Attached files
Exhibit 99.9
Security Agreement
This Security Agreement (This "Security Agreement"), Dated as of June 21,
2013, is Executed by Red Giant Entertainment, Inc., a Nevada Corporation
("Debtor"), in Favor of Typenex Co-investment, Llc, an Illinois Limited
Liability Company ("Secured Party").
A. Debtor has Issued to Secured Party a Certain Secured Convertible
Promissory Note of Even Date Herewith in the Face Amount of $557,500.00 (The
"Note").
B. in Order to Induce Secured Party to Extend the Credit Evidenced by the
Note, Debtor has Agreed to Enter Into This Security Agreement and to Grant
Secured Party the Security Interest in the Collateral (As Defined Below).
Now, Therefore, in Consideration of the Above Recitals and for Other Good
and Valuable Consideration, the Receipt and Adequacy of Which are Hereby
Acknowledged, Debtor Hereby Agrees With Secured Party as Follows:
1. Definitions and Interpretation. When Used in This Security Agreement,
the Following Terms Have the Following Respective Meanings:
"Collateral" has the Meaning Given to That Term in Section 2 Hereof.
"Intellectual Property" Means All Patents, Trademarks, Service Marks, Trade
Names, Copyrights, Trade Secrets, Licenses (Software or Otherwise), Information,
Know-how, Inventions, Discoveries, Published and Unpublished Works of
Authorship, Processes, Any and All Other Proprietary Rights, and All Rights
Corresponding to All of the Foregoing Throughout the World, Now Owned and
Existing or Hereafter Arising, Created or Acquired.
"Lien" Shall Mean, With Respect to Any Property, Any Security Interest,
Mortgage, Pledge, Lien, Claim, Charge or Other Encumbrance In, Of, or On Such
Property or the Income Therefrom, Including, Without Limitation, the Interest of
a Vendor or Lessor Under a Conditional Sale Agreement, Capital Lease or Other
Title Retention Agreement, or Any Agreement to Provide Any of the Foregoing, and
the Filing of Any Financing Statement or Similar Instrument Under the Ucc or
Comparable Law of Any Jurisdiction.
"Obligations" Means (A) All Loans, Advances, Future Advances, Debts,
Liabilities and Obligations, Howsoever Arising, Owed by Debtor to Secured Party
or Any Affiliate of Secured Party of Every Kind and Description, Now Existing or
Hereafter Arising, Whether Created by the Note, This Security Agreement, That
Certain Securities Purchase Agreement of Even Date Herewith, Entered Into by and
Between Debtor and Secured Party (The "Purchase Agreement"), Any Other
Transaction Documents (As Defined in the Purchase Agreement), Any Modification
or Amendment to Any of the Foregoing, Guaranty of Payment or Other Contract or
by a Quasi-contract, Tort, Statute or Other Operation of Law, Whether Incurred
or Owed Directly to Secured Party or as an Affiliate of Secured Party or
Acquired by Secured Party or an Affiliate of Secured Party by Purchase, Pledge
or Otherwise, (B) All Costs and Expenses, Including Attorneys' Fees, Incurred by
Secured Party or Any Affiliate of Secured Party in Connection With the Note or
in Connection With the Collection or Enforcement of Any Portion of the
Indebtedness, Liabilities or Obligations Described in the Foregoing Clause (A),
(C) the Payment of All Other Sums, With Interest Thereon, Advanced in Accordance
Herewith to Protect the Security of This Security Agreement, and (D) the
Performance of the Covenants and Agreements of Debtor Contained in This Security
Agreement and All Other Transaction Documents.
"Permitted Liens" Means (A) Liens for Taxes Not Yet Delinquent or Liens for
Taxes Being Contested in Good Faith and by Appropriate Proceedings for Which
Adequate Reserves Have Been Established, and (B) Liens in Favor of Secured Party
Under This Security Agreement or Arising Under the Other Transaction Documents.
"Ucc" Means the Uniform Commercial Code as in Effect in the State of Nevada
From Time to Time.
Unless Otherwise Defined Herein, All Terms Defined in the Ucc Have the
Respective Meanings Given to Those Terms in the Ucc.
