Optional Redemption Notice”) and as of the date set for redemption (the “Optional Redemption Date”), the Company has achieved the Corporate Milestones and all Equity Conditions are satisfied. The Issuer shall provide the Optional Redemption Notice not less than 15 nor more than 20 Trading
Days prior to the Optional Redemption Date. On the Optional Redemption Date, the Issuer shall pay the Optional Redemption Price in cash to the Holders. The Holder may convert, pursuant to Section 4(a), any principal amount of this Debenture at any time prior to the close of business on the last Trading Day prior to the Optional Redemption Date.

	
7.

	
The definition of “Change of Control Price” set forth in Section 6(d) is amended to read in its entirety as follows:

The “Change of Control Price” shall be 120% of the principal shall be 120% of the principal amount to be repurchased if the Change of Control Date occurs after the Original Issue Date and before the first anniversary of the Consolidation Date; 115% of the principal amount to be repurchased if the Change of Control Date occurs on or after the first but before the second anniversary of the Consolidation Date; 110% of the principal amount to be repurchased if the Change of Control Date occurs on or after the second but before the third anniversary of the Consolidation Date; and 105% of the principal amount to be repurchased if the Change of Control Date occurs thereafter. 

	
8.

	
Section 10 is amended to read in its entirety as follows:

Section 10. General Continuing Guaranty. The due and punctual payment of the principal of, and interest on, the amounts owed by the Issuer under this Debenture and the other Debentures, and the due and punctual payment of all other obligations owed by the Company, the Issuer or any other Subsidiary of the Company pursuant to the Transaction Documents, are jointly and severally guarantied by the Company and the Subsidiaries (other than the Issuer) pursuant to the Transaction Guaranty in favor of the Holders and the Agent. The obligations of the Company and the Subsidiaries hereunder and under the Transaction Guaranty are ratably secured by the Guarantor Security Agreement dated as of the date
hereof among the Issuer, the Company, the other grantors party thereto and the Agent (together with all amendments and supplements thereto, the “Guarantor Security Agreement”). Reference is hereby made to (i) the Transaction Guaranty for a description of the obligations guarantied thereunder, the conditions of such Guaranty, and the rights of the Holders and the Agent in respect thereof and (ii) the Guarantor Security Agreement for a description of the collateral thereby pledged and assigned, the nature and extent of the security for the Debentures, and the rights of the Holders in respect of such security and otherwise.

A-6EXHIBIT 10.3

STAC SECURITY AGREEMENT

This STAC SECURITY AGREEMENT (this “Agreement”), dated as of October 31, 2005, is made among the Grantor listed on the signature pages hereof and those additional entities that hereafter become parties hereto by executing the form of Supplement attached hereto as Annex 1 (collectively, jointly and severally, “Grantors” and each individually “Grantor”), and Christiana Corporate Services, Inc., a Delaware corporation, in its capacity as administrative agent for the Holders (together with its successors and assigns in such capacity, “Agent”).

WHEREAS, pursuant to the Securities Purchase Agreement (the “Purchase Agreement”) dated as of the date hereof, among RelationServe Media, Inc. (“RSM”), SendTec Acquisition Corp. (“STAC”) and the purchasers party thereto, and the Senior Secured Convertible Debentures (the “Debentures”) issued by STAC pursuant to the Purchase Agreement, the Holders have severally agreed to extend the loans evidenced by the Debentures (the “Loans”) to STAC; 

WHEREAS, pursuant to the Purchase Agreement, Agent has agreed to act as agent for the benefit of the Holders in connection with this Agreement; and

WHEREAS, in order to induce the Agent and the Holders to enter into the Purchase Agreement and the other Financing Documents and to extend the Loans to STAC, and in consideration thereof, and in consideration of any other financial accommodations heretofore or hereafter extended by the Holders to RSM, STAC or any of their respective Subsidiaries, whether pursuant to the Purchase Agreement, the Debentures or the other Financing Documents, Grantors have agreed to grant a continuing security interest in and to the Collateral in order to secure the prompt and complete payment, observance and performance of all Obligations of Grantors (including, without limitation, any interest, fees or expenses that accrue after the filing of an Insolvency Proceeding, regardless of whether allowed or allowable in whole or in part as a claim in any Insolvency Proceeding), plus reasonable attorneys fees and expenses if the
obligations represented thereunder are collected by law, through an attorney-at-law, or under advice therefrom (the “Secured Obligations”), by the granting of the security interests contemplated by this Agreement.

NOW, THEREFORE, for and in consideration of the recitals made above and other good and valuable consideration, the receipt, sufficiency and adequacy of which are hereby acknowledged, the parties hereto agree as follows:

1.            Defined Terms. (a) In addition to those terms defined elsewhere in this Agreement, as used in this Agreement, the following terms shall have the following meanings:

“Account” means an account (as that term is defined in the Code).

“Account Debtor” means any Person who is obligated on an Account, chattel paper, or a general intangible.

“Acquisition Documents” means the Asset Purchase Agreement dated as of August 10, 2005, as amended to date, by and between RSM or a designated subsidiary thereof, theglobe.com and SendTec, the SendTec Assignment (as such term is defined in the Purchase Agreement), and the other documents and instruments contemplated by each thereof.

 

 

 

 

 

“Acquisition Transaction” means, collectively, the transactions contemplated by the Acquisition Documents.

“Agent” has the meaning set forth in the preamble hereto.

“Agent’s Account” means the Deposit Account of Agent identified on Schedule A-1.

“Agreement” has the meaning set forth in the preamble hereto.

“Bankruptcy Code” means Title 11 of the United States Code as in effect from time to time or any similar legislation in a relevant jurisdiction.

“Books” has the meaning set forth in Section 2.

“Business Day” means any day that is not a Saturday, Sunday, or other day on which banks are authorized or required to close in the State of New York.

“Chattel Paper” has the meaning set forth in Section 2.

“Closing Date” has the meaning set forth in the Purchase Agreement.

“Code” means the New York Uniform Commercial Code, as in effect from time to time; provided, however, that in the event that, by reason of mandatory provisions of law, any or all of the attachment, perfection, priority, or remedies with respect to Agent’s Lien on any Collateral is governed by the Uniform Commercial Code as enacted and in effect in a jurisdiction other than the State of New York, the term “Code” shall mean the Uniform Commercial Code as enacted and in effect in such other jurisdiction solely for purposes of the provisions thereof relating to such attachment, perfection, priority, or remedies.

“Collateral” has the meaning set forth in Section 2.

“Collateral Access Agreement” means a landlord waiver, bailee letter, or acknowledgement agreement of any lessor, warehouseman, processor, consignee, or other Person in possession of, having a Lien upon, or having rights or interests in a Grantor’s books and records, Equipment, or Inventory, in each case, in form and substance satisfactory to Agent.

“Commercial Tort Claims” has the meaning set forth in Section 2.

“Control Agreement” means a control agreement, in form and substance satisfactory to Agent, executed and delivered by the relevant Grantor or Grantors and the applicable securities intermediary (with respect to a Securities Account) or bank (with respect to a Deposit Account).

“Copyrights” means all of the following now owned or hereafter adopted or acquired by a Grantor: copyrights and copyright registrations, including, without limitation, the copyright registrations and recordings thereof and all applications in connection therewith listed on Schedule 1 attached hereto and made a part hereof, and (i) all restorations, reversions, renewals or extensions thereof, (ii) all income, royalties, damages and payments now and hereafter due and/or payable under and with respect thereto, including, without limitation, payments under all licenses entered into in connection therewith and damages and payments for past or future infringements thereof, (iii) the right to sue for past, present and future infringements thereof, and (iv) all of each Grantor’s rights corresponding
thereto throughout the world.

 

 

	
 

	
2

 

 

 

 

“Copyright Security Agreement” means each Copyright Security Agreement among Grantors, or any of them, and Agent, for the benefit of the Holders, in substantially the form of Exhibit A attached hereto.

“Debentures” has the meaning set forth in the recitals hereto.

“Deposit Account” means a deposit account (as that term is defined in the Code).

“Dollars” or “$” means United States dollars.

“Equipment” means equipment (as that term is defined in the Code).

“Event of Default” has the meaning set forth in Section 16.

“Financing Documents” means this Agreement, the Purchase Agreement, the Debentures and any other instruments, agreements or other documents executed in connection herewith or therewith.

“General Intangibles” has the meaning set forth in Section 2.

“Governing Documents” means, with respect to any Person, the certificate or articles of incorporation, by-laws, or other organizational documents of such Person.

“Governmental Authority” means any federal, state, local, or other governmental or administrative body, instrumentality, board, department, or agency or any court, tribunal, administrative hearing body, arbitration panel, commission, or other similar governmental dispute-resolving panel or body

“Grantor” and “Grantors” have the meanings set forth in the preamble hereto.

“Grantor Trade Secrets” has the meaning set forth in Section 5(dd).

“Holders” means the holders of the Debentures from time to time, their endorsees, transferees and assigns.

“Insolvency Proceeding” means any proceeding commenced by or against any Person under any provision of the Bankruptcy Code or under any other state or federal bankruptcy or insolvency law, assignments for the benefit of creditors, formal or informal moratoria, compositions, extensions generally with creditors, or proceedings seeking reorganization, arrangement, or other similar relief and including the appointment of a trustee, receiver, administrative receiver, administrator or similar officer.

“Intellectual Property” means any and all Intellectual Property Licenses, Patents, Copyrights, Trademarks, the goodwill associated with such Trademarks, trade secrets and customer lists.

“Intellectual Property Licenses” means rights under any written agreement to which a Grantor is a party, granting any right or interest in any patent, trademark, copyright or other intellectual property, including software license agreements with any other party, whether the applicable Grantor is a licensee or licensor under any such license agreement, including, without limitation, the license agreements listed on Schedule 2 attached hereto and made a part hereof, and the right to use the foregoing in connection with the enforcement of the Holders’ rights under the Financing Documents, including, without limitation, the right to prepare for sale and sell any and all Inventory and Equipment now or hereafter owned by any Grantor and now or hereafter covered by such licenses.

 

 

	
 

	
3

 

 

 

 

“Inventory” means inventory (as that term is defined in the Code).

“Investment Related Property” means (i) investment property (as that term is defined in the Code), and (ii) all of the following regardless of whether classified as investment property under the Code: all Pledged Interests, Pledged Operating Agreements, and Pledged Partnership Agreements.

“Lien” means any interest in an asset securing an obligation owed to, or a claim by, any Person other than the owner of the asset, irrespective of whether (a) such interest is based on the common law, statute, or contract, (b) such interest is recorded or perfected, and (c) such interest is contingent upon the occurrence of some future event or events or the existence of some future circumstance or circumstances. Without limiting the generality of the foregoing, the term “Lien” includes the lien or security interest arising from a mortgage, deed of trust, encumbrance, notice of Lien, levy or assessment, pledge, hypothecation, assignment, deposit arrangement, security agreement, conditional sale or trust receipt, or from a lease, consignment, or bailment for security purposes and also includes reservations, exceptions, encroachments,
easements, rights-of-way, covenants, conditions, restrictions, leases, and other title exceptions and encumbrances affecting Real Property.

“Loans” has the meaning set forth in the recitals hereto.

“Mortgages” means, individually and collectively, one or more mortgages, deeds of trust, or deeds to secure debt, executed and delivered by a Grantor in favor of Agent, in form and substance satisfactory to Agent, that encumber the Real Property Collateral.

“Negotiable Collateral” has the meaning set forth in Section 2.

