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EXHIBIT 3
SECURITY AGREEMENT
DEBTOR:
Name: eUniverse, Inc.
101 North Plains Industrial Road
Wallingford, CT 06492
SECURED PARTY:
Name: New Technology Holdings Inc.
Address: 550 Madison Avenue
New York, NY 10022
1. Debtor, in consideration of the agreement of Secured Party to make one
or more loans to Debtor pursuant to that certain Note and Warrant Purchase
Agreement, of even date herewith, between Debtor and Secured Party (the
"Purchase Agreement"), and for other good and sufficient consideration, hereby
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grants to Secured Party a first priority security interest in all of Debtor's
right, title and interest in and to the following property (except as set forth
herein), including without limitation any and all additions, accessions and
substitutions thereto or therefor (hereinafter called the "Collateral"):
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(a) all tangible personal property, machinery, electrical and electronic
components, equipment, fixtures, furniture, office machinery, vehicles,
trailers, implements and other tangible personal property of every kind and
description, all goods of like kind or type hereafter acquired in
substitution or replacement thereof, all additions and accessions thereto
and all rents, proceeds and products on or of any of the foregoing,
including, without limitation, the rights to insurance proceeds covering
the foregoing;
(b) all inventory, including without limitation, all merchandise, raw
materials, components, parts, supplies, unfinished goods, work-in-progress,
finished products intended for sale, lease or other disposition, and
packing and shipping materials of every kind, nature and description,
wherever any of the same may be located;
(c) all deposits, cash, cash equivalents and all drafts, checks,
certificates of deposit, notes, bills of exchange and other writings which
evidence a right to the payment of money;
(d) all insurance policies on which Debtor is named as an insured or
additional insured or loss payee and all proceeds which may be derived
therefrom;
(e) all "accounts" (as that term is defined in the Uniform Commercial Code
as in effect from time to time in the State of New York, the "Uniform
Commercial Code") and/or other rights to payment;
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(f) all "general intangibles" (as that term is defined in the Uniform
Commercial Code);
(g) all leasehold interests and other rights and interests of Debtor
respecting the use or ownership of or title to any real property, including
the interests, easements, licenses, all other rights and interests of any
kind;
(h) all Debtor's books and records and all computer software programs
relating to the Collateral, wherever located; and
(i) all products, proceeds and income of any of the foregoing and all
substitutions and replacement of, and additions and accessions to, any of
the foregoing.
to secure payment of the unpaid principal amount of and interest on the
Notes (as defined in the Purchase Agreement) and all other obligations and
liabilities of Debtor to Secured Party, whether direct or indirect, absolute or
contingent, due or to become due, or now existing or hereafter incurred, which
may arise under, out of, or in connection with, the Purchase Agreement or this
Security Agreement and any other document executed and delivered in connection
therewith or herewith and each other obligation and liability, whether direct or
indirect, absolute or contingent, due or to become due, or now or hereafter
existing, of the Debtor to Secured Party, whether on account of principal,
interest, reimbursement obligations, fees, indemnities, costs, expenses
(including, without limitation, all fees and disbursements of counsel to Secured
Party) or otherwise. Specifically excluded from the Collateral are goods
covered by any purchase money security interest.
2. Debtor expressly represents, warrants and covenants:
(a) That except for the first priority security interest granted hereby and
the permitted liens listed on Schedule A hereto, Debtor is the owner of the
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Collateral free from any adverse lien, security interest or encumbrances;
and that Debtor will defend the Collateral against all claims and demands
of all persons at anytime claiming the same or any interest therein.
(b) That Debtor has the full power and authority to enter into this
Security Agreement, that this Security Agreement has been duly authorized,
executed, and delivered by the Debtor and Debtor's obligations under this
Security Agreement are legal, valid, binding, absolute and unconditional.
(c) That Debtor's location is as stated above and the Collateral will be
kept at that location or at the locations of Debtor's subsidiaries.
(d) That Debtor will promptly notify Secured Party of any change in the
location of the Collateral.
(e) That Debtor will pay all taxes and assessments of every nature which
may be levied or assessed against the Collateral.
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(f) That Debtor will not permit or allow any adverse lien, security
interest or encumbrance whatsoever upon the Collateral and will not permit
the same to be attached or replevined.
(g) That Debtor has used, and will continue to use for the duration of this
Security Agreement, consistent standards of quality in its provision of
services sold under Debtor's service marks. Debtor shall use its best
efforts to do any and all acts required by Secured Party to ensure Debtor's
compliance with this subparagraph.
(h) That the Collateral is in good condition, and that Secured Party may
examine and inspect the Collateral at any time, wherever located. Without
limiting the generality of the foregoing, Debtor hereby grants to Secured
Party and its employees and agents the right to visit Debtor's offices from
which services are provided under any of Debtor's service marks, and to
inspect the quality control relating thereto at reasonable times during
regular business hours.
(i) That Debtor will not do any act, or omit to do any act, whereby
Debtor's service marks or any registration or application appurtenant
thereto, may become abandoned, invalidated, unenforceable, avoided,
avoidable, or will otherwise diminish in value, and shall notify Secured
Party immediately if it knows of any reason or has reason to know of any
ground under which this result may occur. Debtor shall take appropriate
action at its expense to halt the infringement of Debtor's service marks
and shall properly exercise its duty to control the nature and quality of
the goods offered by any licensees in connection therewith.
(j) That Debtor will not use the Collateral in violation of any applicable
statutes, regulations or ordinances or rights to any third parties.
