Exhibit 10.02
SECURITY AGREEMENT
1. Identification.
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This Security Agreement (the "Agreement"), dated for identification
purposes only October 17, 2001, is entered into by and between Versacom
International, Inc., a Utah corporation (the "Issuer"), Xxxx Xxxxxx, Xxxx
Xxxxxxxx (the "Shareholders") and Laurus Master Fund, Ltd. (the "Investor").
2. Recitals.
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2.1 The Investor has made an investment in the Issuer (the "Investment").
2.2 The Investment is evidenced by a certain Convertible Note in the
principal amount of $300,000 ("Note") and executed by the Issuer as the
"Borrower" thereof, for the benefit of the Investor as the "Holder" thereof.
2.3 In order to induce the Investor to make the Investment, and as security
for the Issuer's performance of its obligations under the Note pursuant to a
Securities Purchase Agreement entered into between the Issuer and the
signatories thereto relating to the Note (the "Purchase Agreement"), or pursuant
to other written instruments and agreements entered into by the Issuer and the
Investor, whether before or after the date hereof, and further specifically
including all of the Issuer's obligations arising under the Note and the
Purchase Agreement relating thereto (collectively, the "Obligations"), the
Shareholders for good and valuable consideration, receipt of which is
acknowledged, have agreed to grant to the Investor, a security interest in the
Collateral (as such term is hereinafter defined), on the terms and conditions
hereinafter set forth. Such Investments are specifically made with recourse as
to the Issuer.
Defined Terms. The following defined terms which are defined in the Uniform
Commercial Code in effect in the State of New York on the date hereof are used
herein as so defined: Accounts, Chattel Paper, Documents, Equipment, General
Intangibles, Instruments, Inventory and Proceeds.
3. Grant of General Security Interest in Collateral.
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3.1 As security for the Obligations, the Shareholders hereby grant the
Investor a security interest in the Collateral.
3.2 "Collateral" shall mean all of the following property of the
Shareholders: the common stock of the Issuer as set forth on Schedule A hereto,
together with medallion signature guaranteed stock powers ("Security Shares").
Such additional Collateral shall include, but not be limited to, all the
Shareholders right, title and interest in and to the Security Shares, together
with the proceeds of any sale, exchange, liquidation or other disposition,
whether voluntary or involuntary, and including but not limited to any
securities, Instruments, and all benefits and entitlements evidenced by or
arising out of the Security Shares and all other securities, Instruments and
other property (whether real or personal, tangible or intangible) issued or
accepted in substitution for, or in addition to, the foregoing, and all
dividends, interest, cash, instruments, distributions, income, securities and
any other property (whether real or personal, tangible or intangible) at any
time received, receivable or otherwise distributed in respect of, or in exchange
for, the foregoing, whether now owned or hereafter acquired, and any and all
improvements, additions, replacements, substitutions and any and all Proceeds
arising out of or derived from the foregoing.
3.3 The Investor is hereby specifically authorized to transfer any
Collateral into the name of the Investor and to take any and all action deemed
advisable to the Investor to remove any transfer restrictions affecting the
Collateral.
4. Perfection of Security Interest.
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The Collateral shall be delivered to the Investor. The Investor shall have
a perfected security interest in the Collateral.
5. Distribution on Liquidation.
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5.1 If any sum is paid as a liquidating distribution on or with respect to
the Collateral, the Shareholders shall accept same in trust for the Investor and
shall deliver same to the Investor to be applied to the Obligations then due, in
accordance with the terms of the Note.
5.2 Prior to any Event of Default (as defined herein), the Shareholders
shall be entitled to exercise all voting power pertaining to any of the
Collateral, provided such exercise is not contrary to the interests of the
Investor and does not impair the Collateral.
6. Further Action By the Issuer; Covenants and Warranties.
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6.1 The Investor at all times shall have a perfected security interest in
the Collateral which shall be prior to any other unperfected interest therein.