“Obligations” means all loans, advances, debts, principal, interest (including any interest that accrues after the commencement of an Insolvency Proceeding regardless of whether allowed or allowable in whole or in part as a claim in any such Insolvency Proceeding), premiums, liabilities, obligations (including indemnification obligations), fees, charges, costs, lease payments, guaranties, covenants, and duties of any kind and description owing by Grantors to the Holders and the Agent pursuant to or evidenced by the Financing Documents and irrespective of whether for the payment of money, whether direct or indirect, absolute or contingent, due or to become due, now existing or hereafter arising, and including all interest not paid when due and all other amounts that Grantors are required to pay or reimburse by the Financing Documents, by law, or
otherwise. Any reference to the Obligations shall include all or any portion thereof and any extensions, modifications, renewals, or alterations thereof, both prior and subsequent to any Insolvency Proceeding.

“Patents” means all of the following now owned or hereafter adopted or acquired by a Grantor: patents and patent applications, including, without limitation, the patents and patent applications listed on Schedule 3 attached hereto and made a part hereof, and (i) all reissues, continuations, continuations-in-part, substitutes, extensions or renewals thereof, and improvements thereon, (ii) all income, royalties, damages and payments now and hereafter due and/or payable under and with respect thereto, including, without limitation, payments under all licenses entered into in connection therewith and damages and payments for past or future infringements thereof, (iii) the right to sue for past, present and future infringements thereof, and (iv) all of each Grantor’s rights corresponding thereto
throughout the world.

“Patent Security Agreement” means each Patent Security Agreement among Grantors, or any of them, and Agent, for the benefit of the Holders, in substantially the form of Exhibit B attached hereto.

“Perfection Certificate” means the perfection certificate completed and delivered by Grantors and made part of this Agreement as Schedule 9.

 

 

	
 

	
4

 

 

 

 

“Permitted Liens” means (a) Liens held by Agent to secure the Obligations, (b) Liens for unpaid taxes, assessments, or other governmental charges or levies that are not yet delinquent, (c) judgment Liens that do not constitute an Event of Default, (d) the interests of lessors under operating leases, (e) purchase money Liens and so long as such Lien attaches only to the asset purchased or acquired and the proceeds thereof, (f) Liens arising by operation of law in favor of warehousemen, landlords, carriers, mechanics, materialmen, laborers, or suppliers, incurred in the ordinary course of any Grantor’s business and not in connection with the borrowing of money, and which Liens are for sums not yet delinquent, (g) Liens on amounts deposited in connection with obtaining worker’s compensation or other unemployment insurance, (h) Liens on
amounts deposited in connection with the making or entering into of bids, tenders, or leases in the ordinary course of business and not in connection with the borrowing of money, (i) Liens on amounts deposited as security for surety or appeal bonds in connection with obtaining such bonds in the ordinary course of business, (j) with respect to any Real Property, easements, rights of way, and zoning restrictions that do not materially interfere with or impair the use or operation thereof, and (k) non-exclusive licenses or sublicenses granted to other Persons for fair market value consideration in the ordinary course of business and not materially interfering with the conduct of the business of any Grantor.

“Person” means natural persons, corporations, limited liability companies, limited partnerships, general partnerships, limited liability partnerships, joint ventures, trusts, land trusts, business trusts, or other organizations, irrespective of whether they are legal entities, and governments and agencies and political subdivisions thereof.

“Pledged Companies” means each Person listed on Schedule 4 hereto as a “Pledged Company,” together with each other Person, all or a portion of whose Stock is acquired or otherwise owned by a Grantor after the Closing Date.

“Pledged Interests” means all of each Grantor’s right, title and interest in and to all of the Stock now or hereafter owned by such Grantor, regardless of class or designation, including, without limitation, in each of the Pledged Companies, and all substitutions therefor and replacements thereof, all proceeds thereof and all rights relating thereto, including, without limitation, any certificates representing the Stock, the right to request after the occurrence and during the continuation of an Event of Default that such Stock be registered in the name of Agent or any of its nominees, the right to receive any certificates representing any of the Stock and the right to require that such certificates be delivered to Agent together with undated powers or assignments of investment securities with respect thereto, duly endorsed in blank by such
Grantor, all warrants, options, share appreciation rights and other rights, contractual or otherwise, in respect thereof and of all dividends, distributions of income, profits, surplus, or other compensation by way of income or liquidating distributions, in cash or in kind, and cash, instruments, and other property from time to time received, receivable, or otherwise distributed in respect of or in addition to, in substitution of, on account of, or in exchange for any or all of the foregoing.

“Pledged Interests Addendum” means a Pledged Interests Addendum substantially in the form of Exhibit C to this Agreement.

“Pledged Notes” has the meaning set forth in Section 5(aa).

“Pledged Operating Agreements” means all of each Grantor’s rights, powers, and remedies under the limited liability company operating agreements of the Pledged Companies that are limited liability companies, if any.

“Pledged Partnership Agreements” means all of each Grantor’s rights, powers, and remedies under the partnership agreements of each of the Pledged Companies that are partnerships, if any.

 

 

	
 

	
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“Proceeds” has the meaning set forth in Section 2.

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

“Real Property” means any fee estates in real property now owned or hereafter acquired by Grantors and the improvements thereto.

“Real Property Collateral” means the Real Property identified on Schedule 7 and any Real Property hereafter acquired by any Grantor.

“Record” means information that is inscribed on a tangible medium or which is stored in an electronic or other medium and is retrievable in perceivable form.

“Required Holders” means the holders of 75% of the principal amount then outstanding of the Debentures; provided, however, that so long as LB I Group Inc. owns any Debentures, such holders must include LB I Group Inc.

“RSM” means RelationServe Media, Inc., a Delaware corporation.

“SEC” means the United States Securities and Exchange Commission and any successor thereto.

“Secured Obligations” has the meaning set forth in the recitals hereto.

“Security Interest” has the meaning set forth in Section 2.

“Securities Account” means a securities account (as that term is defined in the Code).

“SendTec” means SendTec, Inc., a Florida corporation.

“SendTec Assets” means the assets of SendTec being sold to STAC pursuant to the Acquisition Documents.

“Solvent” means, with respect to any Person on a particular date, that such Person is not insolvent (as such term is defined in the Uniform Fraudulent Transfer Act).

“STAC” means SendTec Acquisition Corp., a Delaware corporation.

“Stock” means all shares, options, warrants, interests, participations, or other equivalents (regardless of how designated) of or in a Person, whether voting or nonvoting, including common stock, preferred stock, or any other “equity security” (as such term is defined in Rule 3a11-1 of the General Rules and Regulations promulgated by the SEC under the Securities Exchange Act of 1934, as in effect from time to time). 

“Subsidiary” of a Person means a corporation, partnership, limited liability company, or other entity in which that Person directly or indirectly owns or controls the shares of Stock having ordinary voting power to elect a majority of the board of directors (or appoint other comparable managers) of such corporation, partnership, limited liability company, or other entity.

“Supporting Obligations” has the meaning set forth in Section 2.

“theglobe.com” means theglobe.com, inc., a Delaware corporation.

 

 

	
 

	
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“Trademarks” means all of the following now owned or hereafter adopted or acquired by a Grantor: trademarks, trade names, registered trademarks, trademark applications, service marks, registered service marks and service mark applications, including, without limitation, the trade names, registered trademarks, trademark applications, registered service marks and service mark applications listed on Schedule 5 attached hereto and made a part hereof, and (i) all extensions, modifications and renewals thereof, (ii) all income, royalties, damages and payments now and hereafter due and/or payable under and with respect thereto, including, without limitation, payments under all licenses entered into in connection therewith and damages and payments for past or future infringements or dilutions thereof, (iii)
the right to sue for past, present and future infringements and dilutions thereof, (iv) the goodwill of each Grantor’s business symbolized by the foregoing and connected therewith, and (v) all of each Grantor’s rights corresponding thereto throughout the world.

“Trademark Security Agreement” means each Trademark Security Agreement among Grantors, or any of them, and Agent, for the benefit of the Holders, in substantially the form of Exhibit D attached hereto.

“URL” means “uniform resource locator,” an internet web address.

(b)           Code. Any terms used in this Agreement that are defined in the Code shall be construed and defined as set forth in the Code unless otherwise defined herein; provided, however, that to the extent that the Code is used to define any term herein and such term is defined differently in different Articles of the Code, the definition of such term contained in Article 9 shall govern.

(c)           Construction. Unless the context of this Agreement or any other Financing Document clearly requires otherwise, references to the plural include the singular, references to the singular include the plural, the terms “includes” and “including” are not limiting, and the term “or” has, except where otherwise indicated, the inclusive meaning represented by the phrase “and/or.” The words “hereof,” “herein,” “hereby,” “hereunder,” and similar terms in this Agreement or any other Financing Document refer to this Agreement or such other Financing Document, as the case may be, as a whole and not to any particular provision of this Agreement or such other
Financing Document, as the case may be. Section, subsection, clause, schedule, and exhibit references herein are to this Agreement unless otherwise specified. Any reference in this Agreement or in the other Financing Documents to any agreement, instrument, or document shall include all alterations, amendments, changes, extensions, modifications, renewals, replacements, substitutions, joinders, and supplements, thereto and thereof, as applicable (subject to any restrictions on such alterations, amendments, changes, extensions, modifications, renewals, replacements, substitutions, joinders, and supplements set forth herein). Any reference herein to the satisfaction or repayment in full of the Obligations shall mean the repayment in full in cash of all Obligations other than contingent indemnification Obligations. Any reference herein to any Person shall be construed to include such Person’s successors and assigns. Any requirement of a writing contained herein or in the other Financing Documents
shall be satisfied by the transmission of a Record and any Record transmitted shall constitute a representation and warranty as to the accuracy and completeness of the information contained therein.

