SECURITY AGREEMENT
Exhibit 10.3
Execution Copy
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (this “Security Agreement”), dated as of December 28, 2005, is by and between Applied Digital Solutions, Inc., a Missouri corporation (“Obligor”), and Satellite Asset Management, L.P., in its capacity as Collateral Agent (the “Collateral Agent”), for the benefit of the Investors (as defined below).
W I T N E S S E T H:
WHEREAS, pursuant to that certain Note Purchase Agreement, dated as of December 28, 2005 (the “Note Purchase Agreement”), by and among Obligor and the Investors named therein (such Investors, collectively with their successors and permitted assigns, the “Investors”), Obligor issued an aggregate $12 million principal amount of its Senior Secured Notes due 2007 (the “Notes”); and
WHEREAS, pursuant to the terms of the Note Purchase Agreement, the Notes will be secured, in part, by all of the assets and properties owned by the Obligor.
NOW, THEREFORE, in consideration of these premises and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:
1. DEFINITIONS.
Unless otherwise defined herein, capitalized terms used herein shall have the meanings ascribed to such terms in the Note Purchase Agreement, and the following terms that are defined in the Uniform Commercial Code from time to time in effect in the State of New York (the “UCC”) are used herein as so defined: Accounts, Chattel Paper, Deposit Accounts, Disbursement Accounts, Documents, Equipment, Fixtures, General Intangibles, Goods, Instruments, Investment Property, Inventory, Letter-of Credit Rights, Proceeds, Software and Supporting Obligations.
2. GRANT OF SECURITY INTEREST.
Subject to the terms and conditions of this Security Agreement and to secure the performance of the Secured Obligations (as defined in Section 3 hereof), Obligor hereby grants to the Collateral Agent, for the benefit of the Investors, a continuing first priority security interest in any and all right, title and interest of Obligor in and to all of its assets and properties, including, without limitation, the following assets and properties, whether now owned or existing or owned, acquired, or arising hereafter (collectively, the “Collateral”):
(i) all Accounts;
(ii) all Chattel Paper;
(iii) all Documents;
(iv) all General Intangibles (including payment intangibles and Software);
(v) all Goods (including Inventory, Equipment and Fixtures);
(vi) all Instruments;
(vii) all Investment Property;
(viii) all Deposit Accounts (as such term is defined in the UCC) of the Obligor, including all Disbursement Accounts and all other bank accounts and all deposits therein;
(ix) all money, cash or cash equivalents of the Obligor;
(x) all Supporting Obligations and Letter-of Credit Rights of the Obligor; and
(xi) to the extent not otherwise included, all Proceeds, tort claims, insurance claims and other rights to payments not otherwise included in the foregoing and products of the foregoing and all accessions to, substitutions and replacements for, and rents and profits of, each of the foregoing.
Without limiting the generality of the foregoing, it is hereby specifically understood and agreed that the Obligor may from time to time hereafter deliver additional assets and properties to the Collateral Agent as collateral security for the Secured Obligations. Upon such delivery to the Collateral Agent, such additional assets and properties shall be deemed to be part of the Collateral and shall be subject to the terms of this Security Agreement.
3. SECURITY FOR SECURED OBLIGATIONS.
The security interest created hereby in the Pledged Collateral of Obligor constitutes continuing collateral security for all of the following, whether now existing or hereafter incurred (the “Secured Obligations”): (a) the Obligor’s obligations under the Notes and the other Transaction Documents now existing or hereafter arising, whether direct, indirect, related, unrelated, fixed, contingent, liquidated, unliquidated, joint, several or joint and several, including, without limitation, the obligations of the Obligor to repay principal of and interest on the Notes (including, without limitation, interest accruing after any bankruptcy, insolvency, reorganization or other similar filing), and to pay all reasonable fees, indemnities, costs and expenses (including attorneys’ fees) provided for the Transaction Documents, and (b) all reasonable expenses and charges, legal and otherwise, incurred by the Collateral Agent and/or the Investors in enforcing the repayment of the Notes or the other terms and conditions of the Transaction Documents or in realizing on or protecting any security therefor, including, without limitation, the security granted hereunder.