2. Grant of Security Interest. As security for the Obligations, Debtor
hereby pledges to Secured Party and grants to Secured Party a security interest
in all right, title, interest, claims and demands of Debtor in and to the
property described in Schedule A hereto, and all replacements, proceeds,
products, and accessions thereof (collectively, the "COLLATERAL").
3. Authorization to File Financing Statements. Debtor hereby irrevocably
authorizes Secured Party at any time and from time to time to file in any filing
office in any Uniform Commercial Code jurisdiction or other jurisdiction of
Debtor or its subsidiaries (including without limitation Nevada and Illinois)
relevant to the Collateral; or any financing statements or documents having a
similar effect and amendments thereto that provide any other information
required by the Uniform Commercial Code (or similar law of any non-United States
jurisdiction, if applicable) of such state or jurisdiction for the sufficiency
or filing office acceptance of any financing statement or amendment, including
whether Debtor is an organization, the type of organization and any organization
identification number issued to Debtor. Debtor agrees to furnish any such
information to Secured Party promptly upon Secured Party's request only as it
relates to performing the obligations under the Note and the Transaction
Documents.
4. General Representations and Warranties. Debtor represents and warrants
to Secured Party that (a) Debtor is the owner of the Collateral and that no
other person has any right, title, claim or interest (by way of Lien or
otherwise) in, against or to the Collateral, other than Permitted Liens, and (b)
upon the filing of UCC-1 financing statements with the Nevada Secretary of
State, Secured Party shall have a perfected first-position security interest in
the Collateral to the extent that a security interest in the Collateral can be
perfected by such filing, except for Permitted Liens.
5. Additional Covenants. Debtor hereby agrees:
5.1. to perform all acts that may be necessary to maintain, preserve,
protect and perfect in the Collateral, the Lien granted to Secured Party
therein, and the perfection and priority of such Lien, except for Permitted
Liens;
5.2. to procure, execute (including endorse, as applicable), and deliver
from time to time any endorsements, assignments, financing statements,
certificates of title, and all other instruments, documents and/or writings
reasonably deemed necessary or appropriate by Secured Party to perfect, maintain
and protect Secured Party's Lien hereunder and the priority thereof;
5.3. to provide at least fifteen (15) days prior written notice to Secured
Party of any of the following events: (a) any changes or alterations of Debtor's
name, (b) any changes with respect to Debtor's address or principal place of
business, or (c) the formation of any subsidiaries of Debtor;
5.4. upon the occurrence of an Event of Default (as defined in the Note)
under the Note and, thereafter, at Secured Party's request, to endorse (up to
the outstanding amount under such promissory notes at the time of Secured
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Party's request), assign and deliver any promissory notes included in the
Collateral to Secured Party, accompanied by such instruments of transfer or
assignment duly executed in blank as Secured Party may from time to time
specify;
5.5. to the extent the Collateral is not delivered to Secured Party
pursuant to this Security Agreement, to keep the Collateral at the principal
office of Debtor, and not to relocate the Collateral to any other locations
without providing at least thirty (30) days prior written notice to Secured
Party;
5.6. not to sell or otherwise dispose, or offer to sell or otherwise
dispose, of the Collateral or any interest therein (other than inventory in the
ordinary course of business); and
5.7. not to, directly or indirectly, allow, grant or suffer to exist any
Lien upon any of the Collateral, other than Permitted Liens.
6. Default and Remedies.
6.1. Default. Debtor shall be deemed in default under this Security
Agreement upon the occurrence of an Event of Default (as defined in the Note).
