Exhibit 10.1

 

SECURITIES PURCHASE AGREEMENT

THIS SECURITIES PURCHASE AGREEMENT (this “ Agreement ”), dated on and as of the latest date set forth on the signature page hereto, by and between Virtual Piggy, Inc., a Delaware corporation (the “ Company ”), and the purchaser identified on the signature page hereof (“ Purchaser ”).

 

R E C I T A L S:

WHEREAS, Purchaser desires to purchase and the Company desires to sell securities on the terms and conditions set forth herein.

 

NOW, THEREFORE, in consideration of the premises hereof and the agreements set forth herein below, the parties hereto hereby agree as follows:

 

1.              The Offering.

 

(a)              Private Offering .  The securities offered by this Agreement are being offered in a private offering (the “ Offering ”) of up to an aggregate original principal amount of $10,000,000 of 10% Secured Convertible Promissory Notes due 2016 (the “ Notes ”), which Notes shall accrue interest on the unpaid principal amount thereof at a rate equal to ten percent (10%) per annum, compounded quarterly, and shall mature on March 6, 2016.  The Notes shall be convertible by the holder, at any time, into shares of the Company’s Series B Cumulative Convertible Preferred Stock (“ Series B Preferred Stock ”) at a conversion price of $90.00 per share (the “ Conversion Price ”), subject to adjustment for stock, splits, stock dividends and similar transactions with respect to the Series B Preferred Stock only.  Each share of Series B Preferred Stock is currently convertible into 100 shares of the Company’s common stock at a current conversion price of $0.90 per share, subject to anti-dilution adjustment as described in the Certificate of Designation of the Series B Preferred Stock.  The Notes will be sold on a “best efforts” basis pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended (the “ Securities Act ” or the “ Act ”), and/or Rule 506(b) of Regulation D thereunder.  The Notes, the shares of Series B Preferred Stock issuable upon conversion of the Notes and the shares of Company common stock (“ Common Stock ”) issuable upon conversion of the Series B Preferred Stock are hereinafter referred to collectively as the “ Securities .”  The Notes are being offered solely to a limited number of “accredited investors” as that term is defined in Rule 501(a) of the Securities Act during an offering period (the “ Offering Period ”) commencing on the date hereof and terminating not later than June 30, 2015, unless further extended by the Company in its discretion (the “ Termination Date ”).  The Offering may be terminated by the Company at any time in its sole discretion. This Agreement, the Exhibits hereto and the Offering Memorandum dated April 22, 2015 (including the documents incorporated by reference therein) are hereinafter collectively referred to as the “ Offering Documents ”.

 

(b)             Description of Securities .  The terms and provisions of the Notes are set forth in the form of 10% Secured Convertible Promissory Note due 2016, attached hereto as Exhibit A .  The rights, preferences, powers and other terms of the Series B Preferred Stock are set forth in full in the Certificate of Designation of Series B Cumulative Convertible Preferred Stock attached hereto and made a part hereof as Exhibit B (the “ Certificate of Designation ”).  

 

 

(c)              Placement of the Notes.   The Company intends to offer and sell certain or all of the Notes through the efforts of its own officers and personnel without the payment of a brokerage commission or sales incentives.  However, the Company also reserves the right to engage the services of one or more registered broker-dealers serving as a placement agent (a “ Placement Agent ”) to offer and sell the Notes on a best-efforts basis, and in connection with sales to investors introduced to the Offering through the efforts of such Placement Agent(s), if at all, the Company will agree to pay to the Placement Agent: (i) a placement fee of up to five percent (5%) of the principal amount of Notes; (ii) a retainer in such amount or amounts as may be determined in the discretion of the Company; (iii) warrants to purchase up to three percent (3%) of the underlying securities at the applicable offering price; and (iv) such amounts as are necessary to cover the reasonable and ordinary out-of-pocket expenses of the Placement Agent.

 

(d)              Escrow Account . The Company will establish a segregated escrow account (the “ Escrow Account ”) for the deposit of cash subscriptions.   Upon the acceptance of subscriptions for the Notes, the Company may conduct an initial closing of the Offering and thereafter, may conduct any number of additional closings until the Termination Date.

 

(e)              Security Agreement .   As collateral security for the prompt and complete payment and performance when due of the Company’s obligations under the Notes, the Company will enter into a Security Agreement with James E. Davison, as collateral agent for each Purchaser, and each Purchaser in the form attached hereto and made a part hereof as Exhibit C (the “ Security Agreement ”) to grant a security interest in the Company’s Collateral (as defined in the Security Agreement).

 

2.              Sale and Purchase of Securities.

 

(a)            Purchase and Sale .  Subject to the terms and conditions hereof, the Company agrees to sell, and Purchaser irrevocably subscribes for and agrees to purchase, the aggregate principal amount of Notes set forth on the signature page of this Agreement at a purchase price equal to 100% of such principal amount (the “ Aggregate Purchase Price ”), which shall be payable upon execution hereof by check or wire transfer of immediately available funds as set forth below; provided that holders of the Company’s currently outstanding 10% Secured Convertible Promissory Notes due 2016 (the “ Prior Secured Notes ” may exchange such Prior Secured Notes in the original principal amount of $2 million, plus accrued interest, for new Notes on a dollar-for-dollar basis.

 

 

(b)             Subscription Procedure .  In order to purchase Notes, Purchaser shall: (i) deliver to the Company at 1221 Hermosa Avenue, Suite 210, Hermosa Beach, California 90254, Attn: Joseph Dwyer (or via facsimile to 631-980-4253 or email to jdwyer@oink.com): (X) one completed and duly executed copy of this Agreement, (Y) one completed and duly executed copy of the Security Agreement and (Z) one completed and duly executed Accredited Investor Questionnaire in the form attached hereto as Exhibit D ; and (ii) in the case of purchasers for cash, deposit into the Escrow Account payment for the Notes in an amount equal to the Aggregate Purchase Price by certified or bank check covering immediately available funds or through wire transmission, which Escrow Account is identified on Exhibit E , or otherwise provided upon request, and in the case of Purchasers exchanging Prior Secured Notes, by delivery of such Prior Secured Notes to the Company at the address set forth above.  Delivery of the Prior Secured Notes and the closing of this Offering and acceptance thereof shall constitute satisfaction in full of amounts due under the Prior Secured Notes and the collateral therefor shall be released thereupon.  Execution and delivery of this Agreement shall constitute an irrevocable subscription for that aggregate principal amount of Notes set forth on the signature page hereto.  Receipt by the Company in the Escrow Account of funds wired, or deposit and collection into the Escrow Account of the check tendered herewith, or of the original Prior Secured Notes, as the case may be, will not constitute acceptance of this Agreement by the Company.  The Notes subscribed for will not be deemed to be issued to, or owned by, Purchaser until the Company has executed this Agreement.  All consideration tendered by Purchaser will be held by the Company pending acceptance or rejection of this Agreement by the Company and the closing of Purchaser’s purchase of Notes.  This Agreement will either be accepted by the Company, in whole or in part, in its sole discretion, or rejected by the Company prior to the termination of the Offering.  If this Agreement is accepted only in part, Purchaser agrees to purchase such smaller principal amount of Notes as the Company determines to sell to Purchaser.  If this Agreement is rejected for any reason, including the termination of the Offering by the Company, this Agreement and all funds or other consideration tendered herewith will be promptly returned to Purchaser, without interest or deduction of any kind, and this Agreement will be void and of no further force or effect. Until the Company elects to accept or reject a Purchaser’s Securities Purchase Agreement, the Purchaser’s subscription is irrevocable.

 

(c)              C losing .   The Company may conduct an initial closing of the Offering and thereafter, may conduct any number of additional closings until the Termination Date.   Upon the Company’s execution of this Agreement, the subscription evidenced hereby, if not previously rejected by the Company, will, in reliance upon Purchaser’s representations and warranties contained herein, be accepted, in whole or in part, by the Company.  If Purchaser’s subscription is accepted only in part, this Agreement will be marked to indicate such fact, and the Company will return to Purchaser the portion of the funds tendered by Purchaser representing the unaccepted portion of Purchaser’s subscription, without interest or deduction of any kind.  Upon acceptance of this Agreement, in whole or in part, by the Company, the Company will promptly issue the Notes to Purchaser.  

 

3.               Representations and Warranties of Purchaser .  Purchaser represents and warrants to the Company as follows:

 

(a)       Organization and Qualification .  

 

(i)           If Purchaser is an entity, Purchaser is duly organized, validly existing and in good standing under the laws of its jurisdiction of organization, with the corporate or other entity power and authority to own and operate its business as presently conducted, except where the failure to be or have any of the foregoing would not have a material and adverse effect on the legality, validity or enforceability of any Transaction Documents, and Purchaser is duly qualified as a foreign corporation or other entity to do business and is in good standing in each jurisdiction where the character of its properties owned or held under lease or the nature of their activities makes such qualification necessary, except for such failure to be so qualified or in good standing as would not have a Material Adverse Effect on it.  For purposes of this Agreement, “ Material Adverse Effect ” means any of (i) a material and adverse effect on the legality, validity or enforceability of any Transaction Documents, (ii) a material and adverse effect on the results of operations, assets, business or financial condition of such party and its subsidiaries, taken as a whole, or (iii) any material adverse impairment to the ability of such party to perform in any material respect on a timely basis its obligations under any Transaction Document.

 

 

(ii)           If Purchaser is an entity, the address of its principal place of business is as set forth on the signature page hereto, and if Purchaser is an individual, the address of his or her principal residence is as set forth on the signature page hereto.

 

(b)      Authority; Validity and Effect of Agreement .