Subject to the security interest described herein, the Shareholders have and
will continue to have full title to the Collateral free from any liens, leases,
encumbrances, judgments or other claims. The Investor's security interest in the
Collateral constitutes and will continue to constitute a first, prior and
indefeasible security interest in favor of the Investor. The Shareholders will
do all acts and things, and will execute and file all instruments (including,
but not limited to, security agreements, financing statements, continuation
statements, etc.) reasonably requested by the Investor to establish, maintain
and continue the perfected security interest of the Investor in the Collateral,
and will promptly on demand, pay all costs and expenses of filing and recording,
including the costs of any searches deemed necessary by the Investor from time
to time to establish and determine the validity and the continuing priority of
the security interest of the Investor, and also pay all other claims and charges
that in the opinion of the Investor might prejudice, imperil or otherwise affect
the Collateral or its security interest therein.
6.2 The Shareholders will not sell, transfer, assign or pledge those items
of Collateral and the Issuer and the Shareholders will not allow any such items
to be sold, transferred, assigned or pledged, without the prior written consent
of the Investor. Although Proceeds of Collateral are covered by this Security
Agreement, this shall not be construed to mean that the Investor consents to any
sale of the Collateral.
6.3 The Issuer and the Shareholders will, at all reasonable times, allow
the Investor or its representatives free and complete access to all of the
Issuer's and the Shareholders' records which in any way relate to the
Collateral, for such inspection and examination as the Investor deems necessary.
6.4 The Issuer and the Shareholders, at their sole cost and expense, will
protect and defend this Security Agreement, all of the rights of the Investor
hereunder, and the Collateral against the claims and demands of all other
parties.
6.5 The Issuer and the Shareholders will promptly notify the Investor of
any levy, distraint or other seizure by legal process or otherwise of any part
of the Collateral, and of any threatened or filed claims or proceedings that
might in any way affect or impair any of the rights of the Investor under this
Security Agreement.
6.6 The Investor may, at its option, and without any obligation to do so,
pay, perform and discharge any and all amounts, costs, expenses and liabilities
herein agreed to be paid or performed by the Issuer, and all amounts expended by
the Investor in so doing shall become part of the Obligations secured hereby,
and shall be immediately due and payable by the Issuer and the Shareholders to
the Investor upon demand and shall bear interest at 18% per annum from the dates
of such expenditures until paid.
6.7 Upon the request of the Investor, the Issuer will furnish within five
(5) days thereafter to the Investor, or to any proposed assignee of this
Security Agreement, a written statement in form satisfactory to the Investor,
duly acknowledged, certifying the amount of the principal and interest then
owing under the Obligations, whether any claims, offsets or defenses exist
against the Obligations or against this Security Agreement, or any of the terms
and provisions of any other agreement of the Issuer securing the Obligations. In
connection with any assignment by the Investor of this Security Agreement, the
Shareholders hereby agree to cause the insurance policies required hereby to be
carried by the Shareholders, if any, to be endorsed in form satisfactory to the
Investor or to such assignee, with loss payable clauses in favor of such
assignee, and to cause such endorsements to be delivered to the Investor within
ten (10) calendar days after request therefore by the Investor.
6.8 The Issuer and the Shareholders will, at the Issuer's expense, make,
execute, endorse, acknowledge, file and/or deliver to the Investor from time to
time such vouchers, invoices, schedules, confirmatory assignments, conveyances,
financing statements, transfer endorsements, powers of attorney, certificates,
reports and other assurances or instruments and take further steps relating to
the Collateral and other property or rights covered by the security interest
hereby granted, as the Investor may reasonable require.
6.9 The Shareholders, each as to himself, represents and warrants that he
is the true and lawful exclusive owner of the Collateral, free and clear of any
liens and encumbrances and acquired the Security Shares for purposes of
calculating the holding period for purposes of Rule 144 under the Securities Act
of 1933 ("Rule 144") on the dates set forth on Schedule A. The Shareholders make
the foregoing representation to the Investor and any transfer agent of the
Issuer's common stock as if originally made to such transfer agent.
6.10 The Shareholders hereby agree not to divest themselves of any right
under the Collateral absent prior written approval of the Investor.