2.            Grant of Security. Each Grantor hereby unconditionally grants, assigns and pledges to Agent (and its agents and designees), for the benefit of the Holders, a continuing security interest in all personal property of such Grantor whether now owned or hereafter acquired or arising and wherever located (hereinafter referred to as the “Security Interest”), including, without limitation, such Grantor’s right, title, and interest in and to the following, whether now owned or hereafter acquired or arising and wherever located (the “Collateral”):

 

 

	
 

	
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(a)

	
all of such Grantor’s Accounts;

(b)           all of such Grantor’s books and records (including all of its Records indicating, summarizing, or evidencing its assets (including the Collateral) or liabilities, all of its Records relating to its business operations or financial condition, and all of its goods or General Intangibles related to such information) (“Books”);

(c)           all of such Grantor’s chattel paper (as that term is defined in the Code) and, in any event, including, without limitation, tangible chattel paper and electronic chattel paper (“Chattel Paper”);

	
 

	
(d)

	
all of such Grantor’s interest with respect to any Deposit Account;

	
 

	
(e)

	
all of such Grantor’s Equipment and fixtures;

	
 

(f)           all of such Grantor’s general intangibles (as that term is defined in the Code) and, in any event, including, without limitation, payment intangibles, contract rights, rights to payment, rights arising under common law, statutes, or regulations, choses or things in action, goodwill (including the goodwill associated with any Trademark, Patent, or Copyright), Patents, Trademarks, Copyrights, URLs and domain names, industrial designs, other industrial or Intellectual Property or rights therein or applications therefor, whether under license or otherwise, rights in programs, programming materials, blueprints, drawings, purchase orders, customer lists, monies due or recoverable from pension funds, route lists, rights to payment and other rights under any royalty or licensing agreements,
including Intellectual Property Licenses, infringement claims, rights in computer programs, information contained on computer disks or tapes, software, literature, reports, catalogs, pension plan refunds, pension plan refund claims, insurance premium rebates, tax refunds, and tax refund claims, uncertificated securities, and any other personal property other than Commercial Tort Claims, money, Accounts, Chattel Paper, Deposit Accounts, goods, Investment Related Property, Negotiable Collateral, and oil, gas, or other minerals before extraction (“General Intangibles”);

	
 

	
(g)

	
all of such Grantor’s Inventory;

	
 

	
 

	
(h)

	
all of such Grantor’s Investment Related Property;

(i)            all of such Grantor’s letters of credit, letter of credit rights, instruments, promissory notes, drafts, and documents (as such terms may be defined in the Code) (“Negotiable Collateral”);

(j)            all of such Grantor’s rights in respect of supporting obligations (as such term is defined in the Code), including letters of credit and guaranties issued in support of Accounts, Chattel Paper, documents, General Intangibles, instruments, or Investment Related Property (“Supporting Obligations”);

(k)           all of such Grantor’s interest with respect to any commercial tort claims (as that term is defined in the Code), including, without limitation those commercial tort claims listed on Schedule 6 attached hereto (“Commercial Tort Claims”);

(l)            all of such Grantor’s money, cash equivalents, or other assets of such Grantor that now or hereafter come into the possession, custody, or control of Agent (or its agent or designee) or any Holder;

 

 

	
 

	
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(m)         all of the proceeds and products, whether tangible or intangible, of any of the foregoing, including proceeds of insurance or commercial tort claims covering or relating to any or all of the foregoing, and any and all Accounts, Books, Chattel Paper, Deposit Accounts, Equipment, General Intangibles, Inventory, Investment Related Property, Negotiable Collateral, Supporting Obligations, Commercial Tort Claims, money, or other tangible or intangible property resulting from the sale, lease, license, exchange, collection, or other disposition of any of the foregoing, the proceeds of any award in condemnation with respect to any of the property of Grantors, any rebates or refunds, whether for taxes or otherwise, and all proceeds of any such proceeds, or any portion thereof or interest therein, and the proceeds
thereof, and all proceeds of any loss of, damage to, or destruction of the above, whether insured or not insured, and, to the extent not otherwise included, any indemnity, warranty, or guaranty payable by reason of loss or damage to, or otherwise with respect to any of the foregoing Collateral (the “Proceeds”). Without limiting the generality of the foregoing, the term “Proceeds” includes whatever is receivable or received when Investment Related Property or proceeds are sold, exchanged, collected, or otherwise disposed of, whether such disposition is voluntary or involuntary, and includes, without limitation, proceeds of any indemnity or guaranty payable to any Grantor or Agent from time to time with respect to any of the Investment Related Property.

Notwithstanding the foregoing, “Collateral” shall not include any rights or interests in any lease, license, contract, or agreement, as such, if under the terms of such lease, license, contract, or agreement, or applicable law with respect thereto, the valid grant of a security interest or lien therein to Agent is prohibited and such prohibition has not been or is not waived or the consent of the other party to such lease, license, contract, or agreement has not been or is not otherwise obtained or under applicable law such prohibition cannot be waived; provided, that the foregoing exclusion shall in no way be (i) construed to apply if any such prohibition would be rendered ineffective under the Code or other applicable law (including the Bankruptcy Code) or principles of equity, (ii) construed so as to limit, impair or otherwise affect Agent’s unconditional continuing security interests in and liens upon
any rights or interests of Grantors in or to the proceeds thereof, including monies due or to become due under any such lease, license, contract, or agreement (including any Accounts), or (iii) construed to apply at such time as the condition causing such prohibition shall be remedied and, to the extent severable, “Collateral” shall include any portion of such lease, license, contract, or agreement that does not result in such prohibition; and provided, further, that each Grantor shall use commercially reasonable efforts to obtain consents with respect to leases, licenses, contracts and agreements that are material to such Grantor’s business pursuant to commercially reasonable terms for the grant of a security interest or lien over such leases, licenses, contracts, or agreements.

3.            Security for Secured Obligations. This Agreement and the Security Interest created hereby secures the payment and performance of all the Secured Obligations, whether now existing or arising hereafter. Without limiting the generality of the foregoing, this Agreement secures the payment of all amounts which constitute part of the Obligations and would be owed by Grantors, or any of them, to Agent, the Holders or any of them, but for the fact that they are unenforceable or not allowable due to the existence of an Insolvency Proceeding involving any Grantor. 

4.            Grantors Remain Liable. Anything herein to the contrary notwithstanding, (a) each of the Grantors shall remain liable under the contracts and agreements included in the Collateral, including, without limitation, the Pledged Operating Agreements and the Pledged Partnership Agreements, to perform all of the duties and obligations thereunder to the same extent as if this Agreement had not been executed, (b) the exercise by Agent or any Holder of any of the rights hereunder shall not release any Grantor from any of its duties or obligations under such contracts and agreements included in the Collateral, and (c) none of the Agent or the Holders shall have any obligation or liability under such contracts and agreements included in the Collateral by reason of this
Agreement, nor shall any of the 

 

 

	
 

	
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Agent or the Holders be obligated to perform any of the obligations or duties of any Grantor thereunder or to take any action to collect or enforce any claim for payment assigned hereunder. Until an Event of Default shall occur and be continuing, except as otherwise provided in this Agreement or any other Financing Document, Grantors shall have the right to possession and enjoyment of the Collateral for the purpose of conducting the ordinary course of their respective businesses, subject to and upon the terms hereof and the other Financing Documents. Without limiting the generality of the foregoing, it is the intention of the parties hereto that record and beneficial ownership of the Pledged Interests, including, without limitation, all voting, consensual, and dividend rights, shall remain with the applicable Grantor until the occurrence of an Event of Default and until Agent shall notify the applicable Grantor of
Agent’s exercise of voting, consensual, and/or dividend rights with respect to the Pledged Interests pursuant to Section 15 hereof. 

5.            Representations and Warranties. Each Grantor hereby represents and warrants as follows, for the benefit of Agent and the Holders:

(a)           Each material item of Equipment of such Grantor is used or held for use in its business and is in good working order, ordinary wear and tear and damage by casualty excepted.

(b)           The Inventory and Equipment (other than vehicles or Equipment out for repair) of such Grantor are not stored with a bailee, warehouseman, or similar party and are located only at, or in-transit between, the locations identified on the Perfection Certificate (as such Perfection Certificate may be updated pursuant to Section 6(o)).

(c)           The jurisdiction of organization of such Grantor is set forth on the Perfection Certificate (which STAC may amend from time to time solely to reflect new Subsidiaries formed in accordance with Section 24). 

(d)           The chief executive office of each Grantor is located at the address indicated on the Perfection Certificate (as such Perfection Certificate may be updated pursuant to Section 6(o)). 

(e)           Such Grantor’s organizational identification number, if any, is identified on the Perfection Certificate (which STAC may amend from time to time solely to reflect new Subsidiaries formed in accordance with Section 24).

(f)           As of the Closing Date, Grantors do not hold any commercial tort claims, except as set forth on Schedule 6. 

(g)           Each Grantor is duly organized and existing and in good standing under the laws of the jurisdiction of its organization and qualified to do business in any state where it conducts business. 

(h)           Set forth on the Perfection Certificate (which STAC may amend from time to time solely to reflect new Subsidiaries formed in accordance with Section 24) is a complete and accurate list of Grantors’ direct and indirect Subsidiaries, showing: (i) the jurisdiction of their organization, (ii) the number of shares of each class of common and preferred Stock authorized for each of such Subsidiaries, and (iii) the number and the percentage of the outstanding shares of each such class owned directly or indirectly by the applicable Grantor. All of the outstanding capital Stock of each such Subsidiary has been validly issued and is fully paid and non-assessable.

(i)            The execution, delivery, and performance by each Grantor of this Agreement, the other Financing Documents and the Acquisition Documents to which it is a party have been duly authorized by all necessary action on the part of such Grantor.

 

 

	
 

	
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(j)            The execution, delivery, and performance by each Grantor of this Agreement, the other Financing Documents and the Acquisition Documents to which it is a party do not and will not (i) violate any provision of federal, state, or local law or regulation applicable to any Grantor, the Governing Documents of any Grantor, or any order, judgment, or decree of any court or other Governmental Authority binding on any Grantor, (ii) conflict with, result in a breach of, or constitute (with due notice or lapse of time or both) a default under any material contractual obligation of any Grantor, (iii) result in or require the creation or imposition of any Lien of any nature whatsoever upon any properties or assets of any Grantor, other than Permitted Liens, or (iv) require any approval of any
Grantor’s shareholders or any approval or consent of any Person under any material contractual obligation of any Grantor, other than consents or approvals that have been obtained and that are still in force and effect.

(k)           Other than (i) the filing of financing statements, (ii) the recording of the Copyright Security Agreement in the United States Copyright Office and the recording of the Patent Security Agreement and the Trademark Security Agreement in the United States Patent and Trademark Office, and (iii) the recordation of the Mortgages (if any), the execution, delivery, and performance by each Grantor of this Agreement, the other Financing Documents and the Acquisition Documents to which it is a party do not and will not require any registration with, consent, or approval of, or notice to, or other action with or by, any Governmental Authority, other than consents or approvals that have been obtained and that are still in force and effect.

(l)            This Agreement, the other Financing Documents and the Acquisition Documents to which each Grantor is a party, and all other documents contemplated hereby and thereby, when executed and delivered by such Grantor will be the legally valid and binding obligations of such Grantor, enforceable against such Grantor in accordance with their respective terms, except as enforcement may be limited by equitable principles or by bankruptcy, insolvency, reorganization, moratorium, or similar laws relating to or limiting creditors’ rights generally.

(m)         The Agent’s Liens are validly created, perfected, and first priority Liens, subject only to Permitted Liens.

	
 

	
(n)

	
Each Grantor is Solvent.

(o)           No transfer of property is being made by any Grantor and no obligation is being incurred by any Grantor in connection with the transactions contemplated by this Agreement or the other Financing Documents with the intent to hinder, delay, or defraud either present or future creditors of any Grantor.

(p)           Each Grantor enjoys peaceful and undisturbed possession under all leases material to its business and to which it is a party or under which it is operating and all of such material leases are valid and subsisting and no material default by Grantors exists under any of them.

(q)           Set forth on the Perfection Certificate is a list of all of Grantors’ Deposit Accounts and Securities Accounts, including, with respect to each bank or securities intermediary, (a) the name and address of such Person, and (b) the account numbers of the Deposit Accounts or Securities Accounts maintained with such Person.

(r)           All factual information (taken as a whole) furnished by or on behalf of Grantors in writing to Agent or any Holder (including all information contained in the Schedules hereto or in the other Financing Documents) for purposes of or in connection with this Agreement, the other Financing Documents, the Acquisition Documents, or any transaction contemplated herein or therein is, and all other such factual information (taken as a whole) hereafter furnished by or on behalf of Grantors in 

 

 

	
 

	
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writing to Agent or any Holder will be, true and accurate in all material respects on the date as of which such information is dated or certified and not incomplete by omitting to state any fact necessary to make such information (taken as a whole) not misleading in any material respect at such time in light of the circumstances under which such information was provided. 

