SECURITY AGREEMENT
This Security Agreement ("Agreement") is entered into as of
March __, 2001 by and between I-Link Communications, Inc., a Utah corporation
and MiBridge, Inc., a Utah corporation, (collectively referred to herein as the
"Borrower") and Counsel Communications LLC, a Delaware corporation ("Lender").
WHEREAS, Lender has agreed to provide Borrower with periodic
loans in the aggregate amount of up to Ten Million Dollars ($10,000,000),
subject to certain express terms and conditions, commencing on the date hereof
and for the duration of the Term (the "Loan");
WHEREAS, in consideration of such loans, Borrower agrees
hereby to grant Lender a security interest in certain collateral, all as defined
herein; and
WHEREAS, Borrower and Lender desire to enter into this
Agreement on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the foregoing and for
other good and valuable consideration, the receipt and adequacy of which is
hereby acknowledged, the parties hereto agree as follows:
Section 1. PERIODIC LOANS. From and after the date hereof,
through and until the termination of the Term, Lender hereby agrees, subject to
the terms and conditions contained herein, to make periodic loans to Borrower's
parent, I-Link, Incorporated in an aggregate principal amount at any one time
outstanding, not to exceed Ten Million Dollars ($10,000,000).
Section 2. CREATION OF SECURITY INTEREST. In order to secure
the payment of all obligations of I-Link, Incorporated to Lender whether now or
hereafter arising, including all obligations under this Agreement, that certain
Loan Note entered into by and between Lender and I-Link, Incorporated dated as
of March 1, 2001, and any and all amendments, modifications, renewals or
restatements hereof (the "Secured Obligations"). The Borrower hereby grants to
the Lender (or its designee) (the "Secured Parties") a first priority security
interest in all of Borrower's assets, now owned or hereinafter acquired, now in
existence or hereafter arising, wherever located (the "Collateral"), including,
without limitation the property described below on the terms and conditions set
forth in this Agreement:
(a) presently existing and hereafter arising accounts,
contract rights, and all other forms of obligations owing to Borrower arising
out of the sale or lease of goods or the rendition of services by Borrower,
whether or not earned by performance, and any and all credit insurance,
guaranties, and other security therefor, as well as all merchandise returned to
or reclaimed by Borrower and Borrower's Books relating to any of the foregoing
(collectively, "Accounts");
(b) present and future general intangibles and other personal
property (including choses or things in action, goodwill, patents, trade names,
trademarks, servicemarks, copyrights, blueprints, drawings, purchase orders,
customer lists, monies due or recoverable from pension funds, route lists,
monies due under any royalty or licensing agreements, infringement claims,
computer programs, computer discs, computer tapes, literature, reports,
catalogs, deposit accounts, insurance premium rebates, tax refunds and tax
refund claims) other than goods and Accounts, and Borrower's Books relating to
any of the foregoing (collectively, "General Intangibles");
(c) present and future letters of credit, notes, drafts,
instruments, certificated and uncertificated securities, documents, leases, and
chattel paper, and Borrower's Books relating to any of the foregoing
(collectively, "Negotiable Collateral");
(d) present and future inventory in which Borrower has any
interest, including goods held for sale or lease or to be furnished under a
contract of service and all of Borrower's present and future raw materials, work
in process, finished goods, and packing and shipping materials, wherever
located, and any documents of title representing any of the above, and
Borrower's Books relating to any of the foregoing (collectively, "Inventory");
(e) present and hereafter acquired computers, communications
equipment, software code, network servers, switches and other related equipment,
and any interest in any of the foregoing, and all attachments, accessories,
accessions, replacements, substitutions, additions, and improvements to any of
the foregoing, wherever located (collectively, "Equipment");
(f) books and records including: ledgers; records indicating,
summarizing, or evidencing Borrower's assets or liabilities or the Collateral;
all information relating to Borrower's business operations or financial
condition; and all computer programs, disc or tape files, printouts, funds or
other computer prepared information, and the equipment containing such
information (collectively, "Borrower's Books"); and
(g) substitutions, replacements, additions, accessions,
proceeds, products to or of any of the foregoing, including, but not limited to,
proceeds of insurance covering any of the foregoing, or any portion thereof, and
any and all Accounts, General Intangibles, Negotiables, Collateral, Inventory,
Equipment, money, deposits, accounts, or other tangible or intangible property
resulting from the sale or other disposition of the accounts, general
Intangibles, Negotiable Collateral, Inventory, Equipment, or any portion thereof
or interest therein and the proceeds thereof.