 

(i)           If Purchaser is an entity, Purchaser has the requisite corporate or other entity power and authority to execute and deliver this Agreement and any documents contemplated hereby (collectively, the “ Transaction Documents ”) and perform its obligations under the Transaction Documents.  The execution and delivery of each Transaction Document by Purchaser, the performance by Purchaser of its obligations thereunder, and all other necessary corporate or other entity action on the part of Purchaser have been duly authorized by its board of directors or similar governing body, and no other corporate or other entity proceedings on the part of Purchaser is necessary for Purchaser to execute and deliver the Transaction Documents and perform its obligations thereunder.

 

(ii)           Each of the Transaction Documents has been duly and validly authorized, executed and delivered by Purchaser and, assuming each has been duly and validly executed and delivered by the Company, each constitutes a legal, valid and binding obligation of Purchaser, in accordance with its terms.

 

(c)              No Conflict; Required Filings and Consents .  Neither the execution and delivery of the Transaction Documents by Purchaser nor the performance by Purchaser of its obligations, thereunder will: (i) if Purchaser is an entity, conflict with Purchaser’s articles of incorporation or bylaws, or other similar organizational documents; (ii) violate any statute, law, ordinance, rule or regulation, applicable to Purchaser or any of the properties or assets of Purchaser; or (iii) violate, breach, be in conflict with or constitute a default (or an event which, with notice or lapse of time or both, would constitute a default) under, or permit the termination of any provision of, or result in the termination of, the acceleration of the maturity of, or the acceleration of the performance of any obligation of Purchaser under, or result in the creation or imposition of any lien upon any properties, assets or business of Purchaser under, any material contract or any order, judgment or decree to which Purchaser is a party or by which it or any of its assets or properties is bound or encumbered except, in the case of clauses (ii) and (iii), for such violations, breaches, conflicts, defaults or other occurrences which, individually or in the aggregate, would not have a Material Adverse Effect on it.

 

(d)              Accredited Investor .  Purchaser is an “accredited investor” as that term is defined in Rule 501(a) of Regulation D under the Securities Act.  If Purchaser is an entity, Purchaser was not formed for the specific purpose of acquiring the Securities, and, if it was, all of Purchaser’s equity owners are “accredited investors” as defined above.

 

 

(e)              No Government Review .  Purchaser understands that neither the United States Securities and Exchange Commission (“ SEC ”) nor any securities commission or other governmental authority of any state, country or other jurisdiction has approved the issuance of the Notes or passed upon or endorsed the merits of this Agreement, the Notes, or any of the other documents relating to the proposed Offering, or confirmed the accuracy of, determined the adequacy of, or reviewed this Agreement, the Notes or such other documents.

 

(f)              Investment Intent .  The Securities are being acquired for the Purchaser’s own account for investment purposes only, not as a nominee or agent and not with a view to the resale or distribution of any part thereof, and Purchaser has no present intention of selling, granting any participation in or otherwise distributing the same.  By executing this Agreement, Purchaser further represents that Purchaser does not have any contract, undertaking, agreement or arrangement with any person to sell, transfer or grant participation to such person or third person with respect to the Notes.

 

(g)              Restrictions on Transfer .  Purchaser understands that the Securities are “restricted securities” as such term is defined in Rule 144 under the Securities Act and have not been registered under the Securities Act or registered or qualified under any state securities law, and may not be, directly or indirectly, sold, transferred, offered for sale, pledged, hypothecated or otherwise disposed of without registration under the Securities Act and registration or qualification under applicable state securities laws or the availability of an exemption therefrom.  Purchaser acknowledges that it is able to bear the economic risks of an investment in the Securities for an indefinite period of time, and that its overall commitment to investments that are not readily marketable is not disproportionate to its net worth.

 

(h)               Investment Experience .  Purchaser has such knowledge, sophistication and experience in financial, tax and business matters in general, and investments in securities in particular, that it is capable of evaluating the merits and risks of this investment in the Securities, and Purchaser has made such investigations in connection herewith as it deemed necessary or desirable so as to make an informed investment decision without relying upon the Company for legal or tax advice related to this investment.  In making its decision to acquire the Securities, Purchaser has not relied upon any information other than information provided to Purchaser by the Company or its representatives and referenced herein.

 

(i)               Access to Information .  Purchaser acknowledges that it has had access to and has reviewed all publicly available documents and records relating to the Company, including, but not limited to, the Company’s Annual Report on SEC Form 10-K for the year ended December 31, 2014, the Company’s Proxy Statement covering the annual meeting of its shareholders occurring during 2015, and any Quarterly Report on SEC Form 10-Q, or Current Report on SEC Form 8-K, filed with the SEC after December 31, 2014 and before the date this Offering is closed (as such documents have been amended since the date of their filing, collectively, the “ Company SEC Documents ”), that it has deemed necessary in order to make an informed investment decision with respect to an investment in the Notes; that it has had the opportunity to ask representatives of the Company certain questions and request certain additional information regarding the terms and conditions of such investment and the finances, operations, business and prospects of the Company and has had any and all such questions and requests answered to its satisfaction; and that it understands the risks and other considerations relating to such investment.  Purchaser understands any statement contained in the Company SEC Documents shall be deemed to be modified or superseded for the purposes of this Agreement to the extent that a statement contained herein or in any other document subsequently filed with the SEC modifies or supersedes such statement.  

 

 

(j)               Reliance on Representations .  Purchaser understands that the Notes are being offered and sold to it in reliance on specific exemptions from the registration requirements of the federal and state securities laws and that the Company is relying in part upon the truth and accuracy of, and such Purchaser’s compliance with, the representations, warranties, agreements, acknowledgments and understandings of such Purchaser set forth herein in order to determine the availability of such exemptions and the eligibility of such Purchaser to acquire the Notes.  Purchaser represents and warrants to the Company that any information that Purchaser has heretofore furnished or furnishes herewith to the Company is complete and accurate, and further represents and warrants that it will notify and supply corrective information to the Company immediately upon the occurrence of any change therein occurring prior to the Company’s issuance of the Notes.  Within five (5) days after receipt of a request from the Company, Purchaser will provide such information and deliver such documents as may reasonably be necessary to comply with any and all laws and regulations to which the Company is subject.

 

(k)              No General Solicitation .  Purchaser is unaware of, and in deciding to participate in the Offering is in no way relying upon, and did not become aware of the Offering through or as a result of, any form of general solicitation or general advertising including, without limitation, any article, notice, advertisement or other communication published in any newspaper, magazine or similar media, or broadcast over television or radio or the internet, in connection with the Offering.

 

(l)               Placement and Finder’s Fees .  No agent, broker, investment banker, finder, financial advisor or other person acting on behalf of Purchaser or under its authority is or will be entitled to any broker’s or finder’s fee or any other commission or similar fee, directly or indirectly, in connection with the Offering, and no person is entitled to any fee or commission or like payment in respect thereof based in any way on agreements, arrangements or understanding made by or on behalf of Purchaser.

 

(m)             Investment Risks .  Purchaser understands that purchasing Notes in the Offering will subject Purchaser to certain risks, including, but not limited to, those set forth in the Company SEC Documents and the Offering Documents.

 

(n)            OFAC .  Purchaser is directed to review the U.S. Treasury Department’s Office of Foreign Assets Control (“ OFAC ”) website at www.treas.gov. before making the following representations.  Purchaser represents that no part of the Aggregate Purchase Price set forth on the signature page hereto was directly or indirectly derived from activities that may contravene federal, state or international laws and regulations, including anti-money laundering laws and regulations. Federal regulations and executive orders administered by OFAC prohibit, among other things, the engagement in transaction with, and the provision of services to, certain foreign countries, territories, entities and individuals.  The lists of OFAC prohibited countries, territories, persons and entities can be found at the OFAC website. In addition, the programs administered by OFAC prohibit dealing with individuals or entities in certain countries regardless of whether such individuals or entities appear on the OFAC lists.  Purchaser hereby represents that none of the following is named on the OFAC list, nor is a person or entity prohibited under the OFAC programs: (i) the Purchaser, (ii) any person controlling or controlled by the Purchaser, (iii) if the undersigned is an entity, any person having a beneficial interest in the Purchaser, or (iv) any person for whom the undersigned is acting as agent or nominee in connection with this investment. The Purchaser understands and acknowledges that, by law, the Company may be required to disclose the identity of the Purchaser to OFAC.

 

 

(o)             Anti-Money Laundering .  The Purchaser acknowledges that due to anti-money laundering regulations within their respective jurisdictions, the Company and/or any person acting on behalf of the Company may require further documentation verifying the Purchaser’s identity and the source of funds used to purchase the Notes before this Agreement can be accepted.  The Purchaser further agrees to provide the Company at any time with such information as the Company determines to be necessary and appropriate to verify compliance with the anti-money laundering regulations of any applicable jurisdiction or to respond to requests for information concerning the identity of the Purchaser from any governmental authority, self-regulatory organization or financial institution in connection with its anti-money laundering compliance procedures, and to update such information as necessary.

 

(p)            Short Sales and Confidentiality Prior to the Date Hereof .   Other than the transaction contemplated hereunder, Purchaser has not directly or indirectly, nor has any person acting on behalf of or pursuant to any understanding with Purchaser, executed any disposition, including Short Sales (as such term is defined in Rule 200 of Regulation SHO under the Exchange Act), in the securities of the Company during the period commencing from the time that Purchaser first received written or oral notice of this Offering from the Company or any other person setting forth the material terms of the transactions contemplated hereunder or this Agreement until the date hereof (“ Discussion Time ”).  Notwithstanding the foregoing, in the case of a Purchaser that is a multi-managed investment vehicle whereby separate portfolio managers manage separate portions of Purchaser’s assets and the portfolio managers have no direct knowledge of the investment decisions made by the portfolio managers managing other portions of Purchaser’s assets, the representation set forth above shall only apply with respect to the portion of assets managed by the portfolio manager that made the investment decision to purchase the Securities covered by this Agreement.  Other than to other persons a party to this Agreement, Purchaser has maintained the confidentiality of all disclosures made to it in connection with this transaction (including the existence and terms of this transaction).