(s)           (i) As of the Closing Date and after giving effect to the Acquisition Transaction, no party to any Acquisition Document is in default on any of its material obligations under such Acquisition Document the default of which could reasonably be expected to adversely affect the Holders, (ii) all representations and warranties made by any Grantor in the Acquisition Documents and in the certificates delivered in connection therewith are true and correct in all material respects as of the date hereof and, to the best knowledge of each Grantor, all material representations and warranties made in the Acquisition Documents by or on behalf of SendTec or theglobe.com, or any other party thereto other than any Grantor party thereto, are true and correct in all material respects as of the date hereof, (iii)
all written information with respect to the Acquisition Transaction furnished to Agent by or on behalf of any Grantor, was, at the time the same was so furnished, complete and correct in all material respects, or has been subsequently supplemented by other written information to the extent necessary to give Agent and Holders a true and accurate knowledge of the subject matter thereof, (iv) no representation, warranty or statement made by any Grantor or, to the best knowledge of Grantors, SendTec or theglobe.com or any other party thereto other than any Grantor party thereto, at the time made in any Acquisition Document, or any agreement, certificate, statement or document required to be delivered pursuant to any Acquisition Document, contains any untrue statement of material fact or omits to state a material fact necessary in order to make the statements contained therein not misleading in light of the circumstances in which they were made, and (v) in connection with the Acquisition Transaction, STAC
is acquiring the SendTec Assets, and, on the date hereof, after giving effect to the Acquisition Transaction, will have good title to the SendTec Assets, free and clear of all Liens other than Permitted Liens.

(t)            (i) Grantors have delivered to Agent a complete and correct copy of the Acquisition Documents, including all schedules and exhibits thereto, (ii) each Acquisition Document sets forth the entire agreement and understanding of the parties thereto relating to the subject matter thereof, and there are no other agreements, arrangements or understandings, written or oral, relating to the matters covered thereby, (iii) no Acquisition Document has been amended or otherwise modified without the prior written consent of Agent, (iv) the execution, delivery and performance of each of the Acquisition Documents has been duly authorized by all necessary action on the part of each Grantor party thereto and, to the best knowledge of each Grantor, each other Person party thereto, (v) the Acquisition
Transaction has been effected in accordance with the terms of the Acquisition Documents and all applicable law, (vi) at the time of consummation of the Acquisition Transaction, there does not exist any judgment, order or injunction prohibiting or imposing any material adverse condition upon the consummation of the Acquisition Transaction, (vii) at the time of consummation thereof, all consents and approvals of, and filings and registrations with, and all other actions in respect of, all Government Authorities required in order to consummate the Acquisition Transaction shall have been obtained, given, filed or taken and shall be in full force and effect, (viii) all actions taken by the Grantors pursuant to or in furtherance of the Acquisition Transaction have been taken in compliance in all material respects with the Acquisition Documents and the applicable law, and (ix) each Acquisition Document is the legal, valid and binding obligation of each Grantor party thereto and, to the best knowledge of each
Grantor, the other parties thereto, enforceable against all parties thereto in accordance with its terms.

(u)           The exact legal name of each of the Grantors is set forth on the signature pages of this Agreement or a written notice provided to Agent pursuant to Section 6(v).

 

 

	
 

	
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(v)           Schedule 7 attached hereto sets forth all Real Property owned by Grantors as of the Closing Date. 

(w)          Such Grantor is the sole legal and beneficial owner, or a licensee, of all Intellectual Property Rights owned or purported to be owned by such Grantor or licensed to such Grantor that are material to the conduct of its business as currently conducted. As of the Closing Date, (i) such Grantor has no ownership interest in, or title to, any Copyrights, Patents or Trademarks that are registered or the subject of pending applications for registrations, except as set forth on Schedules 1(a), 3(a) and 5(a), respectively, attached hereto; (ii) such Grantor has no ownership interest in, or title to, any Copyrights, Patents or Trademarks that are material to such Grantor’s business as currently conducted and that are not registered or the subject of
pending applications for registrations, except as set forth in Schedules 1(b), 3(b) and 5(b), respectively, attached hereto; and (iii) such Grantor is not a party to any Intellectual Property Licenses that are material to such Grantor’s business, except as set forth on Schedule 2, attached hereto. This Agreement is effective to create a valid and continuing Lien on such Grantor’s Copyrights, Patents and Trademarks, and all of its rights and interests in and to any Intellectual Property Licenses. Upon the filing of the Copyright Security Agreement with the United States Copyright Office and filing of the Patent Security Agreement and the Trademark Security Agreement with the United States Patent and Trademark Office, and the filing of appropriate financing statements in the jurisdictions listed on Schedule 8 hereto, all action necessary or desirable
to perfect the Security Interest in and to such Grantor’s Patents, Trademarks, and Copyrights, will have been taken and such perfected Security Interests will be enforceable as such as against any and all creditors of and purchasers from any Grantor. 

(x)           This Agreement creates a valid security interest in the Collateral of such Grantors, to the extent a security interest therein can be created under the Code, securing the payment and performance of the Secured Obligations. Except to the extent a security interest in the Collateral cannot be perfected by the filing of a financing statement under the Code, all filings and other actions necessary to perfect such security interest have been duly taken or will have been taken upon the filing of financing statements listing such Grantor, as a debtor, and Agent, as secured party, in the jurisdictions listed next to such Grantor’s name on Schedule 8 attached hereto. Upon the making of such filings, Agent shall have a first priority perfected security
interest in the Collateral of such Grantor to the extent such security interest can be perfected by the filing of a financing statement under the Code.

(y)           Except for the Security Interest created hereby, (i) such Grantor is and will at all times be the sole holder of record and the legal and beneficial owner, free and clear of all Liens, of the Pledged Interests indicated on Schedule 4 as being owned by such Grantor and, when acquired by such Grantor, any Pledged Interests acquired after the Closing Date; (ii) all of the Pledged Interests are duly authorized, validly issued, fully paid and nonassessable and the Pledged Interests constitute or will constitute the percentage of the issued and outstanding equity interests of the Pledged Companies of such Grantor identified on Schedule 4 hereto as supplemented or modified by any Pledged Interests Addendum or
any Supplement to this Agreement; (iii) such Grantor has the right and requisite authority to pledge the Investment Related Property pledged by such Grantor to Agent as provided herein; (iv) all actions necessary to perfect, establish the first priority of, or otherwise protect, Agent’s Liens in the Investment Related Collateral, and the proceeds thereof, have been duly taken, (A) upon the execution and delivery of this Agreement, (B) upon the taking of possession by Agent (or its agent or designee) of any certificates constituting the Pledged Interests, to the extent such Pledged Interests are represented by certificates, together with undated powers endorsed in blank by such Grantor, (C) upon the filing of financing statements in the applicable jurisdiction set forth on Schedule 8 attached hereto for such Grantor with respect to the Pledged Interests of such Grantor that are not represented by certificates, and (D) with respect to any Securities
Accounts, upon the delivery of Control Agreements with respect thereto; and (v) such Grantor has delivered to and deposited with Agent (or, with respect to any Pledged 

 

 

	
 

	
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Interests created after the Closing Date, will deliver and deposit in accordance with Sections 6(a) and 8 hereof) all certificates representing the Pledged Interests owned by such Grantor to the extent such Pledged Interests are represented by certificates, and undated powers endorsed in blank with respect to such certificates.

(z)           No consent, approval, authorization, or other order or other action by, and no notice to or filing with, any Governmental Authority or any other Person is required (i) for the grant of a Security Interest by such Grantor in and to the Collateral pursuant to this Agreement or for the execution, delivery, or performance of this Agreement by such Grantor, or (ii) for the exercise by Agent of the voting or other rights provided for in this Agreement with respect to the Investment Related Property or the remedies in respect of the Collateral pursuant to this Agreement, except as may be required in connection with such disposition of Investment Related Property by laws affecting the offering and sale of securities generally. No Intellectual Property License to which such Grantor is a party requires any
consent for such Grantor to grant the Security Interest granted hereunder in such Grantor’s right, title or interest in or to any Copyrights, Patents, Trademarks or Intellectual Property Licenses.

(aa)         There is no default, breach, violation or event of acceleration existing under any promissory note (as defined in the Code) constituting Collateral and pledged hereunder (the “Pledged Notes”) and no event has occurred or circumstance exists which, with the passage of time or the giving of notice, or both, would constitute a default, breach, violation or event of acceleration under the Pledged Notes. Such Grantor, if it is an obligee under a Pledged Note, has not waived any default, breach, violation or event of acceleration under such Pledged Notes. The proceeds of the loans evidenced by the Pledged Notes have been fully disbursed and such Grantor has no obligation to make any future advances or other disbursements under or in respect of the Pledged
Notes.

(bb)        Such Grantor has made in good faith and in accordance with the procedures and regulations of the United States Copyright Office and the United States Patent and Trademark Office, as applicable, all payments, filings and recordations necessary to protect and maintain its interest in the Intellectual Property Rights identified on Schedules 1(a), 3(a) and 5(a) in the United States in a manner sufficient to claim in the public record such Grantor’s ownership thereof, including (i) making all necessary registration, maintenance, and renewal fee payments; and (ii) filing all necessary documents, including all applications for registration of such Intellectual Property
Rights.

(cc)         No past or present employee or contractor of Grantor owns any interest or other right in or to any Intellectual Property Rights that are material to the conduct of any such Grantor’s business.

(dd)        Such Grantor has taken actions reasonably necessary to protect the confidentiality of the Intellectual Property Rights that are material to the conduct of its business, the value of which to such Grantor is or would have been, at least in part, contingent upon maintenance of the confidentiality thereof (collectively, “Grantor Trade Secrets”), including (i) protecting the secrecy and confidentiality of its Grantor Trade Secrets by having and enforcing a policy requiring all current employees and consultants, and any licensees, vendors and contractors that have access to such Grantor Trade Secrets, to execute appropriate confidentiality agreements, and, to such Grantor’s knowledge, there has not been any breach by any such party of such
confidentiality agreements; and (ii) protecting the secrecy and confidentiality of the source code of all computer software programs and applications of which it is the owner or licensee by having and enforcing a policy requiring any licensees (or sublicensees) of such source code to enter into license agreements with appropriate use and non-disclosure restrictions.

 

 

	
 

	
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(ee)         No claim has been made in writing and is continuing or, to the best of such Grantor’s knowledge, threatened in any direct written communication that the use by such Grantor of any Intellectual Property Rights that are material to the conduct of its business does or may violate the Intellectual Property Rights of any Person. To the best of such Grantor’s knowledge, there is currently no infringement or unauthorized use of any item of Intellectual Property Rights contained on Schedules 1, 3 or 5.

6.            Covenants. Each Grantor, jointly and severally, covenants and agrees with Agent (for the benefit of the Holders) that from and after the date of this Agreement and until the date of termination of this Agreement in accordance with Section 22 hereof:

(a)           Possession or Control of Collateral. In the event that any Collateral, including Proceeds, is evidenced by or consists of Negotiable Collateral, Investment Related Property, Chattel Paper, or Deposit Accounts, and if and to the extent that perfection or priority of Agent’s Security Interest is dependent on or enhanced by possession or control, such Grantor, immediately upon the reasonable request of Agent and in accordance with Section 8 hereof, shall execute such other documents and instruments as shall be reasonably requested by Agent or endorse and deliver physical possession of such Negotiable Collateral, Investment Related Property, or Chattel Paper, together with such undated powers endorsed in blank as shall be
requested by Agent (or its agent or designee), or grant control of such Deposit Account, as applicable, to Agent (or its agent or designee). Such Grantor hereby acknowledges and agrees that any such agent or designee of Agent shall be deemed to be a “secured party” with respect to such Collateral for all purposes.

