SECURITY AGREEMENT
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THIS SECURITY AGREEMENT ("Agreement") is made and entered into this 20th
day of April, 2000, by and between VDC Communications, Inc., a Delaware
corporation ("Secured Party"), and Network Consulting Group, Inc., ("Pledgor").
RECITALS
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A. Concurrently herewith, Rare Telephony, Inc. (f/k/a/ Washoe Technology
Corporation) and Cash Back Rebates XX.xxx, Inc. ("Borrower") have executed a
certain Promissory Note (the "Note") in the stated principal amount of Two
Hundred Thousand Dollars ($200,000) in favor of the Secured Party.
B. Also concurrently herewith, Pledgor has executed in favor of Secured
Party a certain Guaranty Agreement (the "Guaranty") pursuant to which Pledgor
has guaranteed the indebtedness of Borrower, to Secured Party under the Note.
C. The indebtedness of Pledgor to the Secured Party under the Guaranty is
hereinafter collectively referred to as the "Indebtedness".
D. It is the purpose and intent of the parties hereto to secure the payment
by Pledgor to Secured Party of the Indebtedness by a pledge of certain
collateral, according to the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and conditions set forth herein, the parties agree as follows:
1. Pledgor hereby grants to Secured Party a security interest in and to
6,250 shares of the common stock of Rare Telephony, Inc. (f/k/a/ Washoe
Technology Corporation) evidenced by Share Certificate No. 8 ("Collateral") and
does hereby deliver to and deposit the Collateral with Secured Party, together
with a stock power duly executed in blank.
During the term hereof, and subject to the provisions of this Agreement,
Secured Party shall hold and retain the Collateral for the purpose of perfecting
the security interest herein granted to Secured Party, and for the purpose of
carrying out the provisions of this Agreement.
2. The Collateral shall secure the payment of the Indebtedness.
3. Pledgor warrants that Pledgor is the sole lawful owner of the Collateral
and that there is no lien or charge against, or encumbrance or security interest
in, or adverse claim to, the Collateral, or any portion thereof, other than the
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security interest created pursuant to this Agreement. So long as there is any
Indebtedness whatsoever owing to Secured Party, Pledgor agrees to keep the
Collateral free and clear of any and all liens, encumbrances, security interests
(other than the security interest of Secured Party), adverse claims or
interests.
4. As long as Pledgor is not in default hereunder, any and all cash
dividends or other property (but not stock dividends) which may be received by
Secured Party during the term of this Agreement which derives from the
Collateral shall be remitted to Pledgor, and Pledgor shall retain all voting
rights associated with the Collateral. Any cash dividends or other property
received with respect to the Collateral after the occurrence of a default
hereunder shall be delivered to and held by Secured Party as additional
Collateral, and after the occurrence of such default Secured Party shall have
all voting rights associated with the Collateral.
5. Pledgor shall be in default under this Agreement upon the happening of
any of the following events:
(a) Pledgor fails to pay any portion of the Indebtedness when due;
(b) Borrower commits a default under the Note or Pledgor commits a
default under the Guaranty;
(c) Pledgor fails to perform any other agreement or covenant under
this Agreement within any applicable notice and/or "grace" periods specified
herein, provided that if no notice or grace period is herein specified, Pledgor
shall have ten (10) calendar days after notice thereof has been given within
which to cure any such default;
(d) All or a majority of the value of the Collateral or the assets
of Borrower is seized or levied upon by writ of attachment, garnishment,
execution or otherwise, and such seizure or levy is not released within thirty
(30) calendar days thereafter;
(e) Either Pledgor or Borrower executes a general assignment for
the benefit of its creditors, convenes any meeting of its creditors, becomes
insolvent, admits in writing its insolvency or inability to pay its debts, or is
unable to pay or is generally not paying its debts as they become due;
(f) A receiver, trustee, custodian or agent is appointed to take
possession of all or any portion of the Collateral or all or any substantial
potion of Pledgor's or Borrower's assets;
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(g) Any case or proceeding is voluntarily commenced by Pledgor or
Borrower under any provision of the federal Bankruptcy Code or any other federal
or state law relating to debtor rehabilitation, insolvency, bankruptcy,
liquidation, or reorganization, or any such case or proceeding is involuntarily
commenced against Pledgor or Borrower and not dismissed within thirty (30)
calendar days thereafter;
(h) Any representation made by Pledgor in this Agreement or in any
of the other documents delivered in connection therewith, shall have been untrue
or incorrect in any material respect when made.
