COLLATERAL
PLEDGE AND SECURITY AGREEMENT
This
COLLATERAL PLEDGE AND SECURITY AGREEMENT (this “Agreement”), dated as of May 16,
2008, by and between GREEN SCREEN INTERACTIVE SOFTWARE, INC., a Delaware
corporation (“Debtor”), and MANDALAY MEDIA, INC., a Delaware corporation
(“Secured Party”).
WHEREAS,
pursuant to that certain Note Purchase Agreement, dated as of even date
herewith, by and between the Debtor and the Secured Party (the “Purchase
Agreement”), the Secured Party has extended credit to Debtor represented by a
convertible secured promissory note (the “Bridge Note”) in the principal amount
of $2,000,000; and
WHEREAS,
to induce the Secured Party to extend credit to Debtor, Debtor has agreed to
grant a security interest in certain collateral to Secured Party;
NOW,
THEREFORE, in consideration of the foregoing premises and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Debtor and Secured Party agree as follows:
1. Certain
Definitions.
The
following terms shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms
defined):
“Account”
shall
have the meaning ascribed to such term in Section 9-102 of the UCC.
“Bridge
Note”
shall
have the meaning specified in the Recitals hereto.
“Chattel
Paper”
shall
have the meaning ascribed to such term in Section 9-102 of the UCC.
“Collateral”
shall
have the meaning specified in Section 2 hereof.
“Commercial
Tort Claim”
shall
have the meaning ascribed to such term in Section 9-102 of the UCC.
“Contracts”
shall
mean, all right, title and interest of Debtor in, to and under, or derived
from,
any and all sale, service, performance and equipment lease contracts (whether
written or oral), and any other contract (whether written or oral), between
Debtor and third parties.
“Deposit
Account”
shall
have the meaning ascribed to such term in Section 9-102 of the UCC.
“Debtor”
shall
have the meaning specified in the preamble hereto.
“Document”
shall
have the meaning ascribed to such term in Section 9-102 of the UCC.
“Equipment”
shall
have the meaning ascribed to such term in Section 9-102 of the UCC.
“Event
of Default”
shall
have the meaning specified in Section 8 hereof.
“Goods”
shall
have the meaning ascribed to such term in Section 9-102 of the UCC.
“Governmental
Authority”
shall
mean any federal, state, local, foreign or other governmental or administrative
(including self-regulatory) body, instrumentality, department or agency or
any
court, tribunal, administrative hearing body, arbitration panel, commission,
or
other similar dispute resolving panel or body and shall include any
“governmental unit” as such term is defined in Section 9-102 of the
UCC.
“Indemnitees”
shall
have the meaning specified in Section 13(a) hereof.
“Instrument”
shall
have the meaning ascribed to such term in Section 9-102 of the UCC.
“Insurance
Policies”
shall
mean all insurance policies held by Debtor or naming Debtor as insured,
additional insured or loss payee (including, without limitation, casualty
insurance, liability insurance, property insurance and business interruption
insurance) and all such insurance policies entered into after the date
hereof.
“Intangibles”
shall
have the meaning ascribed to the term “general intangible” in Section 9-102 of
the UCC.
“Inventory”
shall
have the meaning ascribed to such term in Section 9-102 of the UCC.
“Investment
Property”
shall
have the meaning ascribed to such term in Section 9-102 of the UCC.
“Licenses”
shall
mean all of Debtor’s license agreements and covenants not to sue with any other
Person with respect to a patent, trademark, service mark or copyright (other
than any existing license agreements or covenants not to sue which by their
terms prohibit assignment, transfer or the grant of a security interest by
Debtor or give the other party thereto the right to terminate the same upon
an
assignment, transfer, or the grant of a security interest thereto), whether
Debtor is a licensor or licensee under any such license agreement, along with
any and all (a) renewals, extensions, supplements and continuations thereof,
(b)
income, royalties, damages, claims and payments now and hereafter due and/or
payable to Debtor with respect thereto, including, without limitation, damages
and payments for past, present or future infringements thereof, (c) rights
to
sue for past, present and future infringements thereof, and (d) any other rights
to use, exploit or practice any patent, trademark, service mark or copyright
of
Debtor.
“Lien”
shall
mean any mortgage, pledge, assignment, security interest, encumbrance, lien
or
charge of any kind, any conditional sale or other title retention agreement
or
any lease in the nature thereof (including any agreement to give any of the
foregoing).
“Line
of Credit”
shall
mean a $5 million line of credit which the Company may enter into after the
date
hereof.
“Noncash
Proceeds”
shall
have the meaning ascribed to such term in Section 9-102 of the UCC.
“Obligations”
shall
have the meaning specified in Section 3 hereof.
“Payment
Intangible”
shall
have the meaning ascribed to such term in Section 9-102 of the UCC.
