SECURITY AGREEMENT
SECURITY AGREEMENT made this 30th day of September, 2001 by and between
Vizacom Inc. ( "Debtor"), a Delaware corporation with its principal place of
business located at 0000 Xxxxxxxx Xxxxxxxx Xxxxxxx, Xxxxxxx, Xxx Xxxx 00000, and
Xxxxxxx & Xxxxxxxx, LLC (the "Secured Party"), a New York professional limited
liability company having its principal place of business at 00 Xxxxxxx Xxxxxxxxx
Xxxxxxxxx, Xxxxxxx Xxxxx, Xxx Xxxx 00000.
WHEREAS, Debtor and SpaceLogix, Inc. ("SpaceLogix" and together with
Debtor, the "Merger Parties"), a Delaware corporation, have executed a
non-binding Letter of Intent (the "LOI") which contemplates the merger of
SpaceLogix into Debtor or one of Debtor's subsidiaries (the "Merger") pursuant
to the terms of a merger agreement (the "Merger Agreement") to be negotiated by
the Merger Parties;
WHEREAS, in contemplation of the Merger, Debtor has requested SpaceLogix to
provide a loan in the aggregate principal amount of up to $650,000 in three
separate installments (the "Loan," and each installment thereof, an
"Installment") pursuant to the terms and conditions of a Loan Agreement between
the Merger Parties dated as of September 14, 2001 (the "Loan Agreement");
WHEREAS, to secure the Loan, Debtor granted a security interest (the
"Spacelogix Interest") in the Collateral (as defined herein) to SpaceLogix upon
the terms and conditions contained in a security agreement between the Merger
Parties dated as of September 14, 2001;
WHEREAS, the SpaceLogix Interest shall be senior to the security interest
granted to Secured Party pursuant to this Security Agreement until the closing
of the Merger, at which time the SpaceLogix Interest shall terminate;
WHEREAS, PWR Systems, Inc. ("PWR"), a wholly-owned subsidiary of Debtor,
owes Xxxxx X. Xxxxx and Xxxxxxx XxXxxxxx (the "PWR Parties") an aggregate of
306,824 pursuant to certain promissory notes (the "PWR Notes") made in their
favor, the payment of which has been guaranteed by Debtor;
WHEREAS, Debtor granted a security interest (the "PWR Interest") to the PWR
Parties in the Collateral to secure payment of the PWR Notes upon the terms and
conditions contained herein;
WHEREAS, the security interest granted to the PWR Parties is junior to the
interest granted to the Secured Party;
WHEREAS, Debtor owes Secured Party $739,654.85 (the "Fees") in payment of
services rendered and expenses incurred through August 31, 2001;
WHEREAS, in contemplation of the Merger, Debtor has agreed to the payment
and satisfaction of the Fees pursuant to the terms and conditions of that
certain agreement (the "K&M Agreement"), dated as of September 30, 2001 between
Debtor and Secured Party; and
WHEREAS, Debtor is willing to grant a security interest in certain of its
assets to secure payment of the Fees upon the terms and conditions contained
herein.
NOW, THEREFORE, in consideration of the mutual covenants contained herein,
and other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, it is hereby agreed as follows:
1. Security Interest. Debtor hereby grants to Secured Party a security
interest in the Collateral (as defined herein) to secure payment of the Fees
evidenced by the promissory note issued to Secured Party on the date hereof in
the aggregate principal amount of $439,654.85 (the "Note").
2. Description of Collateral. The collateral subject to this Security
Agreement is all of Debtor's right, title and interest in and to that certain
promissory note issued by Serif Inc. in favor of Debtor, dated March 31, 2001,
in the original aggregate principal amount of $987,500 (the "Collateral").
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3. Obligations of Debtor. Debtor hereby covenants, represents, warrants
and agrees that:
(a) On or prior to January 20, 2002, so long as no Event of Default has
occurred and is continuing under the Promissory Note, dated September 17, 2001,
issued by Debtor to SpaceLogix, or after January 20, 2002 promptly if any Event
of Default in existence on such date is subsequently cured, Debtor shall execute
and deliver to Serif Inc. the irrevocable instruction letter attached hereto as
Exhibit A.