Upon such default, Secured Party may, at its option, declare all
Indebtedness to be immediately due and payable. Additionally, Secured Party
shall have the rights and remedies set forth in Paragraph 6 below.
6. Should Pledgor default under this Agreement, Secured Party shall have
all rights and remedies afforded a secured party under the Uniform Commercial
Code of New Jersey and may, in connection therewith, also:
(a) Sell, lease, or otherwise dispose of the Collateral at public
or private sale, in one or more sales, as a unit or in parcels, at wholesale or
retail, and at such time and place and on such terms as Secured Party may
determine. Secured Party may be the purchaser or any or all of the Collateral at
any public or private sale. If, at any time when Secured Party shall determine
to exercise its right to sell all or any part of the Collateral and such
Collateral, or the part thereof to be sold, it has been advised by legal counsel
that the Collateral is subject to the Securities Act of 1933 as amended or any
state securities laws, Secured Party in its sole and absolute discretion, is
hereby expressly authorized to sell such Collateral, or any part thereof,
subject to obtaining all required regulatory approvals, by private sale in such
manner and under such circumstances as Secured Party may deem necessary or
advisable in order that such sale may be effected legally without registration
or qualification under applicable securities laws. Without limiting the
generality of the foregoing, Secured Party, in it sole and absolute discretion,
may approach and negotiate with a restricted number of potential purchasers to
effect such sale or restrict such sale to a purchaser or purchaser who will
represent and agree that such purchaser or purchasers are purchasing for his or
their own account, for investment only, and not with a view of the distribution
or sale of such Collateral or any part thereof. Any such sale shall be deemed to
be a sale made in a commercially reasonable manner within the meaning of the
Uniform Commercial Code of the State of New Jersey and Pledgor hereby consents
and agrees that Secured Party shall incur no responsibility or liability for
selling all or any part of the Collateral at a price which is not unreasonably
low, notwithstanding the possibility that a higher price might be realized if
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the sale were public. Any public sale of any or all of the Collateral may be
postponed from time to time by public announcement at the time and place last
scheduled for the sale. Without limiting the generality of this Section 6, it
shall conclusively be deemed to be commercially reasonable for Secured Party to
direct any prospective purchaser of any or all of the Collateral to Pledgor to
ascertain all information concerning the status of Borrower. Securing Party's
disposition of any or all of the Collateral in any manner which differs from the
procedures specified in this Section 6 shall not be deemed to be commercially
unreasonable; or
(b) Propose to accept the Collateral after giving notice of such
proposal to Pledgor and to any other person with a security interest in the
Collateral in accordance with the Uniform Commercial Code of New Jersey, or any
applicable successor statute. Such acceptance shall discharge the obligation of
Pledgor and the Corporation with respect to the Indebtedness, provided that
neither Pledgor nor any other person with a security interest in the Collateral
objects in writing to such a proposal within twenty one (21) calendar days after
receipt of such notice.
The proceeds of any sale, lease or other disposition of the Collateral
shall be applied in the manner and priority set forth in the Uniform Commercial
Code of New Jersey, or any applicable successor statute.
7. Pledgor unconditionally agrees upon demand to pay to the Secured Party
the amount of any and all reasonable and necessary out-of-pocket costs, expenses
and disbursements, including fees and expenses of its counsel, which the Secured
Party may incur in connection with (i) the administration of this Agreement,
(ii) the custody, preservation, use or operation of, or the sale of, collection
from, or other realization upon, the Collateral, (iii) the exercise or
enforcement of any of the rights of the Secured Party hereunder or (iv) the
failure by Pledgor to perform or observe any of the provisions hereof. Pledgor
unconditionally agrees to indemnify the Secured Party from and against any and
all claims, losses and liabilities arising out of or resulting from this
Agreement (including enforcement of this Agreement), except claims, losses or
liabilities resulting from the gross negligence or willful misconduct of the
Secured Party.
8. Pledgor waives any right to require the Secured Party to:
(a) Proceed against any person;
(b) Proceed against or exhaust any collateral; or
(c) Pursue any other remedy in Secured Party's power.