4. PERFECTION OF SECURITY INTEREST.
Obligor hereby authorizes the Collateral Agent to prepare and file such financing statements (including continuation statements) or amendments thereof or supplements thereto or other instruments as the Collateral Agent may from time to time deem reasonably necessary or appropriate in order to perfect and maintain the security interests granted hereunder in accordance with the UCC that describes the Collateral in such manner as the Collateral Agent deems necessary or advisable. Obligor shall also execute and deliver to the Collateral Agent and/or file such agreements, assignments or instruments (including affidavits, notices, reaffirmations, amendments and restatements of existing documents and any documents as may be necessary if the law of any jurisdiction other than New York
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becomes or is applicable to the Collateral or any portion thereof, in each case as the Collateral Agent may reasonably request) and do all such other things as the Collateral Agent may reasonably deem necessary or appropriate (i) to assure to the Collateral Agent its security interests hereunder are perfected, including such financing statements (including continuation statements) or amendments thereof or supplements thereto or other instruments as the Collateral Agent may from time to time reasonably request in order to perfect and maintain the security interests granted hereunder in accordance with the UCC and any other personal property security legislation in the appropriate jurisdictions, (ii) to consummate the transactions contemplated hereby and (iii) to otherwise protect and assure the Collateral Agent of its rights and interests hereunder.
5. REPRESENTATIONS AND WARRANTIES.
Obligor hereby represents and warrants to the Collateral Agent, for the benefit of the Investors, that:
5.1. Title. Obligor has good and indefeasible title to, or has a valid and subsisting leasehold interest in, all of the Collateral and will at all times be the legal and beneficial owner of such Collateral free and clear of any Lien, other than Permitted Liens.
5.2 Authority; Enforceability. The Obligor has the authority and capacity to perform its obligations hereunder, and this Security Agreement is the valid and binding obligation of the Obligor enforceable against the Obligor in accordance with its terms, except as the enforceability thereof may be limited by bankruptcy, insolvency or other similar laws of general application affecting the enforcement of creditors’ rights or general equitable principles, whether applied in law or equity.
5.3. Exercising of Rights. The grant by the Obligor of the rights and remedies hereunder will not violate any law or governmental regulation or any material contractual restriction binding on or affecting the Obligor or any of its property.
5.4. Obligor’s Authority. No authorization, approval or action by, and no notice or filing with any Governmental Authority or any other Person is required either (i) for the granting of the security interest by Obligor pursuant to this Security Agreement or (ii) for the exercise by the Collateral Agent or the Investors of their rights and remedies hereunder (except as may be required by laws affecting the offering and sale of securities).
5.5. Security Interest/Priority. This Security Agreement creates a valid security interest in favor of the Collateral Agent, for the ratable benefit of the Investors, in the Collateral. Upon the filing of UCC financing statements in the location of Obligor’s state of organization by the Collateral Agent, the Collateral Agent shall have a first priority perfected security interest in all of the Collateral for which the filing of UCC financing statements is a valid method of perfection, free and clear of all Liens (other than the Permitted Liens).
6. COVENANTS.
Obligor hereby covenants and agrees with the Collateral Agent that Obligor shall:
6.1. Defense of Title. Warrant and defend title to and ownership of the Collateral at its own expense against the claims and demands of all other parties claiming an interest therein; keep the Collateral free from all Liens, other than Permitted Liens; and not sell,
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exchange, transfer, assign, lease or otherwise dispose of the Collateral or any interest therein, except as otherwise expressly permitted herein or in the Transaction Documents.
6.2. Further Assurances. Promptly execute and deliver at its expense all further instruments and documents and take all further action that may be necessary and desirable or that the Collateral Agent may request in order to (i) perfect and protect the security interest created hereby in the Collateral (including, without limitation, execution and delivery of one or more control agreements reasonably acceptable to the Collateral Agent, filing of UCC financing statements and any and all other actions reasonably necessary to satisfy the Collateral Agent that the Collateral Agent has obtained a first priority perfected security interest in all Pledged Collateral); and (ii) enable the Collateral Agent to exercise and enforce its rights and remedies hereunder in respect of the Collateral.
