XFONE, INC. AND CERTAIN OF ITS SUBSIDIARIES MASTER SECURITY AGREEMENT
Exhibit
10.53
XFONE,
INC. AND CERTAIN OF ITS SUBSIDIARIES
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To:
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Laurus
Master Fund, Ltd.
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c/o
M&C Corporate Services Limited
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X.X.
Xxx 000 XX
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Xxxxxx
House
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South
Church Street
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Xxxxxx
Town
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Grand
Cayman, Cayman Islands
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Date:
September 27, 2005
To
Whom
It May Concern:
1. To
secure
the payment of all Obligations (as hereafter defined), XFONE, INC., a Nevada
corporation (the “Company”), each of the other undersigned parties (other than
Laurus Master Fund, Ltd., (“Laurus”)), and each other entity that is required to
enter into this Master Security Agreement (each an “Assignor” and, collectively,
the “Assignors”) hereby assigns and grants to Laurus a continuing security
interest in all of the following property now owned or at any time hereafter
acquired by such Assignor, or in which such Assignor now has or at any time
in
the future may acquire any right, title or interest (the “Collateral”): all
cash, cash equivalents, accounts, accounts receivable, deposit accounts,
inventory, equipment, goods, fixtures, documents, instruments (including,
without limitation, promissory notes), contract rights, general intangibles
(including, without limitation, payment intangibles and an absolute right
to
license on terms no less favorable than those current in effect among such
Assignor’s affiliates), chattel paper, supporting obligations, investment
property (including, without limitation, all partnership interests, limited
liability company membership interests and all other equity interests owned
by
any Assignor), letter-of-credit rights, trademarks, trademark applications,
tradestyles, patents, patent applications, copyrights, copyright applications
and other intellectual property in which such Assignor now has or hereafter
may
acquire any right, title or interest, all proceeds and products thereof
(including, without limitation, proceeds of insurance) and all additions,
accessions and substitutions thereto or therefor. In the event any Assignor
wishes to finance the acquisition in the ordinary course of business of any
hereafter acquired equipment and has obtained a written commitment from an
unrelated third party financing source to finance such equipment, Laurus
shall
release its security interest on such hereafter acquired equipment so financed
by such third party financing source. Except as otherwise defined herein,
all
capitalized terms used herein shall have the meanings provided such terms
in the
Securities Purchase Agreement referred to below. Notwithstanding the foregoing
Section 1, other than those parties who have executed and delivered this
Agreement on the date hereof, only Subsidiaries (as defined in the Securities
Purchase Agreement) created, established or acquired after the date hereof,
shall be required to become joined hereto as additional Assignors.
Notwithstanding the provisions of this Section 1, solely with respect to
the
Company (and not the other undersigned parties hereto), Collateral, as defined
above, shall be limited to all personal property and assets and the proceeds
thereof (including, without limitation, any equity interests held by the
Company
on the date hereof) in which the Company has any right, title or interest
on the
date hereof, and only to the extent such personal property, assets or proceeds
are located within in the United States or arise under the law of the United
States or any state thereof. The defined term “Collateral” shall not include any
equity interests of Story Telecom, Inc. so long as Story Telecom, Inc. is
not a
wholly-owned subsidiary of the Company or any of its Subsidiaries.
2. The
term
“Obligations” as used herein shall mean and include all debts, liabilities and
obligations owing by each Assignor to Laurus arising under, out of, or in
connection with: (i) that certain Securities Purchase Agreement dated as
of the
date hereof by and between the Company and Laurus (the “Securities Purchase
Agreement”) and (ii) the Related Agreements referred to in the Securities
Purchase Agreement (the Securities Purchase Agreement and each Related
Agreement, as each may be amended, modified, restated or supplemented from
time
to time, collectively, the “Documents”), and in connection with any documents,
instruments or agreements relating to or executed in connection with the
Documents or any documents, instruments or agreements referred to therein
or
otherwise, and in connection with any other indebtedness, obligations or
liabilities of each such Assignor to Laurus, whether now existing or hereafter
arising, direct or indirect, liquidated or unliquidated, absolute or contingent,
due or not due and whether under, pursuant to or evidenced by a note, agreement,
guaranty, instrument or otherwise, including, without limitation, obligations
and liabilities of each Assignor for post-petition interest, fees, costs
and
charges that accrue after the commencement of any case by or against such
Assignor under any bankruptcy, insolvency, reorganization or like proceeding
(collectively, the “Debtor Relief Laws”) in each case, irrespective of the
genuineness, validity, regularity or enforceability of such Obligations,
or of
any instrument evidencing any of the Obligations or of any collateral therefor
or of the existence or extent of such collateral, and irrespective of the
allowability, allowance or disallowance of any or all of the Obligations
in any
case commenced by or against any Assignor under any Debtor Relief
Law.