“Pension
Plan Reversions”
shall
mean Debtor’s right to receive the surplus funds, if any, which are payable to
the Debtor following the termination of any employee pension plan and the
satisfaction of all liabilities of participants and beneficiaries under such
plan in accordance with applicable law.
“Person”
shall
have the meaning ascribed to such term in Section 9-102 of the UCC and shall
include any individual, partnership, joint venture, firm, corporation, limited
liability company, limited liability partnership, association, trust or other
enterprise or any Governmental Authority.
“Proceeds”
shall
have the meaning ascribed to such term in Section 9-102 of the UCC and shall
include, without limitation, (a) any and all payments (in any form whatsoever)
made or due and payable to Debtor from time to time in connection with any
condemnation, seizure or forfeiture of all or any part of the Collateral by
any
Governmental Authority), (b) any and all amounts paid or payable to Debtor
for
or in connection with any sale or other disposition of all or any part of the
Collateral and (c) any and all other amounts from time to time paid or payable
under or in connection with any of the Collateral.
“Purchase
Agreement”
shall
have the meaning specified in the Recitals hereto.
“Receivables”
shall
mean all Accounts, Documents, Instruments and Chattel Paper.
“UCC”
shall
mean the Uniform Commercial Code as in effect in the State of New York from
time
to time.
“Secured
Party”
shall
have the meaning specified in the preamble hereto.
“Third
Party Claims”
shall
have the meaning specified in Section 13(a) hereof.
2. Grant
of a Security Interest.
As
security for the prompt and complete payment and performance when due of all
the
Obligations, Debtor hereby pledges, assigns, transfers and grants to Secured
Party, a continuing first-priority security interest in and to all of Debtor’s
right, title and interest in, to and under the following property, wherever
located, now existing or hereafter arising from time to time (collectively,
“Collateral”): (a) all Receivables; (b) all Inventory; (c) all books, records,
ledgers, print-outs, file materials and other papers containing information
relating to Receivables and any account debtors in respect thereof, together
with all Contracts; (d) all Equipment; (e) all Intangibles; (f) all Investment
Property; (g) all Insurance Policies; (h) all Pension Plan Reversions; (i)
all
Licenses; (j) all Deposit Accounts; (k) all Commercial Tort Claims; (l) all
Goods; (m) any and all other property of the Debtor of every name and nature
which from time to time after the date hereof, by delivery or by writing of
any
kind for the purposes hereof, shall have been conveyed, mortgaged, pledged,
assigned or transferred by Debtor or by anyone on its behalf or with its consent
to the Secured Party, as and for additional security for the payment of the
Obligations; and (n) all Proceeds and Noncash Proceeds of any and all of the
foregoing.
3. Debtor’s
Obligations Secured Hereby.
This
Agreement secures, and the Collateral is collateral security for, the prompt
payment and performance in full when due, whether at stated maturity, by
acceleration or otherwise (including, without limitation, the payment of
interest and other amounts which would accrue and become due but for the filing
of a petition in bankruptcy or the operation of the automatic stay under the
Bankruptcy and Insolvency Act (R.S. 1985, c. B-3)) of all obligations of Debtor
now or hereafter arising under or in respect of the Bridge Note, this Agreement
or Paragraph 15 of that certain Letter of Intent, by and between Secured Party
and Debtor, dated as of the date hereof (the “Letter of Intent”) (including,
without limitation, Debtor’s obligations to pay principal and interest and all
other charges, fees, expenses, commissions, reimbursements, indemnities and
other payments related to or in respect of the obligations contained in the
Bridge Note, this Agreement or the Letter of Intent) (collectively, the
“Obligations”).
4. No
Release.
Nothing
set forth in this Agreement shall relieve Debtor from the performance of any
term, covenant, condition or agreement on Debtor’s part to be performed or
observed under or in respect of any of the Collateral or from any liability
to
any Person under or in respect of any of the Collateral or impose any obligation
on the Secured Party to perform or observe any such term, covenant, condition
or
agreement on Debtor’s part to be so performed or observed or shall impose any
liability on the Secured Party for any act or omission on the part of Debtor
relating thereto or for any breach of any representation or warranty on the
part
of Debtor contained in the Bridge Note, the Purchase Agreement or this
Agreement, or in respect of the Collateral or made in connection herewith or
therewith.
5. Debtor’s
Representations and Warranties.
Debtor
represents and warrants and, so long as this Agreement is in effect, shall
be
deemed continuously to represent and warrant, that:
(a) No
Liens.
Debtor
is and will be the owner of all Collateral free from any Lien or other right,
title or interest of any Person, other than Secured Party or the Lender with
respect to the Line of Credit and except as disclosed in Schedule
A
annexed
hereto.
(b) Authority;
Enforceability.
Debtor
has full organizational power and authority and has taken all organizational
action necessary to execute, deliver and perform this Agreement and the Bridge
Note and to encumber and grant a security interest in the Collateral. This
Agreement constitutes legal, valid and binding obligations of Debtor,
enforceable against Debtor in accordance with its terms.
