Exhibit 10.65
VENTURES-NATIONAL INCORPORATED
D/B/A TITAN GENERAL HOLDINGS, INC.
SECURITY AGREEMENT
To: Laurus Master Fund, Ltd.
c/o Onshore Corporate Services, Ltd.
X.X. Xxx 0000 G.T
Queensgate House
South Church Street
Grand Cayman, Cayman Islands
Gentlemen:
1. To secure the payment of all Obligations (as hereafter defined), we
hereby grant to you a continuing security interest in all of the following
property now owned or at any time hereafter acquired by us, or in which we now
have or at any time in the future may acquire any right, title or interest (the
"Collateral"): all accounts, inventory, equipment, goods, 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
our affiliates, but not own intellectual property), chattel paper, supporting
obligations, investment property, letter-of-credit rights, trademarks and
tradestyles in which we now have 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 we wish to finance the acquisition of any hereafter
acquired equipment and have obtained a commitment from a financing source to
finance such equipment from an unrelated third party, you agree to release your
security interest on such hereafter acquired equipment so financed by such third
party financing source.
2. The term "Obligations" as used herein shall mean and include all
debts, liabilities and obligations owing by us to you hereunder and under
whether arising under, out of, or in connection with that certain SECURITIES
PURCHASE AGREEMENT dated as of the date hereof by and between the undersigned
and Laurus Master Fund, Ltd. ("Laurus") (the "Securities Purchase Agreement"),
that certain SECURED CONVERTIBLE NOTE dated as of the date hereof made by in
favor of Laurus (the "Term Note"), THE WARRANT dated as of the date hereof made
by the undersigned in favor of Laurus in connection with the Term Note (the
"Term Note Warrant"), that certain REGISTRATION RIGHTS AGREEMENT dated as of the
date hereof by and between the undersigned and Laurus in connection with the
Term Note (the "Term Note Registration Rights Agreement"), that certain SECURITY
AGREEMENT dated as of the date hereof by and between the undersigned and Laurus
(the "Security Agreement"), that certain SECURED REVOLVING NOTE dated as of the
date hereof made by the undersigned in favor of Laurus (the "Revolving Note"),
that certain SECURED CONVERTIBLE MINIMUM BORROWING NOTE dated as of the date
hereof made by the undersigned in favor of Laurus (the "MB Note"), THE WARRANT
dated as of the date hereof made by the undersigned in favor of Laurus in
connection with the MB Note (the "MB Warrant"), or that
certain REGISTRATION RIGHTS AGREEMENT dated as of the date hereof by and between
the undersigned and Laurus in connection with the MB Note (the "MB Registration
Rights Agreement") (the Securities Purchase Agreement, the Term Note, the Term
Note Warrant and the Term Note Registration Rights Agreement, the Security
Agreement, the Revolving Note, the MB Note, the MB Warrant and the MB
Registration Rights Agreement as each may be amended, modified, restated or
supplemented from time to time, are collectively referred to herein as the
"Documents").
3. We hereby represent, warrant and covenant to you that:
(a) we are a company validly existing, in good standing and
formed under the laws of the State of Utah and we will provide you
thirty (30) days' prior written notice of any change in our state of
formation;
(b) our legal name is Ventures-National Incorporated d/b/a
Titan General Holdings, Inc., as set forth in our Certificate of
Incorporation as amended through the date hereof;
(c) we are the lawful owner of the Collateral and have the
sole right to grant a security interest therein and will defend the
Collateral against all claims and demands of all persons and entities;
(d) we will keep the Collateral free and clear of all
attachments, levies, taxes, liens, security interests and encumbrances
of every kind and nature ("Encumbrances"), other than encumbrances set
forth on Schedule 3(d) hereto, ("Permitted Encumbrances"), except to
the extent said Encumbrance does not secure indebtedness in excess of
$100,000 and such Encumbrance is removed or otherwise released within
ten (10) days of the creation thereof;
(e) we will at our own 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 our business;
(f) we will not without your prior written consent, sell,
exchange, lease or otherwise dispose of the 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 our ongoing
needs, having an aggregate fair market value of not more than $25,000
and only to the extent that:
(i) the proceeds of any such disposition are used to
acquire replacement Collateral which is subject to your first
priority security interest or are used to repay Obligations or
to pay general corporate expenses; or
(ii) following the occurrence of an Event of Default
(as hereinafter defined) which continues to exist the proceeds
of which are remitted to you (to be
2
held as cash collateral by you for the Obligations until such
time as the Event of Default no longer exists);
(g) we will insure the Collateral in your name against loss or
damage by fire, theft, burglary, pilferage, loss in transit and such
other hazards as you shall specify in amounts and under policies by
insurers acceptable to you and all premiums thereon shall be paid by us
and the policies delivered to you. If we fail to do so, you may procure
such insurance and the cost thereof shall constitute Obligations;
(h) we will at all reasonable times allow you or your
representatives free access to and the right of inspection of the
Collateral;
(i) we hereby indemnify and save you harmless from all loss,
costs, damage, liability and/or expense, including reasonable
attorneys' fees, that you may sustain or incur to enforce payment,
performance or fulfillment of any of the Obligations and/or in the
enforcement of this Agreement or in the prosecution or defense of any
action or proceeding either against you or us concerning any matter
growing out of or in connection with this Agreement, and/or any of the
Obligations and/or any of the Collateral except to the extent caused by
your own gross negligence or willful misconduct.