3. Each
Assignor hereby jointly and severally represents, warrants and covenants
to
Laurus that:
(a) it
is a
corporation, partnership or limited liability company, as the case may be,
validly existing, in good standing and formed under the respective laws of
its
jurisdiction of formation set forth on Schedule A, and each Assignor will
provide Laurus thirty (30) days’ prior written notice of any change in any of
its respective jurisdiction of formation;
(b) its
legal
name is as set forth in its Certificate of Incorporation or other organizational
document (as applicable) as amended through the date hereof and as set forth
on
Schedule A, and it will provide Laurus thirty (30) days’ prior written notice of
any change in its legal name;
(c) its
organizational identification number (if applicable) is as set forth on Schedule
A hereto, and it will provide Laurus thirty (30) days’ prior written notice of
any change in its organizational identification number;
(d) subject
to regulatory law and rules where the Assignors operate and conduct their
business, each Assignor is the lawful owner of its Collateral and it has
the
sole right to grant a security interest therein and will defend the Collateral
against all claims and demands of all persons and entities;
(e) it
will
keep its Collateral free and clear of all attachments, levies, taxes, liens,
security interests and encumbrances of every kind and nature (“Encumbrances”),
except (i) Encumbrances securing the Obligations and (ii) Encumbrances securing
indebtedness of each such Assignor not to exceed $100,000 in the aggregate
for
all such Assignors so long as all such Encumbrances are removed or otherwise
released to Laurus’ satisfaction within ten (10) days of the creation
thereof;
(f) it
will,
at its and the other Assignors’ joint and several cost and expense keep the
Collateral in good state of repair (ordinary wear and tear excepted) and
will
not waste or destroy the same or any part thereof other than ordinary course
discarding of items no longer used or useful in its or such other Assignors’
business;
(g) it
will
not, without Laurus’ prior written consent, sell, exchange, lease or otherwise
dispose of any Collateral, whether by sale, lease or otherwise, except for
the
sale of inventory in the ordinary course of business and for the disposition
or
transfer in the ordinary course of business during any fiscal year of obsolete
and worn-out equipment or equipment no longer necessary for its ongoing needs,
having an aggregate fair market value of not more than $50,000 and only to
the
extent that:
(i) the
proceeds of each such disposition are used to acquire replacement Collateral
which is subject to Laurus’ first priority perfected security interest, or are
used to repay the Obligations or to pay general corporate expenses;
or
(ii) following
the occurrence of an Event of Default which continues to exist the proceeds
of
which are remitted to Laurus to be held as cash collateral for the
Obligations;
(h) it
will
insure or cause the Collateral to be insured in Laurus’ name (as an additional
insured and loss payee) against loss or damage by fire, theft, burglary,
pilferage, loss in transit and such other hazards as Laurus shall specify
in
amounts and under policies by insurers acceptable to Laurus and all premiums
thereon shall be paid by such Assignor and the policies delivered to Laurus.