Section 3. ORDER OF PAYMENTS. Any and all amounts actually
received by the Lender in connection with the enforcement of this Agreement,
including the proceeds of any collection, sale or other disposition of all or
any part of the Collateral (collectively, the "Proceeds"), shall, promptly upon
receipt by the Lender, be applied:
(i) first, to the payment in full of the Secured Obligations,
or in the event that such Proceeds are insufficient to pay in full the Secured
Obligations, to the Secured Obligations of the Secured Parties in the following
order of priority:
(A) to all interest (including default interest) owing
to the Secured Parties on Secured Obligations, such amounts to be allocated to
each Secured Party in accordance with its pro rata share of loans outstanding to
Borrower at such time; then
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(B) to principal amounts owing to the Secured Parties
on Secured Obligations, such amounts to be allocated to each Secured Party in
accordance with its pro rata share of loans outstanding to Borrower at such
time;
(C ) any other fees or expenses incurred hereunder; and
(ii) second, to the Borrower or in the manner that a court
of competent jurisdiction shall direct.
Section 4. EVENTS OF DEFAULT. The Borrower shall be in
default under this Agreement when any of the following events or conditions
occurs (each an "Event of Default"):
(a) I-Link, Incorporated shall fail to pay any of the
Secured Obligations pursuant to terms of this Agreement;
(b) The occurrence of an event of default under that certain
Senior Convertible Loan and Security Agreement between Lender and I-Link,
Incorporated.
(c) Borrower fails to comply with any term, obligation,
covenant, or condition contained in this Agreement;
(d) Any warranty or representation made to the Lender by the
Borrower under this Agreement proves to have been false when made or furnished;
(e) If the Borrower voluntarily files a petition under the
federal Bankruptcy Act, as such Act may from time to time be amended, or under
any similar or successor federal statute relating to bankruptcy, insolvency,
arrangements or reorganizations, or under any state bankruptcy or insolvency
act, or files an answer in an involuntary proceeding admitting insolvency or
inability to pay debts, or if the Borrower is adjudged a bankrupt, or if a
trustee or receiver is appointed for the Borrower's property, or if the
Collateral becomes subject to the jurisdiction of a federal bankruptcy court or
similar state court, or if the Borrower makes an assignment for the benefit of
its creditors, or if there is an attachment, receivership, execution or other
judicial seizure, then the Lender may, at the Lender's option, declare all of
the sums secured by this Agreement to be immediately due and payable without
prior notice to the Borrower, and the Lender may invoke any remedies permitted
by this Agreement. Any attorneys' fees and other expenses incurred by the Lender
in connection with the Borrower's bankruptcy or any of the other events
described in this Section shall be additional indebtedness of the Borrower
secured by this Agreement.
Notwithstanding the above, in the event any payments are not received
on the date on which they are due as provided in Sections 4(a) and 4(b)
hereinabove, Borrower shall have five (5) business days in which to pay any such
sums due and owing, provided Borrower notifies Lender of the reason for such
delay. In the event Lender receives payment of any such sums within said five
(5) day period from Borrower, no event of default or Default shall occur or be
deemed to have occurred.
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Section 5. RIGHTS OF SECURED PARTIES.
(a) Upon an Event of Default, the Secured Parties may require
the Borrower to assemble the Collateral and make it available to the Secured
Parties at the place to be designated by the Secured Parties which is reasonably
convenient to the parties. The Secured Parties may sell all or any part of the
Collateral as a whole or in parcels either by public auction, private sale, or
other method of disposition. The Secured Parties may bid at any public sale on
all or any portion of the Collateral. Unless the Collateral is perishable or
threatens to decline speedily in value or is of the type customarily sold on a
recognized market, the Secured Parties shall give the Borrower reasonable notice
of the time and place of any public sale or of the time after which any private
sale or other disposition of the Collateral is to be made, and notice given at
least ten (10) days before the time of the sale or other disposition shall be
conclusively presumed to be reasonable. A public sale in the following fashion
shall be conclusively presumed to be reasonable:
(b) Notice shall be given at least ten (10) days before the
date of sale by publication once in a newspaper of general circulation published
in the county in which the sale is to be held;
(c) The sale shall be held in a county in which the
Collateral or any part is located or in a county in which the Borrower has a
place of business;
(d) Payment shall be in cash or by certified check
immediately following the close of the sale;
(e) The sale shall be by auction, but it need not be by a
professional auctioneer;
(f) The Collateral may be sold as is and without any
preparation for sale.
(g) Notwithstanding any provision of this Agreement, the
Secured Parties shall be under no obligation to offer to sell the Collateral. In
the event the Secured Parties offer to sell the Collateral, the Secured Parties
will be under no obligation to consummate a sale of the Collateral if, in their
reasonable business judgment, none of the offers received by them reasonably
approximates the fair value of the Collateral.
(h) In the event the Secured Parties elect not to sell the
Collateral, the Secured Parties may elect to follow the procedures set forth in
the Uniform Commercial Code for retaining the Collateral in satisfaction of the
Borrower's obligation, subject to the Borrower's rights under such procedures.
(i) In addition to the rights under this Agreement, in the
event of a default by the Borrower, the Secured Parties shall be entitled to the
appointment of a receiver for the Collateral as a matter of right whether or not
the apparent value of the Collateral exceeds the outstanding principal amount of
the Notes and any receiver appointed may serve without bond. Employment by the
Secured Parties shall not disqualify a person from serving as receiver.
