SECURITY AGREEMENT
THIS
SECURITY AGREEMENT
(the
"Aaeement"), is
entered
into
and
made
effective
as of August 24, 2004,
by
and among GLOBAL
IT HOLDINGS, INC., a
Nevada
corporation,
with its principal office located at 000 0xx
Xxxxxx,
Xxxxx 0000, Xxx Xxxx, XX 00000 (the "Company"), and
ADVANTAGE
CAPITAL DEVELOPMENT CORP. ("Secured
Party"),
a Nevada corporation with its principal office at 0000 XX 000" Xxxxxx, XX
Xxxxxxxx, Xxxxxxx
00000.
WHEREAS,
the
Company shall issue and sell to the Secured Party, and the Secured Party
shall purchase Five Hundred Thousand Dollars ($500,000) of 6.5% secured
convertible debentures (the "Convertible
Debentures"),
which
shall be convertible into shares of
the
Company's
common stock, $.001
par
value (the "Common
Stock") (as
converted, the "Conversion Shares"),
for a
total purchase price of up to Five Hundred Thousand Dollars
($500,000);
WHEREAS,
to
induce
the Secured Party to enter into the transaction contemplated by the
Secured Convertible Debenture and the Registration Rights Agreement
(collectively referred to
as the
"Transaction
Documents"), the
Company hereby grants to the Secured Party a security interest
in and to the pledged property identified on Exhibit
"A" hereto
(collectively referred to as the "Pledged
Property")
until
the satisfaction of the Obligations, as defined herein below.
NOW,
THEREFORE, in
consideration of the premises and the mutual covenants herein contained,
and for other good and valuable consideration, the adequacy and receipt of
which
are
hereby
acknowledged, the parties hereto hereby agree as follows:
ARTICLE
1.
DEFINITIONS
AND INTERPRETATIONS
Section
1.1. Recitals.
The
above
recitals are true and correct and are incorporated herein, in their entirety,
by
this
reference.
Section
1.2. Interpretations.
Nothing
herein expressed or implied is intended or shall be construed to confer upon
any
person other than the Secured Party any right, remedy or claim under or by
reason hereof.
Section
1.3. Obligations
Secured.
The
obligations secured hereby are any and all obligations of the Company now
existing or
hereinafter incurred to the Secured Party, whether oral or written and whether
arising before, on
or
after the date hereof including, without limitation, those obligations of the
Company to the
Secured
Party under the Secured Convertible Debenture and the Registration Rights
Agreement, and any other amounts now or hereafter owed to the Secured Party
by
the Company thereunder or hereunder (collectively, the "Obligations").
ARTICLE
2.
PLEDGED
COLLATERAL,
ADMINISTRATION
OF
COLLATERAL
AND
TERMINATION OF
SECURITY INTEREST
Section
2.1. Pledged Property.
(a)
Company
hereby pledges to the Secured Party, and creates in the Secured Party
for
its benefit, a security interest for such time until the Obligations are paid
in
full, in
and
to
all of
the property of the Company as set forth in Exhibit
"A" attached
hereto (collectively, the "Pledged
Property"):
The
Pledged Property, as set forth in Exhibit
"A" attached
hereto, and the products thereof
and the proceeds of all such items are hereinafter collectively referred to
as
the "Pledged Collateral."
(b)
Simultaneously
with the execution and delivery of this Agreement, the Company shall make,
execute, acknowledge, file, record and deliver to the Secured Party any
documents reasonably requested by the Secured Party to perfect its
security interest in the Pledged
Property. Simultaneously
with the execution and delivery of this Agreement, the Company shall make,
execute, acknowledge and deliver to the Secured Party such documents
and
instruments, including, without limitation, financing statements, certificates,
affidavits and forms as may, in the Secured Party's reasonable judgment, be
necessary to effectuate, complete
or
perfect, or to continue and preserve, the security interest of the Secured
Party
in the Pledged
Property,
and the Secured Party shall hold such documents and instruments as
secured party, subject
to the terms and conditions contained herein.
Section
2.2. Rights;
Interests; Etc.
(a) So
long
as no Event of Default (as hereinafter defined) shall have occurred and be
continuing:
(i)
the
Company shall be entitled to exercise any and all
rights pertaining
to the Pledged Property or any part thereof for any purpose not inconsistent
with
the
terms
hereof, and
(ii) the
Company shall be entitled to receive and retain any and all payments paid or
made in respect of the Pledged Property.