6.11 The Issuer and the Shareholders will cooperate and provide such
certificate, resolutions, representations, legal opinions and all other matters
necessary to facilitate a transfer or sale of any part of the Collateral
pursuant to Rule 144. The Issuer and the Shareholders are unaware of any
impediment to the resale of the security by the Investor pursuant to Rule 144.
The Issuer and the Shareholders will take no action that would impede or limit
the Investor's ability to resell all the Security Shares pursuant to Rule 144.
For so long as any Security Shares are subject to this Security Agreement, the
Shareholders will not sell any security of the Issuer which sale would be
aggregated with sales by the Investor pursuant to Rule 144. The Issuer shall
issue written instructions to its transfer agent to comply with the foregoing
sentence. The Issuer will not permit the transfer of any security of the Issuer
if such transfer would aggregate for purposes of Rule 144 with sales of the
Security Shares by the Investor or any sales of the Security Shares. The
Shareholders represent and warrant that they have not sold any security of the
Issuer during the thirty (30) days prior to the date of this Agreement.
7. Power of Attorney.
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The Shareholders hereby irrevocably constitute and appoint the Investor as
the true and lawful attorney of the Issuer and the Shareholders, with full power
of substitution, in the place and stead of the Issuer and the Shareholders and
in the name of the Issuer and the Shareholders or otherwise, at any time or
times, in the discretion of the Investor, to take any action and to execute any
instrument or document which the Investor may deem necessary or advisable to
accomplish the purposes of this Agreement which the Issuer or the Shareholders
fail to take or fail to execute within five (5) business days of the Investor's
reasonable request therefor. This power of attorney is coupled with an interest,
is irrevocable and shall not be affected by any subsequent disability or
incapacity of the Issuer or the Shareholders.
8. Performance By The Investor.
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If the Issuer or the Shareholders fail to perform any material covenant,
agreement, duty or obligation of the Issuer or the Shareholders under this
Agreement, the Investor may, at any time or times in its discretion, take action
to effect performance of such obligation. All reasonable expenses of the
Investor incurred in connection with the foregoing authorization shall be
payable by the Issuer and the Shareholders as provided in Paragraph 12.1 hereof.
No discretionary right, remedy or power granted to the Investor under any part
of this Agreement shall be deemed to impose any obligation whatsoever on the
Investor with respect thereto, such rights, remedies and powers being solely for
the protection of the Investor.
9. Event of Default.
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An event of default ("Event of Default") shall be deemed to have occurred
hereunder upon the occurrence of any event of default as defined in the Note or
Purchase Agreement. Upon and after any Event of Default, after the applicable
cure period, if any, any or all of the Obligations shall become immediately due
and payable at the option of the Investor, for the benefit of the Investor, and
the Investor may dispose of Collateral as provided below. A default by the
Issuer or the Shareholders of any of their obligations pursuant to this
Agreement including but not limited to the obligations set forth in Section 6 of
this Agreement, or a misrepresentation by the Issuer or the Shareholders of a
material fact stated herein, shall be deemed an Event of Default hereunder and
an event of default as defined in the Obligations.
10. Disposition of Collateral.
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10.1 Upon and after any Event of Default which is then continuing,
(a) The Investor may exercise its rights with respect to each
and every component of the Collateral, without regard to the existence of any
other security or source of payment for the Obligations or any other component
of the Collateral. In addition to other rights and remedies provided for herein
or otherwise available to it, the Investor shall have all of the rights and
remedies of a Investor on default under the Uniform Commercial Code then in
effect in the State of New York.
(b) If any notice to the Shareholders of the sale or other
disposition of Collateral is required by then applicable law, five (5) days'
prior notice (or, if longer, the shortest period of time permitted by then
applicable law) to the Shareholders of the time and place of any public sale of
Collateral or of the time after which any private sale or any other intended
disposition is to be made, shall constitute reasonable notification.
(c) The Investor is authorized, at any such sale, if the
Investor deems it advisable to do so, in order to comply with any applicable
securities laws, to restrict the prospective bidders or purchasers to persons
who will represent and agree, among other things, that they are purchasing the
Collateral for their own account for investment, and not with a view to the
distribution or resale thereof, or otherwise to restrict such sale in such other
manner as the Investor deems advisable to ensure such compliance. Sales made
subject to such restrictions shall be deemed to have been made in a commercially
reasonable manner.