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Pledgor further authorizes the Secured Party, without notice or demand and
without affecting its liability hereunder or on the Indebtedness, from time to
time to:
(d) Amend or modify the terms of the Note or the Guaranty with
Pledgor's consent, including, but not limited to, any such amendment or
modification which affects the Indebtedness.
(e) Take and hold security, other than the Collateral herein described,
for the payment of the Indebtedness or any part thereof, and exchange, enforce,
waive, and release the Collateral herein described or any part thereof or any
such other security.
(f) Apply such Collateral or other security and direct the order or
manner of sale thereof as Secured Party in its discretion may determine.
9. In the event that any additional shares of capital stock of Borrower are
issued to or acquired by Pledgor during the term of this Agreement, such
additional shares shall be considered additional Collateral subject to this
Agreement, and Pledgor shall immediately deliver stock certificates evidencing
such additional shares of capital stock and duly executed stock powers to
Secured Party.
10. Neither the acceptance of any partial or delinquent payment by Secured
Party nor Secured Party's failure to exercise any of its rights or remedies on
default by Pledgor shall be a waiver of the default, a modification of this
Agreement or Pledgor's obligations under this Agreement, or a waiver of any
subsequent default by Pledgor.
11. All notices are required or permitted to be given pursuant to this
Agreement shall be in writing, and shall be delivered either personally, by
overnight delivery service or by U.S. certified or registered mail, postage
prepaid, return-receipt requested and addressed to the parties at their
respective addresses as the appear below their signatures hereon. Notices may
also be given by facsimile transmission to the facsimile telephone numbers which
appear below the parties' respective signatures hereon, provided that either (a)
receipt of the facsimile transmission is acknowledged in writing by the
receiving party, which may also be by a facsimile transmission is acknowledged
in writing by the receiving party, which may also be by facsimile transmission,
or (b) the transmitting party obtains a written confirmation from its own
facsimile machine showing that the entire transmission was transmitted to the
receiving party. The parties may also change their addresses or facsimile
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telephone numbers for notice by giving notice of such change in accordance with
this section. Notices sent by overnight delivery service shall be deemed
received on the business day following the date of deposit with the delivery
service. Mailed notices shall be deemed received upon the earlier of the date of
delivery shown on the return-receipt, or the second business day after the date
of mailing. Notices sent by facsimile transmission shall be deemed served on the
date of transmission, provided that all such notices are sent during regular
business hours, otherwise on the next business day.
12. Time is hereby expressly declared to be of the essence of this
Agreement.
13. This Agreement and each of its provisions shall be binding on the
heirs, executors, administrators, successors, and assigns of each of the parties
hereto.
14. This Agreement is made and entered into and shall be interpreted in
accordance with the laws of the State of New Jersey. Any action concerning this
Agreement shall be commenced in a court of competent jurisdiction in the State
of New Jersey.
15. Upon payment in full of the portion of Indebtedness evidenced by the
Note, this Agreement shall terminate and be of no further force or effect. Upon
receipt of satisfactory proof from both parties in writing that such portion of
the Indebtedness has been paid in full, Secured Party shall immediately deliver
to Pledgor the Collateral and the stock powers.
16. Secured Party shall not be responsible for any damage of loss to the
Collateral, or any part thereof, arising from an act of God, flood, fire, or any
other cause beyond the reasonable control of Secured Party.
17. Upon the request of Secured Party, from time to time, Pledgor agrees to
execute, acknowledge and deliver, or cause to be executed, acknowledged and
delivered, all such additional instruments, and agrees to perform any and all
acts reasonably required to carry into effect the provisions and intent of this
Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement on the day and
year first above written.
WITNESS: "PLEDGOR"
/s/ Xxxxx X. Santa Xxxxx /s/ Xxxxx X. Xxxxxxx
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Signature
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Xxxxx X. Xxxxxxx /s/ Xxxxx X. Xxxxxxx 74 Xxxxx Court
------------------------------------- Xxxxxxxxx, XX 00000
Print Name Facsimile No. 000-000-0000
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ATTEST: "SECURED PARTY"
/s/ Xxxxx X. Xxxxx VDC COMMUNICATIONS, INC.
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Signature
By: /s/ Xxxxxxxxx X. Xxxxx
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Xxxxx X. Xxxxx Xxxxxxxxx X. Xxxxx
-------------- Chief Executive Officer
Print Name
00 Xxxxx Xxxx Xxxx
Xxxxxxxxx, XX 00000
Facsimile No. (000) 000-0000
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