	
 

	
(b)

	
Chattel Paper.

(i)         Such Grantor shall take all steps reasonably necessary to grant Agent control of all electronic Chattel Paper in accordance with the Code and all “transferable records” as that term is defined in Section 16 of the Uniform Electronic Transaction Act and Section 201 of the federal Electronic Signatures in Global and National Commerce Act as in effect in any relevant jurisdiction; 

(ii)       If such Grantor retains possession of any Chattel Paper or instruments (which retention of possession shall be subject to the Agent’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 Christiana Corporate Services, Inc., as Agent for the benefit of the Holders, pursuant to the STAC Security Agreement dated as of October 31, 2005”.

	
 

	
(c)

	
Control Agreements. 

(i)         Such Grantor shall promptly obtain an authenticated Control Agreement from each bank holding a Deposit Account for such Grantor.

(ii)       Such Grantor shall promptly obtain authenticated Control Agreements from each issuer of uncertificated securities, securities intermediary, or commodities intermediary issuing or holding any financial assets or commodities to or for any Grantor. 

(d)           Letter of Credit Rights. If such Grantor is or becomes the beneficiary of a letter of credit, such Grantor shall promptly (and in any event within 5 Business Days after becoming a beneficiary) notify Agent thereof and, upon the request by Agent, enter into a tri-party agreement with Agent and the issuer and/or confirmation bank with respect to letter-of-credit rights (as that term is defined in the Code) assigning such letter-of-credit rights to Agent and directing all payments thereunder to Agent’s Account, all in form and substance reasonably satisfactory to Agent.

 

 

	
 

	
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(e)           Commercial Tort Claims. Such Grantor shall promptly (and in any event within 5 Business Days of receipt thereof) notify Agent in writing upon incurring or otherwise obtaining a Commercial Tort Claim after the date hereof against any third party and, upon request of Agent, promptly amend Schedule 6 to this Agreement, authorize the filing of additional financing statements or amendments to existing financing statements and do such other acts or things deemed necessary by Agent to give Agent a first priority, perfected security interest in any such Commercial Tort Claim.

(f)           Government Contracts. If any Account or Chattel Paper arises out of a contract or contracts with the United States of America or any department, agency, or instrumentality thereof, such Grantor shall promptly (and in any event within 10 Business Days of the creation thereof) notify Agent thereof in writing and execute any instruments or take any steps reasonably required by Agent in order that all moneys due or to become due under such contract or contracts shall be assigned to Agent, for the benefit of the Holders, and notice thereof given under the Assignment of Claims Act of 1940 or other applicable law.

	
 

	
(g)

	
Intellectual Property. 

(i)         Upon request of Agent, in order to facilitate filings with the United States Patent and Trademark Office and the United States Copyright Office, such Grantor shall execute and deliver to Agent one or more Copyright Security Agreements, Trademark Security Agreements, and/or Patent Security Agreements to evidence Agent's Lien on such Grantor's Patents, Trademarks, and/or Copyrights, and the General Intangibles of such Grantor relating thereto or represented thereby.

(ii)       Such Grantor shall have the duty, to the extent material to the operation of such Grantor’s business, (A) to promptly sue for infringement, misappropriation, or dilution of any Intellectual Property and to recover any and all damages for such infringement, misappropriation, or dilution, (B) to prosecute diligently any trademark application or service mark application that is part of the Trademarks pending as of the date hereof or hereafter until the termination of this Agreement, (C) to prosecute diligently any patent application that is part of the Patents pending as of the date hereof or hereafter until the termination of this Agreement, and (D) to take all reasonable and necessary action to preserve and maintain all of such Grantor’s Trademarks, Patents, Copyrights, Intellectual Property Licenses, and
its rights therein, including the filing of applications for renewal, affidavits of use, and affidavits of incontestability. Any expenses incurred in connection with the foregoing shall be borne by the appropriate Grantor. Such Grantor further agrees not to abandon any Trademark, Patent, Copyright, or Intellectual Property License that is material to the operation of such Grantor’s business without the prior written consent of Agent. Notwithstanding any of the foregoing to the contrary, none of the obligations and/or restrictions set forth in this Section 6(g)(ii) shall apply to any Patent, Trademark, Copyright or Intellectual Property License that a Grantor determines, in its reasonable business judgment, is no longer necessary or material to the conduct of its business or operations.

(iii)      Such Grantor acknowledges and agrees that neither the Agent nor the Holders shall have any duties with respect to the Trademarks, Patents, Copyrights, or Intellectual Property Licenses. Without limiting the generality of this Section 6(g), such Grantor acknowledges and agrees that neither the Agent nor the Holders shall be under any obligation to take any steps necessary to preserve rights in the Trademarks, Patents, Copyrights, or Intellectual Property Licenses against any other Person, but Agent may do so at its option from and after the occurrence of an Event of Default, and all expenses incurred in connection therewith (including, without limitation, reasonable fees and expenses of attorneys and other professionals) shall be for the sole account of Grantors.

 

 

	
 

	
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(iv)      With respect to the Intellectual Property Rights that a Grantor determines, in its reasonable business judgment, are material to the conduct of Grantor’s business, such Grantor agrees to take all necessary steps, including making all necessary payments and filings in connection with registration, maintenance, and renewal of Copyrights, Trademarks, and Patents in the United States Copyright Office, the United States Patent and Trademark Office, any other appropriate government agencies in foreign jurisdictions or in any court, to maintain each such Intellectual Property Right. Such Grantor hereby agrees to take corresponding steps with respect to each new or acquired Intellectual Property Right to which it or any of its Subsidiaries is now or later becomes entitled that such Grantor determines, in its reasonable
judgment, are material to the conduct of their businesses. Any expenses incurred in connection with such activities shall be borne solely by such Grantor.

(v)        Upon receipt from the United States Copyright Office of notice of registration of any Copyright(s), such Grantor shall promptly (but in no event later than 10 days following such receipt) notify Agent of such registration by delivering, or causing to be delivered to Agent, via overnight courier, electronic mail or telefacsimile at the addresses designated herein, documentation sufficient for Agent to perfect Agent's Liens on such Copyright(s).

(vi)      Such Grantor shall ensure that each of the representations and warranties contained in Sections 5(cc) and 5(dd) hereof shall remain true and correct at all times.

	
 

	
(h)

	
Investment Related Property. 

(i)         If such Grantor shall receive or become entitled to receive any Pledged Interests after the Closing Date, it shall promptly (and in any event within 5 Business Days of receipt thereof) deliver to Agent a duly executed Pledged Interests Addendum identifying such Pledged Interests.

(ii)       All sums of money and property paid or distributed in respect of the Investment Related Property which are received by such Grantor shall be held by such Grantor in trust for the benefit of Agent segregated from such Grantor’s other property, and such Grantor shall deliver such property forthwith to Agent in the exact form received. Agent shall maintain such property in Agent’s Account and otherwise in accordance with instructions from the Required Holders.

(iii)      Such Grantor shall promptly deliver to Agent a copy of each material notice or other material communication received by it in respect of any Pledged Interests.

(iv)      Such Grantor shall not make or consent to any amendment or other modification or waiver with respect to any Pledged Interests, Pledged Operating Agreement, or Pledged Partnership Agreement, or enter into any agreement or permit to exist any restriction with respect to any Pledged Interests unless such Grantor is permitted to do so pursuant to the Financing Documents.

(v)        Such Grantor agrees that it will cooperate with Agent in obtaining all necessary approvals and making all necessary filings under federal, state, local, or foreign law in connection with the Security Interest on the Investment Related Property or any sale or transfer thereof.

(vi)      As to all limited liability company or partnership interests issued under any Pledged Operating Agreement or Pledged Partnership Agreement, such Grantor hereby represents, warrants and covenants that the Pledged Interests issued pursuant to any such agreement (A) are not and shall not be dealt in or traded on securities exchanges or in securities markets, (B) do not and will not constitute investment company securities, and (C) are not and will not be held by such Pledgor in a securities account. In addition, none of the Pledged Operating Agreements, the Pledged Partnership Agreements, or any other agreements governing any of the Pledged Interests issued under any Pledged 

 

 

	
 

	
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Operating Agreement or Pledged Partnership Agreement provide or shall provide that such Pledged Interests are securities governed by Article 8 of the Uniform Commercial Code as in effect in any relevant jurisdiction.

(i)            Real Property; Fixtures. Such Grantor covenants and agrees that upon the acquisition of any fee interest in Real Property it will promptly (and in any event within 5 Business Days of acquisition) notify Agent of the acquisition of such Real Property and will grant to Agent, for the benefit of the Holders, a first priority Mortgage on each fee interest in Real Property now or hereafter owned by such Grantor and shall deliver such other documentation and opinions, in form and substance satisfactory to Agent, in connection with the grant of such Mortgage as Agent shall request in its discretion (acting upon instructions from the Required Holders), including, without limitation, title insurance policies, financing statements, fixture filings and environmental audits,
and such Grantor shall pay all recording costs, intangible taxes and other fees and costs (including reasonable attorneys fees and expenses) incurred in connection therewith. Such Grantor acknowledges and agrees that, to the extent permitted by applicable law, all of its Collateral shall remain personal property regardless of the manner of its attachment or affixation to Real Property.

(j)            Transfers and Other Liens. Such Grantor shall not (i) transfer, license, sell, assign (by operation of law or otherwise) or otherwise dispose of, or grant any option with respect to, any of the Collateral, except as expressly permitted by this Agreement, or (ii) create or permit to exist any Lien upon or with respect to any of its Collateral, except for Permitted Liens. The inclusion of Proceeds in the Collateral shall not be deemed to constitute Agent’s consent to any sale or other disposition of any of the Collateral except as expressly permitted in this Agreement or the other Financing Documents.

(k)           Other Actions as to Any and All Collateral. Such Grantor shall promptly (and in any event within 5 Business Days of acquiring or obtaining such Collateral) notify Agent in writing upon (i) acquiring or otherwise obtaining any Collateral after the date hereof consisting of Investment Related Property, Chattel Paper (electronic, tangible or otherwise), documents (as defined in the Code), promissory notes (as defined in the Code), or instruments (as defined in the Code) or (ii) any amount payable under or in connection with any of the Collateral being or becoming evidenced after the date hereof by any Chattel Paper, documents, promissory notes or instruments, and, upon the request of Agent and in accordance with Section 8
hereof, promptly execute such other documents and instruments, or if applicable, deliver such Chattel Paper, documents, promissory notes, instruments, or certificates evidencing any Investment Related Property in accordance with this Section 6 and do such other acts or things deemed necessary or desirable by Agent to protect Agent’s Security Interest therein.

	
 

	
(l)

	
Pledged Notes.

(i)         Such Grantor will not waive or release any obligation of any party to the Pledged Notes without the prior written consent of Agent.

(ii)       Such Grantor will not take or omit to take any action or suffer or permit any action to be omitted or taken, the taking or omission of which would result in any right of offset against sums payable under the Pledged Notes.

(iii)      Such Grantor shall give Agent copies of all material notices (including notices of default) given or received with respect to the Pledged Notes promptly after giving or receiving any such notice.

 

 

	
 

	
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(iv)      Without Agent’s prior written consent, such Grantor shall not, and shall not agree to, assign or surrender its rights and interests under the Pledged Notes nor terminate, cancel, modify, change, supplement or amend the Pledged Notes. 