6.3. Amendments. Not make or consent to any amendment or other modification or waiver with respect to any of the Collateral or enter into any agreement or allow to exist any restriction with respect to any of the Collateral other than pursuant hereto.
6.4. Maintenance of Collateral. Preserve the Collateral in good condition and order (ordinary wear and tear excepted) and not permit it to be abused or misused, and not allow any of the Collateral to be affixed to real estate, except for any property deemed to be fixtures.
6.5. Disposition of Collateral. Refrain from selling, assigning or otherwise disposing of any of the Collateral or moving or removing any of the Collateral (other than sales of Inventory and dispositions of obsolete Equipment, in each case, in the ordinary course of business consistent with past practice), without obtaining the prior written consent of the Collateral Agent, or until all of the Secured Obligations have been fully performed and paid in full.
6.6. Reports. Promptly provide to the Collateral Agent such financial statements, reports, lists and schedules related to the Collateral and any other information relating to the Collateral as the Collateral Agent may reasonably request from time to time.
6.7. Inspections. Upon reasonable notice, permit the Collateral Agent to inspect all books and records of the Obligor relating to the Collateral at such times and as often as the Collateral Agent may reasonably request.
6.8. Change Name or Location. Shall not, except upon thirty (30) days’ prior written notice to the Collateral Agent, change its company name or conduct its business under any name other than that set forth herein or change its jurisdiction of organization or incorporation.
6.9. Fees and Expenses. Promptly upon demand by the Collateral Agent, pay all reasonable fees and out-of-pocket costs and expenses (including, without limitation, reasonable attorneys’ fees and legal expenses) incurred by the Collateral Agent in connection with (i) filing or recording any documents (including all taxes in connection therewith) in public offices; and (ii) paying or discharging any taxes, counsel fees, maintenance fees, encumbrances or other amounts in connection with protecting, maintaining or preserving the Collateral.
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7. PERFORMANCE OF OBLIGATIONS; ADVANCES BY COLLATERAL AGENT.
On failure of Obligor to perform any of the covenants and agreements contained herein after written notice and ten (10) days to cure, the Collateral Agent may, at its sole option and in its sole discretion, perform or cause to be performed the same and in so doing may expend such sums as the Collateral Agent may reasonably deem advisable in the performance thereof, including, without limitation, the payment of any insurance premiums, the payment of any taxes, a payment to obtain a release of a Lien or potential Lien (other than in either case a Permitted Lien), expenditures made in defending against any adverse claim and all other expenditures which the Collateral Agent may make for the protection of the security interest hereof or may be compelled to make by operation of law. All such sums and amounts so expended shall be repayable by Obligor promptly upon timely notice thereof and demand therefor and shall constitute additional Secured Obligations. No such performance of any covenant or agreement by the Collateral Agent on behalf of Obligor, and no such advance or expenditure therefor, shall relieve Obligor of any default under the terms of this Security Agreement. The Collateral Agent may make any payment hereby authorized upon prior notice to Obligor and in accordance with any bill, statement or estimate procured from the appropriate public office or holder of the claim to be discharged without inquiry into the accuracy of such bill, statement or estimate or into the validity of any tax assessment, sale, forfeiture, tax lien, title or claim except to the extent such payment is being contested in good faith by Obligor in appropriate proceedings and against which adequate reserves are being maintained in accordance with GAAP.
8. EVENTS OF DEFAULT.
The occurrence of either of the following events shall constitute an event of default under this Security Agreement (each, an “Event of Default”): (a) (i) the occurrence of a Mandatory Redemption Event (as defined in the Notes) and (ii) the failure of the Obligor to pay the Mandatory Redemption Price (as defined in the Notes) in full on or prior to the Mandatory Redemption Date (as defined in the Notes); or (b) any material portion of the Collateral shall be damaged, destroyed or otherwise lost and such damage, destruction or loss is not covered by insurance.
8.1. Remedies.
(a) General Remedies. Upon the occurrence of an Event of Default and during the continuation thereof, the Collateral Agent shall have, in respect of the Collateral, in addition to the rights and remedies provided herein and in the other Transaction Documents, the rights and remedies of a secured party under the UCC or any other applicable law.
