Subordinated Secured Promissory Note - Admor Memory Corp. and Netgateway Inc.
AMENDED AND RESTATED
SUBORDINATED SECURED PROMISSORY NOTE
$800,000.00 August 28, 1998
ADMOR MEMORY CORP., a Nevada Corporation ("Maker") previously
delivered a Subordinated Secured Promissory Note, dated July 24, 1998 (the
"Original Note") to NETGATEWAY, INC., a Nevada Corporation ("Holder").
The Maker and the Holder have agreed to amend and restate the Original
Note with this Amended and Restated Subordinated Secured Promissory Note
1. Principal.
For value received, Maker promises to pay to the order of Holder, at its
offices at 300 Oceangate, 5th Floor, Long Beach, California 90802, or at such
other place as Holder may from time to time designate in writing, the principal
sum of Eight Hundred Thousand and No One Hundredths Dollars ($800,000.00),
together with accrued interest from the date of disbursement hereunder on the
unpaid principal at the rate set forth in Paragraph 4. As used herein, the term
"Holder" shall mean Holder and any subsequent holder of this Subordinated
Secured Promissory Note (this "Note"), whichever is applicable from time to
time.
Maker previously has borrowed Six Hundred Thousand Dollars ($600,000.00)
from Holder, pursuant to the terms hereof. Maker is also entitled to borrow up
to an additional Two Hundred Thousand Dollars ($200,000.00) pursuant to the
terms hereof as soon as reasonably practicable hereafter.
2. Maturity Date.
Maker and Holder have previously entered into a definitive agreement (the
"Agreement") pursuant to which Holder or a wholly-owned subsidiary of Holder
shall acquire a minimum of ninety percent (90%) of the outstanding shares of
common stock of Maker through the Agreement and an exchange offer to Maker's
stockholders (the "Transaction"). The unpaid principal balance hereof, together
with all unpaid interest accrued thereon, shall be due and payable on December
31, 1999 or such earlier date, if any, that is ninety (90) days after the date
that the Agreement shall be terminated without the Transaction having been
consummated (the "Maturity Date").
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3. Prepayment.
This Note may be prepaid in full or in part, at any time without penalty,
upon not less than one business days' prior written notice to Holder. Maker
shall have no right to reborrow any such prepaid amounts.
4. Interest.
All interest on the outstanding principal balance hereof shall be due and
payable on the Maturity Date. The outstanding principal balance hereof shall
bear interest at a rate of 9.5% per annum. All payments of principal of and
interest on the Note shall be made without deduction of any present and future
taxes, levies, imposts, deductions, charges or withholdings, which amounts shall
be paid by Maker. Maker will pay the amounts necessary such that the gross
amount of the principal and interest received by Holder is not less than that
required by this Note. All stamp and documentary taxes shall be paid by Maker.
If, notwithstanding the foregoing, Holder pays such taxes, Maker will reimburse
Holder for the amount paid. Maker will furnish Holder official tax receipts or
other evidence of payment of all taxes. Throughout the term of this Note,
interest shall be calculated on a 360-day year, but shall be computed for the
actual number of days in the period for which interest is charged.
5. Manner of Payment.
Principal and interest are payable in lawful money of the United States of
America. All payments of principal and interest on the Note shall be made to
Holder in immediately available funds not later than 11:30 a.m. Los Angeles time
on the dates such payments are to be made. Any payment received after 11:30 a.m.
shall be deemed received by Holder on the next business day.
6. Applications of Payments.
Payments received by Holder pursuant to the terms hereof shall be applied
first to the payment of all interest accrued to the date of such payment and
second to the payment of principal. Notwithstanding anything to the contrary
contained herein, after the occurrence and during the continuation of an Event
of Default (as hereinafter defined), all amounts received by Holder from any
party shall be applied in such order as Holder, in its sole discretion, may
elect.
7. Security.
This Note is secured by a Security Agreement of even date herewith,
executed by Maker and Admor Memory, Ltd., a California corporation ("Limited").
Within five days of the date hereof, Maker shall provide Holder with certified
resolutions of the Boards of Directors of Maker and Limited approving the
proposed Transaction, the loan evidenced by this Note and the Security
Agreement.
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8. Subordination.
The indebtedness evidenced by this Note and the obligations relating to
the security provided pursuant to Paragraph 7 above are subordinated in right of
payment to the Senior Indebtedness. Such subordination is for the benefit of the
holders of Senior Indebtedness. "Senior Indebtedness" means (i) the principal
of, premium, if any, and interest on, and any other indebtedness of the Maker to
its primary senior bank lender(s), plus interest and customary expenses with
respect to such Senior Indebtedness and (ii) refinancings, deferrals,
refundings, replacements, extensions and renewals of or amendments,
modifications or supplements to such Senior Indebtedness.
9. Events of Default.
The occurrence of any of the following shall be deemed to be an event of
default ("Event of Default") hereunder:
(a) Holder shall have notified Maker in writing of a default in the
payment of principal or interest when due pursuant to the terms hereof; or
(b) the occurrence of an Event of Default under the Security
Agreement or under any other deed of trust, security agreement, lease
assignment, guaranty or other agreement (including any amendment,
modification or extension thereof) now or hereafter securing this Note.
10. Remedies; Post-Default Rate; Late Charge.
Upon the occurrence of an Event of Default and without demand or notice,
Holder shall have the option to declare the entire balance of principal together
with all accrued interest thereon immediately due and payable and to exercise
all rights and remedies available to it under the Security Agreement or
applicable law. Notwithstanding any provision of this Note or the Security
Agreement to the contrary, any principal, accrued interest, and other amounts
payable under this Note or the Security Agreement which remain unpaid after the
Maturity Date or any acceleration of this Note, shall bear interest at a rate
per annum equal to 14.5% (the "Post-Default Rate"). If any payment under this
Note (whether of principal or interest or both and including the payment due on
the Maturity Date or upon any acceleration of this Note) is not paid within ten
(10) days after the date on which the payment is due, Maker shall pay to Holder,
in addition to the delinquent payment and without any requirement of notice or
demand by Holder, a late payment charge equal to five percent (5%) of such
delinquent amount. MAKER EXPRESSLY ACKNOWLEDGES AND AGREES THAT THE FOREGOING
ACCRUAL OF INTEREST AT THE POST-DEFAULT RATE AND LATE PAYMENT CHARGE PROVISION
IS REASONABLE UNDER THE CIRCUMSTANCES EXISTING ON THE DATE OF THIS
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NOTE, THAT IT WOULD BE EXTREMELY DIFFICULT AND IMPRACTICAL TO FIX HOLDER'S
ACTUAL DAMAGES ARISING OUT OF (i) ANY FAILURE TO PAY SUCH OUTSTANDING
INDEBTEDNESS OF THIS NOTE UPON THE MATURITY DATE OR UPON ANY ACCELERATION OF
THIS NOTE AND (ii) ANY LATE PAYMENT AND THAT INTEREST ACCRUED AT THE
POST-DEFAULT RATE AND THE FOREGOING LATE PAYMENT CHARGE SHALL BE PRESUMED TO BE
THE ACTUAL AMOUNT OF SUCH DAMAGES INCURRED BY HOLDER. The application of this
default rate or late charge shall not be interpreted or deemed to limit any of
Holder's remedies hereunder or thereunder. No delay or omission on the part of
Holder hereof in exercising any right under this Note or the Security Agreement
shall operate as a waiver of such right.
11. WAIVER.
MAKER HEREBY WAIVES DILIGENCE, PRESENTMENT, PROTEST AND DEMAND, NOTICE OF
PROTEST, DISHONOR AND NONPAYMENT OF THIS NOTE AND EXPRESSLY AGREES THAT, WITHOUT
IN ANY WAY AFFECTING THE LIABILITY OF MAKER HEREUNDER, HOLDER MAY EXTEND ANY
MATURITY DATE OR THE TIME FOR PAYMENT OF ANY INSTALLMENT DUE HEREUNDER, ACCEPT
SECURITY, RELEASE ANY PARTY LIABLE HEREUNDER AND RELEASE ANY SECURITY NOW OR
HEREAFTER SECURING THIS NOTE. MAKER FURTHER WAIVES, TO THE FULL EXTENT PERMITTED
BY LAW, THE RIGHT TO PLEAD ANY AND ALL STATUTES OF LIMITATIONS AS A DEFENSE TO
ANY DEMAND ON THIS NOTE, OR ON ANY DEED OF TRUST, SECURITY AGREEMENT, LEASE
ASSIGNMENT, GUARANTY OR OTHER AGREEMENT NOW OR HEREAFTER SECURING THIS NOTE.
MAKER ALSO EXPRESSLY AND UNCONDITIONALLY WAIVES, IN CONNECTION WITH ANY SUIT,
ACTION OR PROCEEDING BROUGHT BY HOLDER ON THIS NOTE, ANY AND EVERY RIGHT IT MAY
HAVE TO (I) INJUNCTIVE RELIEF, (II) A TRIAL BY JURY, (III) INTERPOSE ANY
COUNTERCLAIM THEREIN AND (IV) HAVE THE SAME CONSOLIDATED WITH ANY OTHER OR
SEPARATE SUIT, ACTION OR PROCEEDING. NOTHING HEREIN CONTAINED SHALL PREVENT OR
PROHIBIT MAKER FROM INSTITUTING OR MAINTAINING A SEPARATE ACTION AGAINST HOLDER
WITH RESPECT TO ANY ASSERTED CLAIM.
12. Attorneys' Fees.
If this Note is not paid when due or if any Event of Default occurs, Maker
promises to pay all costs of enforcement and collection, including but not
limited to, Holder's reasonable attorneys' fees, whether or not any action or
proceeding is brought to enforce the provisions hereof. Upon demand by Holder,
Maker shall also pay the reasonable fees and expenses of Holder's counsel
incurred in connection with the preparation of this Note and the Security
Agreement.
