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EXHIBIT 10.2
SECURITY AGREEMENT
(hereinafter the "Security Agreement")
Dated: March 29, 2000
Section One
Promise to Pay; Collateral
Security Agreement
Sonus Communication Holdings, Inc. a Delaware corporation located at
0000 Xxxxxx Xxxxxxxxx, Xxxxx 0000, Xxxxxxxxx, Xxxxxxxx 00000, jointly and
severally with Empire One Telecommunications, Inc., a Delaware corporation,
located at 000 Xxxx 00xx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000 ("Borrowers"), have
delivered that certain Collateral Note of even date herewith ("Collateral
Note") to Citizens Telecommunications Company ("Secured Party"), in the
principal amount of Three Hundred Fifty Eight Thousand Four Hundred Sixty One
and 88/100 Dollars ($358,461.88), payable as follows:
In order to secure payment of the Collateral Note, Borrowers hereby
grant to Secured Party a security interest in the following collateral: all of
Sonus Communication Holdings, Inc. and Empire One Telecommunications, Inc.'s
now owned and hereafter acquired accounts, including, but not limited to,
accounts receivable and contract rights, client base list, chattel paper,
documents and instruments and the right to receive payment under them (the
"Collateral").
Section Two
Events of Default
At the option of the Secured Party, all obligations shall become
immediately due and payable upon the occurrence of any of the following events
of default and the expiration of the applicable cure period:
(a) Default in the payment or performance of any payment liability or
payment obligation of any of the undersigned, or of any maker, endorser, or
guarantor of any liability or obligation of any of the undersigned to the
Secured Party;
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(b) Death, 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 proceedings under
any bankruptcy or insolvency laws by or against, any maker, endorser, or
guarantor of the Collateral Note (except for the filing of any involuntary
petition under bankruptcy laws that is set aside or withdrawn or ceases to be
in effect within thirty (30) days of such filing);
(c) Any representation or warranty or any other statement of a
material fact herein or in any writing, certificate, report, or statement at
any time furnished to Secured Party pursuant to or in connection with this
Security Agreement, or otherwise, is false or misleading in any material
respect.
Secured Party agrees to grant a cure period of ten (10) business days
after written notice of default has been given to the undersigned corporation.
A notice of default shall be deemed delivered if mailed by registered or
certified mail or sent by courier or express service guaranteeing overnight
delivery to the Borrowers and the Guarantors at the addresses first above
given or such other address as the Borrowers and Guarantors may from time to
time designate in writing.
Section Three
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Remedies on Default
Upon the occurrence of any such events of default, which have not been
cured within the applicable cure period, and at any later time, the Secured
Party shall have the following remedies:
(a) The Secured Party may, (subject to the provisions of the Stock
Pledge and Escrow Agreement of even date herewith, a copy of which is attached
hereto as Exhibit A) at its option, transfer at any time to itself or to its
nominee any securities pledged as collateral, and receive the income from such
securities, and hold the income as security, or apply it on the principal or
interest due under the Collateral Note;
(b) any deposits or other sums any time credited by or due from the
Secured Party to any maker, endorser, or guarantor of the Collateral Note, and
any securities or other property of any maker, endorser, or guarantor in
possession of the Secured Party, may at all times be held and treated as
collateral security for the payment of the obligations. The Secured Party
shall apply or set off such deposits or other sums against the obligations at
any time in the case of makers, but only with respect to matured liabilities
in the case of endorsers or guarantors;
(c) the Secured Party may at its option, demand, xxx for, collect, or
make any compromise or settlement it deems desirable with reference to
collateral held;
(d) all the remedies of a secured party under the New York Uniform
Commercial Code.
Section Four
Notice of Sale
Unless the collateral is perishable or threatens to decline speedily
in value or is of a type customarily sold on a recognized market, the Secured
Party will give the undersigned reasonable notice of the time and place of any
public sale of such collateral, or of the time after which any private sale or
other intended disposition is to be made. The requirement of reasonable notice
shall be met if such notice is mailed, postage prepaid, to the undersigned at
the address given below at least twenty (20) calendar days before the time of
the sale or disposition.