 

4.           Representations and Warranties of the Company.   Except as set forth in the correspondingly numbered section of the Schedules hereto, the Company represents and warrants to Purchaser as follows:

 

(a)             Organization and Qualification .  The Company is duly organized, validly existing and in good standing under the laws of the State of Delaware, with the corporate power and authority to own and operate its business as presently conducted, except where the failure to be or have any of the foregoing would not have a Material Adverse Effect on the Company.  The Company is duly qualified as a foreign corporation or other entity to do business and is in good standing in each jurisdiction where the character of its properties owned or held under lease or the nature of their activities makes such qualification necessary, except for such failures to be so qualified or in good standing as would not have a Material Adverse Effect.

 

 

(b)             Authority; Validity and Effect of Agreement .  The Company has the requisite corporate power and authority to execute and deliver each of the Transaction Documents, perform its obligations thereunder, and conduct the Offering.  The execution and delivery of each of the Transaction Documents by the Company, the performance by the Company of its obligations thereunder, the transactions contemplated thereby, the Offering, and all other necessary corporate action on the part of the Company have been duly authorized by its board of directors, and no other corporate proceedings on the part of the Company are necessary to authorize each of the Transaction Documents or the Offering.  Each of the Transaction Documents has been duly and validly executed and delivered by the Company and, assuming that each has been duly authorized, executed and delivered by Purchaser, each constitutes a legal, valid and binding obligation of the Company, in accordance with its terms, subject to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors’ rights generally, general equitable principles (whether considered in a proceeding in equity or at law) and an implied covenant of good faith and fair dealing.

 

(c)             No Conflict; Required Filings and Consents .  Neither the execution and delivery of the Transaction Documents by the Company nor the performance by the Company of its obligations thereunder will: (i) conflict with the Company’s certificate of incorporation or bylaws; (ii) violate any statute, law, ordinance, rule or regulation, applicable to the Company or any of the properties or assets of the Company; or (iii) violate, breach, be in conflict with or constitute a default (or an event which, with notice or lapse of time or both, would constitute a default) under, or permit the termination of any provision of, or result in the termination of, the acceleration of the maturity of, or the acceleration of the performance of any obligation of the Company, or result in the creation or imposition of any lien upon any properties, assets or business of the Company under, any material contract or any order, judgment or decree to which the Company is a party or by which it or any of its assets or properties is bound or encumbered except, in the case of clauses (ii) and (iii), for such violations, breaches, conflicts, defaults or other occurrences which, individually or in the aggregate, would not have a Material Adverse Effect.

 

(d)             SEC Reports .  The Company has filed   all reports, schedules, forms, statements and other documents required to be filed by it under the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof, for the two years preceding the date hereof (or such shorter period as the Company was required by law or regulation to file such material) on a timely basis or has received a valid extension of such time of filing and has filed any such SEC Reports prior to the expiration of any such extension.  As of their respective dates, or to the extent corrected by a subsequent amendment, the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2014, as amended, and all other reports of the Company filed with the Commission pursuant to the Exchange Act from January 1, 2015 through the date of this Agreement (including the exhibits thereto and documents incorporated by reference therein, being collectively referred to herein as the “ SEC Reports ”) complied in all material respects with the requirements of the Exchange Act, and none of the SEC Reports, when filed, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading.

 

(e)             Issuance of the Securities .  The Notes have been duly authorized and, when issued and paid for in accordance with the terms of the Transaction Documents, will be duly and validly issued, fully paid and nonassessable, free and clear of all liens, other than restrictions on transfer provided for in the Transaction Documents or imposed by applicable securities laws, and shall not be subject to preemptive or similar rights of shareholders.  Assuming the accuracy of the representations and warranties of the Purchasers in this Agreement, the Notes will be issued in compliance with applicable federal and state securities laws.  The Company shall, so long as any of the Notes are outstanding, take all action reasonably necessary to reserve and keep available out of its authorized and unissued capital stock, 100% of the shares of Series B Preferred Stock issuable upon conversion of the Notes, 150% of the shares of Common Stock underlying the Series B Preferred Stock, as well as such other shares as, in the discretion of its Board of Directors, may be necessary for the ordinary and necessary business needs of the Company.

 

5.               Other Agreements of the Parties .

 

(a)            Transfer Restrictions .

 

(i)        The Securities may only be disposed of in compliance with applicable federal and state securities laws. In connection with any transfer of Securities other than pursuant to an effective registration statement or Rule 144, to the Company or to an Affiliate of a Purchaser or in connection with a pledge, the Company may require the transferor thereof to provide to the Company an opinion of counsel to the Company, the form and substance of which opinion shall be reasonably satisfactory to the Company, to the effect that such transfer does not require registration of such transferred Securities under the Securities Act. As a condition of transfer, any such transferee shall agree in writing to be bound by the terms of this Agreement and the other Transaction Documents and shall have the rights and obligations of a Purchaser under this Agreement.

 

(ii) Legends .  The promissory notes, certificates and agreements evidencing the Securities shall have endorsed thereon the following legend (and appropriate notations thereof will be made in the Company’s stock transfer books), and stop transfer instructions reflecting these restrictions on transfer will be placed with the transfer agent of the Securities:

 

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE.  THE SECURITIES REPRESENTED HEREBY HAVE BEEN TAKEN BY THE REGISTERED OWNER FOR INVESTMENT, AND WITHOUT A VIEW TO RESALE OR DISTRIBUTION THEREOF, AND MAY NOT BE SOLD, TRANSFERRED OR DISPOSED OF WITHOUT AN OPINION OF COUNSEL SATISFACTORY TO THE ISSUER THAT SUCH TRANSFER OR DISPOSITION DOES NOT VIOLATE THE SECURITIES ACT OF 1933, AS AMENDED, THE RULES AND REGULATIONS THEREUNDER OR OTHER APPLICABLE SECURITIES LAWS.

 

 

(b)            Securities Laws Disclosure; Publicity .  On or prior to the fourth (4th) Business Day following the initial closing contemplated by this Agreement, the Company will file a Current Report on Form 8-K with the SEC describing the terms of the Transaction Documents. Each Purchaser, severally and not jointly with the other Purchasers, covenants that until such time as the transactions contemplated by this Agreement are publicly disclosed by the Company as described in this Section 5(b), such Purchaser will maintain the confidentiality of all disclosures made to it in connection with this transaction (including the existence and terms of this transaction).

 

(c)            Equal Treatment of Purchasers .  No consideration shall be offered or paid to any person to amend or consent to a waiver or modification of any provision of any of the Transaction Documents unless the same consideration is also offered to all of the parties to the Transaction Documents.  For clarification purposes, this provision constitutes a separate right granted to each Purchaser by the Company and negotiated separately by each Purchaser, and is intended for the Company to treat the Purchasers as a class and shall not in any way be construed as the Purchasers acting in concert or as a group with respect to the purchase, disposition or voting of the Notes, the shares of Series B Preferred Stock (upon conversion of the Notes) or otherwise.

 

(d)            Form D and Blue Sky .  The Company agrees to file a Form D with respect to the sale of the Notes as required under Regulation D.  The Company, on or before the Closing, shall take such action as the Company shall reasonably determine is necessary in order to obtain an exemption for or to qualify the Notes for sale to the Purchasers at the Closing pursuant to this Agreement under applicable securities or “Blue Sky” laws of the states of the United States (or to obtain an exemption from such qualification), and shall make all filings and reports relating to the offer and sale of the Notes required under applicable securities or “Blue Sky” laws of the states of the United States following the Closing.

 

(e)            Lock-Up Agreements .  Each Purchaser agrees in connection with any underwritten public offering that occurs after a closing of the Offering, if requested by the managing underwriter, not to sell or transfer any shares of Common Stock of the Company for a period of up to 180 days, plus up to an additional 20 days to the extent necessary to comply with applicable regulatory requirements following such public offering.  Such lock-up agreement shall provide that any discretionary waiver or termination of the restrictions of such agreements by the Company or representatives of the underwriters shall apply to investors, pro rata, based on the number of shares held.

 

 

6.           Piggyback Registration .

 

(a)            Until the earlier of (i) the date as of which the Purchaser may sell all of the “Registrable Securities” (as defined below) owned by Purchaser without restriction pursuant to Rule 144 (including, without limitation, volume restrictions) and without the need for current public information required by Rule 144(c)(1) (or Rule 144(i)(2), if applicable) or (ii) the date on which the Purchaser shall have sold all of the Registrable Securities owned by Purchaser , (the   “ Registration Period ” ), whenever the Company proposes to register any shares of its Common Stock under the Securities Act (other than a registration effected solely to implement an employee benefit plan or a transaction to which Rule 145 of the Securities Act is applicable, or a Registration Statement on Form S-4, S-8 or any successor form thereto or another form not available for registering the Securities for sale to the public), whether for its own account or for the account of one or more stockholders of the Company and the form of Registration Statement to be used may be used for any registration of Securities (a “ Piggyback Registration ”), the Company shall give prompt written notice (in any event no later than 10 days prior to the filing of such Registration Statement) to the Purchaser and the other holders of securities subject to piggyback registration rights (each, a “ Selling Stockholder ”) of its intention to effect such a registration and, subject to Section 6(b) and Section 6(c), shall include in such registration all Registrable Securities with respect to which the Company has received written requests for inclusion from the holders of Registrable Securities within 5 days after the Company's notice has been given to each such holder. The Company may postpone or withdraw the filing or the effectiveness of a Piggyback Registration at any time in its sole discretion and/or reduce the amount of shares to be included in such registration as a result of rules, regulations, positions or releases issued or actions taken by the SEC pursuant to its authority with respect to Rule 415, promulgated by the SEC under the Securities Act. For purposes of this Section 6, the term “ Registrable Securities ” means (x) the shares of Common Stock issuable upon conversion of shares of the Series B Preferred Stock (the “ Conversion Shares ”), (y) any Common Stock of the Company issued or issuable with respect to the Conversion Shares including, without limitation, as a result of any stock split, stock dividend, recapitalization, exchange or similar event or otherwise, and (z) any other shares of Common Stock of the Company which are subject to piggyback registration rights.