(m)         Maintenance of Properties. Such Grantor shall maintain and preserve all of its properties which are necessary or useful in the proper conduct of its business in good working order and condition, ordinary wear, tear, and casualty excepted, and comply at all times with the provisions of all material leases to which it is a party as lessee, so as to prevent any loss or forfeiture thereof or thereunder.

	
 

	
(n)

	
Insurance. 

(i)         Such Grantor shall maintain, at its expense, insurance respecting its assets wherever located, covering loss or damage by fire, theft, explosion, and all other hazards and risks as ordinarily are insured against by other Persons engaged in the same or similar businesses. Grantors also shall maintain business interruption, public liability, and product liability insurance, as well as insurance against larceny, embezzlement, and criminal misappropriation. All such policies of insurance shall be in such amounts and with such insurance companies as are reasonably satisfactory to Agent. Grantors shall deliver copies of all such policies to Agent with an endorsement naming Agent as a loss payee (under a satisfactory lender’s loss payable endorsement as its interest may appear) or additional insured, as
appropriate. Each policy of insurance or endorsement shall be cancelable only upon 30 days’ prior written notice to Agent. 

(ii)       Such Grantor shall give Agent prompt notice of any loss exceeding $100,000 covered by such insurance. So long as no Event of Default has occurred and is continuing, Grantors shall have the exclusive right to adjust any losses payable under any such insurance policies which are less than $100,000. Following the occurrence and during the continuation of an Event of Default, or in the case of any losses payable under such insurance exceeding $100,000, Agent shall have the exclusive right to adjust any losses payable under any such insurance policies, without any liability to Grantors whatsoever in respect of such adjustments. Any monies received as payment for any loss under any such insurance policy (other than liability insurance policies) or as payment of any award or compensation for condemnation or taking by eminent
domain, shall be paid over to Agent and, if received by any Grantor, shall be held in trust for and immediately paid over to the Agent who shall maintain such monies in Agent’s Account and otherwise in accordance with instructions from the Required Holders.

(iii)      Grantors will not take out separate insurance concurrent in form or contributing in the event of loss with that required to be maintained under this subsection (n), unless Agent is included thereon as an additional insured or loss payee under a lender’s loss payable endorsement. Grantors shall promptly notify Agent whenever such separate insurance is taken out, specifying the insurer thereunder and full particulars as to the policies evidencing the same, and copies of such policies promptly shall be provided to Agent.

(o)           Location of Inventory and Equipment; Chief Executive Offices. Such Grantor shall keep its Inventory and Equipment (other than vehicles and Equipment out for repair) only at the locations identified on the Perfection Certificate therefor and its chief executive office only at the location identified on the Perfection Certificate therefor; provided, however, that STAC may amend the Perfection Certificate so long as such amendment occurs by written notice to Agent not less than 30 days prior to the date on which such Inventory or Equipment is moved to such new location or such chief executive office is relocated, so long as such new location is within the continental United
States, and so long as, at the time of such written notification, the applicable Grantor provides Agent a Collateral Access Agreement with respect thereto.

 

 

	
 

	
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(p)           Compliance with Laws. Such Grantor shall comply in all material respects with the requirements of all applicable laws, rules, regulations, and orders, judgments and awards (including any settlement of any claim that, if breached, could give rise to any of the foregoing) of any Governmental Authority, such compliance to include (a) paying before the same become delinquent all material taxes, assessments and governmental charges or levies imposed upon it or upon its income or profits or upon any of its properties, and (b) paying all lawful material claims which if unpaid might become a Lien or charge upon any of its properties.

(q)           Leases. Such Grantor shall pay when due all rents and other amounts payable under any material leases to which any Grantor is a party or by which any Grantor’s properties and assets are bound.

(r)           Existence. Such Grantor shall at all times preserve and keep in full force and effect its valid existence and good standing and any rights, franchises, permits, licenses, authorizations, approvals, entitlements and accreditations material to its businesses.

(s)           Disclosure Updates. Such Grantor shall, promptly and in no event later than 5 Business Days after obtaining knowledge thereof, notify Agent if any written information, exhibit, or report furnished to the Agent or the Holders contained, at the time it was furnished, any untrue statement of a material fact or omitted to state any material fact necessary to make the statements contained therein not misleading in light of the circumstances in which made. Anything to the contrary notwithstanding, any notification pursuant to the foregoing provision will not cure or remedy the effect of the prior untrue statement of a material fact or omission of any material fact nor shall any such notification have the effect of amending or modifying this Agreement, including the Perfection
Certificate or any of the other Schedules hereto. Such Grantor shall, within 5 Business Days of obtaining knowledge thereof, advise the Agent promptly, in sufficient detail, of any substantial change in the Collateral, and of the occurrence of any event which would have a material adverse effect on the value of the Collateral or on the Agent’s Security Interest therein.

(t)            Control Agreements. Such Grantor shall take all reasonable steps in order for Agent to maintain control in accordance with Sections 8-106, 9-104, 9-105, 9-106, and 9-107 of the Code with respect to all of its Securities Accounts, Deposit Accounts, electronic chattel paper, investment property, and letter of credit rights.

(u)           Inspection. Such Grantor shall permit the Agent, the Holders and their representatives and agents to inspect the Collateral at any time, and to make copies of records pertaining to the Collateral as may be requested by the Agent or a Holder from time to time.

(v)           Name Change, Etc. Such Grantor shall not change its name, type of organization, jurisdiction of organization, organizational identification number (if it has one), legal or corporate structure, or identity, or add any fictitious name unless it provides at least 30 days prior written notice to the Agent of such change and, at the time of such written notification, such Grantor provides any financing statements or fixture filings necessary to perfect and continue perfected the perfected Security Interest granted and evidenced by this Agreement.

(w)          Sale of Inventory. Such Grantor shall not consign any of its Inventory or sell any of its Inventory on bill and hold, sale or return, sale on approval, or other conditional terms of sale without the consent of the Agent which shall not be unreasonably withheld.

7.            Relation to Other Security Documents. The provisions of the Copyright Security Agreements, Trademark Security Agreements, and Patent Security Agreements are supplemental to the 

 

 

	
 

	
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provisions of this Agreement, and nothing contained in the Copyright Security Agreements, Trademark Security Agreements, or the Patent Security Agreements shall limit any of the rights or remedies of Agent hereunder. 

	
 

	
8.

	
Further Assurances. 

(a)           Each Grantor agrees that from time to time, at its own expense, such Grantor will promptly execute and deliver all further instruments and documents, and take all further action, that may be necessary or that Agent may reasonably request, in order to perfect and protect any Security Interest granted or purported to be granted hereby or to enable Agent to exercise and enforce its rights and remedies hereunder with respect to any of the Collateral. 

(b)           Each Grantor hereby authorizes the filing of such financing or continuation statements, or amendments thereto, and such Grantor will execute and deliver to Agent such other instruments or notices, as may be necessary or as Agent may reasonably request, in order to perfect and preserve the Security Interest granted or purported to be granted hereby. 

(c)           Each Grantor hereby authorizes Agent to file, transmit, or communicate, as applicable, financing statements and amendments describing the Collateral as “all personal property of debtor” or “all assets of debtor” or words of similar effect, in order to perfect Agent’s security interest in the Collateral without such Grantor’s signature. Each Grantor also hereby ratifies its authorization for Agent to have filed in any jurisdiction any financing statements filed prior to the date hereof. 

(d)           Each Grantor acknowledges that it is not authorized to file any financing statement or amendment or termination statement with respect to any financing statement filed in connection with this Agreement without the prior written consent of Agent, subject to such Grantor’s rights under Section 9-509(d)(2) of the Code.

9.            Agent’s Right to Perform Contracts. Upon the occurrence of an Event of Default, Agent (or its designee) may proceed to perform any and all of the obligations of any Grantor contained in any contract, lease, or other agreement and exercise any and all rights of any Grantor therein contained as fully as such Grantor itself could. 

10.          Agent Appointed Attorney-in-Fact. Each Grantor hereby irrevocably appoints Agent its attorney-in-fact, with full authority in the place and stead of such Grantor and in the name of such Grantor or otherwise, at such time as an Event of Default has occurred and is continuing, to take any action and to execute any instrument which Agent may reasonably deem necessary or advisable to accomplish the purposes of this Agreement, including, without limitation:

(a)           to ask, demand, collect, sue for, recover, compromise, receive and give acquittance and receipts for moneys due and to become due under or in connection with the Accounts or any other Collateral of such Grantor;

(b)           to receive and open all mail addressed to such Grantor and to notify postal authorities to change the address for the delivery of mail to such Grantor to that of Agent;

(c)           to receive, indorse, and collect any drafts or other instruments, documents, Negotiable Collateral or Chattel Paper;

 

 

	
 

	
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(d)           to file any claims or take any action or institute any proceedings which Agent may deem necessary or desirable for the collection of any of the Collateral of such Grantor or otherwise to enforce the rights of Agent with respect to any of the Collateral;

(e)           to repair, alter, or supply goods, if any, necessary to fulfill in whole or in part the purchase order of any Person obligated to such Grantor in respect of any Account of such Grantor; 

(f)           to use any labels, Patents, Trademarks, trade names, URLs, domain names, industrial designs, Copyrights, advertising matter or other industrial or intellectual property rights, in advertising for sale and selling Inventory and other Collateral and to collect any amounts due under Accounts, contracts or Negotiable Collateral of such Grantor; and

(g)           Agent, on behalf of the Holders, shall have the right, but shall not be obligated, to bring suit in its own name to enforce the Trademarks, Patents, Copyrights and Intellectual Property Licenses and, if Agent shall commence any such suit, the appropriate Grantor shall, at the request of Agent, do any and all lawful acts and execute any and all proper documents reasonably required by Agent in aid of such enforcement. 

To the extent permitted by law, each Grantor hereby ratifies all that such attorney-in-fact shall lawfully do or cause to be done by virtue hereof. This power of attorney is coupled with an interest and shall be irrevocable until this Agreement is terminated. 

11.          Agent May Perform. If any Grantor fails to perform any agreement contained herein, Agent may itself perform, or cause performance of, such agreement, and the reasonable expenses of Agent incurred in connection therewith shall be payable, jointly and severally, by Grantors promptly upon demand.

12.          Agent’s Duties. The powers conferred on Agent hereunder are solely to protect Agent’s interest in the Collateral, for the benefit of the Holders, and shall not impose any duty upon Agent to exercise any such powers. Except for the exercise of reasonable care with respect to the custody of any Collateral in its actual possession and the accounting for moneys actually received by it hereunder or otherwise maintained in Agent’s Account, Agent shall have no duty as to any Collateral or as to the taking of any necessary steps to preserve rights against prior parties or any other rights pertaining to any Collateral and no such duties shall be implied as arising hereunder. Agent shall be deemed to have exercised reasonable care in the custody and preservation of any
Collateral in its actual possession if such Collateral is accorded treatment substantially equal to that which Agent accords its own property, and no additional duties relating to such reasonable care shall be implied as arising hereunder. 

13.          Collection of Accounts, General Intangibles and Negotiable Collateral. At any time upon the occurrence and during the continuation of an Event of Default, Agent or Agent’s designee may (a) notify Account Debtors of any Grantor that such Grantor’s Accounts, General Intangibles, Chattel Paper or Negotiable Collateral have been assigned to Agent, for the benefit of the Holders, or that Agent has a security interest therein, and (b) collect such Grantor’s Accounts (and maintain any monies collected in Agent’s Account and otherwise in accordance with instructions from the Required Holders), General Intangibles and Negotiable Collateral directly, and any collection costs and expenses shall constitute part of such Grantor’s Secured Obligations under the
Financing Documents.