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13. Severability.
Every provision of this Note is intended to be severable. In the event any
term or provision hereof is declared by a court of competent jurisdiction, to be
illegal or invalid for any reason whatsoever, such illegality or invalidity
shall not affect the balance of the terms and provisions hereof, which terms and
provisions shall remain binding and enforceable.
14. Interest Rate Limitation.
It is the intent of Maker and Holder in the execution of this Note and all
other instruments securing this Note that the loan evidenced hereby comply with
the usury laws of the State of California. Holder and Maker stipulate and agree
that none of the terms and provisions contained herein shall ever be construed
to create a contract for use, forbearance or detention of money requiring
payment of interest at a rate in excess of the maximum interest rate permitted
to be charged by the laws of the State of California. In such event, if any
Holder of this Note shall collect monies which are deemed to constitute interest
which would otherwise increase the effective interest rate on this Note to a
rate in excess of the maximum rate permitted to be charged by the laws of the
State of California, all such sums deemed to constitute interest in excess of
such maximum rate shall, at the option of Holder, be credited to the payment of
the sums due hereunder or returned to Maker.
15. Number and Gender.
In this Note the singular shall include the plural and the masculine shall
include the feminine and neuter gender, and vice versa, if the context so
requires.
16. Headings.
Headings at the beginning of each numbered Paragraph of this Note are
intended solely for convenience and are not to be deemed or construed to be a
part of this Note.
17. Choice of Law.
This Note shall be governed by and construed in accordance with the law of
the State of California.
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IN WITNESS WHEREOF, Maker has executed this Secured Promissory Note as of
the date first above written.
ADMOR MEMORY CORP.
By: /s/ Van M. Andrews
-----------------------------
Name: Van M. Andrews
Title: President
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<PAGE>
EXHIBIT B
SECURITY AGREEMENT
See attached Security Agreement.
5
<PAGE>
================================================================================
SECURITY AGREEMENT
Dated as of August 28, 1998
among
ADMOR MEMORY CORP.,
ADMOR MEMORY, LTD.
and
NETGATEWAY, INC.
================================================================================
<PAGE>
SECURITY AGREEMENT
This SECURITY AGREEMENT (this "Agreement") dated as of August 28,
1998 is made among Admor Memory Corp., a Nevada corporation ("Admor") and Admor
Memory, Ltd., a California corporation ("Limited" and together with Admor, the
"Company"), and NetGateway, Inc., a Nevada corporation ("NetGateway").
The Agreement and Plan of Reorganization dated as of July 24, 1998
(the "Purchase Agreement") among Admor, certain stockholders of Admor and
NetGateway provides, subject to its terms and conditions, for the acquisition by
NetGateway of at least 90% of the stock of Admor. It is a condition to the
obligations of the parties under the Purchase Agreement that NetGateway make a
loan of $800,000 to Admor and that Admor shall have executed and delivered a
Secured Promissory Note and the Company shall have executed and delivered, and
granted the Liens provided for in, this Agreement.
To induce NetGateway to enter into, and to consummate the
transactions under, the Purchase Agreement and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Company has agreed to pledge and grant a security interest in the Collateral as
security for the Secured Obligations. Accordingly, the Company agrees with
NetGateway as follows:
Section 1. Definitions and Interpretation.
1.01 Certain Defined Terms. Unless otherwise defined, all
capitalized terms used in this Agreement that are defined in the Purchase
Agreement (including those terms incorporated by reference) shall have the
respective meanings assigned to them in the Purchase Agreement. In addition, the
following terms shall have the following meanings under this Agreement:
"Accounts" shall have the meaning assigned to that term in Section
2.01(b).
"Basic Documents" means, collectively, the Purchase Agreement, the
Note and each other document executed by the Company in connection therewith.
"Collateral" shall have the meaning assigned to that term in Section
2.01.
"Copyright Collateral" shall mean all Copyrights, whether now owned
or hereafter acquired by the Company, including each Copyright identified in
Annex 2.
"Copyrights" shall mean, collectively, (a) all copyrights, copyright
registrations and applications for copyright registrations, (b) all renewals and
extensions of all copyrights, copyright registrations and applications for
copyright registration and (c) all rights, now existing or hereafter coming into
existence, (i) to all income, royalties, damages and other payments (including
in respect of all past, present or future infringements) now or hereafter due or
payable
<PAGE>
under or with respect to any of the foregoing, (ii) to sue for all past, present
and future infringements with respect to any of the foregoing and (iii)
otherwise accruing under or pertaining to any of the foregoing throughout the
world.
"Documents" shall have the meaning assigned to that term in Section
2.01(f).
"Equipment" shall have the meaning assigned to that term in Section
2.01(e).
"Event of Default" shall mean the occurrence of one or more of the
following events:
(a) The Company shall: (i) default in the payment of any principal
of the loan evidenced by the Note when due (whether at stated maturity or
otherwise); or (ii) default in the payment of any interest on the loan evidenced
by the Note or any other Secured Obligation when due and such default shall have
continued unremedied for ten (10) or more days;
(b) The Company or any other guarantor of the loan evidenced by the
Note (collectively, the "Relevant Parties") shall default in the payment when
due of any principal of or interest on any of its other indebtedness; or any
event specified in any note, agreement, indenture or other document evidencing
or relating to any such indebtedness shall occur if the effect of such event is
to cause, or (with the giving of any notice or the lapse of time or both) to
permit the holder or holders of such indebtedness (or a trustee or agent on
behalf of such holder or holders) to cause, such indebtedness to become due, or
to be prepaid in full (whether by redemption, purchase, offer to purchase or
otherwise), prior to its stated maturity or to have the interest rate on such
indebtedness reset to a level so that securities evidencing such indebtedness
trade at a level specified in relation to its par value; provided that the
foregoing Event of Default shall be deemed not to apply to existing defaults
under the Company's Senior Indebtedness (as defined in clause (i) of such
definition) existing on the date hereof for so long as the Company and the
lenders thereunder are conducting active negotiations to consensually
restructure such indebtedness other than pursuant to a proceeding under the
Bankruptcy Code (as defined below);
(c) Any representation, warranty or certification made or deemed
made in this Agreement or the Note by any Relevant Party, or any certificate
furnished to NetGateway pursuant to the provisions of this Agreement, shall
prove to have been false or misleading as of the time made or furnished or
deemed made or furnished in any material respect;
(d) The Company shall default in the performance of any of its
obligations under Sections 4.02 or 5.02 hereof; or the Company shall default in
the performance of any of its other obligations in this Agreement and such
default shall continue unremedied for a period of 30 days after notice of such
default to the Company by NetGateway;
(e) Any Relevant Party shall admit in writing its inability to, or
be generally unable to, pay its debts as such debts become due;
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(f) Any Relevant Party shall (i) apply for or consent to the
appointment of, or the taking of possession by, a receiver, custodian, trustee,
examiner or liquidator of itself or of all or a substantial part of its
property, (ii) make a general assignment for the benefit of its creditors, (iii)
commence a voluntary case under the United States Bankruptcy Code of 1978, as
amended (the "Bankruptcy Code"), (iv) file a petition seeking to take advantage
of any other law relating to bankruptcy, insolvency, reorganization,
liquidation, dissolution, arrangement or winding-up, or composition or
readjustment of debts, (v) fail to controvert in a timely and appropriate
manner, or acquiesce in writing to, any petition filed against it in an
involuntary case under the Bankruptcy Code or (vi) take any corporate action for
the purpose of effecting any of the foregoing;
(g) A proceeding or case shall be commenced, without the application
or consent of the affected Relevant Party, in any court of competent
jurisdiction, seeking (i) its reorganization, liquidation, dissolution,
arrangement or winding-up, or the composition or readjustment of its debts, (ii)
the appointment of a receiver, custodian, trustee, examiner, liquidator or the
like of such Relevant Party or of all or any substantial part of its Property,
or (iii) similar relief in respect of such Relevant Party under any law relating
to bankruptcy, insolvency, reorganization, winding-up, or composition or
adjustment of debts, and such proceeding or case shall continue undismissed, or
an order, judgment or decree approving or ordering any of the foregoing shall be
entered and continue unstayed and in effect, for a period of 60 or more days; or
an order for relief against any Relevant Party shall be entered in an
involuntary case under the Bankruptcy Code;
(h) An event or condition shall occur or exist with respect to any
employee benefit plan to which the Company is a party or in which its employees
participate and, as a result of such event or condition, together with all other
such events or conditions, the Company or any affiliate under the Employee
Retirement Income Security Act of 1974, as amended shall incur or shall be
reasonably likely to incur a liability to an employee benefit plan or the
Pension Benefit Guaranty Corporation (or any combination of the foregoing) in
excess of $100,000;
(i) A reasonable basis shall exist for the assertion against any
Relevant Party (or there shall have been asserted against any Relevant Party)
claims or liabilities, whether accrued, absolute or contingent, based on or
arising from the generation, storage, transport, handling or release of
hazardous materials by the Company or any of its subsidiaries or affiliates, or
any predecessor in interest of the Company or any of its subsidiaries or
affiliates, or relating to any site, facility or vessel owned, operated or
leased by the Company or any of its subsidiaries or affiliates, which claims or
liabilities (insofar as they are payable by the Company or any of its
subsidiaries but after deducting any portion which is reasonably expected to be
paid by other creditworthy persons jointly and severally liable for such
portion), in the judgment of NetGateway are reasonably likely to be determined
adversely to the Company or any of its subsidiaries, and the amount of such
claims or liabilities is, singly or in the aggregate, reasonably likely to have
a material adverse effect on the business, properties or prospects of the
Company;
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or
(j) Except for expiration in accordance with its terms, this
Agreement or any other security document shall be terminated or shall cease to
be in full force and effect, for whatever reason or any guarantor of the loan
evidenced by the Note shall revoke or seek or purport to revoke its obligations
under any such guaranty.