 

(b)            If during the Registration Period, a Piggyback Registration is initiated as a primary underwritten offering on behalf of the Company, all Selling Stockholders proposing to distribute their Registrable Securities through such underwriting shall be required to enter into an underwriting agreement in customary form with the underwriter or underwriters selected for such underwriting by the Company. If during the Registration Period, a Piggyback Registration is initiated as a primary underwritten offering on behalf of the Company and the managing underwriter advises the Company and the Selling Stockholders (if any Selling Stockholders have elected to be included in such Piggyback Registration) in writing that in its opinion the number of shares of Common Stock proposed to be included in such registration, including all Registrable Securities and all other shares of Common Stock proposed to be included in such underwritten offering, exceeds the number of shares of Common Stock which can be sold in such offering and/or that the number of shares of Common Stock proposed to be included in any such registration would adversely affect the price per share of the Common Stock to be sold in such offering and/or the Company is unable to include in such registration all of the securities as a result of rules, regulations, positions or releases issued or actions taken by the SEC pursuant to its authority with respect to Rule 415, promulgated by the SEC under the Securities Act, the Company shall include in such registration (i) first, the number of shares of Common Stock that the Company proposes to sell on its own behalf; and (ii) second, the number of all other shares of Common Stock required to be included as a result of contractual demand or piggyback registration rights, allocated among such holders pro rata on the basis of the number of securities to be included in such registration, or in such manner as they may otherwise agree.

 

 

(c)            If during the Registration Period, a Piggyback Registration is initiated as an underwritten offering on behalf of a holder of Common Stock other than Registrable Securities as a result of contractual demand or mandatory registration rights, and the managing underwriter advises the Company in writing that in its opinion the number of shares of Common Stock proposed to be included in such registration, including all Registrable Securities and all other shares of Common Stock proposed to be included in such underwritten offering, exceeds the number of shares of Common Stock which can be sold in such offering and/or that the number of shares of Common Stock proposed to be included in any such registration would adversely affect the price per share of the Common Stock to be sold in such offering and/or the Company is unable to include in such registration all of the Registrable Securities as a result of rules, regulations, positions or releases issued or actions taken by the SEC pursuant to its authority with respect to Rule 415, promulgated by the SEC under the Securities Act, the Company shall include in such registration (i) first, the number of shares of Common Stock required to be included as a result of contractual demand or mandatory registration rights, (ii) second, the number of shares of Common Stock required to be included therein as a result of contractual piggyback registration rights, allocated among such holders pro rata according to the number of shares to be included in such registration; and (iii) third, the number of all other shares of Common Stock to be included as determined jointly by the Company and managing underwriter.

 

(d)           If any Piggyback Registration is initiated as a primary underwritten offering on behalf of the Company, the Company shall select the investment banking firm or firms to act as the managing underwriter or underwriters in connection with such offering.

 

(e)            Registration Procedures .  Subject to the limitations set forth in this Section 6, whenever it is obligated to register any Registrable Securities pursuant to this Agreement, the Company shall:

 

(i)           use its reasonable best efforts to prepare and file with the SEC a Registration Statement with respect to the Registrable Securities in the manner set forth in this Section 6 and use its reasonable best efforts to cause such Registration Statement to be declared effective by the SEC as soon as reasonably practicable thereafter;

 

(ii)           furnish to each Selling Stockholder such number of copies of the Registration Statement and the prospectus included therein (including each preliminary prospectus) as such person may reasonably request in order facilitate the public sale or other disposition of the Registrable Securities covered by such Registration Statement;

 

(iii)           use its reasonable best efforts to register or qualify the Registrable Securities covered by such Registration Statement under the state securities laws of such jurisdictions as any Selling Stockholder shall reasonably request; provided , however , that the Company shall not be required to qualify generally to transact business as a foreign corporation in any jurisdiction where it is not so qualified or to consent to general service of process in any such jurisdiction;

 

(iv)           in the event of any underwritten public offering, enter into and perform its obligations under an underwriting agreement, in usual and customary form, with the managing underwriter(s) of such offering.  Each Selling Stockholder participating in such underwriting shall also enter into and perform its obligations under such an agreement, as described in Section 6(b);

 

 

(v)           immediately notify each Selling Stockholder at any time when a prospectus relating thereto is required to be delivered under the Act, of the happening of any event as a result of which the prospectus contained in such Registration Statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required or necessary to be stated therein in order to make the statements contained therein not misleading in light of the circumstances under which they were made.  The Company will use reasonable efforts to amend or supplement such prospectus in order to cause such prospectus not to include any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances under which they were made;

 

(vi)          notify each Selling Stockholder of the issuance by the SEC of any stop order of which the Company or its counsel is aware or should be aware suspending the effectiveness of the Registration Statement or any order preventing the use of a related prospectus, or the initiation or any threats of any proceedings for such purposes;

 

(vii)          notify each Selling Stockholder of the receipt by the Company of any written notification of the suspension of the qualification of any of the Registrable Securities for sale in any jurisdiction or the initiation of any threats of any proceeding for that purpose; and

 

(viii)        cooperate in the timely removal of any restrictive legends from the shares of Registrable Securities in connection with the resale of such shares covered by an effective Registration Statement.

 

(f)              Expenses .

 

(i)            For the purposes of this Section 6(f), the term “ Registration Expenses ” shall mean all expenses incurred by the Company in complying with this Section 6, including, without limitation, all registration, qualifying and filing fees, printing expenses, escrow fees, fees and disbursements of counsel for the Company, fees and expenses under state securities laws, fees of the Financial Industry Regulatory Authority, and fees and expenses of listing shares of Registrable Securities on any securities exchange or automated quotation system on which the Company’s shares are listed.  The term “ Selling Expenses ” shall mean all underwriting discounts, broker and other selling fees and commissions, stock transfer taxes applicable to the sale of the Registrable Securities, and fees and disbursements of counsel for any Selling Stockholder.

 

(ii)           Except as otherwise provided herein, the Company will pay all Registration Expenses in connection with the Registration Statements filed pursuant to this Section 6.  All Selling Expenses in connection with any Registration Statements filed pursuant to this Section 6 shall be borne by the Selling Stockholders pro rata on the basis of the number of shares registered by each Selling Stockholder whose shares of Registrable Securities are covered by such Registration Statement, or by such persons other than the Company (except to the extent the Company may be a seller) as they may agree upon.

 

(g)             Obligations of the Selling Stockholders .

 

 

(i)             In connection with each registration hereunder, each Selling Stockholder shall furnish to the Company in writing such information with respect to it and the securities held by it and the proposed distribution by it, as shall be reasonably requested by the Company in order to assure compliance with applicable federal and state securities laws as a condition precedent to including the Selling Stockholder's Registrable Securities in the Registration Statement.  Each Selling Stockholder shall also promptly notify the Company in writing of any changes in such information included in the Registration Statement or prospectus as a result of which there is an untrue statement of material fact or an omission to state any material fact required or necessary to be stated therein in order to make the statements contained therein not misleading in light of the circumstances under which they were made.

 

(ii)            In connection with the filing of the Registration Statement, each Selling Stockholder shall furnish to the Company in writing such information and affidavits as the Company reasonably requests for use in connection with such Registration Statement or prospectus.

 

(iii)           In connection with each registration pursuant to this Agreement, each Selling Stockholder agrees that it will not affect sales of any Registrable Securities until notified by the Company of the effectiveness of the Registration Statement, and thereafter will suspend such sales after receipt of notice from the Company to suspend sales to permit the Company to correct or update a Registration Statement or prospectus or upon receipt by the Company of a threat by the SEC or state securities commission to undertake a stop order with respect to sales under the Registration Statement.  At the end of any period during which the Company is obligated to keep a Registration Statement current, each Selling Stockholder shall discontinue sales of Registrable Securities pursuant to such Registration Statement upon receipt of notice from the Company of its intention to remove from registration the Registrable Securities covered by such Registration Statement which remains unsold, and each Selling Stockholder shall notify the Company in writing of the number of shares registered which remain unsold immediately upon receipt of such notice from the Company.

 

(h)            Information Blackout and Holdbacks .

 

(i)            At any time when a Registration Statement effected pursuant to this Section 6 is effective, upon written notice from the Company to the Selling Stockholder that the Company has determined in good faith that the sale of Registrable Securities pursuant to the Registration Statement would require disclosure of non-public material information, the Selling Stockholder shall suspend sales of Registrable Securities pursuant to such Registration Statement until such time as the Company notifies the Selling Stockholder that such material information has been disclosed to the public or has ceased to be material, or that sales pursuant to such Registration Statement may otherwise be resumed.