6.2. Remedies. Upon the occurrence of any such Event of Default, Secured
Party shall have the rights of a secured creditor under the UCC, all rights
granted by this Security Agreement and by law, including, without limiting the
foregoing, (a) the right to require Debtor to assemble the Collateral and make
it available to Secured Party at a place to be designated by Secured Party, and
(b) the right to take possession of the Collateral, and for that purpose Secured
Party may enter upon premises on which the Collateral may be situated and remove
the Collateral therefrom. Debtor hereby agrees that fifteen (15) days' notice of
a public sale of any Collateral or notice of the date after which a private sale
of any Collateral may take place is reasonable. In addition, Debtor waives any
and all rights that it may have to a judicial hearing in advance of the
enforcement of any of Secured Party's rights and remedies hereunder, including,
without limitation, Secured Party's right following an Event of Default to take
immediate possession of Collateral and to exercise Secured Party's rights and
remedies with respect thereto. Secured Party may also have a receiver appointed
to take charge of all or any portion of the Collateral and to exercise all
rights of Secured Party under this Security Agreement. Secured Party may
exercise any of its rights under this Section 6.2 without demand or notice of
any kind. The remedies in this Security Agreement, including without limitation
this Section 6.2, are in addition to, not in limitation of, any other right,
power, privilege, or remedy, either in law, in equity, or otherwise, to which
Secured Party may be entitled. No failure or delay on the part of Secured party
in exercising any right, power, or remedy will operate as a waiver thereof, nor
will any single or partial exercise thereof preclude any other or further
exercise thereof or the exercise of any other right hereunder. All of Secured
Party's rights and remedies, whether evidenced by this Security Agreement or by
any other agreement, instrument or document shall be cumulative and may be
exercised singularly or concurrently.
6.3. Standards for Exercising Rights and Remedies. To the extent that
applicable law imposes duties on Secured Party to exercise remedies in a
commercially reasonable manner, Debtor acknowledges and agrees that it is not
commercially unreasonable for Secured Party (a) to fail to incur expenses
reasonably deemed significant by Secured Party to prepare Collateral for
disposition, (b) to fail to obtain third party consents for access to Collateral
to be disposed of, or to obtain or, if not required by other law, to fail to
obtain governmental or third party consents for the collection or disposition of
Collateral to be collected or disposed of, (c) to fail to exercise collection
remedies against account debtors or other persons obligated on Collateral or to
fail to remove liens or encumbrances on or any adverse claims against
Collateral, (d) to exercise collection remedies against account debtors and
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other persons obligated on Collateral directly or through the use of collection
agencies and other collection specialists, (e) to advertise dispositions of
Collateral through publications or media of general circulation, whether or not
the Collateral is of a specialized nature, (f) to contact other persons, whether
or not in the same business as Debtor, for expressions of interest in acquiring
all or any portion of the Collateral, (g) to hire one or more professional
auctioneers to assist in the disposition of Collateral, whether or not the
Collateral is of a specialized nature, (h) to dispose of Collateral by utilizing
Internet sites that provide for the auction of assets of the types included in
the Collateral or that have the reasonable capability of doing so, or that match
buyers and sellers of assets, (i) to dispose of assets in wholesale rather than
retail markets, (j) to disclaim disposition warranties, (k) to purchase
insurance or credit enhancements to insure Secured Party against risks of loss,
collection or disposition of Collateral or to provide to Secured Party a
guaranteed return from the collection or disposition of Collateral, or (l) to
the extent deemed appropriate by Secured Party, to obtain the services of other
brokers, investment bankers, consultants and other professionals to assist
Secured Party in the collection or disposition of any of the Collateral. Debtor
acknowledges that the purpose of this Section is to provide non-exhaustive
indications of what actions or omissions by Secured Party would fulfill Secured
Party's duties under the UCC in Secured Party's exercise of remedies against the
Collateral and that other actions or omissions by Secured Party shall not be
deemed to fail to fulfill such duties solely on account of not being indicated
in this Section. Without limitation upon the foregoing, nothing contained in
this Section shall be construed to grant any rights to Debtor or to impose any
duties on Secured Party that would not have been granted or imposed by this
Security Agreement or by applicable law in the absence of this Section.
6.4. Marshalling. Secured Party shall not be required to marshal any
present or future Collateral for, or other assurances of payment of, the
Obligations or to resort to such Collateral or other assurances of payment in
any particular order, and all of its rights and remedies hereunder and in
respect of such Collateral and other assurances of payment shall be cumulative
and in addition to all other rights and remedies, however existing or arising.