(d) If within five (5) days' notice to the Issuer's counsel,
such counsel does not provide the required documents to the Issuer's transfer
agent necessary to effect the transfer of Collateral to the Investor, the
Investor is authorized to appoint, on behalf of the Issuer and at the Issuer's
expense, special counsel to render any such required opinions and to prepare any
other necessary documents.
(e) All cash proceeds received by the Investor in respect of
any sale, collection or other enforcement or disposition of Collateral, shall be
applied (after deduction of any amounts payable to the Investor pursuant to
Paragraph 12.1 hereof) against the Obligations. Upon payment in full of all
Obligations, the Shareholders shall be entitled to the return of all Collateral,
including cash, which has not been used or applied toward the payment of
Obligations or used or applied to any and all costs or expenses of the Investor
incurred in connection with the liquidation of the Collateral (unless another
person is legally entitled thereto). Any assignment of Collateral by the
Investor to the Shareholders shall be without representation or warranty of any
nature whatsoever and wholly without recourse. The Investor may purchase the
Collateral and pay for such purchase by offsetting any sums owed to such
Investor by the Issuer or the Shareholders arising under the Obligations or any
other source.
(f) No exercise by the Investor of any right hereby given it,
no dealing by the Investor with the Issuer, the Shareholders or any other
person, and no change, impairment or suspension of any right or remedy of the
Investor shall in any way affect any of the obligations of the Issuer or the
Shareholders hereunder or any Collateral furnished by the Shareholders or give
the Issuer or the Shareholders any recourse against the Investor.
10.2 The Security Shares shall be released to the Shareholders upon the sooner
of (i) complete satisfaction of the Obligations, or (ii) the timely compliance
by the Issuer of its registration obligations set forth in Section 9.1(d) of the
Purchase Agreement. Notwithstanding anything contained in this Security
Agreement, or in the Purchase Agreement to the contrary, the Security Shares
that have not been released pursuant to this Security Agreement shall be
released and returned promptly to the Shareholders upon the effectiveness of the
SB-2 registration statement required to be filed by the Issuer pursuant to
Section 9.1(d) of the Purchase Agreement, provided that no Event of Default has
occurred, otherwise the Security Shares shall remain subject to this Agreement
until the complete satisfaction of the Obligations.
10.3 The Shareholders collectively may substitute with the Investor prior
to the occurrence of an Event of Default a sum of money equal to the greater of
(i) the Mandatory Payment as defined in Section 8.2 of the Purchase Agreement,
or (ii) all sums due, payable or accruing on the Obligations through the
Maturity Date of the Note as substitute Collateral and receive the Security
Shares in lieu thereof. Said sum of money will be held as Collateral pursuant to
this Security Agreement, and shall be deposited in an interest bearing account
for the benefit of the Shareholders provided each of the Shareholders provide to
the Investor a taxpayer identification number and other documents reasonably
requested by the Investor.