Section Five
No Waiver
No delay or omission on the part of the Secured Party in exercising
any right under the Collateral Note or this Security Agreement shall operate
as a waiver of such right or of any other right under the Collateral Note or
this Security Agreement. A waiver on any one occasion shall not be construed
as a bar to or a waiver of any such right and/or remedy on any future
occasion.
Section Six
Governing Law
This Security Agreement and all rights and obligations under this
Security Agreement, including matters of construction, validity, and
performance, shall be governed by the law of the State of New York. Secured
Party and Borrowers hereby waive the right to any jury trial in any action,
proceeding, or counterclaim brought by either Secured Party or Borrowers
against the other.
Section Seven
Representations, Covenants and Warranties
As inducement to Citizens Telecommunications Company to accept the
Collateral Note, the undersigned represent, covenant and warrant that:
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a) other terms and conditions and promises of the makers herein:
i) Sonus Communication Holdings, Inc. will provide quarterly
and yearend consolidated financial statements within forty-five
(45) days of the end of each quarter, and year-end financial
statements within ninety (90) days of the end of the Borrowers'
fiscal year;
Section Seven
Representations, Covenants and Warranties (continued)
ii) all balance sheets, earnings statements and other financial
data (including footnotes thereto) which have been or may
hereafter be furnished to Citizens Telecommunications Company
to induce it to enter into this Security Agreement or otherwise
in connection with it, do or shall fairly represent the
financial condition of the Borrowers and the results of its
operations as of the dates or the periods for which the same
are furnished (subject in the case of unaudited quarterly
reports to year end adjustments), and all other information,
reports and other papers and data furnished to Secured Party
are or shall be at the time the same are so furnished accurate
and correct in all material respects and that Generally
Accepted Accounting Principles (GAAP) shall be used in
preparation of any and all such financial statements;
iii) Borrowers shall not merge this business out of existence
without the written consent of Secured Party. Borrowers shall
not enter into any dispositive sales, transfers, assignments or
leases that are not in the ordinary course of business and that
exceed One Hundred Thousand Dollars ($100,000) without the
written consent of Secured Party. Borrowers shall not incur any
additional debt or credit facility (which shall not include
sales of unsecured debt securities or convertible debt
securities) in an amount exceeding $100,000 without the written
consent of Secured Party which consent shall not be withheld
unless Secured Party reasonably believes its security will be
impaired;
vi) this Security Agreement, the Collateral Note, and all
related documents are binding upon Borrowers as well as upon
Borrowers' successors, representatives and assigns, are legally
enforceable in accordance with their respective terms; and are
not in contravention of law or of any order, rule or regulation
applicable to Borrowers, or any existing agreement or
instrument of Borrowers.
b) That Sonus Communication Holdings, Inc. and Empire One Telecommunications,
Inc. are duly organized and existing in good standing in and under the law of
the State of Delaware and Empire One Telecommunications is duly qualified to
do business in the State of New York and all other states in which it does or
will carry out business, except where the lack of such qualification would not
reasonably be expected to have a material adverse affect.
c) That the Collateral Note and this Security Agreement have been duly
authorized by the Board of Directors of Empire One Telecommunications, Inc.
and Sonus Communication Holdings, Inc. and by all required corporate action,
have
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been duly executed and delivered by the Borrowers and constitutes its legal,
valid and binding agreement and obligation, except as the enforceability
thereof may be limited by bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium or other similar laws relating to the enforcement
of creditors' rights generally and by general principles of equity.