(b) Upon
the
occurrence and during the continuance of an Event of Default:
(i)
All
rights of the Company to exercise the rights which it would otherwise be
entitled to exercise pursuant to Section 2.2(a)(i) hereof
and to receive payments which
it
would otherwise be authorized to receive and retain pursuant to Section
2.2(a)(ii) hereof shall
be
suspended, and all such rights shall thereupon become vested in the Secured
Party who shall
thereupon have the sole right to exercise such rights and to receive and hold
as
Pledged Collateral
such payments; provided,
however, that
if
the Secured Party shall become entitled and shall
elect to exercise its right to realize on the Pledged Collateral pursuant to
Article 5 hereof,
then
all
cash sums received by the Secured Party, or held by Company for the benefit
of
the
Secured
Party and paid over pursuant to Section 2.2(b)(ii) hereof, shall
be
applied against any outstanding Obligations; and
2
(ii)
All
interest,
dividends, income
and
other
payments
and distributions
which
are
received
by
the
Company
contrary to
the
provisions
of
Section
2.2(b)(i) hereof shall be received in trust for the benefit of the Secured
Party, shall
be
segregated
from other property of the Company and shall be forthwith paid over to the
Secured
Party; or
(iii)
The
Secured Party in its sole discretion shall be authorized to sell any
or
all of the Pledged Property at public or private sale in order to recoup all
of
the outstanding principal
plus accrued interest owed pursuant to the Convertible Debenture as described
herein
(c) Each
of
the following events shall constitute a default under this Agreement
(each an "Event
of Default"):
(i)
any
default, whether in whole or in part, shall occur in the payment to
the
Secured Party of principal, interest or other item comprising the Obligations
as
and
when due
or
with respect to any other debt or obligation of the Company to a party other
than
the
Secured
Party;
(ii)
any
default, whether in whole or in part, shall occur in the due observance
or performance of any obligations or other covenants, terms
or
provisions to be performed
under this Agreement or the Transaction Documents;
(iii)
the
Company shall: (1) make a general assignment for the benefit of
its
creditors; (2) apply for or consent to the appointment of a receiver,
trustee,
assignee, custodian,
sequestrator, liquidator or similar official for itself or any of its
assets
and properties; (3)
commence a voluntary case for relief as a debtor under the United States
Bankruptcy Code; (4)
file
with or otherwise submit to any governmental authority any petition,
answer
or
other document seeking: (A)
reorganization, (B) an arrangement with creditors or (C) to take advantage
of any other present or future applicable law respecting bankruptcy,
reorganization, insolvency, readjustment of debts, relief of debtors,
dissolution or liquidation; (5) file or otherwise submit any answer or other
document admitting or failing to contest the material allegations
of a petition or other document filed or otherwise submitted
against it in any proceeding under any such applicable law, or (6) be
adjudicated a bankrupt or insolvent by a court of competent jurisdiction;
or
(iv)
any
case,
proceeding or other action shall be commenced against the Company for the
purpose of effecting, or an order, judgment or decree shall be entered by any
court of competent jurisdiction approving (in whole or in part) anything
specified in Section
2.2(c)(iii) hereof, or any receiver, trustee, assignee, custodian, sequestrator,
liquidator or other
official shall be appointed with respect to the Company, or shall be appointed
to
take
or shall
otherwise acquire possession or control of all or
a
substantial part of the assets and properties
of the Company, and any of the foregoing shall continue unstayed and in effect
for any
period of thirty (30) days.
3
ARTICLE
3.
ATTORNEY-IN-FACT;
PERFORMANCE
Section
3.1. Secured
Party Appointed Attorney-In-Fact.
Upon
the
occurrence of an Event of Default, the Company hereby appoints the Secured
Party
as
its attorney-in-fact, with full authority in the place and stead of the Company
and in
the
name
of
the Company or otherwise, from time to time in the Secured Party's discretion
to
take
any
action and to execute any instrument which the Secured Party may reasonably
deem
necessary to accomplish the purposes of this Agreement, including, without
limitation, to
receive and
collect all instruments made payable to the Company representing any payments
in
respect of
the
Pledged Collateral or any part thereof and to give full discharge for
the
same. The
Secured
Party may demand, collect, receipt for, settle, compromise, adjust, xxx for,
foreclose,
or realize
on the Pledged Property as and when the Secured Party may determine.
To
facilitate collection,
the Secured Party may notify account debtors and obligors on any Pledged
Property or
Pledged Collateral to make payments directly to the Secured Party.