(b) Sale of Collateral. Upon the occurrence of an Event of Default and during the continuation thereof, without limiting the generality of this Section 8.1, the Collateral Agent may, in its sole discretion, sell or otherwise dispose of or realize upon the Collateral, or any part thereof, in one or more parcels, at public or private sale, at any exchange or broker’s board or elsewhere, at such price or prices and on such other terms as the Collateral Agent may deem commercially reasonable, for cash, credit or for future delivery or otherwise in accordance with applicable law. To the extent permitted by law, any Investor may, in such event, bid for the purchase of such Collateral. Obligor agrees that, to the extent notice of sale shall be required by law and has not been waived by Obligor, any requirement of reasonable notice shall be met if an authenticated notification of disposition under Section 9-611 of the UCC, specifying the place of any public sale or the time after which any private sale is to be made, is personally served on or mailed, postage prepaid, to
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Obligor, in accordance with Section 9.6 at least twenty (20) days before the time of such sale. The Collateral Agent shall not be obligated to make any sale of Collateral regardless of notice of sale having been given. The Collateral 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.
(c) Retention of Collateral. In addition to the rights and remedies hereunder, upon the occurrence of an Event of Default and during the continuation thereof, the Collateral Agent may, after providing the notices required by Sections 9-620 and 9-621 of the UCC (or any successor sections of the UCC) or otherwise complying with the notice requirements of applicable law of the relevant jurisdiction, accept or retain all or any portion of the Collateral in satisfaction of the Secured Obligations. Unless and until the Collateral Agent shall have provided such notices, however, the Collateral Agent shall not be deemed to have retained any Collateral in satisfaction of any Secured Obligations for any reason.
(d) Deficiency. In the event that the proceeds of any sale, collection or realization are insufficient to pay all amounts to which the Collateral Agent or the Investors are legally entitled, Obligor shall be liable for the deficiency, together with the costs of collection and the reasonable fees of any attorneys employed by the Collateral Agent to collect such deficiency. Any surplus remaining after the full payment and satisfaction of the Secured Obligations shall be returned to Obligor or to whomsoever a court of competent jurisdiction shall determine to be entitled thereto.
(e) Other Security. To the extent that any of the Secured Obligations are now or hereafter secured by property other than the Collateral, or by a guarantee, endorsement or property of any other Person, then the Collateral Agent shall have the right to proceed against such other property, guarantee or endorsement upon the occurrence and during the continuation of any Event of Default, and the Collateral Agent shall have the right, in its sole discretion, to determine which rights, security, Liens, security interests or remedies the Collateral Agent shall at any time pursue, relinquish, subordinate, modify or take with respect thereto, without in any way modifying or affecting any of them, any of the Collateral Agent’s rights or the Secured Obligations under this Security Agreement or under any of the Transaction Documents.
(f) Cumulative Remedies. The rights and remedies provided in this Security Agreement are cumulative, may be exercised singly or concurrently, and are not exclusive of any other rights or remedies provided by law.
8.2. Rights of the Collateral Agent.
(a) Power of Attorney. Obligor hereby designates and appoints the Collateral Agent, on behalf of the Investors, and each of its designees or agents as attorney-in-fact of Obligor, irrevocably and with power of substitution, with authority to take any or all of the following actions upon the occurrence and during the continuation of an Event of Default:
(i) to demand, collect, settle, compromise, adjust and give discharges and releases concerning the Collateral of Obligor, all as the Collateral Agent may reasonably determine in respect of the Collateral;
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(ii) to commence and prosecute any actions at any court for the purposes of collecting any of the Collateral and enforcing any other right in respect thereof;
(iii) to defend, settle, adjust or compromise any action, suit or proceeding brought with respect to the Collateral and, in connection therewith, give such discharge or release as the Collateral Agent may deem reasonably appropriate;
(iv) to pay or discharge taxes, Liens, security interests, or other encumbrances levied or placed on or threatened against the Collateral;
(v) to direct any parties liable for any payment under any of the Collateral to make payment of any and all monies due and to become due thereunder directly to the Collateral Agent or as the Collateral Agent shall direct;
(vi) to receive payment of and receipt for any and all monies, claims, and other amounts due and to become due at any time in respect of or arising out of any of the Collateral;
(vii) to sign and endorse any drafts, assignments, proxies, stock powers, verifications, notices and other documents relating to the Collateral;
(viii) to execute and deliver and/or file all assignments, conveyances, statements, financing statements, continuation statements, pledge agreements, affidavits, notices and other agreements, instruments and documents that the Collateral Agent may determine necessary in order to perfect and maintain the security interests and Liens granted in this Security Agreement and in order to fully consummate all of the transactions contemplated herein; and
(ix) to do and perform all such other acts and things as the Collateral Agent may reasonably deem to be necessary, proper or convenient in connection with the Collateral.