To the extent that it lawfully may, Debtor hereby agrees that it will not invoke
any law relating to the marshalling of Collateral which might cause delay in or
impede the enforcement of Secured Party's rights and remedies under this
Security Agreement or under any other instrument creating or evidencing any of
the Obligations or under which any of the Obligations is outstanding or by which
any of the Obligations is secured or payment thereof is otherwise assured, and,
to the extent that it lawfully may, Debtor hereby irrevocably waives the
benefits of all such laws.
6.5. Application of Collateral Proceeds. The proceeds and/or avails of the
Collateral, or any part thereof, and the proceeds and the avails of any remedy
hereunder (as well as any other amounts of any kind held by Secured Party at the
time of, or received by Secured Party after, the occurrence of an Event of
Default) shall be paid to and applied as follows:
(a) First, to the payment of reasonable costs and expenses, including all
amounts expended to preserve the value of the Collateral, of foreclosure or
suit, if any, and of such sale and the exercise of any other rights or remedies,
and of all proper fees, expenses, liability and advances, including reasonable
legal expenses and attorneys' fees, incurred or made hereunder by Secured Party;
(b) Second, to the payment to Secured Party of the amount then owing or
unpaid on the Note (to be applied first to accrued interest and second to
outstanding principal) and all amounts owed under any of the other Transaction
Documents; and
(c) Third, to the payment of the surplus, if any, to Debtor, its successors
and assigns, or to whosoever may be lawfully entitled to receive the same.
In the absence of final payment and satisfaction in full of all of the
Obligations, Debtor shall remain liable for any deficiency.
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7. Miscellaneous.
7.1. Notices. Any notice required or permitted hereunder shall be given in
writing (unless otherwise specified herein) and shall be deemed effectively
given on the earliest of:
(a) the date delivered, if delivered by personal delivery as against
written receipt therefor or by email to an executive officer, or by facsimile
(with successful transmission confirmation),
(b) the fifth Trading Day (as defined in the Purchase Agreement) after
deposit, postage prepaid, in the United States Postal Service (with delivery
confirmation or certified mail), or
(c) the second Trading Day after mailing by domestic or international
express courier (e.g., FedEx), with delivery costs and fees prepaid,
in each case, addressed to each of the other parties thereunto entitled at the
following addresses (or at such other addresses as such party may designate by
five (5) Trading Days' advance written notice similarly given to each of the
other parties hereto):
Debtor: Red Giant Entertainment, Inc.
Attn: Benny Powell
614 E. Hwy 50, Suite 235
Clermont, Florida 34711
Secured Party: Typenex Co-Investment, LLC
Attn: John M. Fife
303 East Wacker Drive, Suite 1200
Chicago, Illinois 60601
With a copy to (which shall not constitute notice):
Hansen Black Anderson PLLC
Attn: Jonathan K. Hansen
2940 West Maple Loop Drive, Suite 103
Lehi, Utah 84043
7.2. Nonwaiver. No failure or delay on Secured Party's part in exercising
any right hereunder shall operate as a waiver thereof or of any other right nor
shall any single or partial exercise of any such right preclude any other
further exercise thereof or of any other right.
7.3. Amendments and Waivers. This Security Agreement may not be amended or
modified, nor may any of its terms be waived, except by written instruments
signed by Debtor and Secured Party. Each waiver or consent under any provision
hereof shall be effective only in the specific instances for the purpose for
which given.
7.4. Assignment. This Security Agreement shall be binding upon and inure to
the benefit of Secured Party and Debtor and their respective successors and
assigns; PROVIDED, HOWEVER, that Debtor may not sell, assign or delegate rights
and obligations hereunder without the prior written consent of Secured Party.
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7.5. Cumulative Rights, etc. The rights, powers and remedies of Secured
Party under this Security Agreement shall be in addition to all rights, powers
and remedies given to Secured Party by virtue of any applicable law, rule or
regulation of any governmental authority, or the Note, all of which rights,
powers, and remedies shall be cumulative and may be exercised successively or
concurrently without impairing Secured Party's rights hereunder. Debtor waives
any right to require Secured Party to proceed against any person or entity or to
exhaust any Collateral or to pursue any remedy in Secured Party's power.