11. Waiver of Automatic Stay. The Issuer and the Shareholders acknowledge and
agree that should a proceeding under any bankruptcy or insolvency law be
commenced by or against the Issuer or the Shareholders, or if any of the
Collateral (as defined in the Security Agreement) should become the subject of
any bankruptcy or insolvency proceeding, then the Investor should be entitled
to, among other relief to which the Investor may be entitled under the Note,
Security Agreement, Purchase Agreement and any other agreement to which the
Issuer, the Shareholders, or the Investor are parties, (collectively "Investment
Documents") and/or applicable law, an order from the court granting immediate
relief from the automatic stay pursuant to 11 U.S.C. Section 362 to permit the
Investor to exercise all of its rights and remedies pursuant to the Investment
Documents and/or applicable law. THE ISSUER AND THE SHAREHOLDERS EXPRESSLY WAIVE
THE BENEFIT OF THE AUTOMATIC STAY IMPOSED BY 11 U.S.C. SECTION 362. FURTHERMORE,
THE ISSUER AND THE SHAREHOLDERS EXPRESSLY ACKNOWLEDGE AND AGREE THAT NEITHER 11
U.S.C. SECTION 362 NOR ANY OTHER SECTION OF THE BANKRUPTCY CODE OR OTHER STATUTE
OR RULE (INCLUDING, WITHOUT LIMITATION, 11 U.S.C. SECTION 105) SHALL STAY,
INTERDICT, CONDITION, REDUCE OR INHIBIT IN ANY WAY THE ABILITY OF THE INVESTOR
TO ENFORCE ANY OF ITS RIGHTS AND REMEDIES UNDER THE INVESTMENT DOCUMENTS AND/OR
APPLICABLE LAW. The Issuer and the Shareholders hereby consent to any motion for
relief from stay which may be filed by the Investor in any bankruptcy or
insolvency proceeding initiated by or against the Issuer and the Shareholders,
and further agree not to file any opposition to any motion for relief from stay
filed by the Investor. The Issuer and the Shareholders represent, acknowledge
and agree that this provision is a specific and material aspect of this
Agreement, and that the Investor would not agree to the terms of this Agreement
if this waiver were not a part of this Agreement. The Issuer and the
Shareholders further represent, acknowledge and agree that this waiver is
knowingly, intelligently and voluntarily made, that neither the Investor nor any
person acting on behalf of the Investor has made any representations to induce
this waiver, that the Issuer and the Shareholders have been represented (or has
had the opportunity to be represented) in the signing of this Agreement and in
the making of this waiver by independent legal counsel selected by the Issuer
and the Shareholders and that the Issuer and the Shareholders have had the
opportunity to discuss this waiver with counsel. The Issuer and the Shareholders
further agree that any bankruptcy or insolvency proceeding initiated by the
Issuer or the Shareholders will only be brought in courts within the geographic
boundaries of New York State.
12. Miscellaneous.
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12.1 Expenses. The Issuer and the Shareholders shall severally pay to the
Investor, on demand, the amount of any and all reasonable expenses, including,
without limitation, attorneys' fees, legal expenses and brokers' fees, which the
Investor may incur in connection with (a) sale, collection or other enforcement
or disposition of Collateral; (b) exercise or enforcement of any the rights,
remedies or powers of the Investor hereunder or with respect to any or all of
the Obligations; or (c) failure by the Issuer or the Shareholders to perform and
observe any agreements of the Issuer or the Shareholders contained herein which
are performed by the Investor.
12.2 Waivers, Amendment and Remedies. No course of dealing by the Investor
and no failure by the Investor to exercise, or delay by the Investor in
exercising, any right, remedy or power hereunder shall operate as a waiver
thereof, and no single or partial exercise thereof shall preclude any other or
further exercise thereof or the exercise of any other right, remedy or power of
the Investor. No amendment, modification or waiver of any provision of this
Agreement and no consent to any departure by the Issuer or the Shareholders
therefrom, shall, in any event, be effective unless contained in a writing
signed by the Investor, and then such waiver or consent shall be effective only
in the specific instance and for the specific purpose for which given. The
rights, remedies and powers of the Investor, not only hereunder, but also under
any instruments and agreements evidencing or securing the Obligations and under
applicable law are cumulative, and may be exercised by the Investor from time to
time in such order as the Investor may elect.
12.3 Notices. Any notice or other communications under the provisions of
this Agreement shall be given in writing and delivered to the recipient in
person, by reputable overnight courier or delivery service, by facsimile machine
(receipt conformed) with a copy sent by first class mail on the date of
transmission, or by registered or certified mail, return receipt requested,
directed to its address set forth below (or to any new address of which a party
hereto shall have informed the other by the giving of notice in the manner
provided herein):
To the Issuer: Versacom International, Inc.
0000 Xxxxx Xxxxxxx Xxxxxxx
Xxxx Xxxxx, Xxxxxxx 00000
Fax: (561) 362 - 6022
And for Informational
Purposes only, a copy to:
Sichenzia, Ross, Xxxxxxxx & Xxxxxxx LLP
000 Xxxx 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attn: Xxxx Xxxxxxxxx, Esq.
Fax: (000) 000-0000
To the Shareholder: c/o Versacom International, Inc.