Section
3.2. Secured
Party May Perform.
If
the
Company fails to perform any agreement contained herein, the Secured Party,
at
its option,
may itself perform, or cause performance of, such agreement, and the expenses
of
the Secured
Party incurred in connection therewith shall be included in
the
Obligations secured hereby
and payable by the Company under Section 8.3.
ARTICLE
4.
REPRESENTATIONS
AND WARRANTIES
Section
4.1. Authorization;
Enforceability.
Each
of
the parties hereto represents and warrants that it has taken all action
necessary to authorize
the execution, delivery and performance of
this
Agreement and the transactions contemplated hereby; and upon execution and
delivery, this Agreement shall constitute
a valid and binding obligation of the respective party, subject to applicable
bankruptcy, insolvency, reorganization, moratorium and similar laws affecting
creditors'
rights or by the principles governing
the availability of equitable remedies.
Section
4.2. Ownership
of Pledged Property.
The
Company warrants and represents that it is the legal and beneficial owner
of
the Pledged
Property free and clear of any lien, security
interest, option or other charge or encumbrance
except for the security interest created by this Agreement.
4
ARTICLE
5.
DEFAULT;
REMEDIES; SUBSTITUTE COLLATERAL
Section
5.1. Default
and Remedies.
(a)
If
an
Event of Default described in Section 2.2(c)(i)
and (ii) occurs, then in each such case the Secured Party may declare the
Obligations to be due and payable immediately, by a notice in writing to the
Company, and upon any such declaration, the Obligations shall become immediately
due and payable. If
an
Event of Default described in Sections
2.2(c)(iii) or (iv) occurs and is continuing for the period set forth therein,
then the Obligations
shall automatically become immediately due and payable without
declaration or other
act
on the part of the Secured Party.
(b)
Upon
the
occurrence of an Event of Default, the Secured Party shall,: (i)
be
entitled to receive all distributions with respect to the Pledged Collateral,
(ii)
to
cause the Pledged
Property to be transferred into the name of the Secured Party or its nominee,
(iii) to dispose of the Pledged Property, and (iv) to realize upon any and
all
rights in the Pledged Property then held by the Secured Party.
Section
5.2. Method
of Realizing Upon the Pledged Property: Other
Remedies.
Upon
the
occurrence of an Event of Default, in addition to any rights and
remedies available
at law or in equity, the following provisions shall govern the Secured Party's
right
to
realize
upon the Pledged Property:
(a)
Any
item
of the Pledged Property may be sold for cash or other value in any
number of lots at brokers board, public auction or private sale and may be
sold
without demand,
advertisement or notice (except that the Secured Party shall give the Company
ten
(10)
days' prior written notice of the time and place or of the time after which
a
private sale
may
be
made (the "Sale
Notice")), which
notice period shall in any event is hereby agreed to be commercially
reasonable. At
any
sale or sales of the Pledged Property, the Company may bid for
and
purchase the whole or any part of the Pledged Property and, upon compliance
with
the terms
of
such sale, may hold, exploit and dispose of the same without further
accountability to
the
Secured Party. The
Company will execute and deliver, or cause to be executed and
delivered,
such instruments, documents, assignments, waivers, certificates, and affidavits
and supply or cause to be supplied such further information and take such
further action as the Secured
Party reasonably shall require in connection with any such sale.
(b)
Any
cash being held by the Secured Party as Pledged Collateral and all cash
proceeds received by the Secured Party in respect of, sale of, collection
from, or other realization
upon all or any part of the Pledged Collateral shall be applied as
follows:
(i) to
the
payment of all amounts due the Secured Party for the expenses reimbursable
to it
hereunder or owed to it pursuant to Section 8.3 hereof;
(ii) to
the
payment of the Obligations then due and unpaid.
5
(iii) the
balance, if any, to the person or persons entitled thereto, including, without
limitation, the Company.
(c)
In
addition to all of the rights and remedies which the Secured Party may
have
pursuant to this Agreement, the Secured Party shall have all of the rights
and
remedies provided by law, including, without limitation, those under the Uniform
Commercial Code.
(i)
If
the
Company fails to pay such amounts due upon the occurrence of
an
Event of Default which is continuing, then the Secured Party may institute
a
judicial proceeding
for the collection of the sums so due and unpaid, may prosecute such proceeding
to
judgment
or final decree and may enforce the same against the Company and collect the
monies adjudged
or decreed to be payable in the manner provided by law out
of
the property of Company,
wherever situated.