 

(ii)           Notwithstanding any other provision of this Agreement, the Selling Stockholder shall not affect any sale or other transfer, or make any short sale of, any Common Stock or other securities of the Company held by such Selling Stockholder (other than those included in a Registration Statement) during the 180-day period following the effective date of any primary offering undertaken by the Company of shares of its Common Stock, (“ Primary Offering ”), which may also include other securities, unless the Company, in the case of a non-underwritten Primary Offering, or the managing underwriter, in the case of an underwritten Primary Offering, otherwise agree. The obligations described in this Section 6(h)(ii) shall not apply to a registration relating solely to employee benefit plans on Form S-8 or similar forms that may be promulgated in the future, or a registration relating solely to a transaction on Form S-4 or similar forms that may be promulgated in the future.

 

 

7.              Indemnification .  Purchaser agrees to indemnify, defend and hold harmless the Company and its respective affiliates and agents from and against any and all demands, claims, actions or causes of action, judgments, assessments, losses, liabilities, damages or penalties and reasonable attorneys’ fees and related disbursements incurred by the Company that arise out of or result from a breach of any representations or warranties made by Purchaser herein, and Purchaser agrees that in the event of any breach of any representations or warranties made by Purchaser herein, the Company may, at its option, forthwith rescind the sale of the Notes to Purchaser.

 

8.              Confidentiality .  Purchaser acknowledges and agrees that:

 

(a)            Certain of the information contained herein is of a confidential nature and may be regarded as material non-public information under Regulation FD of the Securities Act.

 

(b)            This Agreement has been furnished to Purchaser by the Company for the sole purpose of enabling Purchaser to consider and evaluate an investment in the Company, and will be kept confidential by Purchaser and not used for any other purpose.

 

(c)            Until the time the information contained herein has been adequately disseminated to the public, the existence of this Agreement and the information contained herein shall not, without the prior written consent of the Company, be disclosed by Purchaser to any person or entity, other than Purchaser’s personal financial and legal advisors for the sole purpose of evaluating an investment in the Company, and Purchaser will not, directly or indirectly, disclose or permit Purchaser’s personal financial and legal advisors to disclose, any of such information without the prior written consent of the Company.

 

(d)            Purchaser shall make its representatives aware of the terms of this Section 8 and to be responsible for any breach of this Agreement by such representatives.  

 

(e)            Purchaser shall not, without the prior written consent of the Company, directly or indirectly, make any statements, public announcements or release to trade publications or the press with respect to the contents or subject matter of this Agreement.  

 

(f)            If Purchaser decides to not pursue further investigation of the Company or to not participate in the Offering, Purchaser will promptly return this Agreement and any accompanying documentation to the Company.

 

9.              Non-Public Information .  Purchaser acknowledges that certain information concerning the matters that are the subject matter of this Agreement constitute material non-public information under United States federal securities laws, and that United States federal securities laws prohibit any person who has received material non-public information relating to the Company from purchasing or selling securities of the Company, or from communicating such information to any person under circumstances in which it is reasonably foreseeable that such person is likely to purchase or sell securities of the Company.  Accordingly, until such time as any such non-public information has been adequately disseminated to the public, Purchaser shall not purchase or sell any securities of the Company, or communicate such information to any other person.

 

 

10.            Sales and Confidentiality After The Date Hereof .   Such Purchaser shall not, and shall cause its affiliates not to, engage, directly or indirectly, in any transactions in the securities of the Company (including, without limitation, any Short Sales (as such term is defined in Rule 200 promulgated under Regulation SHO under the Exchange Act)) during the period from the date hereof until such time as (i) the transactions contemplated by this Agreement are first publicly announced or (ii) this Agreement is terminated.  Notwithstanding the foregoing, in the case of a Purchaser that is a multi-managed investment vehicle whereby separate portfolio managers manage separate portions of such Purchaser's assets and the portfolio managers have no direct knowledge of the investment decisions made by the portfolio managers managing other portions of such Purchaser's assets, the representation set forth above shall apply only with respect to the portion of assets managed by the portfolio manager that have knowledge about the financing transaction contemplated by this Agreement.  Each Purchaser understands and acknowledges, severally and not jointly with any other Purchaser, that the SEC currently takes the position that covering a short position established prior to effectiveness of a resale registration statement with shares included in such registration statement would be a violation of Section 5 of the Securities Act, as set forth in Division of Corporation Finance Compliance and Disclosure Interpretation 239.10 regarding short selling.

 

11.            Entire Agreement; No Third Party Beneficiaries .  This Agreement and the other Transaction Documents contain the entire agreement between the parties and supersede all prior agreements and understandings, both written and oral, between the parties with respect to the subject matter hereto, and no party shall be liable or bound to any other party in any manner by any warranties, representations, guarantees or covenants except as specifically set forth in this Agreement and the Transaction Documents.  Purchaser acknowledges and agrees that, with the exception of the information contained or incorporated by reference in the Offering Documents, Purchaser did not rely upon any statements or information, whether oral or written, provided by the Company, or any of its officers, directors, employees, agents or representatives, in deciding to enter into this Agreement or purchase the Notes.  Nothing in this Agreement, express or implied, is intended to confer upon any person other than the parties hereto or their respective successors and assigns any rights, remedies, obligations or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement.

 

12.            Amendment and Modification .  This Agreement may not be amended, modified or supplemented except by an instrument or instruments in writing signed by the Company and the Purchaser.

 

13.            Extensions and Waivers .  At any time prior to the Closing, the parties hereto entitled to the benefits of a term or provision may (a) extend the time for the performance of any of the obligations or other acts of the parties hereto, (b) waive any inaccuracies in the representations and warranties contained herein or in any document, certificate or writing delivered pursuant hereto, or (c) waive compliance with any obligation, covenant, agreement or condition contained herein.  Any agreement on the part of a party to any such extension or waiver shall be valid only if set forth in an instrument or instruments in writing signed by the Company and the holders of a majority of the outstanding principal amount of the Notes sold in the Offering.  No failure or delay on the part of any party hereto in the exercise of any right hereunder shall impair such right or be construed to be a waiver of, or acquiescence in, any breach of any representation, warranty, covenant or agreement.

 

 

14.            Successors and Assigns .  This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns; provided , however , that the Company may not assign its rights or delegate its obligations under this Agreement without the express prior written consent of the Purchaser.  Except as provided in Section 6, nothing in this Agreement is intended to confer upon any person not a party hereto (and their successors and assigns) any rights, remedies, obligations or liabilities under or by reason of this Agreement.

 

15.            Survival of Representations, Warranties and Covenants .  The representations and warranties contained herein shall survive the Closing and shall thereupon terminate 18 months from the Closing, except that the representations contained in Sections 3(a), 3(b), 4(a), and 4(b) shall survive indefinitely.  All covenants and agreements contained herein which by their terms contemplate actions following the Closing shall survive the Closing and remain in full force and effect in accordance with their terms.  All other covenants and agreements contained herein shall not survive the Closing and shall thereupon terminate.

 

16.            Headings; Definitions .  The Section headings contained in this Agreement are inserted for convenience of reference only and will not affect the meaning or interpretation of this Agreement.  All references to Sections contained herein mean Sections of this Agreement unless otherwise stated.  All capitalized terms defined herein are equally applicable to both the singular and plural forms of such terms.

 

17.            Severability .  If any provision of this Agreement or the application thereof to any person or circumstance is held to be invalid or unenforceable to any extent, the remainder of this Agreement shall remain in full force and effect and shall be reformed to render the Agreement valid and enforceable while reflecting to the greatest extent permissible the intent of the parties.

 

18.            Notices .  All notices hereunder shall be sufficiently given for all purposes hereunder if in writing and delivered personally, sent by documented overnight delivery service or, to the extent receipt is confirmed, telecopy, telefax or other electronic transmission service to the appropriate address or number as set forth below:

 

If to the Company :

 

Virtual Piggy, Inc.

1221 Hermosa Avenue, Suite 210

Hermosa Beach, CA 90254

Fax (310) 634-1246

Attention: Joseph Dwyer

 

 

with a copy to :

Wiggin and Dana LLP

Two Stamford Plaza

281 Tresser Boulevard

Stamford, CT 06901

Fax (203) 363-7676

Attention:  Michael Grundei, Esquire

If to Purchaser :

 

To that address indicated on the signature page hereof.

 

19.         Governing Law .  This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, without regard to the laws that might otherwise govern under applicable principles of conflicts of laws thereof.

 

20.         Arbitration .  If a dispute arises as to the interpretation of this Agreement, it shall be decided in an arbitration proceeding conforming to the Rules of the American Arbitration Association applicable to commercial arbitration then in effect at the time of the dispute.  The arbitration shall take place in Wilmington, Delaware.  The decision of the arbitrators shall be conclusively binding upon the parties and final and such decision shall be enforceable as a judgment in any court of competent jurisdiction. The parties shall share equally the costs of the arbitration.

 

21.         Counterparts .  This Agreement may be executed and delivered by facsimile in two or more counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one and the same agreement.

 

[Signature page follows.]

 

 

IN WITNESS WHEREOF, intending to be legally bound, the parties hereto have caused this Agreement to be executed as of the date set forth below.

 

 

 

 

 

Exhibit 10.2

 

Exhibit 10.3

 

SECURITY AGREEMENT

 

This SECURITY AGREEMENT is made as of May [_] , 2015 between JAMES E. DAVISON, an individual residing at 222 Loblolly Lane, Choudrant, LA 71227, as agent (hereinafter, in such capacity, the “ Agent ”) for itself and the other lenders listed on the signature page hereto (hereinafter, collectively, the “ Secured Parties ”) and Virtual Piggy, Inc., a Delaware corporation with its chief executive office located at 1221 Hermosa Avenue, Suite 210, Hermosa Beach, CA 90254, Attention:  President  (the “ Debtor ”).