0000 Xxxxx Xxxxxxx Xxxxxxx
Xxxx Xxxxx, Xxxxxxx 00000
Fax: (561) 362 - 6022
To the Investor: LAURUS MASTER FUND, LTD.
A Cayman Island corporation
c/o Onshore Corporate Services Ltd.
X.X. Xxx 0000 G.T.
Queensgate House, South Church Street
Grand Cayman, Cayman Islands
Fax: 000-000-0000
And for Informational
Purposes Only,
copy to: Xxxxxx X. Xxxxxx, Esq.
000 Xxxx 00xx Xxxxxx, Xxxxx 0000
Xxx Xxxx, Xxx Xxxx 00000
Fax: (000) 000-0000
Any party may change its address by written notice in accordance with this
paragraph.
12.4 Term: Binding Effect. This Agreement shall (a) remain in full force
and effect until payment and satisfaction in full of all of the Obligations; (b)
be binding upon the Issuer and the Shareholders, and their successors and
assigns; and (c) inure to the benefit of the Investor, for the benefit of the
Investor and their respective heirs, legal representatives, successors in title
and permitted assigns.
12.5 Captions. The captions of Paragraphs, Articles and Sections in this
Agreement have been included for convenience of reference only, and shall not
define or limit the provisions hereof and have no legal or other significance
whatsoever.
12.6 Governing Law; Venue; Severability. This Agreement shall be governed
by and construed in accordance with the laws of the State of New York without
regard to principles of conflicts or choice of law, except to the extent that
the perfection of the security interest granted hereby in respect of any item of
Collateral may be governed by the law of another jurisdiction. Any legal action
or proceeding against the Issuer and the Shareholders with respect to this
Agreement may be brought in the courts of the State of New York or of the United
States for the Southern District of New York, and, by execution and delivery of
this Agreement, each of the Issuer and the Shareholders hereby irrevocably
accepts for itself and in respect of its property, generally and
unconditionally, the jurisdiction of the aforesaid courts. The Issuer and the
Shareholders hereby irrevocably waive any objection which they may now or
hereafter have to the laying of venue of any of the aforesaid actions or
proceedings arising out of or in connection with this Agreement brought in the
aforesaid courts and hereby further irrevocably waives and agrees not to plead
or claim in any such court that any such action or proceeding brought in any
such court has been brought in an inconvenient forum. If any provision of this
Agreement, or the application thereof to any person or circumstance, is held
invalid, such invalidity shall not affect any other provisions which can be
given effect without the invalid provision or application, and to this end the
provisions hereof shall be severable and the remaining, valid provisions shall
remain of full force and effect.
12.7 Counterparts/Execution. This Agreement may be executed in any number
of counterparts and by the different signatories hereto on separate
counterparts, each of which, when so executed, shall be deemed an original, but
all such counterparts shall constitute but one and the same instrument. This
Agreement may be executed by facsimile signature and delivered by facsimile
transmission.
[THIS SPACE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the undersigned have executed and delivered this
Security Agreement, as of the date first written above.
"THE ISSUER"
VERSACOM INTERNATIONAL, INC.
a Utah corporation
By: _______________________
Its: ______________________
"THE SHAREHOLDERS"
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Xxxx Xxxxxx
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Xxxx Xxxxxxxx
"THE INVESTOR"
LAURUS MASTER FUND, LTD.
By: _______________________
Name:
Title:
This Security Agreement may be executed by facsimile signature and
delivered by confirmed facsimile transmission.
SCHEDULE A TO SECURITY AGREEMENT
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DEPOSITOR DEPOSITED SECURITY SHARES STOCK CERTIFICATE ACQUISITION DATE *
NUMBERS
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Xxxx Xxxxxx 1,368,000 1746
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Xxxx Xxxxxxxx 774,000 1643
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* Each of the deposited Security Shares was initially issued on the Acquisition
Date and fully paid for as of the Acquisition Date.