This power of attorney is a power coupled with an interest and shall be irrevocable for so long as any of the Secured Obligations remain outstanding. The Collateral Agent shall be under no duty to exercise or withhold the exercise of any of the rights, powers, privileges and options expressly or implicitly granted to the Collateral Agent in this Security Agreement, and shall not be liable for any failure to do so or any delay in doing so. The Collateral Agent shall not be liable for any act or omission or for any error of judgment or any mistake of fact or law in its individual capacity or its capacity as attorney-in-fact except acts or omissions resulting from its gross negligence or willful misconduct. This power of attorney is conferred on the Collateral Agent solely to perfect, protect, preserve and realize upon its security interest in the Collateral.
(b) Assignment by the Collateral Agent. The Collateral Agent may from time to time assign the Secured Obligations or any portion thereof and/or the Collateral or any portion thereof to a successor Collateral Agent, and the assignee shall be entitled to all of the rights and remedies of the Collateral Agent under this Security Agreement in relation thereto.
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(c) Release of Collateral. The Collateral Agent may release any of the Collateral from this Security Agreement or may substitute any of the Collateral for other Collateral without altering, varying or diminishing in any way the force, effect, Lien, pledge or security interest of this Security Agreement as to any Collateral not expressly released or substituted, and this Security Agreement shall continue as a first priority Lien on all Collateral not expressly released or substituted.
8.3. Application of Proceeds. After the exercise of remedies by the Collateral Agent or the Investors, any proceeds of the Collateral, when received by the Collateral Agent or the Investors in cash or its equivalent, will be applied in reduction of the Secured Obligations, and Obligor irrevocably waives the right to direct the application of such payments and proceeds and acknowledges and agrees that the Collateral Agent shall have the continuing and exclusive right to apply and reapply any and all such proceeds in the Collateral Agent’s sole discretion, notwithstanding any entry to the contrary upon any of its books and records.
8.4. Costs of Counsel. Upon the occurrence of an Event of Default or a material breach of any provision herein or in any of the other Transaction Documents, if the Collateral Agent employs counsel to prepare or consider amendments, waivers or consents with respect to this Security Agreement, or to take action or make a response in or with respect to any legal or arbitral proceeding relating to this Security Agreement or relating to the Collateral, or to protect the Collateral or exercise any rights or remedies under this Security Agreement or with respect to the Collateral, then Obligor agrees to promptly pay the costs and expenses of the Collateral Agent, all of which costs and expenses shall constitute Secured Obligations hereunder.
8.5. Continuing Agreement.
(a) This Security Agreement shall be a continuing agreement in every respect and shall remain in full force and effect so long as any of the Secured Obligations remain outstanding. Upon such payment and termination, this Security Agreement shall be automatically terminated and the Collateral Agent shall, upon the request and at the expense of Obligor, forthwith release all of the Liens and security interests granted hereunder and shall deliver all UCC termination statements and/or other documents reasonably requested by Obligor evidencing such termination. Notwithstanding the foregoing, all releases and indemnities provided hereunder shall survive termination of this Security Agreement.