 

W I T N E S S E T H:

 

WHEREAS , on the date hereof, the Debtor has issued in favor of each of the Secured Parties, Secured Convertible Promissory Notes due 2016 (each a “ Note ” and collectively the “ Notes ”), in the aggregate principal amount of [___________] Dollars ($ [________] ); such Notes have been issued pursuant to the terms of a Securities Purchase Agreement (the “ Purchase Agreement ”) of even date herewith between the Debtor and the Secured Parties; and

 

WHEREAS , it is a condition precedent to the Secured Parties’ making any loans under the Purchase Agreement and the Notes   or otherwise extending credit to the Debtor that the Debtor execute and deliver to the Secured Parties this Security Agreement;

 

NOW, THEREFORE , in consideration of the premises and to induce the Secured Parties to extend the loans to the Debtor pursuant to the Notes, the Debtor hereby agrees with the Secured Parties as follows:

 

1.             Defined Terms .

 

(a)             Unless otherwise defined herein, (i) terms, which are defined in the Notes and used herein, shall have the meanings ascribed to such terms in the Notes, and (ii) terms, which are defined in the Purchase Agreement and used herein, shall have the meanings ascribed to such terms in the Purchase Agreement.

 

(b)           The following terms which are defined in Article 9 are used herein as so defined:  Accessions, Accounts, Chattel Paper, Commercial Tort Claims, Deposit Accounts, Documents, Equipment, General Intangibles, Goods, Instruments, Inventory, Investment Property, Letters of Credit, Letter-of-Credit Rights, Payment Intangibles, Proceeds, Promissory Notes, Software and Supporting Obligations.

 

(c)           The following terms shall have the following meanings:

 

“ Article 9 ” means Article 9 of the Code as in effect from time to time.

 

“ Code ” means the Uniform Commercial Code as from time to time in effect in the State of Delaware, including, specifically, Article 9.

 

 

 

“ Contracts ” means the separate contracts between the Debtor and third parties (including without limitation its customers), as the same may from time to time be amended, supplemented or otherwise modified, including, without limitation, (a) all rights of the Debtor to receive moneys due and to become due to it thereunder or in connection therewith, (b) all rights of the Debtor to damages arising out of, or for, breach or default in respect thereof and (c) all rights of the Debtor to perform and to exercise all remedies thereunder; but excluding any contracts, the assignment or hypothecation of which, for collateral purposes, would result in a default or require, or cause, a forfeiture or permit a revocation of material rights under such contract.

 

“ Copyrights ” means (a) all copyrights of the United States or any other country, (b) all copyright registrations filed in the United States or in any other country, and (c) all Proceeds thereof.

 

 

           “ Customer Contracts ” means Contracts between the Debtor and its customers.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

“ Source   Code ” means all source code and all updates, releases and/or new versions of the Software.

 

 

 

 

2.              Grant of Security Interest .

 

(a)           As collateral security for the prompt and complete payment and performance when due of the Obligations, the Debtor hereby grants to the Agent, for the benefit of each of the Secured Parties, a security interest in all properties, assets and rights of the Debtor now owned or at any time hereafter acquired by the Debtor or in which the Debtor now has or at any time in the future may acquire any right, title or interest, wherever located or situated and however defined or classified under Article 9, including, without limitation, all of the property described in clause (b) below  (collectively, the “ Collateral ”).

 

(b)           Without limitation of the foregoing, the Collateral includes all of Debtor’s right, title and interest in the following at all times:

 

(i)	all Accounts;
(ii)	all Chattel Paper;
(iii)	all Commercial Tort Claims;
(iv)	all Contracts;
(v)	all Copyrights;
(vi)	all Copyright Licenses;
(vii)	all Deposit Accounts;
(viii)	all Documents;
(ix)	all Equipment;
(x)	all General Intangibles;
(xi)	all Goods;
(xii)	all Instruments;
(xiii)	all Inventory;
(xiv)	all Investment Property;
(xv)	all Letter-of-Credit Rights;
(xvi)	all Letters of Credit;

 

(xvii)	all Patents;
(xviii)	all Patent Licenses;
(xix)	all Payment Intangibles;
(xx)	all Promissory Notes;
(xxi)	all Software (including, without limitation, any Source Code thereto, all Software Licenses and any Patents or Copyrights associated therewith);
(xxii)	all Supporting Obligations;
(xxiii)	all Trademarks;
(xxiv)	all Trademark Licenses;
(xxv)	all Proceeds, all Accessions and additions thereto and all substitutions and replacements therefor and products of any and all of the foregoing.

 

3.              Rights of Agent; Limitations on Agent’s Obligations .

 

 

 

 

4.              Representations and Warranties .   The Debtor hereby represents and warrants to the Secured Parties that (a) it is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, (b) it has the corporate power and authority to own or hold under lease the Collateral, to transact the business it transacts and proposes to transact, to execute and deliver this Security Agreement and to perform the provisions hereof, (c) this Security Agreement has been duly authorized by all necessary corporate action on the part of the Debtor and constitutes a legal, valid and binding obligation of the Debtor enforceable against the Debtor in accordance with its terms, except as such enforceability may be limited by (i) applicable bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or other similar laws affecting the enforcement of creditors’ rights generally and (ii) general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law), (d) the execution, delivery and performance by the Debtor of this Security Agreement will not (i) contravene, result in any breach of, or constitute a default under, or result in the creation of any lien (other than those provided for in this Security Agreement) in respect of any property of the Debtor under, any indenture, mortgage, deed of trust, loan, purchase or credit agreement, lease, the Debtor’s articles of incorporation or bylaws, or any other material agreement or instrument to which the Debtor is a party or by which the Debtor or any of its properties may be bound or affected; (ii) conflict with or result in a breach of any of the terms, conditions or provisions of any order, judgment, decree, or ruling of any court, arbitrator or Governmental Authority applicable to the Debtor, or (iii)violate any provision of any statute or other rule or regulation of any Governmental Authority applicable to the Debtor, (e) except for the Encumbrances granted pursuant to this Security Agreement and  Permitted Encumbrances, the Debtor owns each item of the Collateral free and clear of any and all Encumbrances or claims of others,  and (f)  except in connection with Permitted Encumbrances, no security agreement, financing statement or other public notice with respect to all or any part of the Collateral is on file or of record in any public office, except such as may have been filed in favor of the Secured Parties.

 

5.              Covenants .   The Debtor covenants and agrees with the Secured Parties that, from and after the date of this Security Agreement until the Obligations are paid in full:

 

(a)            Further Documentation; Pledge of Instruments and Chattel Paper .  Upon the written request of the Secured Parties, and at the sole expense of the Debtor, the Debtor will promptly and duly execute and deliver such further instruments and documents and take such further action as the Secured Parties may reasonably request for the purpose of obtaining or preserving the full benefits of this Security Agreement and of the rights and powers herein granted, including, without limitation, the filing of any financing or continuation statements under the Uniform Commercial Code in effect in any jurisdiction with respect to the Encumbrances created hereby.  The Debtor also hereby authorizes the Secured Parties to file any such financing or continuation statement.  A carbon, photographic or other reproduction of this Security Agreement shall be sufficient as a financing statement for filing in any jurisdiction.  If any amount payable under or in connection with any of the Collateral shall be or become evidenced by any Instrument or Chattel Paper, such Instrument or Chattel Paper shall be delivered to the Secured Parties, duly endorsed in a manner satisfactory to the Secured Parties  to be held as Collateral pursuant to this Security Agreement.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(o)            Patents, Copyrights, Software, Trademarks and General Intangibles .

 

(i)           Whenever Debtor shall file an application for the registration of any Patent, Software or Trademark with the United States Patent and Trademark Office or any Copyright or Software with the United States Copyright Office or any similar office or agency in any other country or any political subdivision thereof, Debtor shall report such filing to the Secured Parties within five (5) business days after the last day of the fiscal quarter in which such filing occurs.

 

(ii)           The Debtor shall execute and deliver any and all agreements, instruments, documents, and papers as the Secured Parties may reasonably request to evidence the Secured Parties’ security interest in any Patent, Copyright, Software, General Intangible or Trademark and the goodwill of Debtor relating thereto or represented thereby, and Debtor hereby constitutes the Agent as its attorney-in-fact to execute and file all such writings for the foregoing purposes, all acts of such attorney being hereby ratified and confirmed; such power being coupled with an interest is irrevocable until the Obligations are paid in full.

 

(iii)           The Debtor will take all reasonable and necessary steps, including, without limitation, in any proceeding before the United States Patent and Trademark Office, or any similar office or agency in any other country or any political subdivision thereof, to maintain and pursue each application (and to obtain the relevant registration) and to maintain each registration of any registered Patents, Copyrights, Software, General Intangibles or Trademarks, including, without limitation, filing of applications for renewal, affidavits of use and affidavits of incontestability.

 

 

(iv)           In the event that any material Patent, Copyright, Software, General Intangible or Trademark included in the Collateral is infringed, misappropriated or diluted by a third party, Debtor shall promptly notify the Agent after it learns thereof and shall, unless Debtor shall reasonably determine that such Patent, Copyright, Software, General Intangible or Trademark is of negligible economic value to Debtor, promptly sue for infringement, misappropriation or dilution, to seek injunctive relief where appropriate and to recover any and all damages for such infringement, misappropriation or dilution, or take such other actions as Debtor shall reasonably deem appropriate under the circumstances to protect such Patent, Copyright, Software, General Intangible or Trademark.