7.6. Partial Invalidity. If any part of this Security Agreement is
construed to be in violation of any law, such part shall be modified to achieve
the objective of the parties to the fullest extent permitted and the balance of
this Security Agreement shall remain in full force and effect.
7.7. Expenses. Debtor shall pay on demand all reasonable fees and expenses,
including reasonable attorneys' fees and expenses, incurred by Secured Party in
connection with the custody, preservation or sale of, or other realization on,
any of the Collateral or the enforcement or attempt to enforce any of the
Obligations which are not performed as and when required by this Security
Agreement.
7.8. Waiver of Jury Trial. EACH PARTY TO THIS SECURITY AGREEMENT
IRREVOCABLY WAIVES ANY AND ALL RIGHTS IT MAY HAVE TO DEMAND THAT ANY ACTION,
PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR IN ANY WAY RELATED TO THIS SECURITY
AGREEMENT OR THE RELATIONSHIPS OF THE PARTIES HERETO BE TRIED BY JURY. THIS
WAIVER EXTENDS TO ANY AND ALL RIGHTS TO DEMAND A TRIAL BY JURY ARISING UNDER
COMMON LAW OR ANY APPLICABLE STATUTE, LAW, RULE OR REGULATION. FURTHER, EACH
PARTY HERETO ACKNOWLEDGES THAT IT IS KNOWINGLY AND VOLUNTARILY WAIVING ITS RIGHT
TO DEMAND TRIAL BY JURY.
7.9. Entire Agreement. This Security Agreement and the other Transaction
Documents, taken together, constitute and contain the entire agreement of Debtor
and Secured Party with respect to this particular matter and supersede any and
all prior agreements, negotiations, correspondence, understandings and
communications between the parties, whether written or oral, respecting the
subject matter hereof.
7.10. Governing Law; Venue. Except as otherwise specifically set forth
herein, the parties expressly agree that this Security Agreement shall be
governed solely by the laws of the State of Illinois, without regard to its
principles of conflict of laws. Debtor hereby expressly consents to the personal
jurisdiction of the state and federal courts located in or about Cook County,
Illinois, for any action or proceeding arising from or relating to this Security
Agreement, waives, to the maximum extent permitted by law, any argument that
venue in any such forum is not convenient, and agrees that any such action or
proceeding shall only be venued in such courts.
7.11. Counterparts. This Security Agreement may be executed in any number
of counterparts, each of which shall be an original and all of which together
shall constitute one instrument. Facsimile copies of signed signature pages will
be deemed binding originals.
7.12. Termination of Security Interest. Upon the payment in full of all
Obligations, the security interest granted herein shall terminate and all rights
to the Collateral shall revert to Debtor. Upon such termination, Secured Party
hereby authorizes Debtor to file any UCC termination statements necessary to
effect such termination and Secured Party will execute and deliver to Debtor any
additional documents or instruments as Debtor shall reasonably request to
evidence such termination.
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7.13. Time of the Essence. Time is expressly made of the essence of each
and every provision of this Agreement.
[Remainder of page intentionally left blank; signature page to follow]
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IN WITNESS WHEREOF, Secured Party and Debtor have caused this Security
Agreement to be executed as of the day and year first above written.
SECURED PARTY:
TYPENEX CO-INVESTMENT, LLC
By: Red Cliffs Investments, Inc., its Manager
By: /s/ John M. Fife
--------------------------------------------
John M. Fife, President
DEBTOR:
RED GIANT ENTERTAINMENT, INC.
By: /s/ Benny R. Powell
-------------------------------------------
Benny R. Powell, President/CEO
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SCHEDULE A
TO SECURITY AGREEMENT
Those certain Secured Buyer Notes (comprised of Secured Buyer Note #1 and
Secured Buyer Note #2) and Buyer Notes (comprised of Buyer Note #3 and Buyer
Note #4) issued by Secured Party in favor of Debtor on June 21, 2013, each in
the initial principal amount of $100,000.00, and any and all claims, rights and
interests in any of the above and all substitutions for, additions and
accessions to and proceeds thereof.