(c) Other
Financing Statements.
Except
as disclosed in Schedule
A
annexed
hereto, there is no financing statement (or similar statement or instrument
of
registration under any jurisdiction) or any notice filed with any Governmental
Authority covering or purporting to cover any interest of any kind in the
Collateral. So long as any of the Obligations remain unpaid, Debtor shall not
execute or authorize to be filed in any public office any financing statement
(or similar statement or instrument of registration under the law of any
jurisdiction) or statements relating to the Collateral, except financing
statements filed or to be filed in respect of and covering the security interest
granted hereby by Debtor or as may be required by the Lender with respect to
the
Line of Credit.
(d) Security
Interest; Necessary Filings.
This
Agreement creates a valid security interest of Secured Party in the Collateral
securing payment of the Obligations. The security interest granted to Secured
Party pursuant to this Agreement in and to the Collateral constitutes and
hereafter will constitute a perfected security interest therein to the extent
that perfection can be achieved by the filing of a financing statement, superior
and prior to the rights of all other persons therein and subject to no other
Liens, except as disclosed in Schedule
A
annexed
hereto except as may be required by the Lender with respect to the Line of
Credit.
(e) No
Consents, etc.
No
other consent of any other Person (including, without limitation, members or
creditors of Debtor) and no consent, authorization, approval, or other action
by, and no notice to or filing with, any Governmental Authority (other than
a
court in connection with the exercise of judicial remedies by Secured Party)
or
regulatory body is required either (i) for the pledge by Debtor of the
Collateral pursuant to this Agreement, or for the execution, delivery or
performance of this Agreement by Debtor, or (ii) for the exercise by
Secured Party of the rights provided for in this Agreement or the remedies
in
respect of the Collateral pursuant to this Agreement.
(f) Organization;
Chief Executive Office; Name.
The
chief executive office of Debtor is located at 575 Broadway, New York, New
York
10012. The Debtor’s legal name, as it appears in the records of the jurisdiction
in which the Debtor is organized, is “Green Screen Interactive Software, Inc.”
Debtor has not done business during the past three years or since inception
(whichever period is shorter) under any name other than Green Screen LLC, or
Green Screen Interactive Software, LLC. Debtor shall not change its name or
move
its chief executive office, except to such new location as Debtor may establish
in accordance with the last sentence of this Section 5(f). All tangible evidence
of all Collateral and the only original books of account and records of Debtor
relating thereto are, and will continue to be, kept at such chief executive
office, or at such new location for such chief executive office as Debtor may
establish in accordance with the last sentence of this Section 5(f). All
Collateral are, and will continue to be, controlled and monitored (including,
without limitation, for general accounting purposes) from, such chief executive
office location shown above, or such new location as Debtor may establish in
accordance with the last sentence of this Section 5(f). Debtor shall not
establish a new location for its chief executive office nor shall it change
its
name until it shall have given to Secured Party not less than 45 days’ prior
written notice of its intention so to do, clearly describing such new location
or name and providing such other information and taking such action in
connection therewith as Secured Party may request.
(g) Debtor’s
Structure.
The
Debtor is a corporation duly organized under the laws of the State of Delaware.
The Debtor shall not change its organizational structure or the state in which
it is organized without the prior written consent of the Secured Party and
shall, in any such connection, take all action satisfactory to Secured Party
to
maintain the perfection and proof of the security interest of Secured Party
in
the Collateral intended to be granted hereby.
(h) Debtor’s
Tax and Organizational Identification Numbers.
Debtor’s tax identification number is 33-1215749.
(i) Collateral.
All
information set forth herein relating to the Collateral is accurate and complete
in all material respects.
(j) Additional
Representations, Warranties and Covenants of Debtor.
Debtor
hereby repeats each of the representations and warranties made by Debtor and
contained or incorporated by reference in the Bridge Note and the Purchase
Agreement as fully as if each such representation and warranty were expressly
set forth herein and expressly made herein by Debtor on and as of the date
hereof, each such representation and warranty being incorporated in this
Agreement by reference mutatis mutandis.
6. Debtor’s
Covenants.
Debtor
agrees and covenants for itself, its successors and permitted assigns
that:
(a) Business
Use; Protection of Secured Party’s Security.
The
Collateral will be used solely for business purposes of Debtor and will remain
in the possession or under the control of Debtor and will not be used for any
unlawful purpose. The Collateral will not be misused, abused, wasted or allowed
to deteriorate. Debtor shall not take any action that impairs the rights of
Secured Party in the Collateral. Debtor will defend the Collateral against
the
claims and demands of all other parties against Debtor or Secured Party other
than the Lender with respect to the Line of Credit.; will keep the Collateral
free from all Liens (except as disclosed in Schedule
A
annexed
hereto); and (except with respect to Inventory which is addressed in Section
6(q) below) will not sell, transfer, lease, license, sublicense, assign, deliver
or otherwise dispose of any Collateral or any interest therein without the
prior
written consent of Secured Party. Debtor will not sell, license, amend or permit
the amendment of any License, Instrument, Contract or Chattel Paper in any
manner adverse to the interests of the Secured Party without the prior written
consent of the Secured Party.