If
any such Assignor fails to do so, Laurus may procure such insurance and the
cost
thereof shall be promptly reimbursed by the Assignors, jointly and severally,
and shall constitute Obligations;
(i) it
will,
in accordance with Section 6.6 of the Securities Purchase Agreement at all
reasonable times allow Laurus or Laurus’ representatives free access to and the
right of inspection of the Collateral;
(j) such
Assignor (jointly and severally with each other Assignor) hereby indemnifies
and
saves Laurus harmless from all loss, costs, damage, liability and/or expense,
including reasonable attorneys’ fees, that Laurus may sustain or incur to
enforce payment, performance or fulfillment of any of the Obligations and/or
in
the enforcement of this Master Security Agreement or in the prosecution or
defense of any action or proceeding either against Laurus or any Assignor
concerning any matter growing out of or in connection with this Master Security
Agreement, and/or any of the Obligations and/or any of the Collateral except
to
the extent caused by Laurus’ own gross negligence or willful misconduct (as
determined by a court of competent jurisdiction in a final and nonappealable
decision ; and
(k) On
or
prior to the Closing Date (or such later date as may be agreed by Laurus
in
writing), each Assignor will (x) irrevocably direct all of its present and
future Account Debtors (as defined below) and other persons or entities
obligated to make payments constituting Collateral to make such payments
directly to the lockboxes maintained by such Assignor (the “Lockboxes”) with
AmSouth Bank or such other financial institution accepted by Laurus in writing
as may be selected by the Company (the “Lockbox Bank”) (each such direction
pursuant to this clause (x), a “Direction Notice”) and (y) provide Laurus with
copies of each Direction Notice, each of which shall be agreed to and
acknowledged by the respective Account Debtor. The Lockbox Bank shall agree
to
deposit the proceeds of such payments immediately upon receipt thereof in
that
certain deposit account maintained at the Lockbox Bank and evidenced by the
account name of Xfone, USA, Inc. and the account number of 000905179, or
such
other deposit account accepted by Laurus in writing (the “Lockbox Deposit
Account”). On or prior to the Closing Date, the Company shall and shall cause
the Lockbox Bank to enter into all such documentation acceptable to Laurus
pursuant to which, among other things, the Lockbox Bank agrees to, following
notification by Laurus (which notification Laurus shall only give following
the
occurrence and during the continuance of an Event of Default), comply only
with
the instructions or other directions of Laurus concerning the Lockbox and
the
Lockbox Deposit Account. All of each Assignor’s invoices, account statements and
other written or oral communications directing, instructing, demanding or
requesting payment of any Account (as hereinafter defined) of any such Assignor
or any other amount constituting Collateral shall conspicuously direct that
all
payments be made to the Lockbox or such other address as Laurus may direct
in
writing. If, notwithstanding the instructions to Account Debtors, any Assignor
receives any payments, such Assignor shall immediately remit such payments
to
the Lockbox Deposit Account in their original form with all necessary
endorsements. Until so remitted, the Assignors shall hold all such payments
in
trust for and as the property of Laurus and shall not commingle such payments
with any of its other funds or property. For the purpose of this Master Security
Agreement, (x) “Accounts” shall mean all “accounts”, as such term is
defined in the Uniform Commercial Code as in effect in the State of New York
on
the date hereof, now owned or hereafter acquired by any Assignor and (y)
“Account Debtor” shall mean any person or entity who is or may be obligated with
respect to, or on account of, an Account.
(l) No
account debtor notification letter, substantially in the form and substance
delivered to Laurus on the date hereof shall be sent to any Account Debtor
absent an Event of Default that has occurred and is continuing beyond any
applicable grace period.
4. The
occurrence of any of the following events or conditions shall constitute
an
“Event of Default” under this Master Security Agreement:
(a) any
covenant or any other term or condition of this Master Security Agreement
is
breached in any material respect and such breach, to the extent subject to
cure,
shall continue without remedy for a period of twenty (20) days after the
occurrence thereof;
(b) any
representation or warranty, or statement made or furnished to Laurus under
this
Master Security Agreement by any Assignor or on any Assignor’s behalf should
prove to any time be false or misleading in any material respect on the date
as
of which made or deemed made;
(c) the
loss,
theft, substantial damage, destruction, sale or encumbrance to or of any
of the
Collateral or the making of any levy, seizure or attachment thereof or thereon
except to the extent:
(i) such
loss
is covered by insurance proceeds which are used to replace the item or repay
Laurus; or
(ii) said
levy, seizure or attachment does not secure indebtedness in excess of $100,000
in the aggregate for all Assignors and such levy, seizure or attachment has
been
removed or otherwise released within ten (10) days of the creation or the
assertion thereof;
(d) an
Event
of Default shall have occurred under and as defined in any Document.
5. Upon
the
occurrence and during the continuance of any Event of Default and at any
time
thereafter, Laurus may declare all Obligations immediately due and payable
and
Laurus shall have the remedies of a secured party provided in the Uniform
Commercial Code as in effect in the State of New York, this Agreement and
other
applicable law. Upon the occurrence of any Event of Default and at any time
thereafter, Laurus will have the right to take possession of the Collateral
and
to maintain such possession on any Assignor’s premises or to remove the
Collateral or any part thereof to such other premises as Laurus may desire.
Upon
Laurus’ request, each Assignor shall assemble or cause the Collateral to be
assembled and make it available to Laurus at a place designated by Laurus.