(b) This Security Agreement shall continue to be effective or be automatically reinstated, as the case may be, if at any time payment, in whole or in part, of any of the Secured Obligations is rescinded or must otherwise be restored or returned by the Collateral Agent or any Investor as a preference, fraudulent conveyance or otherwise under any bankruptcy, insolvency or similar law, all as though such payment had not been made; provided that in the event payment of all or any part of the Secured Obligations is rescinded or must be restored or returned, all reasonable costs and expenses (including without limitation any reasonable legal fees and disbursements) incurred by the Collateral Agent or any Investor in defending and enforcing such reinstatement shall be deemed to be included as a part of the Secured Obligations.
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9. MISCELLANEOUS.
9.1 Survival; Severability. The representations, warranties, covenants and indemnities made by the Obligor herein shall survive the execution and delivery of this Security Agreement until such time as there are no Secured Obligations due to the Collateral Agent. In the event that any provision of this Security Agreement becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable or void, this Security Agreement shall continue in full force and effect without said provision; provided, that in such case the parties shall negotiate in good faith to replace such provision with a new provision which is not illegal, unenforceable or void, as long as such new provision does not materially change the economic benefits of this Security Agreement to the parties.
9.2 Successors and Assigns. This Security Agreement shall create a continuing security interest in the Pledged Collateral and shall be binding upon Obligor and shall inure, together with the rights and remedies of the Collateral Agent hereunder, to the benefit of the Collateral Agent and the holders of the Notes and their respective successors and permitted assigns. The Obligor may not assign its rights or obligations under this Security Agreement.
9.3 Governing Law; Jurisdiction. This Security Agreement shall be governed by and construed under the laws of the State of New York applicable to contracts made and to be performed entirely within the State of New York. The Obligor hereby irrevocably submit to the non-exclusive jurisdiction of the state and federal courts sitting in the City of New York, for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waive, and agree 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 brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper. The Obligor 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 to the Obligor via express mail (effective five (5) days after such mailing) at the address in effect for notices to them under this Security 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 Obligor hereby irrevocably and unconditionally waives trial by jury in any legal action or proceeding relating to this Security Agreement or any other Transaction Document to which it is a party and for any counterclaim therein.
9.4 Counterparts. This Security Agreement may be executed in counterparts, each of which where so executed and delivered shall be an original, but all of which shall constitute one and the same instrument. It shall not be necessary in making proof of this Security Agreement to produce or account for more than one such counterpart. Delivery of executed counterparts of this Security Agreement by facsimile shall be effective as an original and shall constitute a representation that an original shall be delivered upon the request of the Collateral Agent.
9.5 Headings. The headings used in this Security Agreement are used for convenience only and are not to be considered in construing or interpreting this Security Agreement.
9.6 Notices. Any notice, demand or request required or permitted to be given by the Obligor or the Collateral Agent pursuant to the terms of this Security Agreement shall be in writing and shall be deemed delivered (i) when delivered personally or by verifiable facsimile transmission (immediately followed by written confirmation delivered according to
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another mechanism provided by this section), unless such delivery is made on a day that is not a Business Day, in which case such delivery will be deemed to be made on the next succeeding Business Day, (ii) on the next Business Day after timely delivery to an overnight courier and (iii) on the Business Day actually received if deposited in the U.S. mail (certified or registered mail, return receipt requested, postage prepaid), addressed as follows:
If to the Obligor:
Applied Digital Solutions, Inc.
1690 S. Congress Avenue, Suite 200
Delray Beach, FL 33445
Attn: Scott R. Silverman
Tel: (561) 805-8000
Fax: (561) 805-0002
with a copy to:
Holland & Knight LLP
701 Brickell Avenue, Suite 3000
Miami, FL 33131
Attn: Harvey A. Goldman, Esq.
Tel: (305) 374-8500
Fax: (305) 789-7799
If to the Collateral Agent:
Satellite Asset Management, L.P.
623 Fifth Avenue, 20th Floor
New York, NY 10022
Attn: Jim LaChance
Tel: 212 ###-###-####
Fax: 212- 209-2020
with a copy to:
Mazzeo Song LLP
708 Third Avenue, 19th Floor
New York, NY 10017
Attn: Robert L. Mazzeo
Tel: 212 ###-###-####
Fax: 212 ###-###-####
Either party may, by notice given in accordance with this Section 9.6, change the address to which notices, demands and requests shall be sent to such party.