(b) Financing
Statements.
As
promptly as practicable after the execution and delivery of this Agreement,
Debtor shall perfect and evidence the perfection of the first-priority security
interest granted herein, by the completion, signing and filing of UCC-1
Financing Statements. Debtor hereby irrevocably appoints the Secured Party
as
the Debtor’s attorney-in-fact to execute and deliver any and all UCC-1 Financing
Statements, notices and other documents in furtherance of the foregoing, which
power-of-attorney the parties hereto acknowledge and agree is coupled with
an
interest. Debtor authorizes the Secured Party (i) to file financing statements
against the Collateral and (ii) at the election of the Secured Party, to
describe the Collateral as “all assets,” “all personal property,” or words of
similar import.
(c) Further
Actions.
Debtor
shall at any time and from time to time take such steps as Secured Party may
reasonably request to insure the continued perfection and priority of Secured
Party’s security interest in any of the Collateral and of the preservation of
its rights therein in any jurisdiction except as otherwise provided herein.
(d) After
Acquired Collateral.
Any and
all Collateral described or referred to in the granting clauses hereof which
is
hereafter acquired shall, and without any further conveyance, assignment or
act
on the part of Debtor or Secured Party, become and be subject to the security
interests herein granted as fully and completely as though specifically
described herein.
(e) Maintenance
of Records.
Debtor
shall keep and maintain at its own cost and expense satisfactory and complete
records of each Receivable, in a manner consistent with prudent business
practices, for at least seven years from the date on which such Receivable
comes
into existence, including, without limitation, records of all payments received,
all credits granted thereon, all merchandise returned and all other
documentation relating thereto, and Debtor shall make the same available to
Secured Party for inspection, at Debtor’s own cost and expense, at any and all
reasonable times upon demand. Upon the occurrence and during the continuance
of
an Event of Default, Debtor shall, at its own cost and expense, deliver all
tangible evidence of Receivables (including, without limitation, all documents
evidencing Receivables) and such books and records to Secured Party or to its
representatives (copies of which evidence and books and records may be retained
by Debtor) at any time upon Secured Party’s demand. Upon the occurrence and
during the continuance of an Event of Default, Secured Party may transfer a
full
and complete copy of Debtor’s books, records, credit information, reports,
memoranda and all other writings relating to the Receivables to and for the
use
by any Person that has acquired or is contemplating acquisition of an interest
in the Receivables or Secured Party’s security interest therein without the
consent of Debtor.
(f) Modification
of Terms, etc.
Subject
to the provisions of Section 6(h), Debtor shall not rescind or cancel any
indebtedness evidenced by any Receivable or modify any term thereof or make
any
adjustment with respect thereto, or extend or renew any such indebtedness,
or
compromise or settle any dispute, claim, suit or legal proceeding relating
thereto, or sell any Receivable or interest therein, without the prior written
consent of the Secured Party. Debtor shall timely fulfill in all material
respects all obligations on its part to be fulfilled under or in connection
with
the Receivables.
(g) Collection.
Debtor
shall take all commercially reasonable actions to cause to be collected from
the
account debtor of each of the Receivables, as and when due (including, without
limitation, Receivables that are delinquent), any and all amounts owing under
or
on account of such Receivable, and apply forthwith upon receipt thereof all
such
amounts as are so collected to the outstanding balance of such Receivable,
except that Debtor may allow in the ordinary course of business (i) a refund
or
credit due as a result of returned or damaged or defective merchandise, and
(ii)
so long as no Event of Default shall exist and be continuing, such extensions
of
time to pay amounts due in respect of Receivables and such other modifications
or payment terms or settlements in respect of Receivables as shall be
commercially reasonable in the circumstances, all in accordance with Debtor’s
ordinary course of business consistent with its collection practices as in
effect from time to time. The costs and expenses (including, without limitation,
attorneys’ fees and the allocated costs of internal counsel) of collection,
whether incurred by Debtor or Secured Party, shall be paid by Debtor. The
Secured Party shall have the right at any time to notify an account debtor
or
the obligor on any insurance with respect to a Receivable of the security
interest herein and to make payment directly to the Secured Party.
(h) [Intentionally
Deleted.]
(i) Protection
of Secured Party’s Security.
Debtor
shall not take any action that impairs the rights of Secured Party in the
Collateral. Debtor shall at all times keep the Inventory and Equipment insured
by financially sound and reputable insurers in favor of Secured Party as an
additional insured, at the Debtors’ own expense, to Secured Party’s reasonable
satisfaction against fire, theft and all other risks to which the Collateral
may
be subject, in such amounts (but in no event less than the replacement cost
thereof) and with such deductibles as would be maintained by operators of
businesses similar to the business of Debtor or as Secured Party may otherwise
require. At least 30 days prior to the expiration of any such policy of
insurance, Debtor shall deliver to Secured Party an extension or renewal policy
or an insurance certificate evidencing renewal or extension of such policy.