"Instruments" shall have the meaning assigned to that term in
Section 2.01(c).
"Intellectual Property" shall mean all Copyright Collateral, all
Patent Collateral and all Trademark Collateral, together with (a) all
inventions, processes, production methods, proprietary information, know-how and
trade secrets of the Company; (b) all licenses or user or other agreements
granted to the Company with respect to any of the foregoing, in each case
whether now or hereafter owned or used, including the licenses or other
agreements with respect to the Copyright Collateral, the Patent Collateral or
the Trademark Collateral listed in Annex 5; (c) all information, customer lists,
identification of suppliers, data, plans, blueprints, specifications, designs,
drawings, recorded knowledge, surveys, engineering reports, test reports,
manuals, materials standards, processing standards, performance standards,
catalogs, computer and automatic machinery software and programs; (d) all of the
Company's field repair data, sales data and other information relating to sales
or service of products now or hereafter manufactured; (e) all of the Company's
accounting information and all media in which or on which any information or
knowledge or data or records may be recorded or stored and all computer programs
used for the compilation or printout of such information, knowledge, records or
data; (f) the approvals of any governmental person now held or hereafter
obtained by the Company in respect of any of the foregoing; and (g) all causes
of action, claims and warranties now owned or hereafter acquired by the Company
in respect of any of the foregoing. It is understood that Intellectual Property
shall include all of the foregoing owned or acquired by the Company on a
worldwide basis.
"Inventory" shall have the meaning assigned to that term in Section
2.01(d).
"Issuers" shall mean, collectively, each subsidiary, directly or
indirectly, of the Company that is the issuer (as defined in the Uniform
Commercial Code) of any shares of capital stock now owned or hereafter acquired
by the Company, including the respective corporations identified in Annex 1
under the caption "Issuer."
"Patent Collateral" shall mean all Patents, whether now owned or
hereafter acquired by the Company, including each Patent identified in Annex 3.
"Patents" shall mean, collectively, (a) all patents and patent
applications, (b) all reissues, divisions, continuations, renewals, extensions
and continuations-in-part of all patents or patent applications and (c) all
rights, now existing or hereafter coming into existence, (i) to all income,
royalties, damages, and other payments (including in respect of all past,
present and
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future infringements) now or hereafter due or payable under or with respect to
any of the foregoing, (ii) to sue for all past, present and future infringements
with respect to any of the foregoing and (iii) otherwise accruing under or
pertaining to any of the foregoing throughout the world, including all
inventions and improvements described or discussed in all such patents and
patent applications.
"Pledged Stock" shall have the meaning assigned to that term in
Section 2.01(a).
"Secured Obligations" shall mean (a) the payment and performance of
the Note by the Company and (b) any and all obligations of the Company for the
performance of its agreements, covenants and undertakings under or in respect of
the Note and this Agreement.
"Stock Collateral" shall have the meaning assigned to that term in
Section 2.01(a).
"Senior Indebtedness" means (i) the principal of, premium, if any,
and interest on, and any other indebtedness of the Company to its primary senior
bank lender(s), plus interest and customary expenses with respect to such Senior
Indebtedness and (ii) refinancings, deferrals, refundings, replacements,
extensions and renewals of or amendments, modifications or supplements to such
Senior Indebtedness.
"Trademark Collateral" shall mean all Trademarks, whether now owned
or hereafter acquired by the Company, including each Trademark identified in
Annex 4. Notwithstanding the foregoing, the Trademark Collateral shall not
include any Trademark which would be rendered invalid, abandoned, void or
unenforceable by reason of its being included as part of the Trademark
Collateral nor shall the Company be required to take any action hereunder that
would render any Trademark invalid, abandoned, void or unenforceable by reason
of such action.
"Trademarks" shall mean, collectively, (a) all trade names,
trademarks and service marks, logos, trademark and service mark registrations
and applications for trademark and service mark registrations, (b) all renewals
and extensions of any of the foregoing and (c) all rights, now existing or
hereafter coming into existence, (i) to all income, royalties, damages and other
payments (including in respect of all past, present and future infringements)
now or hereafter due or payable under or with respect to any of the foregoing,
(ii) to sue for all past, present and future infringements with respect to any
of the foregoing and (iii) otherwise accruing under or pertaining to any of the
foregoing throughout the world, together, in each case, with the product lines
and goodwill of the business connected with the use of, or otherwise symbolized
by, each such trade name, trademark and service mark.
"Uniform Commercial Code" shall mean the Uniform Commercial Code as
in effect in the State of California from time to time or, by reason of
mandatory application, any other applicable jurisdiction.
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Section 1.02 Interpretation. In this Agreement, unless otherwise
indicated: the singular includes the plural and plural the singular; words
importing either gender include the other gender; references to statutes or
regulations are to be construed as including all statutory or regulatory
provisions consolidating, amending or replacing the statute or regulation
referred to; references to "writing" include printing, typing, lithography and
other means of reproducing words in a tangible visible form; the words
"including," "includes" and "include" shall be deemed to be followed by the
words "without limitation;" references to articles, sections (or subdivisions of
sections), exhibits, annexes or schedules are to this Agreement; references to
agreements and other contractual instruments shall be deemed to include all
subsequent amendments, extensions and other modifications to such instruments
(without, however, limiting any prohibition on any such amendments, extensions
and other modifications by the terms of any Basic Document); references to
persons include their respective permitted successors and assigns and, in the
case of governmental persons, persons succeeding to their respective functions
and capacities and references to the Company shall include Admor and Limited,
jointly and severally.
Section 2. Collateral.
2.01 Grant. As collateral security for the prompt payment in full of
the Note when due (whether at stated maturity, by acceleration or otherwise) and
performance of the Secured Obligations, the Company hereby pledges and grants to
NetGateway a security interest in all of the Company's right, title and interest
in and to the following property, whether now owned or hereafter acquired by the
Company and whether now existing or hereafter coming into existence
(collectively, the "Collateral"):
(a) (i) all of the shares of capital stock of all subsidiaries of
the Company, including the Issuers represented by the respective certificates
identified in Annex 1 and all other shares of capital stock of whatever class of
the Issuers, now owned or hereafter acquired by the Company, together with in
each case the certificates representing the same (collectively, the "Pledged
Stock");
(ii) all shares, securities, moneys or property representing a
dividend on, or a distribution or return of capital in respect of, any of the
Pledged Stock, resulting from a split-up, revision, reclassification or other
like change of any of the Pledged Stock or otherwise received in exchange for
any of the Pledged Stock and all rights issued to the holders of, or otherwise
in respect of, any of the Pledged Stock; and
(iii) without affecting the obligations of the Company under
any provision prohibiting such action under any Basic Document, in the event of
any consolidation or merger in which any Issuer is not the surviving
corporation, all shares of each class of the capital stock of the successor
corporation (unless such successor corporation is the Company itself) formed by
or resulting from such consolidation or merger (collectively, and together with
the property described in clauses (i) and (ii) above, the "Stock Collateral");
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(b) all accounts and general intangibles (each as defined in the
Uniform Commercial Code) of the Company constituting a right to the payment of
money, whether or not earned by performance, including all moneys due and to
become due to the Company in repayment of any loans or advances, in payment for
goods (including Inventory and Equipment) sold or leased or for services
rendered, in payment of tax refunds and in payment of any guarantee of any of
the foregoing (collectively, the "Accounts");
(c) all instruments, chattel paper or letters of credit (each as
defined in the Uniform Commercial Code) of the Company evidencing, representing,
arising from or existing in respect of, relating to, securing or otherwise
supporting the payment of, any of the Accounts (collectively, the
"Instruments");
(d) all inventory (as defined in the Uniform Commercial Code) and
all other goods of the Company that are held by the Company for sale, lease or
furnishing under a contract of service (including to its subsidiaries or
affiliates), that are so leased or furnished or that constitute raw materials,
work in process or material used or consumed in its business, including all
spare parts and related supplies, all goods obtained by the Company in exchange
for any such goods, all products made or processed from any such goods and all
substances, if any, commingled with or added to any such goods (collectively,
the "Inventory");
(e) all equipment (as defined in the Uniform Commercial Code) and
all other goods of the Company that are used or bought for use primarily in its
business, including all spare parts and related supplies, all goods obtained by
the Company in exchange for any such goods, all substances, if any, commingled
with or added to such goods and all upgrades and other improvements to such
goods, in each case to the extent not constituting Inventory (collectively, the
"Equipment");
(f) all documents of title (as defined in the Uniform Commercial
Code) or other receipts of the Company covering, evidencing or representing
Inventory or Equipment (collectively, the "Documents");
(g) all contracts and other agreements of the Company relating to
the sale or other disposition of all or any part of the Inventory, Equipment or
Documents and all rights, warranties, claims and benefits of the Company against
any person arising out of, relating to or in connection with all or any part of
the Inventory, Equipment or Documents of the Company, including any such rights,
warranties, claims or benefits against any person storing or transporting any
such Inventory or Equipment or issuing any such Documents;
(h) all other accounts or general intangibles of the Company not
constituting Accounts, including, to the extent related to all or any part of
the other Collateral, all books, correspondence, credit files, records,
invoices, tapes, cards, computer runs and other papers and documents in the
possession or under the control of the Company or any computer bureau or service
company from time to time acting for the Company;
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(i) all other tangible and intangible property of the Company,
including all Intellectual Property; and
(j) all proceeds and products in whatever form of all or any part of
the other Collateral, including all proceeds of insurance and all condemnation
awards and all other compensation for any casualty with respect to all or any
part of the other Collateral (together with all rights to recover and proceed
with respect to the same), and all accessories to, substitutions for and
replacements of all or any part of the other Collateral.