(b) Subject to the SpaceLogix Interest, Debtor shall, at no cost or
expense to Secured Party, defend Secured Party's right, title and interest
in and to the Collateral, and defend the Collateral against all other claims or
demands of any other party and all other liabilities of any nature whatsoever;
(c) Subject to the SpaceLogix Interest and the PWR Interest, the Collateral
is free and clear from, and is not subject to, any assignment, security
interest, mortgage, pledge, lien, levy for taxes (other than for taxes not yet
due and payable) or other assessments, interest, charge, adverse claim or other
encumbrance, including any financing statement or other document filed in any
public office ("Encumbrance"), and Debtor shall keep and maintain the
Collateral, and each part thereof, free and clear of any Encumbrance which is
not subordinate to the security interest granted hereunder, and shall not create
nor permit to remain any such Encumbrance;
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(d) Debtor shall duly and promptly pay and discharge when due and payable,
or cause to be paid and discharged all taxes, assessments and governmental
charges or levies upon or against it or its profits, income, properties or
assets;
(e) Debtor, at its sole cost and expense, shall execute and deliver, or
cause to be duly executed and delivered, such instruments and documents, and do
and cause to be done such acts and things, as Secured Party may at any time
reasonably request to enforce, perfect and protect its security interest in the
Collateral as herein provided and its rights and remedies with respect to the
Collateral;
(f) Subject to the SpaceLogix Interest, the Collateral, or any part
thereof, will not be sold, assigned, conveyed, transferred or disposed of, or
become subjected to any subsequent interest of any party senior to the interest
of Secured Party, except pursuant to the Security Agreement between the Debtor
and PWR;
(g) Debtor shall take any and all actions, including making any necessary
filings, required or requested by K&M to assure that the K&M Interest is at
all times senior to the PWR Interest and that the PWR Interest is subordinated
in all respects to the K&M Interest;
(h) Debtor shall keep and maintain at all times true and complete books,
records and accounts in accordance with normal business practices; and
(i) Debtor shall pay and reimburse Secured Party for all costs and expenses
(including attorneys' fees, legal expenses, and advances and expenditures
for recording and filing fees, if any) in connection with perfection and
protection of Secured Party's security interest hereunder (other than the
recording and filing of UCC-1 financing statements, for removal of any
encumbrance from the Collateral, for curing, correcting or remedying any Event
of Default hereunder, or for protection, preservation, maintenance and repair of
the Collateral) incurred by Secured Party in connection with the exercise by
Secured Party of any of its rights and remedies under this Security Agreement in
enforcing, perfecting or protecting its interests under this Security Agreement.
4. Events of Default. The occurrence of any of the following events with
respect to Debtor shall constitute an event of default on the part of Debtor
hereunder (an "Event of Default"):
(a) failure by Debtor to pay the principal or interest of the Note or
any installment thereof when due, whether on the date fixed for payment or
by acceleration or otherwise; provided, however, that failure to pay any
principal or interest when due shall not be an Event of Default if such overdue
payment is paid within ten business days of such due date; or
(b) if Debtor or any other authorized person or entity shall take any
action to effect a dissolution, liquidation or winding up of Debtor; or
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(c) if Debtor shall make a general assignment for the benefit of creditors
or consent to the appointment of a receiver, liquidator, custodian, or
similar official of all or substantially all of its properties, or any such
official is placed in control of such properties, or Debtor shall commence any
action or proceeding or take advantage of or file under any federal or state
insolvency statute, including, without limitation, the United States Bankruptcy
Code or any political subdivision thereof, seeking to have an order for relief
entered with respect to it or seeking adjudication as a bankrupt or insolvent,
or seeking reorganization, arrangement, adjustment, liquidation, dissolution,
administration, a voluntary arrangement, or other relief with respect to it or
its debts; or
(d) there shall be commenced against Debtor any action or proceeding of
the nature referred to in paragraph (c) above or seeking issuance of a
warrant of attachment, execution, distraint, or similar process against all or
any substantial part of the property of Debtor, which results in the entry of an
order for relief which remains undismissed, undischarged or unbonded for a
period of sixty days.