(j) Commercial
Tort Claims.
If the
Debtor shall at any time acquire a Commercial Tort Claim, the Debtor shall
immediately notify the Secured Party in a writing signed by the Debtor of the
details of such claim and grant to the Secured Party in such writing an express
security interest therein and in the proceeds thereof, all upon the terms of
this Security Agreement, with such writing to be in the form and substance
satisfactory to the Secured Party.
(k) Payment
of Taxes: Claims.
Debtor
shall pay promptly when due all property and other taxes, assessments and
governmental charges or levies (other than those the Company is contesting
in
good faith and with respect to which it has made sufficient reserves on its
financial statements) imposed upon, and all claims (including claims for labor,
materials and supplies) against, the Collateral.
(l) Ordinary
Course of Business.
Subject
to any limitation contained in the Bridge Note, nothing in this Section 6 shall
be deemed to prohibit (i) the sale of Inventory and the collection of
Receivables by Debtor in the ordinary course of business, or (ii) the
disposition and replacement of obsolete assets as necessary in the ordinary
course of Debtor’s business.
(m) No
Impairment.
Debtor
shall not enter into any agreement that would materially impair or conflict
with
Debtor’s obligations hereunder or under the Bridge Note without the prior
written consent of the Secured Party.
(n) No
Additional Indebtedness.
Except
for the Line of Credit, Debtor agrees that it shall not incur any additional
Indebtedness (as such term is defined in the Bridge Note) without the prior
written consent of the Secured Party, which consent shall not be unreasonably
withheld so long as such additional Indebtedness is Junior Debt (as such term
is
defined in the Bridge Note).
7. Reasonable
Care.
Secured
Party shall be deemed to have exercised reasonable care in the custody and
preservation of Collateral in its possession if such Collateral is accorded
treatment substantially equivalent to that which Secured Party, in its
individual capacity, accords its own property, it being understood that Secured
Party shall not have responsibility for taking any necessary steps to preserve
rights against any Person with respect to any Collateral.
8. Events
of Default.
The
occurrence of any “Event of Default” under the Bridge Note shall constitute an
“Event of Default” under this Agreement.
9. Remedies.
(a) Acceleration
of Bridge Notes.
Upon
the occurrence of an Event of Default, Secured Party may, by notice to Debtor,
or automatically in the case of an Event of Default pursuant to
Section 7(a)(v) of the Bridge Note, declare the aggregate unpaid principal
balance of all the Bridge Note, together with all unpaid accrued interest
thereon, to be immediately due and payable and thereupon all such amounts shall
be and become immediately due and payable to Secured Party.
(b) Obtaining
the Collateral Upon Event of Default.
If any
Event of Default shall have occurred and be continuing, then and in every such
case, Secured Party may, at any time or from time to time during the continuance
of such Event of Default take any or all of the following actions, all if which
shall be at Debtor’s expense, which expenses shall constitute Obligations
secured by the Collateral:
(i) Personally,
or by agents or attorneys, immediately take possession of the Collateral or
any
part thereof from Debtor or any other Person who then has possession of any
part
thereof, with or without notice or process of law, and for that purpose may
enter upon Debtor’s premises where any of the Collateral is located and remove
such Collateral, and use in connection with such removal any and all services,
supplies, aids and other facilities of Debtor;
(ii) Instruct
the obligor or obligors on any agreement, instrument or other obligation
constituting the Collateral, to make any payment required by the terms of such
agreement, instrument or other obligation directly to Secured Party;
provided,
however,
in the
event that any such payments are made directly to Debtor, Debtor shall hold
such
payments in trust and shall segregate all amounts received pursuant thereto
in a
separate account and pay the same promptly to Secured Party;
(iii) Sell,
assign or otherwise liquidate, or direct Debtor to sell, assign or otherwise
liquidate, the Collateral, or any part thereof, and take possession of the
proceeds of any such sale, assignment or liquidation; and/or
(iv) Take
possession of the Collateral, or any part thereof, by directing Debtor in
writing to deliver the same to Secured Party at any place or places designated
by Secured Party, in which event Debtor shall at its own expense: (A) forthwith
cause the same to be moved to the place or places so designated by Secured
Party
and there delivered to Secured Party; (B) store and keep any Collateral so
delivered to Secured Party at such place or places pending further action by
Secured Party; and (C) while the Collateral shall be so stored and kept, provide
such guards and maintenance services as shall be necessary to protect the same
and to preserve and maintain them in good condition. Debtor’s obligation to
deliver the Collateral is of the essence of this Agreement. Upon application
to
a court of equity having jurisdiction, Secured Party shall be entitled to a
decree requiring specific performance by the Debtor of such
obligation.