2.02 Intellectual Property. For the purpose of enabling NetGateway
to exercise its rights, remedies, powers and privileges under Section 6 at such
time or times as NetGateway shall be lawfully entitled to exercise such rights,
remedies, powers and privileges, and for no other purpose, the Company hereby
grants to NetGateway, to the extent assignable, an irrevocable, nonexclusive
license (exercisable without payment of royalty or other compensation to the
Company) to use, assign, license or sublicense any of the Intellectual Property
of the Company, together with reasonable access to all media in which any of the
licensed items may be recorded or stored and to all computer programs used for
the compilation or printout of such items.
2.03 Perfection. Concurrently with the execution and delivery of
this Agreement, the Company shall (i) file such financing statements and other
documents in such offices as shall be necessary or as NetGateway may request to
perfect and establish the priority of the Liens granted by this Agreement, (ii)
deliver and pledge to NetGateway any and all Instruments, endorsed or
accompanied by such instruments of assignment and transfer in such form and
substance as NetGateway may request, (iii) deliver to NetGateway all
certificates identified in Annex 1, accompanied by undated stock powers duly
executed in blank and (iv) take all such other actions as shall be necessary or
as NetGateway may request to perfect and establish the priority of the Liens
granted by this Agreement.
2.04 Preservation and Protection of Security Interests. The Company
shall:
(a) upon the acquisition after the Closing Date by the Company of
any Stock Collateral, promptly either (x) transfer and deliver to NetGateway all
such Stock Collateral (together with the certificates representing such Stock
Collateral securities duly endorsed in blank or accompanied by undated stock
powers duly executed in blank) or (y) take such other action as NetGateway shall
deem necessary or appropriate to perfect, and establish the priority of, the
Liens granted by this Agreement in such Stock Collateral;
(b) upon the acquisition after the Closing Date by the Company of
any Instrument, promptly deliver and pledge to NetGateway all such Instruments,
endorsed or accompanied by such instruments of assignment and transfer in such
form and substance as NetGateway may request;
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(c) upon the acquisition after the Closing Date by the Company of
any Equipment covered by a certificate of title or ownership, promptly cause
NetGateway to be listed as the lienholder on such certificate of title and
within 30 days of the acquisition of such Equipment deliver evidence of the same
to NetGateway;
(d) upon the Company's acquiring, or otherwise becoming entitled to
the benefits of, any Copyright (or copyrightable material), Patent (or
patentable invention), Trademark (or associated goodwill) or other Intellectual
Property or upon or prior to the Company's filing, either directly or through
any agent, licensee or other designee, of any application with any governmental
person with respect to any Copyright, Patent, Trademark, or other Intellectual
Property, in each case after the Closing Date, to the extent the Company has the
right to do so, execute and deliver such contracts, agreements and other
instruments as NetGateway may request to evidence, validate, perfect and
establish the priority of the Liens granted by this Agreement in such and any
related Intellectual Property and, if requested by NetGateway, amend Annex 2, 3
or 4 (as the case may be) to reflect the inclusion of any such Intellectual
Property as part of the Collateral (it being understood that the failure to
amend any such Annex shall not affect the Liens granted by this Agreement on any
such Intellectual Property); and
(e) give, execute, deliver, file or record any and all financing
statements, notices, contracts, agreements or other instruments, obtain any and
all approvals of governmental persons and take any and all steps that may be
necessary or as NetGateway may request to create, perfect, establish the
priority of, or to preserve the validity, perfection or priority of, the Liens
granted by this Agreement or to enable NetGateway to exercise and enforce its
rights, remedies, powers and privileges under this Agreement with respect to
such Liens, including causing any or all of the Stock Collateral to be
transferred of record into the name of NetGateway or its nominee (and NetGateway
agrees that if any Stock Collateral is transferred into its name or the name of
its nominee, NetGateway will thereafter promptly give to the Company copies of
any notices and communications received by it with respect to the Stock
Collateral pledged by the Company), provided that notices to account debtors in
respect of any Accounts or Instruments shall be subject to the provisions of
Section 3.01.
2.05 Attorney-in-Fact.
(a) Subject to the rights of the Company under Sections 2.06, 2.07,
2.08 and 2.09, NetGateway is hereby appointed the attorney-in-fact of the
Company, effective as of the Closing Date and terminating upon termination of
this Agreement for the purpose of carrying out the provisions of this Agreement
and taking any action and executing any instruments which NetGateway may deem
necessary or advisable to accomplish the purposes of this Agreement, to preserve
the validity, perfection and priority of the Liens granted by this Agreement
and, following any Event of Default, to exercise its rights, remedies, powers
and privileges under this Agreement. This appointment as attorney-in-fact is
irrevocable and coupled with an interest. Without limiting the generality of the
foregoing, NetGateway shall be entitled under this
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Agreement upon the occurrence and continuation of any Event of Default (i) to
ask, demand, collect, sue for, recover, receive and give receipt and discharge
for amounts due and to become due under and in respect of all or any part of the
Collateral; (ii) to receive, endorse and collect any Instruments or other
drafts, instruments, documents and chattel paper in connection with clause (i)
above (including any draft or check representing the proceeds of insurance or
the return of unearned premiums); (iii) to file any claims or take any action or
proceeding that NetGateway may reasonably deem necessary or advisable for the
collection of all or any part of the Collateral, including the collection of any
compensation due and to become due under any contract or agreement with respect
to all or any part of the Collateral; and (iv) to execute, in connection with
any sale or disposition of the collateral under Section 6, any endorsements,
assignments, bills of sale or other instruments of conveyance or transfer with
respect to all or any part of the Collateral.
(b) Without limiting the rights and powers of NetGateway under
Section 2.05(a), the Company hereby appoints NetGateway as its attorney-in-fact,
effective as of the Closing Date and terminating upon the termination of this
Agreement, for the purpose of (i) filing such applications with such state
agencies and (ii) executing such other documents and instruments on behalf of,
and taking such other action in the name of, the Company as NetGateway may
reasonably deem necessary or advisable to accomplish the purposes of this
Agreement. This appointment as attorney-in-fact is irrevocable and coupled with
an interest.
2.06 Special Provisions Relating to Stock Collateral.
(a) So long as no Event of Default shall have occurred and be
continuing, the Company shall have the right to exercise all voting, consensual
and other powers of ownership pertaining to the Stock Collateral for all
purposes not inconsistent with the terms of any Basic Document, provided that
the Company agrees that it will not vote the Stock Collateral in any manner that
is inconsistent with the terms of any Basic Document; and NetGateway shall, at
the Company expense, execute and deliver to the Company or cause to be executed
and delivered to the Company all such proxies, powers of attorney, dividend and
other orders and other instruments, without recourse, as the Company may
reasonably request for the purpose of enabling the Company to exercise the
rights and powers which it is entitled to exercise pursuant to this Section
2.06(a).
(b) So long as no Event of Default shall have occurred and be
continuing, the Company's shall be entitled to receive and retain any dividends
on the Stock Collateral paid in cash out of earned surplus.
(c) If any Event of Default shall have occurred and be continuing,
and whether or not NetGateway exercises any available right to declare any
Secured Obligation due and payable or seeks or pursues any other right, remedy,
power or privilege available to it under applicable law, this Agreement or any
other Basic Document, all dividends and other distributions on the Stock
Collateral shall be paid directly to NetGateway as part of the Stock
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Collateral, subject to the terms of this Agreement, and, if NetGateway shall so
request, the Company agrees to execute and deliver to NetGateway appropriate
additional dividend, distribution and other orders and instruments to that end,
provided that if such Event of Default is cured, any such dividend or
distribution paid to NetGateway prior to such cure shall, upon request of the
Company (except to the extent applied to the Secured Obligations), be returned
by NetGateway to the Company.
(d) Notwithstanding anything to the contrary contained in this
Agreement, the security interest in the Stock Collateral shall be subordinate to
the security interest granted in favor of the holders of Senior Indebtedness and
the provisions hereof relating to Stock Collateral shall be deemed to be
satisfied through such holders as collateral agent for NetGateway (subordinate
to the rights of the holders of Senior Indebtedness).
2.07 Use of Intellectual Property. So long as no Event of Default
shall have occurred and be continuing, the Company will be permitted to exploit,
use, enjoy, protect, license, sublicense, assign, sell, dispose of or take any
other actions with respect to the Intellectual Property in the ordinary course
of the business of the Company. In furtherance of the foregoing, so long as no
Event of Default shall have occurred and be continuing, if necessary NetGateway
shall from time to time, upon the request of the Company, execute and deliver
any instruments, certificates or other documents, in the form so requested, to
allow the Company to take any action permitted above (including relinquishment
of the license provided pursuant to Section 2.02 as to any specific Intellectual
Property). The exercise of rights, remedies, powers and privileges under Section
6 by NetGateway shall not terminate the rights of the holders of any licenses or
sublicenses theretofore granted by the Company in accordance with the first
sentence of this Section 2.07.
2.08 Instruments. So long as no Event of Default shall have occurred
and be continuing, the Company may retain for collection in the ordinary course
of business any Instruments obtained by it in the ordinary course of business,
and NetGateway shall, promptly upon the request, and at the expense of, the
Company, make appropriate arrangements for making any Instruments pledged by the
Company available to the Company for purposes of presentation, collection or
renewal. Any such arrangement shall be effected, to the extent deemed
appropriate by NetGateway, against trust receipt or like document.