4. We shall be in default under this Agreement upon the happening of
any of the following events or conditions, each such event or condition an
"Event of Default:"
(a) we shall fail to pay when due or punctually perform any of
the Obligations and such failure shall continue for a period of three
(3) days following such failure to pay or punctually perform, or for a
period of thirty (30) days following default for any other such
failure;
(b) any covenant, warranty, representation or statement made
or furnished to you by us or on our behalf was false in any material
respect when made or furnished;
(c) the loss, theft, substantial damage, destruction, sale or
encumbrance not permitted hereunder 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, theft, substantial damage, or
destruction is covered by insurance proceeds which are used to
replace the item or repay us; or
(ii) said levy, seizure or attachment does not secure
indebtedness in excess of $100,000 and such levy, seizure or
attachment has not been removed or otherwise released within
thirty (30) days after the creation or the assertion thereof;
(d) we shall become insolvent, cease operations, dissolve,
terminate our business existence, make an assignment for the benefit of
creditors, suffer the appointment of a receiver, trustee, liquidator or
custodian of all or any part of our property;
3
(e) any proceedings under any bankruptcy or insolvency law
shall be commenced by or against us and if commenced against us shall
not be dismissed within sixty (60) days after the commencement thereof;
(f) we shall repudiate, purport to revoke or fail to perform
any of our obligations under the Note (after passage of applicable cure
period, if any); or
(g) an Event of Default shall have occurred under and as
defined in the Notes.
5. Upon the occurrence of any Event of Default and at any time
thereafter, you may declare all Obligations immediately due and payable and you
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, you
will have the right to take possession of the Collateral and to maintain such
possession on our premises or to remove the Collateral or any part thereof to
such other premises as you may desire. Upon your request, we shall assemble the
Collateral and make it available to you at a place designated by you. 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
us, Attention: President, either at our address shown herein or as may be
amended by us in writing to you from time to time. Any proceeds of any
disposition of any of the Collateral shall be applied by you to the payment of
all expenses in connection with the sale of the Collateral, including reasonable
attorneys' fees and disbursements and the reasonable expense of retaking,
holding, preparing for sale, selling, and the like, and any balance of such
proceeds may be applied by you toward the payment of the Obligations in such
order of application as you may elect, and we shall be liable for any
deficiency.
6. If we default in any material respect in the performance or
fulfillment of any of the terms, conditions, promises, covenants, provisions or
warranties on our part to be performed or fulfilled under or pursuant to this
Agreement, you may, at your option without waiving your right to enforce this
Agreement according to its terms, immediately or at any time thereafter and
without notice to us, perform or fulfill the same or cause the performance or
fulfillment of the same for our account and at our sole 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 your option, debited by you from the
account pledged to you in connection with this Agreement (the"Pledged Account"),
the details of which are set forth on Schedule 6, attached hereto.
7. We appoint you, any of your officers, employees or any other person
or entity whom you may designate as our attorney-in-fact, with power to execute
such documents in our behalf and to supply any omitted information and correct
patent errors in any documents executed by us or on our behalf; to file
financing statements against us covering the Collateral; to sign our name on
public records; and to do all other things you deem necessary to carry out this
Agreement. We hereby ratify and approve all acts of the attorney-in-fact and
neither you nor the attorney-in-fact 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. This power being coupled with an
interest, is irrevocable so long as any Obligations remains unpaid.
4
8. No delay or failure on your 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 you and then only to the extent therein set forth, and no
waiver by you of any default shall operate as a waiver of any other default or
of the same default on a future occasion. Your books and records containing
entries with respect to the Obligations shall be admissible in evidence in any
action or proceeding, shall be binding upon us for the purpose of establishing
the items therein set forth and shall constitute prima facie proof thereof. You
shall have the right to enforce any one or more of the remedies available to
you, successively, alternately or concurrently. We agree to join with you in
executing financing statements or other instruments to the extent required by
the Uniform Commercial Code in form satisfactory to you and in executing such
other documents or instruments as may be required or deemed necessary by you for
purposes of affecting or continuing your security interest in the Collateral.
9. This Agreement shall be governed by and construed in accordance with
the laws of the State of New York, without giving effect to conflicts of law
principles and cannot be terminated orally. All of the rights, remedies,
options, privileges and elections given to you hereunder shall inure to the
benefit of your successors and assigns. The term "you" as herein used shall
include your company, any parent of your company, any of your subsidiaries and
any co-subsidiaries of your 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 and shall bind the
representatives, successors and assigns of each of us and them. You and we
hereby (a) waive any and all right to trial by jury in litigation relating to
this Agreement and the transactions contemplated hereby and we agree not to
assert any counterclaim in such litigation, (b) submit to the nonexclusive
jurisdiction of any New York State court sitting in the borough of Manhattan,
the city of New York and (c) waive any objection you or we may have as to the
bringing or maintaining of such action with any such court.
5
10. All notices from you to us shall be sufficiently given if mailed or
delivered to us at our address set forth below.
Very truly yours,
VENTURES-NATIONAL INCORPORATED
D/B/A TITAN GENERAL HOLDINGS, INC.
By: /s/ Xxxxxx Xxxxxxx
---------------------------
Name: Xxxxxx Xxxxxxx
---------------------------
ACKNOWLEDGED: Title: President
---------------------------
LAURUS MASTER FUND, LTD. Address:
By: /s/ Xxxxx Grin
---------------------------
Name: Xxxxx Grin
---------------------------
Title:
---------------------------
6