14.          Disposition of Pledged Interests by Agent. None of the Pledged Interests existing as of the date of this Agreement are, and none of the Pledged Interests hereafter acquired on the date of acquisition thereof will be, registered or qualified under the various federal or state securities laws of the United States and disposition thereof after an Event of Default may be restricted to one or more private 

 

 

	
 

	
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(instead of public) sales in view of the lack of such registration. Each Grantor understands that in connection with such disposition, Agent may approach only a restricted number of potential purchasers and further understands that a sale under such circumstances may yield a lower price for the Pledged Interests than if the Pledged Interests were registered and qualified pursuant to federal and state securities laws and sold on the open market. Each Grantor, therefore, agrees that: (a) if Agent shall, pursuant to the terms of this Agreement, sell or cause the Pledged Interests or any portion thereof to be sold at a private sale, Agent shall have the right to rely upon the advice and opinion of any nationally recognized brokerage or investment firm (but shall not be obligated to seek such advice and the failure to do so shall not be considered in determining the commercial reasonableness of such action) as to the best
manner in which to offer the Pledged Interest for sale and as to the best price reasonably obtainable at the private sale thereof; and (b) such reliance shall be conclusive evidence that Agent has handled the disposition in a commercially reasonable manner.

	
 

	
15.

	
Voting Rights.

(a)           Upon the occurrence and during the continuation of an Event of Default, (i) Agent may, at its option, and with prior notice (unless such Event of Default is an Event of Default specified in Section 8(a)(v) of the Debentures (or its equivalent in any New STAC Debenture), in which case no such notice need be given) to each Grantor, and in addition to all rights and remedies available to Agent under any other agreement, at law, in equity, or otherwise, exercise all voting rights, and all other ownership or consensual rights in respect of the Pledged Interests owned by such Grantor, but under no circumstances is Agent obligated by the terms of this Agreement to exercise such rights, and (ii) if Agent duly exercises its right to vote any of such Pledged
Interests, each Grantor hereby appoints Agent such Grantor’s true and lawful attorney-in-fact and IRREVOCABLE PROXY to vote such Pledged Interests in any manner Agent deems advisable for or against all matters submitted or which may be submitted to a vote of shareholders, partners or members, as the case may be. The power-of-attorney granted hereby is coupled with an interest and shall be irrevocable.

(b)           For so long as any Grantor shall have the right to vote the Pledged Interests owned by it, such Grantor covenants and agrees that it will not, without the prior written consent of Agent, vote or take any consensual action with respect to such Pledged Interests which would adversely affect the rights of Agent and the Holders or the value of the Pledged Interests or that would be inconsistent with or result in any violation of any provision of the Financing Documents.

	
 

	
16.

	
Events of Default; Remedies. 

(a)           Events of Default. The following events shall be “Events of Default” under this Agreement:

(i)         The occurrence of an “Event of Default” (as defined in the Debentures) under any of the Debentures;

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

(iii)      The failure by any Grantor to observe or perform any of its obligations hereunder for 5 Business Days after delivery to such Grantor of notice of such failure by or on behalf of the Agent unless such default is capable of cure but cannot be cured within such time frame and such Grantor is using best efforts to cure same in a timely fashion; or

 

 

	
 

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

(b)           Remedies. Upon the occurrence and during the continuance of an Event of Default:

(i)         Agent may exercise in respect of the Collateral, in addition to other rights and remedies provided for herein, in the other Financing Documents, or otherwise available to it, all the rights and remedies of a secured party on default under the Code or any other applicable law. Without limiting the generality of the foregoing, each Grantor expressly agrees that, in any such event, Agent, without demand of performance or other demand, advertisement or notice of any kind (except a notice specified below of time and place of public or private sale) to or upon any of Grantors or any other Person (all and each of which demands, advertisements and notices are hereby expressly waived to the maximum extent permitted by the Code or any other applicable law), may take immediate possession of all or any portion of the
Collateral and (i) require Grantors to, and each Grantor hereby agrees that it will at its own expense and upon request of Agent forthwith, assemble all or part of the Collateral as directed by Agent and make it available to Agent at one or more locations where such Grantor regularly maintains Inventory, and (ii) without notice except as specified below, sell the Collateral or any part thereof in one or more parcels at public or private sale, at any of Agent’s offices or elsewhere, for cash, on credit, and upon such other terms as Agent may deem commercially reasonable. Each Grantor agrees that, to the extent notice of sale shall be required by law, at least 10 days notice to any of Grantors of the time and place of any public sale or the time after which any private sale is to be made shall constitute reasonable notification and specifically such notice shall constitute a reasonable “authenticated notification of disposition” within the meaning of Section 9-611 of the Code. Agent shall
not be obligated to make any sale of Collateral regardless of notice of sale having been given. Agent 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.

(ii)       Agent is hereby granted a license or other right to use, without liability for royalties or any other charge, each Grantor’s labels, Patents, Copyrights, rights of use of any name, trade secrets, trade names, Trademarks, service marks and advertising matter, URLs, domain names, industrial designs, other industrial or intellectual property or any property of a similar nature, whether owned or licensable by any Grantor or with respect to which any Grantor has sublicensable rights under license, sublicense, or other agreements, as it pertains to the Collateral, in preparing for sale, advertising for sale and selling any Collateral, and each Grantor’s rights under all licenses and all franchise agreements shall inure to the benefit of Agent.

(iii)      Any cash held by Agent as Collateral and all cash proceeds received by Agent in respect of any sale of, collection from, or other realization upon all or any part of the Collateral shall be applied against the Secured Obligations. In the event the proceeds of Collateral are insufficient to satisfy all of the Secured Obligations in full, each Grantor shall remain jointly and severally liable for any such deficiency.

(iv)      Each Grantor hereby acknowledges that the Secured Obligations arose out of a commercial transaction, and agrees that if an Event of Default shall occur Agent shall have the right to an immediate writ of possession without notice of a hearing. Agent shall have the right to the appointment of a receiver for the properties and assets of each Grantor, and each Grantor hereby consents 

 

 

	
 

	
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to such rights and such appointment and hereby waives any objection such Grantor may have thereto or the right to have a bond or other security posted by Agent.

17.          No Waivers; Remedies Cumulative. No course of dealing among Grantors, Agent and Holders, nor any failure to exercise, nor any delay in exercising, on the part of the Agent or the Holders, any right, power or privilege hereunder or under the Debentures shall operate as a waiver thereof; nor shall any single or partial exercise of any right, power or privilege hereunder or thereunder preclude any other or further exercise thereof or the exercise of any other right, power or privilege. Each right, power, and remedy of Agent as provided for in this Agreement or in the other Financing Documents or now or hereafter existing at law or in equity or by statute or otherwise shall be cumulative and concurrent and shall be in addition to every other right, power, or remedy provided for
in this Agreement or in the other Financing Documents or now or hereafter existing at law or in equity or by statute or otherwise, and the exercise or beginning of the exercise by Agent, of any one or more of such rights, powers, or remedies shall not preclude the simultaneous or later exercise by Agent of any or all such other rights, powers, or remedies.

18.          Marshaling. Agent shall not be required to marshal any present or future collateral security (including but not limited to the Collateral) for, or other assurances of payment of, the Secured Obligations or any of them or to resort to such collateral security or other assurances of payment in any particular order, and all of its rights and remedies hereunder and in respect of such collateral security and other assurances of payment shall be cumulative and in addition to all other rights and remedies, however existing or arising. To the extent that it lawfully may, each Grantor hereby agrees that it will not invoke any law relating to the marshaling of collateral which might cause delay in or impede the enforcement of Agent’s rights and remedies under this Agreement or
under any other instrument creating or evidencing any of the Secured Obligations or under which any of the Secured Obligations is outstanding or by which any of the Secured Obligations is secured or payment thereof is otherwise assured, and, to the extent that it lawfully may, each Grantor hereby irrevocably waives the benefits of all such laws.

	
 

	
19.

	
Indemnity and Expenses. 

(a)           Each Grantor agrees to indemnify, defend and hold harmless Agent, the Holders, their respective affiliates, and each such Person’s agents, officers, directors, employees and professional advisors, from and against all claims, lawsuits and liabilities (including reasonable attorneys fees) growing out of or resulting from this Agreement (including, without limitation, enforcement of this Agreement) or any other Financing Document to which such Grantor is a party, except claims, losses or liabilities resulting from the gross negligence or willful misconduct of the party seeking indemnification as determined by a final non-appealable order of a court of competent jurisdiction. This provision shall survive the termination of this Agreement and any other Financing Document and the repayment of the
Secured Obligations.

(b)          Grantors, jointly and severally, shall, upon demand, pay to Agent all costs, fees, charges and expenses (including reasonable attorneys’ fees) which Agent may incur in connection with (i) the administration of this Agreement, (ii) the custody, preservation, use or operation of, or, upon an Event of Default, the sale of, collection from, or other realization upon, any of the Collateral in accordance with this Agreement and the other Financing Documents, (iii) the exercise or enforcement of any of the rights of Agent hereunder or (iv) the failure by any of Grantors to perform or observe any of the provisions hereof.

20.          Merger, Amendments; Etc. THIS WRITTEN AGREEMENT, TOGETHER WITH THE OTHER FINANCING DOCUMENTS, REPRESENTS THE FINAL AGREEMENT BETWEEN THE 

 

 

	
 

	
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PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN AGREEMENTS BETWEEN THE PARTIES. No waiver of any provision of this Agreement, and no consent to any departure by any of Grantors herefrom, shall in any event be effective unless the same shall be in writing and signed by Agent, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. No amendment of any provision of this Agreement shall be effective unless the same shall be in writing and signed by Agent (acting upon instructions from the Required Holders) and each of Grantors to which such amendment applies.

21.          Notices. Unless otherwise provided in this Agreement, all notices or demands by Agent or any of the Grantors to the other relating to this Agreement shall be in writing and shall be personally delivered or sent by registered or certified mail (postage prepaid, return receipt requested), overnight courier, electronic mail (at such email addresses as Agent or any of the Grantors, as applicable, may designate to each other in accordance herewith), or telefacsimile to Agent or any of the Grantors, as the case may be, at its address set forth under its signature hereof.

Agent or any of the Grantors may change the address at which it is to receive notices hereunder, by notice in writing in the foregoing manner given to the other party. All notices or demands sent in accordance with this Section 21, other than notices by Agent in connection with enforcement rights against the Collateral under the provisions of the Code, shall be deemed received on the earlier of the date of actual receipt or 3 Business Days after the deposit thereof in the mail. Grantors acknowledge and agree that notices sent by the Agent or any Holder in connection with the exercise of enforcement rights against Collateral under the provisions of the Code shall be deemed sent when deposited in the mail or personally delivered, or, where permitted by law, transmitted by telefacsimile or any other method set forth above.