(c) Other
Rights and Remedies.
Upon
the occurrence and during the continuance of an Event of Default, Secured Party
may from time to time exercise in respect of the Collateral, in addition to
other rights and remedies provided for herein or otherwise available to it,
all
the rights and remedies of a secured party under the UCC at the time of an
Event
of Default.
(d) Waiver
of Claims.
Except
as otherwise provided herein, Debtor hereby waives, to the fullest extent
permitted by applicable law, notice or judicial hearing in connection with
Secured Party’s taking possession, or Secured Party’s disposition of any of the
Collateral, including, without limitation, any and all prior notice and hearing
for any prejudgment remedy or remedies and any such right which Debtor would
otherwise have under law, and Debtor hereby further waives to the extent
permitted by applicable law: (i) all damages occasioned by such taking of
possession, (ii) all other requirements as to the time, place and terms of
sale or other requirements with respect to the enforcement of Secured Party’s
rights hereunder, and (iii) all rights of redemption, appraisal, valuation,
stay, extension or moratorium now or hereafter in force under any applicable
law. Any sale of, or the grant of options to purchase, or any other realization
upon, any Collateral shall operate to divest all rights, title, interest, claim
and demand, either at law or in equity, of Debtor therein and thereto, and
shall
be a perpetual bar both at law and in equity against Debtor and against any
and
all Persons claiming or attempting to claim the Collateral so sold, optioned
or
realized upon, from, through or under Debtor.
(e) Notice.
Without
in any way requiring notice to be given in the following time and manner, Debtor
agrees that any notice by Secured Party of sale, disposition or other intended
action hereunder or in connection herewith, whether required by the UCC or
otherwise, shall constitute reasonable notice to Debtor if such notice is
delivered in accordance with Section 16(h) hereof and is given at least ten
days prior to the intended action which is the subject matter thereof.
10. Payments
After an Event of Default.
All
payments received and amounts realized by Secured Party pursuant to
Section 9, including all such payments and amounts received after the
entire unpaid principal and interest amount of the Bridge Note has been declared
due and payable, as well as all payments or amounts then held or thereafter
received by Secured Party as part of the Collateral while an Event of Default
shall be continuing, shall be promptly applied and distributed by Secured Party
in the following order of priority:
(a) first,
to the
payment of all costs and expenses, including reasonable legal expenses and
attorneys’ fees for one counsel in each jurisdiction in which counsel may be
required, incurred or made hereunder or under the Bridge Note by Secured Party,
whether or not constituting Obligations, including, without limitation, any
such
costs and expenses of foreclosure or suit, if any, and of any sale or the
exercise of any other remedy under Section 9, and of all taxes, assessments
or liens superior to the lien granted under this Agreement, except any taxes,
assessments or other superior lien subject to which any said sale under
Section 9 hereof may have been made; and
(b) second,
to the
payment to Secured Party of the amount then owing or unpaid on the Bridge Note;
and
(c) third,
to the
payment of the balance or surplus, if any, to Debtor, its successors and
assigns, or to whomsoever may be lawfully entitled to receive the
same.
11. Secured
Party’s Right to Cure; Reimbursement.
In the
event Debtor should fail to do any act as herein provided, Secured Party may,
but without obligation to do so, without notice to Debtor, and without releasing
Debtor from any obligation hereof, make or do the same in such manner and to
such extent as Secured Party may deem necessary to protect the Collateral,
including, without limitation, the defense of any action purporting to affect
the Collateral or the rights or powers of Secured Party hereunder, at Debtor’s
expense. Debtor shall reimburse Secured Party for expenses reasonably incurred
under this Section 11 and any such expenses not reimbursed will constitute
Obligations secured by the Collateral.
12. Expenses.
Debtor
will upon demand pay to Secured Party the amount of any and all reasonable
expenses, including the fees and expenses of its counsel and the allocated
fees
and expenses of staff counsel and the fees and expenses of any experts and
agents, which Secured Party may incur in connection with (a) the collection
of the Obligations, (b) the administration of this Agreement, (c) the
custody or preservation of, or the sale of, collection from, or other
realization upon, any of the Collateral, (d) the exercise or enforcement of
any of the rights of Secured Party hereunder, or (e) the failure by Debtor
to perform or observe any of the provisions hereof. All amounts payable by
Debtor under this Section 12 shall be due upon demand and shall be part of
the Obligations. Debtor’s obligations under this Section 12 shall survive the
termination of this Agreement and the discharge of Debtor’s other obligations
hereunder.
13. Indemnity.
(a) Indemnity.