Section 6. EXPENSES. Borrower agrees to pay all reasonable
costs and
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expenses incurred by Lender in connection with this Agreement, including but
not limited to filing fees, recording taxes in connection with such filings
and reasonable attorneys' fees actually incurred, promptly upon demand of
Lender.
Section 7. REMEDIES CUMULATIVE. Each remedy provided in this
Agreement is distinct and cumulative to all other rights or remedies under this
Agreement or afforded by law or equity, and may be exercised concurrently,
independently, or successively, in any order whatsoever.
Section 8. NOTICES. All notices and other communications
hereunder shall be in writing and shall be deemed given if delivered personally,
sent by overnight courier or telecopied (with a confirmatory copy sent by
overnight courier) to the parties at the following addresses (or at such other
address for a party as shall be specified by like notice):
If to Borrower , to:
I-Link, Incorporated
00000 X. Xxxxxxxxx Xxxx Xxxxx
Xxxxxx, XX 00000
Attention: Xxxxx Xxxxx, Esq.
Facsimile: 000-000-0000
Telephone: 000-000-0000
with a copy to:
De Xxxxxxx Xxxxxxxxxxx Xxxxx & Xxxxx
0000 X Xxxxxx, X.X.
Xxxxx 000
Xxxxxxxxxx, XX 00000
Attention: Xxxxx X. Xx Xxxxxxx, Esq.
Facsimile: 000-000-0000
Telephone: 000-000-0000
If to Lender, to:
Counsel Corporation (US)
000 Xxxx Xxxxxx
Xxxx Xxxxxxxx, 00xx floor
New York, New York 10017
Attention: Xxxxx Xxxxxx
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
with a copy to:
Xxxxxxx Xxxxxx Xxxx Xxxxxxx & Manner, P.C.
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000 Xxxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxx, Xxxxxxxxx 00000
Attention: Xxxx Manner
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
Section 9. INTERPRETATION. When a reference is made in this
Agreement of a Section, such reference shall be to a Section of this Agreement
unless otherwise indicated, and the words "hereof," "herein" and "hereunder" and
similar terms refer to this Agreement as a whole and not to any particular
provision of this Agreement, unless the context otherwise requires. The headings
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement. Whenever the words
"include," "includes" or "including" are used in this Agreement, they shall be
deemed to be followed by the words "without limitation."
Section 10. COUNTERPARTS. This Agreement may be executed in
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties.
Section 11. ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARIES.
This Agreement, and the Notes, (i) constitute the entire agreement between the
parties hereto and supersedes all prior agreements and understandings, both
written and oral, among the parties with respect to the subject matter hereof
and (ii) are not intended to confer upon any person other than the parties any
rights or remedies hereunder.
Section 12. GOVERNING LAW. This Agreement shall be governed
by, and construed in accordance with, the laws of the State of New York,
regardless of the laws that might otherwise govern under applicable principles
of conflicts of laws thereof.
Section 13. ASSIGNMENT. Neither this Agreement nor any of the
rights, interests or obligations hereunder may be assigned by operation of law
or otherwise by the Borrower without the prior written consent of the Lender,
and any such purported assignment without the express prior written consent of
the Lender party shall be void ab initio; and the Lender may assign any or all
of the rights, interests or obligations hereunder to any party. Notwithstanding
the above, Lender shall not unreasonably withhold consent upon written
application of Borrower for such consent. Subject to the preceding sentence,
this Agreement shall be binding upon, inure to the benefit of, and be
enforceable by, the parties and their respective successors and assigns.
Section 14. SEVERABILITY. If any term or other provision of
this Agreement is invalid, illegal or incapable of being enforced by any rule of
law, or public policy, all other conditions and provisions of this Agreement
shall nevertheless remain in full force and effect so long as the economic or
legal substance of the transactions contemplated hereby are not affected in any
manner materially adverse to any party. Upon such determination that any term or
other provision is invalid, illegal or incapable of being enforced, the parties
shall negotiate in good
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faith to modify this Agreement so as to effect he original intent of the
parties as closely as possible in a mutually acceptable manner in order that
the transactions be consummated as originally contemplated to the fullest
extent possible.
Section 15. CONSENT TO JURISDICTION. In the event that any
legal proceedings are commenced in any court with respect to any matter arising
under this Agreement, the parties hereto specifically consent and agree that the
courts of the State of New York and/or the Federal Courts located in the State
of New York shall have jurisdiction over each of the parties hereto and over the
subject matter of any such proceedings, and the venue of any such action shall
be in New York County, New York and/or the U.S. District Court for the Southern
District of New York.
[Remainder of this page is intentionally blank.]
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IN WITNESS WHEREOF, Borrower and Lender have executed this
Agreement as of the date first written above.
BORROWER:
I-LINK COMMUNICATIONS, INC.
By:
--------------------------------
Name:
Title:
MIBRIDGE, INC.
By:
--------------------------------
Name:
Title:
LENDER:
COUNSEL COMMUNICATIONS LLC
By:
--------------------------------
Name:
Title:
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