(k) That Debtor will keep the Collateral at all times insured against risks
of loss or damage by fire, theft and such other casualties as Secured Party
may reasonably require, all in such amounts, under such forms of policies,
upon such terms, for such periods, and written by such companies or
underwriters as Secured Party may approve, losses in all cases to be
payable to Secured Party and Debtor as their interest may appear. Secured
Party may act as attorney for Debtor in making, adjusting and settling
claims under or canceling such insurance and endorsing Debtor's name on any
drafts drawn by insurers of the Collateral.
(l) At any time and from time to time, upon the request of Secured Party,
Debtor will promptly and duly execute and deliver any and all such further
instruments and documents and take such further action as Secured Party may
reasonably deem desirable in obtaining the full benefits of this Security
Agreement, including, without limitation, the filing of any financing or
continuation statement under the Uniform Commercial Code with respect to
the liens and security interests granted hereby. Debtor hereby authorizes
Secured Party to file any such financing or continuation statement without
the signature of Debtor to the extent permitted by applicable law.
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(m) That Debtor hereby indemnifies and holds Secured Party, its officers,
directors, employees and shareholders, harmless from and against any claim,
suit, loss, damage or expense (including reasonable attorneys' fees)
arising out of this Security Agreement, the Purchase Agreement, or Debtor's
operation of its business from the use of the Collateral.
(n) That Debtor hereby irrevocably appoints Secured Party, and its
successors and assigns, Debtor's true and lawful attorney, with full power
(in the name of Debtor or otherwise), after the occurrence and during the
continuance of an Event of Default (defined in Section 4 below), to ask,
require, demand, receive, compound and give acquittance for any and all
moneys, claims and other amounts due and to become due at any time under,
or arising out of, the Collateral; to endorse any checks or other
instruments or orders in connection therewith; to enforce all Secured
Party's rights hereunder, to enter into all agreements or instruments
required to carry out the terms hereof which are required to be performed
by Debtor; to execute such other assignments and mortgages of the
Collateral as Secured Party may deem to be necessary or advisable. Such
power of attorney shall be deemed a power coupled with an interest and,
therefore, irrevocable.
3. Until an Event of Default, Debtor may have possession of the Collateral
and use it in any lawful manner, and upon an Event of Default, Secured Party
shall have the immediate right to the possession of the Collateral.
4. Debtor shall be in default under this Security Agreement upon the
happening of any of the following events or conditions (each an "Event of
Default"):
(a) default in the payment or performance of any obligation, covenant or
liability contained or referred to herein or in any note evidencing the
same;
(b) the making or furnishing of any warranty, representation or statement
to Secured Party by or on behalf of Debtor which proves to have been false
in any material respect when made or furnished;
(c) loss, theft, damage, destruction, sale or encumbrance to or of any of
the Collateral, or the making of any levy seizure or attachment thereof or
thereon and, if capable of being remedied, such default shall continue
unremedied for a period of 30 days;
(d) dissolution, termination of existence, insolvency, business failure,
appointment of a receiver of any part of the property of, assignment for
the benefit of creditors by, or the commencement of any proceeding under
any bankruptcy or insolvency laws of, by or against Debtor or any guarantor
or surety for Debtor.
and Debtor shall give Secured Party immediate notice of the occurrence of any
matter referred to in clause (d) of this paragraph.
5. Upon such default and at any time thereafter, Secured Party may declare
all obligations secured hereby immediately due and payable and shall have the
remedies of a
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secured party under Article 9 of the Uniform Commercial Code. Secured Party may
require Debtor to assemble the Collateral and deliver or make it available to
Secured Party at a place to be designated by Secured Party which is reasonably
convenient to both parties. Expenses of taking, holding, preparing for sale, or
selling the Collateral or the like shall include Secured Party's reasonable
attorney's fees and legal expenses.
6. No waiver by Secured Party of any Event of Default shall operate as a
waiver of any other Event of Default or of the same Event of Default on a future
occasion. The taking of this Security Agreement shall not waive or impair any
other security said Secured Party may have or hereafter acquire for the payment
of the above indebtedness, nor shall the taking of any such additional security
waive or impair this Security Agreement; but said Secured Party may, resort to
any security it may have in the order it may deem proper, and notwithstanding
any collateral security, Secured Party shall retain its rights of set-off
against Debtor.
7. Secured Party's rights hereunder shall be senior to the rights of any
other person except as listed on Schedule A hereto.
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8. All rights of Secured Party hereunder shall inure to the benefit of its
successors and assigns; and all promises and duties of Debtor shall bind his
heirs, executors or administrators or his or its successors or assigns. If
there be more than one Debtor, their liabilities hereunder shall be joint and
several.
9. THIS SECURITY AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, EXCLUDING
CONFLICT OF LAWS PRINCIPLES THAT WOULD CAUSE THE APPLICATION OF LAWS OF ANY
OTHER JURISDICTION.
10. This Security Agreement may be executed in counterparts, each of which
shall be deemed an original but all of which together shall constitute one and
the same instrument.
[signature page follows]
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Dated this 6th day of September, 2000.
Debtor: Secured Party:
eUniverse, Inc. New Technology Holdings Inc.
By: /s/ Brad Greenspan By: /s/ Mark Eisenberg
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Name: Brad Greenspan Name: Mark Eisenberg
Title: President and Title: Vice President
Chief Executive
Officer
[SIGNATURE PAGE TO SECURITY AGREEMENT]