d) That Borrowers shall execute all additional documentation and do all other
things reasonably required by Secured Party to perfect its security interest
in the collateral, including, but not limited to:
i) The Stock Pledge and Escrow Agreement delivered
herewith;
ii) UCC Forms 1; and
iii) Physical delivery of the shares of stock, as outlined
herein, in Sonus Communication Holdings, Inc. held by W. Xxxx Xxxxxx and Xxxx
X. Xxxxxxxx to Xxxx Xxxxxxxxx, Esq. at VVinthrop, Xxxxxxx, Xxxxxx & Xxxxxxx
("Stock Pledge Escrow Agent") at Xxx Xxxxxxx Xxxx Xxxxx, Xxx Xxxx, Xxx Xxxx
00000, pursuant to the Stock Pledge and Escrow Agreement between Secured
Party, Borrowers, and Stock Pledge Escrow Agent.
e) Sonus Communication Holdings, Inc. represents and warrants that it has
not granted any prior security interest in or to the Collateral owned by it,
and Empire One Telecommunications, Inc. represents and warrants that it has
not granted any prior security interest in or to the Collateral owned by it.
All representations, covenants and warranties herein shall survive any
expiration, termination or cancellation of this Security Agreement and shall
continue to bind the undersigned, their successors, heirs and assigns.
Section Eight
Amendments
This Security Agreement, the Collateral Note, and any related
documents, constitute the entire understanding and agreement of the parties as
to the matters set forth in this Security Agreement. No alteration of or
amendment to this Security Agreement shall be effective unless given in
writing and signed by the party or parties to be charged or bound by the
alteration or amendment.
Section Nine
Notice
Any notice required or permitted to be given by either Borrowers or
Secured Party under this Security Agreement shall be in writing and shall be
personally delivered, sent by overnight courier service or sent by certified
or registered letter or by telecopy confirmed by registered or certified
letter to the other Party at its address set forth below. If mailed, notices
will be deemed effective three (3) working days after deposit, postage
prepaid, in the mail.
To Secured Party:
Attn: Xxxxxx X. Xxxxx
Citizens Telecommunications Company
0 Xxxx Xxxxx Xxxx
Xxxxxxxx, Xxxxxxxxxxx 00000
with a copy to the Legal Department at the same address;
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To Borrower (Empire One Telecommunications, Inc.):
Attn: Xxxx X. Xxxxxxxx
Empire One Telecommunications, Inc.
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
with a copy to:
Xxxxx Xxxxxxxx, Esquire
Wolf, Block, Shore and Xxxxx-Xxxxx LLP
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
To Borrower (SONUS Communication Holdings, Inc.)
Xxxxxxx X. Xxxx
Chief Financial Officer
SONUS Communication Holdings, Inc.
0000 Xxxxxx Xxxxxxxxx, Xxxxx 0000
Xxxxxxxxx, XX 00000
With a copy to:
Xxxxx X. Xxxxxx III, Esquire
XxXxxxx Xxxxx, Battle & Xxxxxx LLP
0 Xx. Xxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxx, XX 00000
Section Ten
Severability
If a court of competent jurisdiction finds any provision of this
Security Agreement to be invalid or unenforceable as to any person or
circumstance, such finding shall not render that provision invalid or
unenforceable as to any other persons or circumstances. If feasible, any such
offending provision shall be deemed to be modified to be within the limits of
enforceability or validity; however, if the offending provision cannot be so
modified, it shall be stricken and all other provisions of this Security
Agreement in all other respects shall remain valid and enforceable.
BORROWER ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS SECURITY
AGREEMENT, AND BORROWER AGREES TO ITS TERMS. THIS SECURITY AGREEMENT IS DATED
AS OF March 29, 2000.
BORROWER:
SONUS COMMUNICATION HOLDINGS, INC.
By: /s/ W. Xxxx Xxxxxx
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W. Xxxx Xxxxxx
Chief Executive Officer
EMPIRE ONE TELECOMMUNICATIONS, INC.
By: /s/ Xxxx X. Xxxxxxxx
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Xxxx X. Xxxxxxxx
Chief Executive Officer
SECURED PARTY:
CITIZENS TELECOMMUNICATIONS COMPANY
By: /s/ Xxxxxxx X. Xxxxx
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Its: Secretary
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