 

(p)             Insurance .   Debtor , at its expense, shall keep the Collateral insured against loss or damage by fire, theft, explosion, sprinklers, and all other hazards and risks, and in such amounts, are reasonable given the nature of Debtor ’s business and the type and use of Collateral.   Debtor shall also maintain insurance relating to Debtor ’s business, ownership and use of the Collateral in amounts and of a type that are customary to businesses similar to Debtor ’s .  All such policies of insurance shall be in such form, with such companies, and in such amounts as are reasonably satisfactory to the Agent.  All such policies of property insurance shall contain a lender’s loss payable endorsement, in a form satisfactory to the Agent, showing the Agent as an additional loss payee thereof, and all liability insurance policies shall show the Agent as an additional insured and shall specify that the insurer must give at least twenty (20) days notice to the Agent before canceling its policy for any reason.  Upon the Agent’s request, Debtor shall deliver to the Agent certified copies of such policies of insurance and evidence of the payments of all premiums therefor.  All proceeds payable under any such policy shall, at the option of the Agent, be payable to the Agent to be applied on account of the Obligations in such order as the Agent shall elect.

 

 

6.              Agent’s Appointment as Attorney-in-Fact .

 

(a)            Powers .  During the existence of an Event of Default, the Debtor hereby irrevocably constitutes and appoints the Agent with full power of substitution, as its true and lawful attorney-in-fact with full irrevocable power and authority in the place and stead of Debtor and in the name of Debtor or in its own name, from time to time in the Agent’s discretion upon instruction from the Required Secured Parties, for the purpose of carrying out the terms of this Security Agreement, to take any and all appropriate action and to execute any and all documents and instruments which may be necessary or desirable to accomplish the purposes of this Security Agreement, and, without limiting the generality of the foregoing, Debtor hereby gives the Agent the power and right, on behalf of Debtor, without notice to or assent by Debtor, to do the following:  to pay or discharge taxes and Encumbrances (other than Permitted Encumbrances) levied or placed

 

 

 on the Collateral (upon written instruction of the Required Secured Parties), to effect any repairs or any insurance called for by the terms of this Security Agreement and to pay all or any part of the premiums therefor and the costs thereof (upon written instruction of the Required Secured Parties); and during the existence of an Event of Default and only upon written instruction of the Required Secured Parties, (A) to direct any party liable for any payment under any of the Collateral to make payment of any and all moneys due or to become due thereunder directly to the Secured Party or as the Secured Party shall direct; (B) to ask or demand for, collect, receive payment of and receipt for, any and all moneys, claims and other amounts due or to become due at any time in respect of or arising out of any Collateral; (C) to sign and endorse any invoices, freight or express bills, bills of lading, storage or warehouse receipts, drafts against debtors, assignments, verifications, notices and other documents in connection with any of the Collateral; (D) to commence and prosecute any suits, actions or proceedings at law or in equity in any court of competent jurisdiction to collect the Collateral or any thereof and to enforce any other right in respect of any Collateral; (E) to defend any suit, action or proceeding brought against Debtor with respect to any Collateral; (F) to settle, compromise or adjust any suit, action or proceeding described in clause (E) above and, in connection therewith, to give such discharges or releases as the Agent may deem appropriate; (G) to assign any Patent, Copyright, Software, General Intangible or Trademark (along with the goodwill of the business to which any such Trademark pertains), throughout the world for such term or terms, on such conditions, and in such manner, as the Agent shall determine; and (H) generally, to sell, transfer, pledge and make any agreement with respect to or otherwise deal with any of the Collateral as fully and completely as though the Agent were the absolute owner thereof for all purposes, and to do, at the Agent’s option and Debtor’s expense, at any time, or from time to time, all acts and things which the Agent, with the consent and instruction of the Required Secured Parties, deems necessary to protect, preserve or realize upon the Collateral and the Agent’s Encumbrances thereon and to effect the intent of this Security Agreement, all as fully and effectively as Debtor might do.  In addition, the Debtor hereby irrevocably constitutes and appoints the Agent with full power of substitution, as its true and lawful attorney-in-fact with full irrevocable power and authority in the place and stead of Debtor and in the name of Debtor or in its own name, from time to time in the Agent’s discretion, for the purpose of perfecting the Agent’s Lien against the Collateral, to take any and all appropriate action and to execute any and all documents and instruments which may be necessary or desirable to accomplish such purpose.  The Debtor hereby ratifies all that said attorneys shall lawfully do or cause to be done by virtue hereof. The powers of attorney in this subsection are powers coupled with an interest and shall be irrevocable.

 

(b)            Other Powers .  The Debtor also authorizes the Agent, at any time and from time to time, to execute, in connection with the sale provided for in Section 9 hereof, any endorsements, assignments or other instruments of conveyance or transfer with respect to the Collateral.

 

(c)            No Duty on Agent’s Part .  The powers conferred on the Agent hereunder are solely to protect Agent’s interests in the Collateral and shall not impose any duty upon the Agent to exercise any such powers.  The Agent shall be accountable only for amounts that it or the Secured Parties actually receive as a result of the exercise of such powers, and none of them nor any of their officers, directors, or employees shall be responsible to Debtor for any act or failure to act hereunder, except for its own gross negligence or willful misconduct.

 

           7.            Performance by Agent of Debtor’s Obligations .   If Debtor fails to perform or comply with any of its agreements contained herein and the Agent, upon written instruction of the Required Secured Parties, shall itself perform or comply, or otherwise cause performance or compliance, with such agreement, the reasonable expenses of the Agent incurred in connection with such performance or compliance, shall be payable by Debtor to the Agent on demand and shall constitute Obligations secured hereby.

 

           8.            Proceeds .   In addition to the rights of the Agent specified in Section 3 with respect to payments of Accounts, it is agreed that during the existence of an Event of Default (a) all Proceeds received by the Debtor consisting of cash, checks and other near-cash items shall be held by the Debtor in trust for the Secured Parties, segregated from other funds of the Debtor, and shall, forthwith upon receipt by the Debtor, be turned over to the Agent in the exact form received by the Debtor (duly endorsed by the Debtor to the Agent), and (b) any and all such Proceeds received by the Agent (whether from the Debtor or otherwise) may, in the sole discretion of the Agent upon written instruction of the Required Secured Parties, be held by the Agent as collateral security for, and/or then or at any time thereafter may be applied by the Agent, pro ratably against, the Obligations or in such order as the Required Secured Parties may elect.  Any balance of such Proceeds remaining after the Obligations shall have been paid in full, shall be paid over to the Debtor or to whomsoever may be lawfully entitled to receive the same.

 

           9.            Remedies .   Upon the occurrence and during the continuance of an Event of Default, the Agent, at the written direction of the Required Secured Parties, may exercise, in addition to all other rights and remedies granted to it in this Security Agreement and in any other instrument or agreement securing, evidencing or relating to the Obligations, all rights and remedies of a secured party under the Code.  Without limiting the generality of the foregoing, the Agent at written direction of the Required Secured Parties, during the existence of an Event of Default and without further demand of performance or other demand, presentment, protest, advertisement or notice of any kind (except any notice required by law referred to below) to or upon Debtor or any other Person (all and each of which demands, defenses, advertisements and notices are hereby waived), may in such circumstances forthwith collect, receive, appropriate and realize upon the Collateral, or any part thereof, and/or may forthwith sell, lease, assign, give option or options to purchase, or otherwise dispose of and deliver the Collateral or any part thereof (or contract to do any of the foregoing), in one or more parcels at public or private sale or sales, at any exchange, broker’s board or office of the Agent or elsewhere upon such terms and conditions as it may deem advisable and at such prices as it may deem best, for cash or on credit or for future delivery without assumption of any credit risk.  Each purchaser at any such sale shall hold the Collateral sold absolutely free from any claim or right on the part of the Debtor, and Debtor hereby waives (to the extent permitted by law) all rights of redemption, stay, or appraisal that it now has or may at any time in the future have under any rule of law or statute now existing or hereafter enacted. Each of the Secured Parties shall have the right upon any such public sale or sales, and, to the extent permitted by law, upon any such private sale or sales, to purchase the whole or any part of the Collateral so sold, free of any right or equity of redemption in Debtor, which right or equity is hereby waived or released, and in connection herewith to

 

 

credit bid the Obligations with the proceeds that would otherwise be payable to such Secured Party.  The  Agent shall not be obligated to make any sale of Collateral regardless of notice of sale having been given. The 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. To the extent permitted by law, Debtor hereby waives any claims against Agent arising because the price at which any Collateral may have been sold at a private sale was less than the price that might have been obtained at a public sale.  The Debtor further agrees, at the Agent’s request upon instruction from the Required Secured Parties, to assemble the Collateral and make it available to the Agent at places, which the Agent shall reasonably select, whether at Debtor’s premises or elsewhere.  The Agent shall apply the net proceeds of any such collection, recovery, receipt, appropriation, realization or sale, after deducting all reasonable costs and expenses of every kind incurred therein or incidental to the care or safekeeping of any of the Collateral or in any way relating to the Collateral or the rights of the Agent hereunder, including, without limitation, reasonable attorneys’ fees and disbursements, to the payment in whole or in part of the Obligations, in such order as the Required Secured Parties may elect, and only after such application and after the payment by Agent of any other amount required by any provision of law, including, without limitation, any provision of the Code, need the Agent account for the surplus, if any, to Debtor.  To the extent permitted by applicable law, Debtor waives all claims, damages and demands it may acquire against the Agent or any Secured Party arising out of the exercise by Agent of any of its rights hereunder.  If any notice of a proposed sale or other disposition of Collateral shall be required by law, such notice shall be deemed reasonable and proper if given at least ten (10) days before such sale or other disposition.  The Debtor shall remain liable for any deficiency if the proceeds of any sale or other disposition of the Collateral are insufficient to pay the obligations and the fees and disbursements of any attorneys employed by Agent to collect such deficiency.  Debtor hereby agrees that any sale or other disposition of the Collateral conducted in conformity with reasonable commercial practices of banks, insurance companies, or other financial institutions in the city and state where Agent is located in disposing of property similar to the Collateral shall be deemed to be commercially reasonable.