2.09 Use of Collateral. So long as no Event of Default shall have
occurred and be continuing, the Company shall, in addition to its rights under
Sections 2.06, 2.07 and 2.08 in respect of the Collateral contemplated in those
sections, be entitled to use and possess the other Collateral and to exercise
its rights, title and interest in all contracts, agreements, licenses and
approvals of governmental persons, subject to the rights, remedies, powers and
privileges of NetGateway under Sections 3 and 6 and to such use, possession or
exercise not otherwise constituting an Event of Default.
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2.10 Rights and Obligations.
(a) The Company shall remain liable to perform its duties and
obligations under the contracts and agreements included in the Collateral in
accordance with their respective terms to the same extent as if this Agreement
had not been executed and delivered. The exercise by NetGateway of any right,
remedy, power or privilege in respect of this Agreement shall not release the
Company from any of its duties and obligations under such contracts and
agreements. NetGateway shall have no duty, obligation or liability under such
contracts and agreements or in respect to any approval of any governmental
persons included in the Collateral by reason of this Agreement or any other
Basic Document, nor shall NetGateway be obligated to perform any of the duties
or obligations of the Company under any such contract or agreement or any such
approval of any governmental persons or to take any action to collect or enforce
any claim (for payment) under any such contract or agreement or approval of any
governmental persons.
(b) No Lien granted by this Agreement in the Company's right, title
and interest in any contract, agreement or approval of any governmental person
shall be deemed to be a consent by NetGateway to any such contract, agreement or
approval of any governmental person.
(c) No reference in this Agreement to proceeds or to the sale or
other disposition of Collateral shall authorize the Company to sell or otherwise
dispose of any Collateral except to the extent otherwise expressly permitted by
the terms of any Basic Document.
(d) NetGateway shall not be required to take steps necessary to
preserve any rights against prior parties to any part of the Collateral.
2.11 Termination. When all Secured Obligations shall have been paid
or performed in full, this Agreement shall terminate, and NetGateway shall
forthwith cause to be assigned, transferred and delivered, against receipt but
without any recourse, warranty or representation whatsoever, any remaining
Collateral and money received in respect of the Collateral, to or on the order
of the Company and to be released, canceled and granted back all licenses and
rights referred to in Section 2.02. NetGateway shall also execute and deliver to
the Company upon such termination such Uniform Commercial Code termination
statements, and such other documentation as shall be reasonably requested by the
Company to effect the termination and release of the Liens granted by this
Agreement on the Collateral.
2.12 Subordination. The Lien granted hereby in the Collateral in
favor of NetGateway and the obligations relating to the Collateral are
subordinate to any Lien granted to holders of the Senior Indebtedness. Such
subordination is for the benefit of the holders of Senior Indebtedness.
NetGateway shall execute and deliver to the holders of the Senior Indebtedness
such inter-creditor and subordination agreements as the holders of the Senior
Indebtedness shall reasonably request to evidence such subordination.
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Section 3. Certain Proceeds.
3.01 Notice to Account Debtors. If any Event of Default shall have
occurred and be continuing, the Company shall, upon request of NetGateway,
promptly notify (and the Company hereby authorizes NetGateway so to notify) each
account debtor in respect of any Accounts or Instruments that such Collateral
has been assigned to NetGateway under this Agreement and that any payments due
or to become due in respect of such Collateral are to be made directly to
NetGateway.
3.02 Proceeds Held in Trust. If any Event of Default shall have
occurred and be continuing, the Company agrees that if the proceeds of any
Collateral (including payments made in respect of Accounts and Instruments)
shall be received by it, all such proceeds shall be held in trust by the Company
for and as the property of NetGateway and shall not be commingled with any other
funds or property of the Company.
Section 4. Representations and Warranties. As of the Closing Date,
the Company represents and warrants to NetGateway as follows:
4.01 Title. The Company is the sole beneficial owner of the
Collateral in which it purports to grant a Lien pursuant to this Agreement, and
such Collateral is free and clear of all Liens and, with respect to the Stock
Collateral, of any right in favor of any other person, subject in each case to
Liens in favor of the holders of Senior Indebtedness. Subject to Section 2.03
above, the Liens granted by this Agreement in favor of NetGateway have attached
and constitute a perfected security interest in all of such Collateral (other
than Intellectual Property registered or otherwise located outside of the United
States of America) prior to all other Liens, other than Liens in favor of the
holders of Senior Indebtedness.
4.02 Pledged Stock.
(a) The Pledged Stock evidenced by the certificates identified in
Annex 1 is duly authorized, validly existing, fully paid and nonassessable, and
none of such Pledged Stock is subject to any contractual restriction, or any
restriction under the charter or by-laws of the respective Issuer of such
Pledged Stock, upon the transfer of such Pledged Stock (except for any such
restriction contained in any Basic Document).
(b) The Pledged Stock evidenced by the certificates identified in
Annex 1 constitutes all of the issued and outstanding shares of capital stock of
any class of the Issuers beneficially owned by the Company on the Closing Date
(whether or not registered in the name of the Company), and Annex 1 correctly
identifies, as at the Closing Date, the respective Issuers of such Pledged
Stock, the respective class and par value of the shares comprising such Pledged
Stock and the respective number (and registered owners) of the shares evidenced
by each such certificate.
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4.03 Intellectual Property.
(a) Annexes 2, 3 and 4 set forth completely and correctly all
registered Copyrights and applications therefore, Patents and Trademarks owned
by the Company on the Closing Date; except pursuant to licenses and other
agreements entered into by the Company in the ordinary course of business and
listed in Annex 5, the Company owns and possesses the right to use, and has done
nothing to authorize or enable any other person to use, any Copyright, Patent or
Trademark listed in Annex 2, 3 or 4; all registrations listed in Annexes 2, 3
and 4 are in full force and effect; and, except as may be set forth in Annex 5,
the Company owns and possesses the right to use all Copyrights, Patents and
Trademarks listed in Annexes 2, 3 and 4;
(b) Annex 5 sets forth completely and correctly all material
licenses and other agreements included in the Intellectual Property on the
Closing Date;
(c) To the Company's knowledge, (i) except as set forth in Annex 5,
there is no violation by others of any right of the Company with respect to any
Copyright, Patent or Trademark listed in Annex 2, 3 or 4 and (ii) the Company is
not infringing in any respect upon any Copyright, Patent or Trademark of any
other person; and no proceedings have been instituted, are pending against the
Company or, to the Company's knowledge, have been threatened against, and no
claim has been received by, the Company, alleging any such violation, except as
may be set forth in Annex 5; and
(d) The Company does not own any Trademarks registered in the United
States of America to which the last sentence of the definition of Trademark
Collateral applies.
4.04 Limited Waivers, Etc. Limited acknowledges that the obligations
undertaken by it under this Agreement involve the guarantee of obligations of
persons other than Limited and that such obligations of Limited are absolute,
irrevocable and unconditional under any and all circumstances. In full
recognition and in furtherance of the foregoing, Limited agrees that:
(a) Without affecting the enforceability or effectiveness of this
Agreement in accordance with its terms and without affecting, limiting,
reducing, discharging or terminating the liability of Limited, or the rights,
remedies, powers and privileges of NetGateway under this Agreement, NetGateway
may, at any time and from time to time and without notice or demand of any kind
or nature whatsoever:
(i) amend, supplement, modify, extend, renew, waive,
accelerate or otherwise change the time for payment or performance of, or the
terms of, all or any part of the Secured Obligations (including any increase or
decrease in the rate or rates of interest on all or any part of the Secured
Obligations);
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(ii) amend, supplement, modify, extend, renew, waive or
otherwise change, or enter into or give, any Basic Document or any agreement,
security document, guarantee, approval, consent or other instrument with respect
to all or any part of the Secured Obligations, any Basic Document or any such
other instrument or any term or provision of the foregoing;
(iii) accept or enter into new or additional agreements,
security documents, guarantees (including letters of credit) or other
instruments in addition to, in exchange for or relative to any Basic Document,
all or any part of the Secured Obligations or any collateral now or in the
future serving as security for the Secured Obligations;
(iv) accept or receive partial payments or performance on the
Secured Obligations (whether as a result of the exercise of any right, remedy,
power or privilege or otherwise);
(v) accept, receive and hold any additional collateral for all
or any part of the Secured Obligations;
(vi) release, reconvey, terminate, waive, abandon, allow to
lapse or expire, fail to perfect, subordinate, exchange, substitute, transfer,
foreclose upon or enforce any collateral, security documents or guarantees
(including letters of credit) for or relative to all or any part of the Secured
Obligations;
(vii) apply any collateral or the proceeds of any collateral
or guarantee (including any letter of credit) to all or any part of the Secured
Obligations in such manner and extent as NetGateway may in its discretion
determine;
(viii) release any person from any personal liability with
respect to all or any part of the Secured Obligations;
(ix) settle, compromise, release, liquidate or enforce upon
such terms and in such manner as NetGateway may determine or as applicable law
may dictate all or any part of the Secured Obligations or any collateral on or
guarantee of (including any letter of credit issued with respect to) all or any
part of the Secured Obligations;
(x) consent to the merger or consolidation of, the sale of
substantial assets by, or other restructuring or termination of the corporate
existence of the Company or any other person;
(xi) proceed against Admor, Limited or any other guarantor of
(including any issuer of any letter of credit issued with respect to) all or any
part of the Secured Obligations or any collateral provided by any person and
exercise the rights, remedies, powers and privileges of NetGateway under the
Basic Documents or otherwise in such order and such
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manner as NetGateway may, in its discretion, determine, without any necessity to
proceed upon or against or exhaust any collateral, right, remedy, power or
privilege before proceeding to call upon or otherwise enforce this Agreement as
to Limited;
(xii) foreclose upon any deed of trust, mortgage or other
instrument creating or granting liens on any interest in real property by
judicial or nonjudicial sale or by deed in lieu of foreclosure, bid any amount
or make no bid in any foreclosure sale or make any other election of remedies
with respect to such liens or exercise any right of set-off;
(xiii) obtain the appointment of a receiver with respect to
any collateral for all or any part of the Secured Obligations and apply the
proceeds of such receivership as NetGateway may in its discretion determine (it
being agreed that nothing in this clause (xiii) shall be deemed to make
NetGateway a party in possession in contemplation of law, except at its option);
(xiv) enter into such other transactions or business dealings
with the Company, any subsidiary or affiliate of the Company or any other
guarantor of all or any part of the Secured Obligations as NetGateway may
desire; and
(xv) do all or any combination of the actions set forth in
this Section 4.04(a).