Debtor
agrees to indemnify, reimburse and hold Secured Party and its successors,
assigns, officers, directors, stockholders, members, managers, employees,
agents, representatives, heirs, attorneys and servants (collectively,
“Indemnitees”) harmless from and against any and all liabilities, obligations,
damages, injuries, penalties, claims, demands, actions, suits, judgments and
any
and all costs and expenses (including, without limitation, attorneys’ fees and
expenses and the allocated costs of internal counsel) of whatsoever kind and
nature imposed on, asserted against or incurred by any of the Indemnitees in
any
way relating to or arising out of this Agreement, the Purchase Agreement or
the
Bridge Note or in any other way connected with the administration of the
transactions contemplated hereby or the enforcement of any of the terms hereof,
or the preservation of any rights hereunder, or in any way relating to or
arising out of the manufacture, processing, ownership, ordering, purchase,
delivery, control, acceptance, lease, financing, possession, operation,
condition, sale, return or other disposition, or use of the Collateral
(including, without limitation, latent or other defects, whether or not
discoverable), the violation of the laws of any Governmental Authority, any
tort
(including, without limitation, claims arising or imposed under the doctrine
of
strict liability, or for or on account of injury to or the death of any Person
(including any Indemnitee)), or property damage, or contract claim; provided,
that
Debtor shall have no obligation to an Indemnitee hereunder to the extent it
is
judicially determined by a final order or decree that such indemnified
liabilities arise solely from the gross negligence or willful misconduct of
that
Indemnitee. Any Indemnitee shall provide Debtor with prompt notice of all third
party actions, suits, proceedings, claims, demands or assessments subject to
the
indemnification provisions of this Section 13(a) (collectively, “Third
Party Claims”), and provide Debtor with notice of all other claims or demands
for indemnification pursuant to this Section 13(a); provided, however, that
the failure to provide timely notice shall not affect Debtor’s indemnification
obligations except to the extent Debtor shall have been materially prejudiced
by
such failure. Debtor shall, if requested by such Indemnitee, resist and defend
any Third Party Claim or cause the same to be resisted and defended by counsel
reasonably satisfactory to such Indemnitee. Each Indemnitee shall, unless any
other Indemnitee has made the request described in the preceding sentence and
such request has been complied with, have the right to employ its own counsel
(or internal counsel) to investigate and control the defense of any matter
covered by the indemnity set forth in this Section 13, and the fees and
expenses of such counsel shall be paid by Debtor; provided
that,
only to the extent no conflict exists between or among the Indemnitees as
reasonably determined by the Indemnitees, Debtor shall not be obligated to
pay
the fees and expenses of more than one counsel for all Indemnitees as a group
with respect to any such matter, action, suit or proceeding.
(b) Misrepresentations.
Without
limiting the application of subsection 13(a), Debtor agrees to pay,
indemnify and hold each Indemnitee harmless from and against any loss, costs,
damages and expenses which such Indemnitee may suffer, expend or incur in
consequence of or growing out of any misrepresentation by Debtor in this
Agreement, the Purchase Agreement or the Bridge Note or in any statement or
writing contemplated by or made or delivered pursuant to or in connection with
this Agreement, the Purchase Agreement or the Bridge Note.
(c) Contribution.
If and
to the extent that the obligations of Debtor under this Section 13 are
unenforceable for any reason, Debtor hereby agrees to make the maximum
contribution to the payment and satisfaction of such obligations that is
permissible under applicable law.
(d) Survival.
The
obligations of Debtor contained in this Section 13 shall survive the
termination of this Agreement and the discharge of Debtor’s other obligations
hereunder and under the Bridge Note.
(e) Reimbursement.
Any
amounts paid by an Indemnitee as to which such Indemnitee has the right to
reimbursement shall constitute Obligations secured by the
Collateral.
14. Termination;
Release.
This
Agreement shall terminate on the satisfaction in full of all of the Obligations
and, on such termination, Secured Party shall release to Debtor the security
interest granted in the Collateral hereunder and, upon the request and at the
expense of Debtor, forthwith assign, transfer and deliver to Debtor, against
receipt and without recourse to or warranty by Secured Party, such of the
Collateral to be released as may then be in the possession of Secured Party
and
proper instruments acknowledging the termination of this Agreement or the
release of such Collateral, as the case may be; provided, that if, after receipt
of any payment of all or any part of the Obligations, Secured Party is for
any
reason compelled to surrender such payment to any person or entity because
such
payment is determined to be void or voidable as a preference, impermissible
setoff, or a diversion of trust funds, or for any other reason, this Agreement
shall continue in full force notwithstanding any contrary action which may
have
been taken by Secured Party in reliance upon such payment, and any such contrary
action so taken shall be without prejudice to Secured Party’s rights under this
Agreement and shall be deemed to have been conditioned upon such payment having
become final and irrevocable.
15. Miscellaneous.
(a) Entire
Agreement; Amendment.
This
Agreement, the Purchase Agreement and the Bridge Note set forth the entire
understanding of the parties with respect to the subject matter hereof and
supersede all existing agreements among them concerning such subject matter.
This Agreement may only be amended or modified by a written instrument duly
executed by Debtor and Secured Party.
(b) Successors
and Assigns.