If
any notification of intended disposition of any Collateral is required by
law,
such notification, if mailed, shall be deemed properly and reasonably given
if
mailed at least ten (10) days before such disposition, postage prepaid,
addressed to the applicable Assignor either at such Assignor’s address shown
herein or at any address appearing on Laurus’ records for such Assignor. Any
proceeds of any disposition of any of the Collateral shall be applied by
Laurus
to the payment of all expenses in connection with the sale of the Collateral,
including reasonable attorneys’ fees and other legal expenses and disbursements
and the reasonable expenses of retaking, holding, preparing for sale, selling,
and the like, and any balance of such proceeds may be applied by Laurus toward
the payment of the Obligations in such order of application as Laurus may
elect,
and each Assignor shall be liable for any deficiency. For the avoidance of
doubt, following the occurrence and during the continuance of an Event of
Default, Laurus shall have the immediate right to withdraw any and all monies
contained in any deposit account in the name of any Assignor and controlled
by
Laurus and apply same to the repayment of the Obligations (in such order
of
application as Laurus may elect).
6. If
any
Assignor defaults in the performance or fulfillment of any of the terms,
conditions, promises, covenants, provisions or warranties on such Assignor’s
part to be performed or fulfilled under or pursuant to this Master Security
Agreement, Laurus may, at its option without waiving its right to enforce
this
Master Security Agreement according to its terms, immediately or at any time
thereafter and without notice to any Assignor, perform or fulfill the same
or
cause the performance or fulfillment of the same for each Assignor’s joint and
several account and at each Assignor’s joint and several cost and expense, and
the cost and expense thereof (including reasonable attorneys’ fees) shall be
added to the Obligations and shall be payable on demand with interest thereon
at
the highest rate permitted by law, or, at Laurus’ option, debited by Laurus from
any other deposit accounts in the name of any Assignor and controlled by
Laurus.
7. Each
Assignor appoints Laurus, any of Laurus’ officers, employees or any other person
or entity whom Laurus may designate as such Assignor’s attorney, with power to
execute such documents in each such Assignor’s behalf and to supply any omitted
information and correct patent errors in any documents executed by any Assignor
or on any Assignor’s behalf; to file financing statements against such Assignor
covering the Collateral (and, in connection with the filing of any such
financing statements, describe the Collateral as “all assets and all personal
property, whether now owned and/or hereafter acquired” (or any substantially
similar variation thereof)); to sign such Assignor’s name on public records; and
to do all other things Laurus deem necessary to carry out this Master Security
Agreement. Each Assignor hereby ratifies and approves all acts of the attorney
and neither Laurus nor the attorney will be liable for any acts of commission
or
omission, nor for any error of judgment or mistake of fact or law other than
gross negligence or willful misconduct (as determined by a court of competent
jurisdiction in a final and non-appealable decision). This power being coupled
with an interest, is irrevocable so long as any Obligations remains unpaid.
8. No
delay
or failure on Laurus’ part in exercising any right, privilege or option
hereunder shall operate as a waiver of such or of any other right, privilege,
remedy or option, and no waiver whatever shall be valid unless in writing,
signed by Laurus and then only to the extent therein set forth, and no waiver
by
Laurus of any default shall operate as a waiver of any other default or of
the
same default on a future occasion. Laurus’ books and records containing entries
with respect to the Obligations shall be admissible in evidence in any action
or
proceeding, shall be binding upon each Assignor for the purpose of establishing
the items therein set forth and shall constitute prima facie proof thereof.
Laurus shall have the right to enforce any one or more of the remedies available
to Laurus, successively, alternately or concurrently. Each Assignor agrees
to
join with Laurus in executing such documents or other instruments to the
extent
required by the Uniform Commercial Code in form satisfactory to Laurus and
in
executing such other documents or instruments as may be required or deemed
necessary by Laurus for purposes of affecting or continuing Laurus’ security
interest in the Collateral.
9. THIS
MASTER SECURITY AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED
IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS
MADE
AND PERFORMED IN SUCH STATE, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF
LAWS.
All of the rights, remedies, options, privileges and elections given to Laurus
hereunder shall inure to the benefit of Laurus’ successors and assigns. The term
“Laurus” as herein used shall include Laurus, any parent of Laurus’, any of
Laurus’ subsidiaries and any co-subsidiaries of Laurus’ parent, whether now
existing or hereafter created or acquired, and all of the terms, conditions,
promises, covenants, provisions and warranties of this Agreement shall inure
to
the benefit of each of the foregoing, and shall bind the representatives,
successors and assigns of each Assignor.