(b) The enforceability and effectiveness of this Agreement and the
liability of Limited, and the rights, remedies, powers and privileges of
NetGateway, under this Agreement shall not be affected, limited, reduced,
discharged or terminated, and Limited hereby expressly waives to the fullest
extent permitted by law any defense now or in the future arising, by reason of:
(i) the illegality, invalidity or unenforceability of all or
any part of the Secured Obligations, any Basic Document or any agreement,
security document, guarantee or other instrument relative to all or any part of
the Secured Obligations;
(ii) any disability or other defense with respect to all of
any part of the Secured Obligations of the Company or any other guarantor of all
or any part of the Secured Obligations (including any issuer of any letters of
credit), including the effect of any statute of limitations that may bar the
enforcement of all or any part of the Secured Obligations or the obligations of
any such other guarantor;
(iii) the illegality, invalidity or unenforceability of any
security or guarantee (including any letter of credit) for all or any part of
the Secured Obligations or the lack of perfection or continuing perfection or
failure of the priority of any lien on any collateral for all or any part of the
Secured Obligations;
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(iv) the cessation, for any cause whatsoever, of the liability
of the Company or any other guarantor of all or any part of the Secured
Obligations (other than by reason of the full payment and performance of all
Secured Obligations);
(v) any failure of NetGateway to marshal assets in favor of
the Company or any other person, to exhaust any collateral for all or any part
of the Secured Obligations, to pursue or exhaust any right, remedy, power or
privilege it may have against the Company, any other guarantor of all or any
part of the Secured Obligations (including any issuer of any letter of credit)
or any other person or to take any action whatsoever to mitigate or reduce
Limited's liability under this Agreement, NetGateway being under no obligation
to take any such action notwithstanding the fact that all or any part of the
Secured Obligations may be due and payable and that the Company may be in
default of its obligations under any Basic Document;
(vi) any failure of NetGateway to give notice of sale or other
disposition of any collateral (including any notice of any judicial or
nonjudicial foreclosure or sale of any interest in real property serving as
collateral for all or any part of the Secured Obligations) for all or any part
of the Secured Obligations to the Company, Limited or any other person or any
defect in, or any failure by Limited or any other person to receive, any notice
that may be given in connection with any sale or disposition of any collateral;
(vii) any failure of NetGateway to comply with applicable laws
in connection with the sale or other disposition of any collateral for all or
any part of the Secured Obligations;
(viii) any judicial or nonjudicial foreclosure or sale of, or
other election of remedies with respect to, any interest in real property or
other collateral serving as security for all or any part of the Secured
Obligations, even though such foreclosure, sale or election of remedies may
impair the subrogation rights of Limited or may preclude Limited from obtaining
reimbursement, contribution, indemnification or other recovery from the Company,
any other guarantor or any other person and even though the Company may not, as
a result of such foreclosure, sale or election of remedies, be liable for any
deficiency;
(ix) any benefits the Company or any other guarantor may
otherwise derive from Section 580a, 580b, 580d or 726 of the California Code of
Civil Procedure or any comparable provisions of the laws of any other
jurisdiction;
(x) any act or omission of NetGateway or any other person that
directly or indirectly results in or aids the discharge or release of the
Company of all or any part of the Secured Obligations or any security or
guarantee (including any letter of credit) for all or any part of the Secured
Obligations by operation of law or otherwise;
(xi) any law which provides that the obligation of a surety or
guarantor must neither be larger in amount nor in other respects more burdensome
than that of the
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principal or which reduces a surety's or guarantor's obligation in proportion to
the principal obligation;
(xii) the possibility that the obligations of the Company to
NetGateway may at any time and from time to time exceed the aggregate liability
of the Limited under this Agreement;
(xiii) any counterclaim, set-off or other claim which the
Company has or alleges to have with respect to all or any part of the Secured
Obligations;
(xiv) any failure of NetGateway to file or enforce a claim in
any bankruptcy or other proceeding with respect to any person;
(xv) the election by NetGateway, in any bankruptcy proceeding
of any person, of the application or nonapplication of Section 1111(b)(2) of the
Bankruptcy Code;
(xvi) any extension of credit or the grant of any Lien under
Section 364 of the Bankruptcy Code;
(xvii) any use of cash collateral under Section 363 of the
Bankruptcy Code;
(xviii) any agreement or stipulation with respect to the
provision of adequate protection in any bankruptcy proceeding of any person;
(xix) the avoidance of any Lien in favor of NetGateway for any
reason;
(xx) any bankruptcy, insolvency, reorganization, arrangement,
readjustment of debt, liquidation or dissolution proceeding commenced by or
against any person, including any discharge of, or bar or stay against
collecting, all or any part of the Secured Obligations (or any interest on all
or any part of the Secured Obligations) in or as a result of any such
proceeding;
(xxi) any action taken by NetGateway that is authorized by
this Section 4.04 or otherwise in this Agreement or by any other provision of
any Basic Document or any omission to take any such action; or
(xxii) any other circumstance whatsoever that might otherwise
constitute a legal or equitable discharge or defense of a surety or guarantor,
including by reason of Sections 2809, 2810, 2819, 2839, 2845, 2850, 2899, 3275
and 3433 of the California Civil Code, and any future judicial decisions or
legislation or of any comparable provisions of the laws of any other
jurisdiction.
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(c) Limited expressly waives, for the benefit of NetGateway, all
set-offs and counterclaims and all presentments, demands for payment or
performance, notices of nonpayment or nonperformance, protests, notices of
protest, notices of dishonor and all other notices or demands of any kind or
nature whatsoever with respect to the Secured Obligations, and all notices of
acceptance of this Agreement or of the existence, creation, incurring or
assumption of new or additional Secured Obligations. Limited further expressly
waives the benefit of any and all statutes of limitation and any and all laws
providing for the exemption of property from execution or for valuation and
appraisal upon foreclosure, to the fullest extent permitted by applicable law.
(d) Limited represents and warrants to NetGateway that it has
established adequate means of obtaining financial and other information
pertaining to the business, operations and condition (financial and otherwise)
of the Company and its properties on a continuing basis and that Limited is now
and will in the future remain fully familiar with the business, operations and
condition (financial and otherwise) of the Company and its properties. Limited
further represents and warrants that it has reviewed and approved each of the
Basic Documents and is fully familiar with the transaction contemplated by the
Basic Documents and that it will in the future remain fully familiar with such
transaction and with any new Basic Documents and the transactions contemplated
by such Basic Documents. Limited hereby expressly waives and relinquishes any
duty on the part of NetGateway (should any such duty exist) to disclose to
Limited any matter of fact or other information related to the business,
operations or condition (financial or otherwise) of the Company or its
properties or to any Basic Document or the transactions undertaken pursuant to,
or contemplated by, any such Basic Document, whether now or in the future known
by NetGateway.
(e) Limited intends that its rights and obligations shall be those
expressly set forth in this Agreement and that its obligations shall not be
affected, limited, reduced, discharged or terminated by reason of any principles
or provisions of law which conflict with the terms of this Agreement.
(f) Limited warrants and agrees that each of the waivers and
consents set forth in this Agreement is made voluntarily and unconditionally
after consultation with outside legal counsel and with full knowledge of its
significance and consequences, with the understanding that events giving rise to
any defense or right waived may diminish, destroy or otherwise adversely affect
rights which Limited otherwise may have against the Company, NetGateway or any
other person or against any Collateral. If, notwithstanding the intent of the
parties that the terms of this Agreement shall control in any and all
circumstances, any such waivers or consents are determined to be unenforceable
under applicable law, such waivers and consents shall be effective to the
fullest extent permitted by law.
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(g) Limited hereby waives, and agrees not to exercise, all rights,
remedies, powers or privileges, such as rights of subrogation, contribution,
reimbursement or indemnity or related remedies, powers or privileges, arising
against the Company or any other guarantor of all or any part of the Secured
Obligations or any collateral for all or any part of the Secured Obligations
(whether by contract or operation of law, including under the Bankruptcy Code)
by reason of any payment or other performance by Limited pursuant to the
provisions of this Agreement and agrees for the benefit of each of the Company's
creditors (including NetGateway) that any such payment by it shall constitute a
contribution of capital by Limited to the Company. Limited further agrees that,
to the extent that the waiver of, or agreement not to exercise, any such rights,
remedies, powers or privileges is found by a court of competent jurisdiction to
be void or voidable for any reason, any such rights, remedies, powers or
privileges Limited may have shall be junior and subordinate to the rights,
remedies, powers and privileges of NetGateway against Limited under this
Agreement.
(h) The obligations of Limited under this Agreement shall be
automatically reinstated if and to the extent that for any reason any payment by
or on behalf of the Company or any other person or any other application of
funds (including the proceeds of any Collateral for all or any part of the
Secured Obligations) in respect of all or any part of the Secured Obligations is
rescinded or must be otherwise restored by any holder of such Secured
Obligations, whether as a result of any proceedings in bankruptcy,
reorganization or otherwise and Limited agrees that it will indemnify NetGateway
on demand for all reasonable costs and expenses (including fees and expenses of
counsel) incurred by NetGateway in connection with such rescission or
restoration.