This
Agreement, together with the covenants and warranties contained in it, shall
inure to the benefit of Secured Party and its successors, assigns, heirs and
personal representatives, and shall be binding upon Debtor, its successors
and
permitted assigns; provided, that Debtor may not assign this Agreement without
the prior written consent of Secured Party. No other Persons (including, without
limitation, any other creditor of Debtor) shall have any interest herein or
any
right or benefit with respect hereto. Without limiting the generality of the
foregoing, Secured Party may assign or otherwise transfer any indebtedness
held
by it and secured by this Agreement to any other Person, and such other Person
shall thereupon become vested with all the benefits in respect thereof granted
to such Secured Party, herein or otherwise, subject, however, to the provisions
of the Bridge Note.
(c) No
Waiver; Cumulative Remedies.
No
failure on the part of Secured Party to exercise, no course of dealing with
respect to, and no delay on the part of Secured Party in exercising, any right,
power or remedy hereunder shall operate as a waiver thereof; nor shall any
single or partial exercise of any such right, power or remedy hereunder preclude
any other or further exercise thereof or the exercise of any other right, power
or remedy. The remedies herein provided are cumulative and are not exclusive
of
any remedies provided by law. In the event Secured Party shall have instituted
any proceeding to enforce any right, power or remedy under this Agreement by
foreclosure, sale, entry or otherwise, and such proceeding shall have been
discontinued or abandoned for any reason or shall have been determined adversely
to Secured Party, then and in every such case, Debtor and Secured Party shall
be
restored to their respective former positions and rights hereunder with respect
to the Collateral, and all rights, remedies and powers of Secured Party shall
continue as if no such proceeding had been instituted.
(d) Governing
Law.
This
Agreement shall be governed by, and shall be construed and enforced in
accordance with, the laws of the State of New York.
(e) Consent
to Jurisdiction and Service of Process.
Debtor
irrevocably consents to the jurisdiction of the courts of New York County,
New
York in connection with any action or proceeding arising out of or relating
to
this Agreement, any document or instrument delivered pursuant to, in connection
with or simultaneously with this Agreement, or a breach of this Agreement or
any
such document or instrument.
(f) WAIVER
OF JURY TRIAL.
DEBTOR
HEREBY WAIVES TRIAL BY JURY IN ANY JUDICIAL PROCEEDING TO WHICH IT IS A PARTY
INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT,
CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED
WITH
THIS AGREEMENT OR THE RELATIONSHIP ESTABLISHED HEREUNDER.
(g) Severability
of Provisions.
If any
provision of this Agreement is invalid, illegal or unenforceable, the balance
of
this Agreement shall remain in effect, and if any provision is inapplicable
to
any person, party or circumstance, it shall nevertheless remain applicable
to
all other persons, parties and circumstances.
(h) Notices.
All
notices and other communications required or permitted under this Agreement
shall be sent by registered or certified mail, postage prepaid, overnight
courier, confirmed telex or facsimile transmission (provided, that a copy is
also set by registered or certified mail), or delivered by hand or by messenger,
addressed (a) if to Secured Party, at its office at 2121 Avenue of the
Stars, Suite 2550, Los Angeles, CA 90067, Fax (310) 277-2741, marked to the
attention to Bruce L. Stein, CEO, or at such other address as Secured Party
shall have furnished to Debtor in writing, or (b) if to Debtor, at its
office at 575 Broadway, New York, NY 10012, marked to the attention to Ron
Chaimowitz, CEO, or at such other address as Debtor shall have furnished to
the
Secured Party in writing. Each such notice or other communication shall for
all
purposes of this Agreement be treated as effective or having been given
(i) when delivered if delivered personally, (ii) if sent by registered
or certified mail, at the earlier of its receipt or three business days after
registration or certification thereof, (iii) if sent by overnight courier,
on the next business day after the same has been deposited with a nationally
recognized courier service, or (iv) when sent by confirmed telex or
facsimile, on the day sent (if a business day) if sent during normal business
hours of the recipient, and if not, then on the next business day.
(i) Execution
in Counterparts.
This
Agreement and any amendments, waivers, consents or supplements hereby may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed and delivered shall be
deemed to be an original, but all such counterparts together shall constitute
one and the same agreement. Facsimile signatures shall be deemed originals
for
all purposes hereunder.
(j) Headings.
The
Section headings used in this Agreement are for convenience of reference only
and shall not affect the construction or interpretation of this
Agreement.
[Remainder
of page left intentionally blank. Signature page follows]
IN
WITNESS WHEREOF,
the
parties have executed this Collateral Pledge and Security Agreement on the
date
set forth above.
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GREEN
SCREEN INTERACTIVE SOFTWARE, INC.
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By:
/s/ Ron Chaimowitz
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Name:
Ron Chaimowitz
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Title
CEO
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MANDALAY
MEDIA, INC.
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By:
/s/ James Lefkowitz
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Name:
James Lefkowitz
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Title
President
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SCHEDULE
A