Exhibit 10.1
NETGURU, INC.
SECURITY AGREEMENT
To: Laurus Master Fund, Ltd.
c/o M&C Corporate Services Limited
X.X. Xxx 000 XX
Xxxxxx House
South Church Street
Xxxxxx Town
Grand Cayman, Cayman Islands
Date: December 23, 2004
To Whom It May Concern:
1. To secure the payment of all Obligations (as hereafter defined),
Netguru, Inc., a Delaware corporation (the "Assignor"), 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 the Assignor, or in which the
Assignor now have 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 (including, without limitation, Lockbox Deposit
Account (defined below)), accounts receivable, 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 currently in effect among our affiliates), chattel paper, supporting
obligations, investment property (including, without limitation, all equity
interests owned by the Assignor), letter-of-credit rights, trademarks, trademark
applications, tradestyles, patents, patent applications, copyrights and
copyright applications in which the 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 therefore. In the event the Assignor wishes 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, Laurus agrees to 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
meaning provided such terms the Securities Purchase Agreement referred to below,
as applicable.
2. The term "Obligations" as used herein shall mean and include all
debts, liabilities and obligations owing by the 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") (ii) the Related Agreements referred to in the
Securities Purchase Agreement and (iii) that certain Amended and Restated
Convertible Note of the Borrower in the original principal amount of $2,400,000
issued to the Holder effective as of December 4, 2003 (the "December 2003
Note"), (the Securities Purchase Agreement, each Related Agreement and the
December 2003 Note, as each may be amended, modified, restated or supplemented
from time to time, are collectively referred to herein as the "Documents"), or
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, or any other indebtedness, obligations or liabilities of
the 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, 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 the Assignor under Xxxxx 00, Xxxxxx Xxxxxx Code, including,
without limitation, obligations or indebtedness of the Assignor for
post-petition interest, fees, costs and charges that would have accrued or been
added to the Obligations but for the commencement of such case.
3. The Assignor hereby represents, warrants and covenants to Laurus
that:
(a) it is a corporation, validly existing, in good standing
and organized under the laws of the State of Delaware, and it will
provide Laurus thirty (30) days' prior written notice of any change in
its jurisdiction of organization;
(b) its legal name, as set forth in its Certificate of
Incorporation (or equivalent organizational document) as amended
through the date hereof, is Netguru, Inc. 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 2612179, and it will provide Laurus thirty (30) days' prior written
notice of any change in its organizational identification number;
(d) it is the lawful owner of the 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 the Collateral owned by it 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) 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;
(f) it will at its 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 its business;
(g) it will not without Laurus' 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 its ongoing
needs, having an aggregate fair market value of not more than $25,000
and only to the extent that:
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(i) the proceeds of any such disposition are used to
acquire replacement Collateral which is subject to Laurus'
first priority perfected security interest or are used to
repay Obligations or to pay general corporate expenses; and
(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 the Collateral in Laurus' name as Loss
Payee against loss or damage by fire, theft, burglary, pilferage, loss
in transit and such other hazards under our current policies and all
premiums thereon shall be paid by the Assignor and the policies
delivered to Laurus and will deliver evidence of such Loss Payee
endorsement within ten days of the date of the Securities Purchase
Agreement.
(i) it will at all reasonable times allow Laurus or Laurus'
representatives free access to and the right of inspection of the
Collateral; and
(j) the 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 Security Agreement or in the prosecution or
defense of any action or proceeding either against the Assignor or
Laurus concerning any matter growing out of or in connection with this
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
4. The occurrence of any of the following events or conditions shall
constitute an "Event of Default" under this Security Agreement:
(a) any covenant, warranty, representation or statement made
or furnished to Laurus by the Assignor or on the Assignor's behalf was
breached in any material respect or false in any material respect when
made or furnished, as the case may be, and, in the case of a covenant,
if subject to cure, shall not be cured for a period of thirty (30)
days;
(b) 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
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(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
ten (10) days of the creation or the assertion thereof;
(c) the Assignor 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 the Assignor's property;
(d) any proceedings under any bankruptcy or insolvency law
shall be commenced by or against the Assignor;
(e) the Assignor shall repudiate, purport to revoke or fail to
perform any of its obligations under the Note (after passage of
applicable cure period, if any); or
(f) an Event of Default (or similar term) shall have occurred
under and as defined in the Securities Purchase Agreement or any other
Document.
5. Upon the occurrence 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 Master Security
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 the Assignor's premises or to
remove the Collateral or any part thereof to such other premises as Laurus may
desire. Upon Laurus' request, the Assignor shall assemble the Collateral 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 Assignor
either at the Assignor's address shown herein or at any address appearing on
Laurus' records for the 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 expense 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 the Assignor shall be liable
for any deficiency.
6. If the Assignor defaults in the performance or fulfillment of any of
the terms, conditions, promises, covenants, provisions or warranties on the
Assignor's part to be performed or fulfilled under or pursuant to this Security
Agreement, Laurus may, at its option without waiving its right to enforce this
Security Agreement according to its terms, immediately or at any time thereafter
and without notice to the Assignor, perform or fulfill the same or cause the
performance or fulfillment of the same for the Assignor's account and at the
Assignor's 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.
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7. The Assignor hereby appoints Laurus, upon an Event of Default which
has not been cured within the applicable cure period, any of Laurus' officers,
employees or any other person or entity whom Laurus may designate as our
attorney, with power to execute such documents in our behalf and to supply any
omitted information and correct patent errors in any documents executed by the
Assignor or on our behalf; to file financing statements against the 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 the Assignor's name on public records; and
to do all other things Laurus deems necessary to carry out this Security
Agreement. The Assignor hereby ratifies and approve 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
their 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 the 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. The
Assignor agrees to join with Laurus in executing financing statements 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 Security Agreement shall be governed by and construed in
accordance with the laws of the State of New York and cannot be terminated
orally. 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 Security Agreement shall
inure to the benefit of each of the foregoing, and shall bind the
representatives, successors and assigns of the Assignor. Each of Laurus and the
Assignor hereby (a) waives any and all right to trial by jury in litigation
relating to this Security Agreement and the transactions contemplated hereby and
the Assignor hereby agrees 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
the Assignor or Laurus may have as to the bringing or maintaining of such action
with any such court.
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10. All notices from Laurus to the Assignor shall be sufficiently given
if mailed or delivered to the Assignor at its address set forth in the
Securities Purchase Agreement.
Very truly yours,
NETGURU, INC.
By:
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Name:
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Title
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ACKNOWLEDGED:
LAURUS MASTER FUND, LTD.
By:
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Name:
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Title:
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