 

           10.          Limitation on Duties Regarding Preservation of Collateral .   The Agent’s sole duty with respect to the custody, safekeeping and physical preservation of the Collateral in its possession, under Article 9 or otherwise, shall be to deal with it in the same manner as any Secured Party deals with similar property for its own account.  Neither the Agent nor any of its directors, officers, agents or employees shall be liable for failure to demand, collect or realize upon all or any part of the Collateral or for any delay in doing so or shall be under any obligation to sell or otherwise dispose of any Collateral upon the request of Debtor or otherwise.

 

           11.          Powers Coupled with an Interest .   All authorizations and agencies herein contained with respect to the Collateral are irrevocable and powers coupled with an interest.

 

 

           12.          Agent .   Each Secured Party hereby designates and appoints the Agent to serve in accordance with the terms and conditions of this Agreement, and the Agent hereby agrees to act as such, upon the terms and conditions provided in this Agreement.  The Agent may execute any of its duties under this Agreement by or through agents, employees or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties.  The Agent shall be entitled to rely, and shall be fully protected in relying, upon any writing, resolution, notice, consent or other document or conversation believed by it to be genuine and correct.  The Agent shall be fully justified in failing or refusing to take any action unless it first receives such advice or concurrence from the Required Secured Parties.  The Agent shall be under no obligation to take any action to protect, preserve or enforce any rights or interests in the Collateral or to take any action toward the execution or enforcement of the rights and remedies hereunder, whether on its own motion or on the request of any other Person, which in the opinion of the Agent may involve loss, liability or expense to it, unless the Debtor and/or one or more Secured Parties shall offer and furnish security or indemnity, reasonably satisfactory to the Agent, against loss, liability and expense to the Agent.  As used herein, “ Required Secured Parties ” means, as of any date, the Secured Parties holding at least a majority of the outstanding principal amount of the Notes on such date.  The Agent shall in all cases be fully protected in acting or refraining from acting in accordance with a request or consent of the Required Secured Parties and such request and any action taken or failure to act pursuant thereto shall be binding upon all of the Secured Parties.  The Agent will not be deemed to have knowledge or notice of the occurrence of any Event of Default except with respect to payment default required to be paid to the Agent in its individual capacity, unless the Agent shall have received written notice from a Secured Party or the Debtor describing such default.  The Agent shall use its best efforts to notify all Secured Parties and the Debtor of any such notice.  The Agent shall take such action with respect to such default as may be reasonably and lawfully requested by the Required Secured Parties in accordance with the terms of this Agreement subject to the requirements set forth above for indemnification and further subject to its right to resign under Section 13 below.  In addition to any other indemnification provided for hereunder or otherwise in favor of the Agent, each of the Secured Parties shall indemnify upon demand the Agent and its agents, pro rata, from and against any and all actions, causes of actions, suits, losses, liabilities, damages and expenses, including reasonable attorney's fees, other than those resulting from the Agent or its agents gross negligence or willful misconduct.  The Agent shall not be required to advance, expend or risk its own funds or otherwise incur personal liability in the performance of its duties or in the exercise of any rights or remedies hereunder.  All funds expended by the Agent hereunder (including, without limitation, funds expended for reasonable attorney’s fees) shall be promptly reimbursed by the Debtor and/or the Secured Parties upon demand from the Agent.  Nothing shall limit or restrict the right of the Agent in its individual capacity to be a holder of Notes and to exercise its rights thereunder, including, without limitation, its right to vote as a Secured Party as part of the Required Secured Parties.  The Agent shall not be liable or responsible in any way for any diminution in the value of the Collateral or any act or default of any warehouseman, carrier, forwarding agency, or other Person whomsoever, but the same shall be at the sole risk of the Debtor and/or the Secured Parties.  Unless instructed in writing by the Required Secured Parties and indemnified by the Secured Parties, the Agent shall not be responsible for effecting any filings with the United States Patent and Trademark Office or the United States Copyright Office with respect to any of the Collateral.  The Agent makes no representation or warranty as to the validity, sufficiency or enforceability hereof or of the Collateral or as to the value, title, condition, or adequacy of insurance on, or otherwise with respect to, the Collateral.  The Agent shall not be accountable to anyone for the use or application of the proceeds of the Notes.  The Agent makes no representation or warranty as to the attachment, perfection or priority of the security interests and liens contemplated hereby.

 

 

           13.          Resignation of Agent .    The Agent may resign at any time by giving twenty (20) days prior written notice thereof to the Secured Parties and the Debtor.  Upon any such resignation, the Required Secured Parties shall have the right to appoint a successor Agent.  Unless an Event of Default shall have occurred and be continuing, such successor Agent shall be reasonably acceptable to the Debtor.  If no successor Agent shall have been so appointed by the Required Secured Parties and shall have accepted such appointment within fifteen (15) days after the retiring Agent's giving of notice of resignation, then the retiring Agent may, on behalf of the Secured Parties, appoint a successor Agent.  If no such successor can be found or appointed, a successor Agent may be appointed, upon application of the retiring Agent or any Secured Party, by any court of competent jurisdiction.  Upon the acceptance of any appointment as Agent hereunder by a successor Agent, such successor Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Agent, and the retiring Agent shall be discharged from its duties and obligations hereunder.

 

           14.            Severability .   Any provision of this Security Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.  All covenants and other agreements contained in this Security Agreement by or on behalf of any of the parties hereto bind and inure to the benefit of their respective successors and assigns  whether so expressed or not.

 

           15.            Paragraph Headings .   The paragraph headings used in this Security Agreement are for convenience of reference only and are not to affect the construction hereof or be taken into consideration in the interpretation hereof.  This Security Agreement may be executed in any number of counterparts, each of which shall be an original but all of which together shall constitute one instrument.  Each counterpart may consist of a number of copies hereof, each signed by less than all, but together signed by all, of the parties hereto.

 

            16.             No Waiver; Cumulative Remedies .   The Agent shall not, by any act (except by a written instrument), delay, indulgence, omission or otherwise, be deemed to have waived any right or remedy hereunder or to have acquiesced in any default or in any breach of any of the terms and conditions hereof.  No failure to exercise, nor any delay in exercising, on the part of the Agent, of any right, power or privilege hereunder shall operate as a waiver thereof.  No single or partial exercise of any right, power or privilege hereunder shall preclude any other or further exercise thereof or the exercise of any other right, power or privilege.  A waiver by the Agent or any Secured Party of any right or remedy hereunder on any one occasion shall not be construed as a bar to any right or remedy that the Agent would otherwise have on any future occasion.  The rights and remedies herein provided are cumulative, may be exercised singly or concurrently and are not exclusive of any rights or remedies provided by law.   THIS SECURITY AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAW OF THE STATE OF DELAWARE EXCLUDING CHOICE-OF-LAW PRINCIPLES OF THE LAW OF SUCH STATE THAT WOULD REQUIRE THE APPLICATION OF THE LAWS OF A JURISDICTION OTHER THAN SUCH STATE.

 

 

              17.            Jurisdiction; Venue; Service of Process .   This Agreement shall be subject to the exclusive jurisdiction of the Federal District Court, District of Delaware and if such court does not have proper jurisdiction, the State Courts of Delaware. The parties to this Agreement agree that any breach of any term or condition of this Agreement shall be deemed to be a breach occurring in the State of Delaware by virtue of a failure to perform an act required to be performed in the State of Delaware and irrevocably and expressly agree to submit to the jurisdiction of the Federal District Court, District of Delaware and if such court does not have proper jurisdiction, the State Courts of Delaware for the purpose of resolving any disputes among the parties relating to this Agreement or the transactions contemplated hereby. The parties irrevocably waive, to the fullest extent permitted by law, any objection which they may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement, or any judgment entered by any court in respect hereof brought in Delaware, and further irrevocably waive any claim that any suit, action or proceeding brought in Federal District Court, District of Delaware and if such court does not have proper jurisdiction, the State Courts of Delaware has been brought in an inconvenient forum. Each of the parties hereto consents to process being served in any such suit, action or proceeding, by mailing a copy thereof 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 in this Section 17 shall affect or limit any right to serve process in any other manner permitted by law.

 

           18.            Notices .   Notices hereunder shall be given to the Debtor, the Agent and each Secured Party in the manner set forth in the Purchase Agreement of even date herewith between the Debtor and each of the Secured Parties and at the addresses set forth therein.

 

           19.            Termination .   Upon the repayment in full of all Obligations, this Security Agreement shall terminate, the Secured Parties shall deliver any release of the Encumbrances created under this Security Agreement that Debtor may reasonably request (at the cost of the Debtor), and the Secured Parties shall return to the Debtor all Collateral then in its possession, custody, or control, and this Security Agreement shall terminate without further action by the Party and be of no further force and effect.

 

 

[Signature page follows.]

 

IN WITNESS WHEREOF, the parties hereto have caused this Security Agreement to be duly executed and delivered as of the date first above written.

 

 

	VIRTUAL PIGGY, INC.
	By:
	Name: Joseph Dwyer
	Title: Chief Financial Officer

	AGENT
	By:
	Name:  James E. Davison

 

 

OMNIBUS SIGNATURE PAGE TO

 

VIRTUAL PIGGY, INC.

 

SECURITY AGREEMENT

 

 

The undersigned, as a Secured Party, hereby executes and delivers the Security Agreement to which this signature page is attached, which, together with all counterparts of the Security Agreement and signature pages of the other parties named in said Security Agreement, shall constitute one and the same document in accordance with the terms of the Security Agreement.

 

 

	Print Name:
	By:
	Name:
	Title:

 

 

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