5. Secured Party's Rights and Remedies. Upon the occurrence of an Event of
Default, Secured Party shall have and may exercise all of the rights and
remedies provided by the Uniform Commercial Code at the date of execution of
this Security Agreement, and any other applicable law, and, in conjunction with,
in addition to, or in substitution therefor, Secured Party shall have and may
exercise the following rights and remedies:
(a) Upon demand by Secured Party, the Fees shall be immediately due and
payable in full;
(b) Subject to the SpaceLogix Interest, Secured Party may (but shall not be
required), alone or in conjunction with Debtor, take any or all action
necessary to collect or receive any money or property at any time payable or
receivable on account of or in exchange for the Collateral; and
(c) Subject to the SpaceLogix Interest, Secured Party may require Debtor to
pay and deliver to Secured Party, immediately upon collection and receipt
thereof by Debtor, all proceeds arising from the Collateral, or may require
Debtor to deposit all such proceeds in a bank selected by Secured Party in a
collateral account acceptable to Secured Party. Until the proceeds from the
Collateral have been paid and delivered to Secured Party or deposited in the
bank as hereinabove provided, Debtor shall hold such proceeds for and on behalf
of Secured Party separate and apart from Debtor's other funds or property, and
shall not mingle such proceeds with any other such funds or property.
7. Other Provisions.
(a) Secured Party may waive any default, or remedy any default in any
reasonable manner, without waiving such default remedied and without waiving any
other prior or subsequent
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default; and Secured Party may waive or delay the exercise of any right or
remedy under this Security Agreement without waiving that right or remedy or any
other right or remedy hereunder;
(b) This Security Agreement shall be binding upon, and shall inure to the
benefit of, the respective heirs, executors, administrators, successors and
assigns of the parties hereto;
(c) Each of the foregoing instruments, covenants and warranties on the part
of Debtor shall be deemed and construed to be on a continuing basis and shall
survive the execution and delivery of this Security Agreement;
(d) All notices, demands, requests and other communications required or
otherwise given under this Security Agreement shall be in writing and shall be
deemed to have been duly given if: (i) delivered by hand against written receipt
therefor, (ii) forwarded by a third party company or governmental entity
providing delivery services in the ordinary course of business which guarantees
delivery the following business day, (iii) mailed by registered or certified
mail, return receipt requested, postage prepaid, or (iv) transmitted by
facsimile transmission electronically confirmed for receipt, in full, by the
other party no later than 5:00 pm, local time, on the date of transmission,
addressed as follows:
If to Debtor to: 0000 Xxxxxxxx Xxxxxxxx Xxxxxxx
Xxxxxxx, Xxx Xxxx 00000
Attention: President
Facsimile: (000) 000-0000
If to Secured Party to: Xxxxxxx & Xxxxxxxx, LLC
00 Xxxxxxx Xxxxxxxxx Xxxxxxxxx - Xxxxx 000
Xxxxxxx Field, New York 11553
Attention: Xxxx X. Xxxxxxx, Esq.
Facsimile: (000) 000-0000
or at such other address as such party shall have furnished to each of the
other parties hereto in accordance with this Section 6(d). Each such notice,
demand, request or other communication shall be deemed given (i) on the date of
such delivery by hand, (ii) on the first business day following the date of such
delivery to the overnight delivery service or facsimile transmission, or (iii)
three business days following such mailing.
(e) The provisions of this Security Agreement shall be deemed severable, so
that if any provision hereof is declared invalid under the laws of any state
where it is in effect or of the United States, all other provisions of this
Security Agreement shall continue in full force and effect;
(f) This Security Agreement shall not be modified or amended or any
provision hereof waived except in writing executed by both parties hereto; and
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(g) This Security Agreement shall be construed in accordance with and
governed by the laws of the State of New York, without regard to its conflicts
of law principles.
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound
hereby, have executed and delivered this Security Agreement as of the day and
year first above written.
XXXXXXX & XXXXXXXX, LLC
By: /s/ Xxxx X. Xxxxxxx
-------------------------------------
Name: Xxxx X. Xxxxxxx
Title: Member
VIZACOM INC.
By: /s/ Xxxx Xxxxxxxxxx
-------------------------------------
Name: Xxxx Xxxxxxxxxx
Title: CFO
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EXHIBIT A
[Vizacom Letterhead]
[Date]
Serif Inc.
[address]
Gentlemen:
Vizacom Inc. ("Vizacom") hereby irrevocably instructs you to
pay $25,000 of the monthly amount due under the Promissory Note (the "Note"),
dated March 31, 2001, issued by Serif Inc. in favor of Vizacom directly to
Xxxxxxx & Xxxxxxxx, LLC ("K&M") commencing as of the date hereof, unless or
until (i) otherwise instructed in writing by K&M or (ii) receipt of written
notice from SpaceLogix, Inc. that an Event of Default has occurred and is
continuing under the Promissory Note, dated September 17, 2001, issued by
Vizacom to SpaceLogix, as follows:
[Insert wire transfer instructions]
VIZACOM INC.
By:
-----------------------------
Name:
Title:
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