(i) NetGateway may bring and prosecute a separate action or actions
against Limited whether or not the Company, any other guarantor or any other
person is joined in any such action or a separate action or actions are brought
against the Company, any other guarantor, any other person, or any Collateral
for all or any part of the Secured Obligations. The obligations of Limited
under, and the effectiveness of, this Agreement are not conditioned upon the
existence or continuation of any other guarantee (including any letter of
credit) of all or any part of the Secured Obligations.
Section 5. Covenants.
5.01 Books and Records. The Company shall:
(a) keep full and accurate books and records relating to the
Collateral and stamp or otherwise mark such books and records in such manner as
NetGateway may reasonably require in order to reflect the Liens granted by this
Agreement;
(b) furnish to NetGateway from time to time (but, unless any Event
of Default shall have occurred and be continuing, no more frequently than
quarterly) statements and
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schedules further identifying and describing the Copyright Collateral, the
Patent Collateral and the Trademark Collateral and such other reports in
connection with the Copyright Collateral, the Patent Collateral and the
Trademark Collateral, as NetGateway may reasonably request, all in reasonable
detail;
(c) within 5 business days of filing, either directly or through an
agent, licensee or other designee, any application for any Copyright, Patent or
Trademark, furnish to NetGateway prompt notice of such proposed filing; and
(d) permit representatives of NetGateway, upon reasonable notice, at
any time during normal business hours to inspect and make abstracts from its
books and records pertaining to the Collateral, permit representatives of
NetGateway to be present at the Company's place of business to receive copies of
all communications and remittances relating to the Collateral and forward copies
of any notices or communications received by the Company with respect to the
Collateral, all in such manner as NetGateway may reasonably request.
5.02 Removals, Etc. Without at least 30 days' prior written notice
to NetGateway, the Company shall not (i) maintain any of its books and records
with respect to the Collateral at any office or maintain its principal place of
business at any place, or permit any Inventory or Equipment to be located
anywhere, other than at the address initially indicated for notices to it under
Section 7 or at one of the locations identified in Annex 6 or in transit from
one of such locations to another or (ii) change its corporate name, or the name
under which it does business, from the name shown on the signature pages to this
Agreement.
5.03 Sales and Other Liens. Except for sales of inventory in the
ordinary course of business and the disposal of obsolete property on
commercially reasonable terms, the Company shall not knowingly dispose of any
Collateral, create, incur, assume or suffer to exist any Lien upon any
Collateral or file or suffer to be on file or authorize to be filed, in any
jurisdiction, any financing statement or like instrument with respect to all or
any part of the Collateral in which NetGateway is not named as the sole secured
party for its own benefit.
5.04 Stock Collateral. The Company will cause the Stock Collateral
to constitute at all times 100% of the total number of shares of each class of
capital stock of each Issuer then outstanding. The Company shall cause all such
shares to be duly authorized, validly issued, fully paid and nonassessable and
to be free of any contractual restriction or any restriction under the charter
or bylaws of the respective Issuer of such Stock Collateral, upon the transfer
of such Stock Collateral (except for any such restriction contained in any Basic
Document).
5.05 Intellectual Property.
(a) The Company (either itself or through licensees) will, for each
Trademark, to the extent consistent with past practice and good business
judgment, (i) continue to use such Trademark on each and every trademark class
of goods applicable to its current line as reflected
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in its current catalogs, brochures and price lists in order to maintain such
Trademark in full force and effect free from any claim of abandonment for
nonuse, (ii) maintain as in the past the quality of products and services
offered under such Trademark, (iii) employ such Trademark with the appropriate
notice of registration and (iv) not (and not permit any licensee or sublicensee
to) do any act or knowingly omit to do any act whereby any Trademark material to
the conduct of its business may become invalidated.
(b) The Company (either itself or through licensees) will not
knowingly do any act or knowingly omit to do any act whereby any Patent material
to the conduct of its business may become abandoned or dedicated to the public
domain.
(c) The Company shall notify NetGateway immediately if it knows or
has reason to know that any Intellectual Property material to the conduct of its
business may become abandoned or dedicated to the public domain, or of any
adverse determination or development (including the institution of, or any such
determination or development in, any proceeding before any governmental person)
regarding the Company's ownership of any Intellectual Property material to its
business, its right to copyright, patent or register the same (as the case may
be), or its right to keep, use and maintain the same.
(d) The Company will take all necessary steps that are consistent
with good business practices in any proceeding before any appropriate
governmental person to maintain and pursue each application relating to any
Intellectual Property (and to obtain the relevant registrations) and to maintain
each registration material to the conduct of its business, including payment of
maintenance fees, filing of applications for renewal, affidavits of use,
affidavits of incontestability and opposition, interference and cancellation
proceedings.
(e) In the event that any Intellectual Property material to the
conduct of its business is infringed, misappropriated or diluted by a third
party, the Company shall notify NetGateway within (10) days after it learns of
such event and shall, if consistent with good business practice, promptly sue
for infringement, misappropriation or dilution, seek temporary restraints and
preliminary injunctive relief to the extent practicable, seek to recover any and
all damages for such infringement, misappropriation or dilution and take such
other actions as are appropriate under the circumstances to protect such
Collateral.
(f) The Company shall, through counsel acceptable to NetGateway,
prosecute diligently any application relating to any Intellectual Property
pending before any governmental person as of the date of this Agreement or
thereafter made until the termination of this Agreement, make application on
uncopyrighted but copyrightable material, unpatented but patentable inventions
and unregistered but registerable Trademarks and preserve and maintain all
rights in applications for any Intellectual Property; provided, however, nothing
in this Agreement or in the Basic Documents shall impose upon the Company any
obligation to make any such application if making such application would be
unnecessary or imprudent in the good faith business judgment of the Company. Any
expenses incurred in connection with such an
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application shall be borne by the Company. The Company shall not abandon any
right to file an application for any Intellectual Property or any pending such
application in the United States without the consent of NetGateway, which
consent shall not be unreasonably withheld.
(g) If any Event of Default shall have occurred and be continuing,
NetGateway shall have the right but shall in no way be obligated to bring suit
in its own name to enforce the Copyrights, Patents and Trademarks and any
license under such Intellectual Property, in which event the Company shall, at
the request of NetGateway, do any and all lawful acts and execute and deliver
any and all proper documents required by NetGateway in aid of such enforcement
action.
5.06 Further Assurances. The Company agrees that, from time to time
upon the written request of NetGateway, the Company will execute and deliver
such further documents and do such other acts and things as NetGateway may
reasonably request in order fully to effect the purposes of this Agreement.
Section 6. Remedies.
6.01 Events of Default, Etc. If any Event of Default shall have
occurred and be continuing:
(a) NetGateway in its discretion may require the Company to, and the
Company shall, assemble the Collateral owned by it at such place or places,
reasonably convenient to both NetGateway and the Company, designated in
NetGateway's request;
(b) NetGateway in its discretion may make any reasonable compromise
or settlement it deems desirable with respect to any of the Collateral and may
extend the time of payment, arrange for payment in installments, or otherwise
modify the terms of, all or any part of the Collateral;
(c) NetGateway in its discretion may, in its name or in the name of
the Company or otherwise, demand, sue for, collect or receive any money or
property at any time payable or receivable on account of or in exchange for all
or any part of the Collateral, but shall be under no obligation to do so;
(d) NetGateway in its discretion may, upon ten business days = prior
written notice to the Company of the time and place, with respect to all or any
part of the Collateral which shall then be or shall thereafter come into the
possession, custody or control of NetGateway or any of its agents, sell, lease
or otherwise dispose of all or any part of such Collateral, at such place or
places as NetGateway deems best, for cash, for credit or for future delivery
(without thereby assuming any credit risk) and at public or private sale,
without demand of performance or notice of intention to effect any such
disposition or of time or place of any such sale (except such notice as is
required above or by applicable statute and cannot be waived),
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<PAGE>
and NetGateway or any other person may be the purchaser, lessee or recipient of
any or all of the Collateral so disposed of at any public sale (or, to the
extent permitted by law, at any private sale) and thereafter hold the same
absolutely, free from any claim or right of whatsoever kind, including any right
or equity of redemption (statutory or otherwise), of the Company, any such
demand, notice and right or equity being hereby expressly waived and released.
In the event of any sale, license or other disposition of any of the Trademark
Collateral, the goodwill connected with and symbolized by the Trademark
Collateral subject to such disposition shall be included, and the Company shall
supply to NetGateway or its designee, for inclusion in such sale, assignment or
other disposition, all Intellectual Property relating to such Trademark
Collateral. NetGateway may, without notice or publication, adjourn any public or
private sale or cause the same to be adjourned from time to time by announcement
at the time and place fixed for the sale, and such sale may be made at any time
or place to which the sale may be so adjourned; and
(e) NetGateway shall have, and in its discretion may exercise, all
of the rights, remedies, powers and privileges with respect to the Collateral of
a secured party under the Uniform Commercial Code (whether or not the Uniform
Commercial Code is in effect in the jurisdiction where such rights, remedies,
powers and privileges are asserted) and such additional rights, remedies, powers
and privileges to which a secured party is entitled under the laws in effect in
any jurisdiction where any rights, remedies, powers and privileges in respect of
this Agreement or the Collateral may be asserted, including the right, to the
maximum extent permitted by law, to exercise all voting, consensual and other
powers of ownership pertaining to the Collateral as if NetGateway were the sole
and absolute owner of the Collateral (and the Company agrees to take all such
action as may be appropriate to give effect to such right).
The proceeds of, and other realization upon, the Collateral by virtue of
the exercise of remedies under this Section 6.01 and of the exercise of the
license granted to NetGateway in Section 2.02 shall be applied in accordance
with Section 6.04.