9.7 Entire Agreement; Amendments. This Security Agreement and the other Transaction Documents constitute the entire agreement between the parties with regard to the subject matter hereof and thereof, superseding all prior agreements or understandings, whether written or oral, between or among the parties. Except as expressly provided herein, neither this Security Agreement nor any term hereof may be amended except pursuant to a written
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instrument executed by the Obligor and the Collateral Agent, and no provision hereof may be waived other than by a written instrument signed by the party against whom enforcement of any such waiver is sought.
9.8 No Waiver. Other than pursuant to an amendment or waiver effected in accordance with Section 9.7 of this Security Agreement, the Collateral Agent shall not, by any act, any failure to act or any delay in acting be deemed to have (i) waived any right or remedy under this Security Agreement, any other Transaction Document or any document, agreement or instrument made, delivered or given in connection with this Security Agreement or the other Transaction Documents, or (ii) acquiesced in any Event of Default or in any breach of any of the terms and conditions of this Security Agreement, any other Transaction Document or any document, agreement or instrument made, delivered or given in connection with this Security Agreement or the other Transaction Documents. No failure to exercise, nor any delay in exercising, any right, power or privilege of the Collateral Agent under this Security Agreement, any other Transaction Document or any document, agreement or instrument made, delivered or given in connection with this Security Agreement or the other Transaction Documents shall operate as a waiver of any such right, power or privilege. No single or partial exercise of any right, power or privilege under this Security Agreement, any other Transaction Document or any document, agreement or instrument made, delivered or given in connection with this Security Agreement or the other Transaction Documents shall preclude any other or further exercise of any other right, power or privilege. A waiver by the Collateral Agent of any right or remedy under this Security Agreement, any other Transaction Document or any other document or instrument made, delivered or given in connection with this Security Agreement or the other Transaction Documents on any one occasion shall not be construed as a bar to any right or remedy that the Collateral Agent would otherwise have on any future occasion.
9.9 Compliance with the Transaction Documents. The Obligor covenants and agrees that on and after the date hereof and until all Secured Obligations have been paid and performed in full, such Obligor shall take, or will refrain from taking, all actions that are necessary to be taken or not taken so that no violation of any covenant or agreement of such Obligor contained in the Note Purchase Agreement or any of the other Transaction Documents is caused by the actions (or non-actions) of such Obligor or any of its Affiliates. The Obligor hereby agrees to pay all reasonable out-of-pocket costs and expenses of the Collateral Agent in connection with the enforcement of this Security Agreement and any amendment, waiver or consent relating hereto (including, without limitation, reasonable legal fees and disbursements).
9.10 Waivers. The Obligor acknowledges that the Secured Obligations arose out of a commercial transaction and hereby knowingly and intelligently waives any right to require the Collateral Agent to (i) proceed against any person or entity, (ii) proceed against any other collateral under any other agreement, or (iii) pursue any other remedy available to the Collateral Agent. The Obligor further waives any defense that it may have to the exercise by the Collateral Agent of its rights under this Security Agreement, other than the defense that the Secured Obligations have fully been paid and performed.
9.11 Cross Default. The Obligor agrees and acknowledges that during any period in which any Secured Obligations remain outstanding, a default under the terms of this Security Agreement shall constitute a default under the other Transaction Documents, and a
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default under any of the other Transaction Documents shall constitute a default under this Security Agreement.
9.12 Rights of Investors. All rights of the Collateral Agent hereunder, if not exercised by the Collateral Agent, may be exercised by the Investors.
[Signature Page to Follow]
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IN WITNESS WHEREOF, the undersigned have executed this Security Agreement as of the date first-above written.
OBLIGOR:
APPLIED DIGITAL SOLUTIONS, INC.
| By: | /s/ Evan McKeown |
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| Name: Evan C. McKeown | |
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| Title: Senior Vice President and Chief Financial Officer | |
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| COLLATERAL AGENT: | ||
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| SATELLITE ASSET MANAGEMENT, L.P. | ||
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| By: | /s/ Simon Rayhker |
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| Name: Simon Raykher | |
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| Title: General Counsel | |