22.          Continuing Security Interest. This Agreement shall create a continuing security interest in the Collateral and shall (a) remain in full force and effect until the Obligations have been indefeasibly satisfied in full, (b) be binding upon each Grantor, and their respective successors and assigns, and (c) inure to the benefit of, and be enforceable by, Agent, and its successors, transferees and assigns. Upon the indefeasible payment in full in cash of the Obligations in accordance with the provisions of the Financing Documents, the Security Interest granted hereby shall terminate and this Agreement and all rights to the Collateral shall revert to Grantors or any other Person entitled thereto. At such time, Agent will file, or authorize the filing of, appropriate termination
statements to terminate such Security Interests. No transfer or renewal, extension, assignment, or termination of this Agreement, any other Financing Document, or any other instrument or document executed and delivered by any Grantor to Agent, nor the taking of further security, nor the retaking or re-delivery of the Collateral to Grantors, or any of them, by Agent, nor any other act of the Holders, or any of them, shall release any Grantor from any obligation, except a release or discharge executed in writing by Agent. Agent shall not by any act, delay, omission or otherwise, be deemed to have waived any of its rights or remedies hereunder, unless such waiver is in writing and signed by Agent and then only to the extent therein set forth. A waiver by Agent of any right or remedy on any occasion shall not be construed as a bar to the exercise of any such right or remedy which Agent would otherwise have had on any other occasion.

23.          Governing Law. All questions concerning the construction, validity, enforcement and interpretation of the Transaction Documents shall be governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the principles of conflicts of law thereof. Each party agrees that all legal proceedings concerning the interpretations, enforcement and defense of the transactions contemplated by this Agreement and any other Transaction Documents 

 

 

	
 

	
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(whether brought against a party hereto or its respective affiliates, directors, officers, shareholders, employees or agents) shall be commenced exclusively in the state and federal courts sitting in the City of New York. Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in the City of New York, borough of Manhattan for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including with respect to the enforcement of any of the Transaction Documents), and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is improper or inconvenient venue for such proceeding. Each party hereby irrevocably waives personal service of process and
consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. The parties hereby waive all rights to a trial by jury. If either party shall commence an action or proceeding to enforce any provisions of the Transaction Documents, then the prevailing party in such action or proceeding shall be reimbursed by the other party for its attorneys’ fees and other costs and expenses incurred with the investigation, preparation and prosecution of such action or proceeding.

24.          New Subsidiaries. At the time that any Grantor forms any direct or indirect Subsidiary or acquires any direct or indirect Subsidiary after the Closing Date, such Grantor shall (a) cause such new Subsidiary to provide to Agent a joinder to this Agreement, together with such other security documents (including Mortgages with respect to any Real Property of such new Subsidiary), as well as appropriate financing statements (and with respect to all property subject to a Mortgage, fixture filings), all in form and substance satisfactory to Agent (including being sufficient to grant Agent a first priority Lien (subject to Permitted Liens) in and to the assets of such newly formed or acquired Subsidiary), (b) provide to Agent a pledge agreement and appropriate certificates and
powers or financing statements, hypothecating all of the direct or beneficial ownership interest in such new Subsidiary, in form and substance satisfactory to Agent, and (c) provide to Agent all other documentation, including updates to the Perfection Certificate and the other Schedules, hereto and one or more opinions of counsel satisfactory to Agent, which in its opinion is appropriate with respect to the execution and delivery of the applicable documentation referred to above (including policies of title insurance or other documentation with respect to all property subject to a Mortgage). Any document, agreement, or instrument executed or issued pursuant to this Section 24 shall be a Financing Document. Any new direct or indirect Subsidiary (whether by acquisition or creation) of any Grantor is required to enter into this Agreement by executing and delivering in favor of Agent a supplement to this Security Agreement in the form of Annex 1 attached hereto. Upon the execution and delivery of such supplement by such new Subsidiary, such Subsidiary shall become a Grantor hereunder with the same force and effect as if originally named as a Grantor herein. The execution and delivery of any instrument adding an additional Grantor as a party to this Agreement shall not require the consent of any Grantor hereunder. The rights and obligations of each Grantor hereunder shall remain in full force and effect notwithstanding the addition of any new Grantor hereunder.

25.          Agent. Each reference herein to any right granted to, benefit conferred upon or power exercisable by the “Agent” shall be a reference to Agent, for the benefit of the Holders. Agent may resign or be removed as Agent in accordance with, and subject to, Section 4.20(h) of the Purchase Agreement. Any successor Agent (or the Required Purchasers, as the case may be) shall succeed to all the rights, powers, and duties of the retiring Agent and the term “Agent” shall mean such successor Agent (or the Required Purchasers, as the case may be) and the retiring Agent’s appointment, powers, and duties as Agent shall be terminated. After any retiring Agent’s resignation hereunder as Agent, the provisions of 

 

 

	
 

	
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Section 4.20 of the Purchase Agreement shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent under this Agreement.

	
 

	
26.

	
Miscellaneous.

(a)           This Agreement may be executed in any number of counterparts and by different parties on separate counterparts, each of which, when executed and delivered, shall be deemed to be an original, and all of which, when taken together, shall constitute but one and the same Agreement. Delivery of an executed counterpart of this Agreement by telefacsimile or other electronic method of transmission shall be equally as effective as delivery of an original executed counterpart of this Agreement. Any party delivering an executed counterpart of this Agreement by telefacsimile or other electronic method of transmission also shall deliver an original executed counterpart of this Agreement but the failure to deliver an original executed counterpart shall not affect the validity, enforceability, and binding
effect of this Agreement. 

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

(c)           Headings used in this Agreement are for convenience only and shall not be used in connection with the interpretation of any provision hereof.

[SIGNATURE PAGES TO FOLLOW]

 

 

 

	
 

	
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IN WITNESS WHEREOF, the undersigned parties hereto have executed this Agreement by and through their duly authorized officers, as of the day and year first above written.

 

	
GRANTOR:

	
SENDTEC ACQUISITION CORP.

a Delaware corporation, as a Grantor

By:         /s/ Danielle Karp                                         

Name:    Danielle Karp                                               

Title:     Secretary                                                       

Address for Notices:

877 Executive Center Drive West
Suite 300
St. Petersburg, FL 33702
Attention: Chief Executive Officer
Fax: 727-576-7790

 

 

[SIGNATURE PAGE OF SECURITY AGREEMENT]

 

 

 

 

	
AGENT:

	
CHRISTIANA CORPORATE SERVICES, INC., 
a Delaware corporation, as Agent

 

By:         /s/                                                                  

Name:                                                                          

Title:                                                                            

 

Address for Notices:

1314 King Street

Wilmington, DE 19801

Attention: Corporate Trust Administration

Fax: 301-421-9015

 

 

[SIGNATURE PAGE OF SECURITY AGREEMENT]

 

 

 

ANNEX 1 TO SECURITY AGREEMENT

FORM OF SUPPLEMENT

Supplement No. ____ (this “Supplement”) dated as of _______________, 200_, to the STAC Security Agreement dated as of October 31, 2005 (as amended, restated, supplemented or otherwise modified from time to time, the “Security Agreement”) by each of the parties listed as “Grantors” on the signature pages thereto and those additional entities that thereafter become grantors thereunder (collectively, jointly and severally, “Grantors” and each individually “Grantor”), and Christiana Corporate Services, Inc., a Delaware corporation, in its capacity as Agent for the Holders (together with its successors and assigns in such capacity, “Agent”). 

W I T N E S S E T H:

WHEREAS, pursuant to the Securities Purchase Agreement (the “Purchase Agreement”) dated as of October 31, 2005, among SendTec Acquisition Corp. (“STAC”) and the other parties thereto, and the Senior Secured Convertible Debentures (the “Debentures”) issued by STAC pursuant to the Purchase Agreement, the Holders have severally agreed to extend the loans evidenced by the Debentures (the “Loans”) to STAC; 

WHEREAS, Grantors have entered into the Security Agreement in order to induce the Holders to make the Loans; 

WHEREAS, capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the Security Agreement; and

WHEREAS, pursuant to Section 24 of the Security Agreement, new direct or indirect Subsidiaries of Grantors, must execute and deliver to Agent certain Financing Documents, including the Security Agreement, and the execution of the Security Agreement by the undersigned new Grantor or Grantors (collectively, the “New Grantors”) may be accomplished by the execution of this Supplement in favor of Agent, for the benefit of the Holders.

NOW, THEREFORE, for and in consideration of the foregoing and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, each New Grantor hereby agrees as follows:

1.            In accordance with Section 24 of the Security Agreement, each New Grantor, by its signature below, becomes a “Grantor” under the Security Agreement with the same force and effect as if originally named therein as a “Grantor” and each New Grantor hereby (a) agrees to all of the terms and provisions of the Security Agreement applicable to it as a “Grantor” thereunder and (b) represents and warrants that the representations and warranties made by it as a “Grantor” thereunder are true and correct on and as of the date hereof. In furtherance of the foregoing, each New Grantor, as security for the payment and performance in full of the Secured Obligations, does hereby grant, assign, and pledge to Agent, for
the benefit of the Holders, a security interest in and security title to all assets of such New Grantor including, without limitation, all property of the type described in Section 2 of the Security Agreement to secure the full and prompt payment of the Secured Obligations, including, without limitation, any interest thereon, plus reasonable attorneys’ fees and expenses if the Secured Obligations represented by the Security Agreement are collected by law, through an attorney-at-law, or under advice therefrom. Schedule 1, “Copyrights,” Schedule 2, “Intellectual Property Licenses,” Schedule 3, “Patents,” Schedule 4, “Pledged Companies,” Schedule 5, “Trademarks,”
Schedule 6, “Commercial Tort Claims,” Schedule 7, “Owned Real Property,” Schedule 8, “List of Uniform Commercial Code Filing Jurisdictions,” and Schedule 9, “Perfection Certificate,” attached hereto supplement Schedule 1, Schedule 2, Schedule 3, Schedule 4, Schedule 5, Schedule 6, Schedule 7, Schedule 8, and Schedule 9, respectively, to the Security Agreement and
shall be deemed a part thereof for all purposes of the Security Agreement. Each reference to a “Grantor” in the Security 

 

 

 

 

Agreement shall be deemed to include each New Grantor. The Security Agreement is incorporated herein by reference.

2.            Each New Grantor represents and warrants to Agent and the Holders that this Supplement has been duly executed and delivered by such New Grantor and constitutes its legal, valid and binding obligation, enforceable against it in accordance with its terms, except as enforceability thereof may be limited by bankruptcy, insolvency, reorganization, fraudulent transfer, moratorium or other similar laws affecting creditors’ rights generally and general principles of equity (regardless of whether such enforceability is considered in a proceeding at law or in equity). 

3.            This Supplement may be executed in multiple counterparts, each of which shall be deemed to be an original, but all such separate counterparts shall together constitute but one and the same instrument. Delivery of a counterpart hereof by facsimile transmission or by e-mail transmission shall be as effective as delivery of a manually executed counterpart hereof.

4.            Except as expressly supplemented hereby, the Security Agreement shall remain in full force and effect.

5.            This Supplement shall be construed in accordance with and governed by the internal laws of the State of New York, without regard to the principles of conflicts of law thereof.

[SIGNATURE PAGE FOLLOWS]

 

 

 

 

IN WITNESS WHEREOF, each New Grantor and Agent have duly executed this Supplement to the Security Agreement as of the day and year first above written.

	
 

	
NEW GRANTORS:

	
[Name of New Grantor]

 

 

By:                                                              

Name:                                                         

Title:                                                           

 

[Address for Notices]

 

	
 

	
[Name of New Grantor]

 

 

By:                                                             

Name:                                                         

Title:                                                           

 

[Address for Notices]

 

	
 

	
AGENT:

	
CHRISTIANA CORPORATE SERVICES, INC.,

a Delaware corporation, as Agent

 

By:                                                             

Name:                                                         

	
 

	
Title:                                                           

 

SIGNATURE PAGE OF SUPPLEMENT TO SECURITY AGREEMENT

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