6.02 Deficiency. If the proceeds of, or other realization upon, the
Collateral by virtue of the exercise of remedies under Section 6.01 and of the
exercise of the license granted by NetGateway in Section 2.02 are insufficient
to cover the costs and expenses of such exercise and the payment in full of the
other Secured Obligations, the Company's shall remain liable for any deficiency.
6.03 Private Sale.
(a) NetGateway shall incur no liability as a result of the sale,
lease or other disposition of all or any part of the Collateral at any private
sale pursuant to Section 6.01 conducted in a commercially reasonable manner. The
Company hereby waives any claims against NetGateway arising by reason of the
fact that the price at which the Collateral may have been sold at such a private
sale was less than the price which might have been obtained at a public sale or
was less than the aggregate amount of the Secured Obligations, even if
NetGateway accepts the first offer received and does not offer the Collateral to
more than one offeree.
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<PAGE>
(b) The Company recognizes that, by reason of certain prohibitions
contained in the Securities Act of 1933 and applicable state securities laws,
NetGateway may be compelled, with respect to any sale of all or any part of the
Collateral, to limit purchasers to those who will agree, among other things, to
acquire the Collateral for their own account, for investment and not with a view
to distribution or resale. The Company acknowledges that any such private sales
may be at prices and on terms less favorable to NetGateway than those obtainable
through a public sale without such restrictions, and, notwithstanding such
circumstances, agree that any such private sale shall be deemed to have been
made in a commercially reasonable manner and that NetGateway shall have no
obligation to engage in public sales and no obligation to delay the sale of any
Collateral for the period of time necessary to permit the respective Issuer of
such Collateral to register it for public sale.
6.04 Application of Proceeds. Except as otherwise expressly provided
in this Agreement and except as provided below in this Section 6.04, the
proceeds of, or other realization upon, all or any part of the Collateral by
virtue of the exercise of remedies under Section 6.01 or of the exercise of the
license granted in Section 2.02, and any other cash at the time held by
NetGateway under Section 3 or this Section 6, shall be applied by NetGateway:
First, to the payment of the costs and expenses of such exercise of
remedies, including reasonable out-of-pocket costs and expenses of NetGateway,
the fees and expenses of its agents and counsel and all other expenses incurred
and advances made by NetGateway in that connection;
Next, to the payment in full of the remaining Secured Obligations in
such manner as NetGateway may determine; and
Finally, to the payment to the Company, or its respective successors
or assigns, or as a court of competent jurisdiction may direct, of any surplus
then remaining.
As used in this Section 6, "proceeds" of Collateral shall mean cash,
securities and other property realized in respect of, and distributions in kind
of, Collateral, including any property received under any bankruptcy,
reorganization or other similar proceeding as to the Company or any issuer of,
or account debtor or other the Company on, any of the Collateral.
Section 7. Miscellaneous.
7.01 Waiver. No failure on the part of NetGateway to exercise and no
delay in exercising, and no course of dealing with respect to, any right,
remedy, power or privilege under this Agreement shall operate as a waiver of
such right, remedy, power or privilege, nor shall any single or partial exercise
of any right, remedy, power or privilege under this Agreement preclude any other
or further exercise of any such right, remedy, power or privilege or the
exercise of any other right, remedy, power or privilege. The rights, remedies,
powers and privileges provided
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<PAGE>
in this Agreement are cumulative and not exclusive of any rights, remedies,
powers and privileges provided by law.
7.02 Notices. All notices and other communications provided for in
this Agreement shall be in writing and delivered by registered or certified
mail, postage prepaid, or delivered by overnight courier (for next business day
delivery) or telecopied, addressed as follows, or at such other address as any
of the parties hereto may hereafter designate by notice to the other parties
given in accordance with this Section:
1) if to the Company:
Admor Memory Corp.
217 Technology Drive, Suite 100
Irvine, CA 92618
(Fax: (949) 789-7294)
Attn: President
2) if to NetGateway:
NetGateway, Inc.
300 Oceangate, 5th Floor
Long Beach, California 90802
Attn: Donald M. Corliss, Jr.
(Fax: (562) 981-7383)
Any such notice or communication shall be deemed to have been duly given on the
fifth day after being so mailed, the next business day after delivery by
overnight courier, when received when sent by telecopy or upon receipt when
delivered personally.
7.03 Expenses, Etc. The Company agrees to pay or to reimburse
NetGateway for all costs and expenses (including reasonable attorney's fees and
expenses) that may be incurred by NetGateway in any effort to enforce any of the
provisions of Section 6 or any of the obligations of the Company in respect of
the Collateral or in connection with (a) the preservation of the Lien of, or the
rights of NetGateway under this Agreement or (b) any actual or attempted sale,
lease, disposition, exchange, collection, compromise, settlement or other
realization in respect of, or care of, the Collateral, including all such costs
and expenses (and reasonable attorney's fees and expenses) incurred in any
bankruptcy, reorganization, workout or other similar proceeding.
7.04 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument. Signatures may be
exchanged by telecopy, with original signatures to follow. Each of the parties
hereto agrees that it will be bound by its own telecopied signature and that it
accepts the telecopied signatures of the other parties to this Agreement. The
original
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<PAGE>
signature pages shall be forwarded to NetGateway or its counsel and NetGateway
or its counsel will provide all of the parties hereto with a copy of the entire
Agreement.
7.05 Amendments. This Agreement may only be amended by a writing
duly executed by the parties hereto.
7.06 Severability. If any term or provision of this Agreement or any
other document executed in connection herewith shall be determined to be illegal
or unenforceable, all other terms and provisions hereof and thereof shall
nevertheless remain effective and shall be enforced to the fullest extent
permitted by applicable law.
7.07 Governing Law; Submission to Process. EXCEPT TO THE EXTENT THAT
THE LAW OF ANOTHER JURISDICTION IS EXPRESSLY SELECTED IN A DOCUMENT, THIS
AGREEMENT AND ALL AMENDMENTS, SUPPLEMENTS, WAIVERS AND CONSENTS RELATING HERETO
OR THERETO SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF CALIFORNIA WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW, OR WHERE
APPLICABLE U.S. LAW. THE COMPANY HEREBY IRREVOCABLY SUBMITS ITSELF TO THE
NON-EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS SITTING IN THE STATE
OF CALIFORNIA AND AGREES AND CONSENTS THAT SERVICE OF PROCESS MAY BE MADE UPON
IT IN ANY LEGAL PROCEEDINGS RELATING HERETO BY ANY MEANS ALLOWED UNDER
CALIFORNIA OR FEDERAL LAW. THE COMPANY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW, ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO
THE LAYING OF VENUE OF ANY SUCH PROCEEDING BROUGHT IN SUCH COURT AND ANY CLAIM
THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM.
7.08 Entire Agreement. This Agreement contains the entire Agreement
of the parties hereto with respect to the transactions contemplated hereby and
supersedes all previous oral and written, and all previous contemporaneous oral
negotiations, commitments and understandings.
7.09 Further Assurances. The Company agrees promptly to execute and
deliver such documents and to take such other acts as are reasonably necessary
to effectuate the purposes of this Agreement.
7.10 Headings. The headings contained herein are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
7.11 Waiver of Jury Trial. THE COMPANY AND NETGATEWAY EACH HEREBY
AGREES TO WAIVE ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY
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CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT.
NOTWITHSTANDING ANYTHING TO THE CONTRARY HEREIN, THIS WAIVER IS IRREVOCABLE,
MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THE WAIVER
SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS
TO THIS AGREEMENT OR ANY OTHER DOCUMENTS OR AGREEMENTS RELATING HERETO.
[Signature Page Follows]
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<PAGE>
IN WITNESS WHEREOF, the parties hereto execute this Agreement as of
the date first set forth above.
NETGATEWAY:
NETGATEWAY, INC.,
a Nevada corporation
By: /s/ Donald M. Corliss, Jr.
-------------------------------------
Name: Donald M. Corliss, Jr.
Title: President
THE COMPANY:
ADMOR MEMORY CORP.,
a Nevada corporation
By: /s/ Van M. Andrews
-------------------------------------
Name: Van M. Andrews
Title: Pres.
ADMOR MEMORY, LTD.,
a California corporation
By: /s/ Van M. Andrews
-------------------------------------
Name: Van M. Andrews
Title: Pres.
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<PAGE>
ANNEX 1
PLEDGED STOCK
Certificate Registered
Issuer Nos. Owner Number of Shares
Annex 1 to Security Agreement
<PAGE>
ANNEX 2
LIST OF COPYRIGHTS, COPYRIGHT REGISTRATIONS AND
APPLICATIONS FOR COPYRIGHT REGISTRATIONS
Title Date Filed Registration No. Effective Date
Annex 2 to Security Agreement
<PAGE>
ANNEX 3
LIST OF PATENTS AND PATENT APPLICATIONS
File Patent Country Registration No. Date
Annex 3 to Security Agreement
<PAGE>
ANNEX 4
LIST OF TRADE NAMES, TRADEMARKS, SERVICES MARKS,
TRADEMARK AND SERVICE MARK REGISTRATIONS AND
APPLICATIONS FOR TRADEMARK AND SERVICE MARK REGISTRATIONS
U.S. Trademarks
Application (A)
Registration (R) Registration
Mark or Series No. (S) or Filing Date
Annex 4 to Security Agreement
<PAGE>
Foreign Trademarks
Application (A) Registration or
Mark Registration (R) Country Filing Date (F)
Annex 4 to Security Agreement
<PAGE>
ANNEX 5
LIST OF MATERIAL CONTRACTS, LICENSES AND OTHER AGREEMENTS
Annex 5 to Security Agreement