10. Each
Assignor hereby consents and agrees that the state of federal courts located
in
the County of New York, State of New York shall have exclusive jurisdiction
to
hear and determine any claims or disputes between Assignor, on the one hand,
and
Laurus, on the other hand, pertaining to this Master Security Agreement or
to
any matter arising out of or related to this Master Security Agreement,
provided, that Laurus and each Assignor acknowledges that any appeals from
those
courts may have to be heard by a court located outside of the County of New
York, State of New York, and further provided, that nothing in this Master
Security Agreement shall be deemed or operate to preclude Laurus from bringing
suit or taking other legal action in any other jurisdiction to collect, the
Obligations, to realize on the Collateral or any other security for the
Obligations, or to enforce a judgment or other court order in favor of Laurus.
Each Assignor expressly submits and consents in advance to such jurisdiction
in
any action or suit commenced in any such court, and each Assignor hereby
waives
any objection which it may have based upon lack of personal jurisdiction,
improper venue or forum non conveniens.
Each
Assignor hereby waives personal service of the summons, complaint and other
process issues in any such action or suit and agrees that service of such
summons, complaint and other process may be made by registered or certified
mail
addressed to such assignor at the address set forth on the signature lines
hereto and that service so made shall be deemed completed upon the earlier
of
such Assignor’s actual receipt thereof or three (3) days after deposit in the
U.S. mails, proper postage prepaid.
The
parties desire that their disputes be resolved by a judge applying such
applicable laws. Therefore, to achieve the best combination of the benefits
of
the judicial system and of arbitration, the parties hereto waive all rights
to
trial by jury in any action, suite, or proceeding brought to resolve any
dispute, whether arising in contract, tort, or otherwise between Laurus,
and/or
any Assignor arising out of, connected with, related or incidental to the
relationship established between them in connection with this Master Security
Agreement or the transactions related hereto.
11. It
is
understood and agreed that any person or entity that desires to become an
Assignor hereunder, or is required to execute a counterpart of this Master
Security Agreement after the date hereof pursuant to the requirements of
any
Document, shall become an Assignor hereunder by (x) executing a Joinder
Agreement in form and substance satisfactory to Laurus, (y) delivering
supplements to such exhibits and annexes to such Documents as Laurus shall
reasonably request and (z) taking all actions as specified in this Master
Security Agreement as would have been taken by such Assignor had it been
an
original party to this Master Security Agreement, in each case with all
documents required above to be delivered to Laurus and with all documents
and
actions required above to be taken to the reasonable satisfaction of
Laurus.
12. All
notices from Laurus to any Assignor shall be sufficiently given if mailed
or
delivered to such Assignor’s address set forth pursuant to the provisions of
Section 11.8 of the Securities Purchase Agreement.
13. This
Master Security Agreement shall terminate and be of no further force or effect
and expire upon the irrevocable repayment in full of the Obligations. Without
prejudice to the generality of the above, if the all of the Obligations have
been satisfied through the conversion into common stock of Xfone, Inc. and/or
the Note has been redeemed prior to its Maturity Date (as defined therein)
then
Laurus will within seven (7) days of such event remove all liens, interests
and
other such legal and financial security interests, including the UCC-1 Filings
existing in its favor against the Collateral.
Very
truly yours,
XFONE,
INC.
By:
____________________
Name:
Xxx
Xxxxxxxxx
Title:
President & CEO
Address:
XFONE
USA, INC.
By:
____________________
Name:
Xxxx Xxxxxxx
Title:
President & CEO
Address:
EXPETEL
COMMUNICATIONS, INC.
By:
____________________
Name:
Xxxx Xxxxxxx
Title:
President & CEO
Address:
GULF
COAST UTILITIES, INC.
By:
____________________
Name:
Xxxx Xxxxxxx
Title:
President & CEO
Address:
ACKNOWLEDGED:
LAURUS
MASTER FUND, LTD.
By:______________________
Name:
Title:
SCHEDULE
A
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Entity
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Jurisdiction
of
Formation
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Organization
Identification Number
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XFONE,
INC.
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Nevada
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C23688-2000
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XFONE
USA, INC.
|
Mississippi
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856153
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EXPETEL
COMMUNICATIONS, INC
|
Mississippi
|
711539
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GULF
COAST UTILITIES, INC.
|
Mississippi
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741008
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