(ii)
The
Company agrees that it shall be liable for any reasonable fees, expenses
and costs incurred by the Secured Party in connection with enforcement,
collection and
preservation
of the Transaction Documents, including, without limitation, reasonable
legal fees and
expenses, and such amounts shall be deemed included as Obligations secured
hereby and
payable
as set forth in Section 8.3 hereof.
Section
5.3. Proofs
of Claim.
In
case
of the pendency of any receivership, insolvency, liquidation, bankruptcy,
reorganization,
arrangement, adjustment, composition or other judicial proceeding relating
to
the
Company
or the property of the Company or of such other obligor or its creditors,
the
Secured Party
(irrespective of whether the Obligations shall then be due and payable as
therein expressed or by declaration or otherwise and irrespective of whether
the
Secured Party shall have made any
demand
on
the Company for the payment of the Obligations), subject to the rights of
Previous Security Holders, shall be entitled and empowered, by intervention
in
such proceeding or otherwise:
(i)
to
file
and prove a claim for the whole amount of the Obligations and
to
file such other papers or documents as may be necessary or advisable in order
to
have the claims
of
the Secured Party (including any claim for the reasonable legal fees and
expenses and
other
expenses paid or incurred by the Secured Party permitted hereunder and
of
the
Secured Party
allowed in such judicial proceeding), and
(ii)
to
collect and receive any monies or other property payable or deliverable
on any such claims and to distribute the same; and any custodian, receiver,
assignee,
trustee,
liquidator, sequestrator or other similar official in any such judicial
proceeding is
hereby
authorized
by the Secured Party to make such payments to the Secured Party and,
in
the
event that the Secured Party shall consent to the making of such payments
directed to
the
Secured Party,
to
pay to the Secured Party any amounts for expenses due it hereunder.
6
Section
5.4. Duties
Regarding Pledged Collateral.
The
Secured Party shall have no duty as to the collection or protection of the
Pledged Property
or any income thereon or as to the preservation of any rights pertaining
thereto, beyond
the
safe
custody and reasonable care of any of the Pledged Property actually in the
Secured Party's
possession.
ARTICLE
6.
AFFIRMATIVE
COVENANTS
The
Company covenants and agrees that, from the date hereof and until the
Obligations have
been
fully paid and satisfied, unless the Secured Party shall consent otherwise
in
writing (as
provided
in Section 8.4 hereof):
Section
6.1. Existence,
Properties, Etc.
(a)
The
Company shall do, or cause to be done, all things, or proceed with due
diligence
with any actions or courses of action, that may be reasonably necessary (i)
to
maintain
Company's due organization, valid existence and good standing under the laws
of
its
state of incorporation,
and (ii) to preserve and keep in full force and effect all qualifications,
licenses
and registrations
in those jurisdictions in which the failure to do so could have a Material
Adverse
Effect (as defined below); and (b) the Company shall not do, or
cause
to be done, any act impairing the Company's corporate power or authority (i)
to
carry on the Company's business as
now
conducted, and (ii) to execute or deliver this Agreement or any other document
delivered in
connection
herewith, including, without limitation, any UCC-1 Financing Statements required
by the
Secured Party to which it is or will be a party, or perform any of its
obligations hereunder or
thereunder.
For purpose of this Agreement, the term "Material
Adverse Effect" shall
mean any material
and adverse affect as determined by Secured Party in its
sole
discretion, whether individually
or in the aggregate, upon (a) the Company's assets, business, operations,
properties
or
condition, financial or otherwise; (b) the Company's to make payment as and
when
due of all or any part of the Obligations; or (c) the Pledged
Property.
Section
6.2. Financial
Statements and Reports.
The
Company shall furnish to the Secured Party such financial data as the Secured
Party may
reasonably request. Without
limiting the foregoing, the Company shall furnish to the
Secured
Party (or cause to be. furnished
to the Secured Party) the following:
(a)
as
soon as practicable and in any event within ninety (90) days after the
end
of
each fiscal year of the Company, the balance sheet of the Company as of the
close of such fiscal
year, the statement of earnings and retained earnings of the Company as
of
the
close of such
fiscal year, and statement of cash flows for the Company for such fiscal year,
all in reasonable detail, prepared in accordance
with generally accepted accounting
principles consistently
applied, certified by the chief executive and chief financial officers
of
the
Company as
being
true and correct and accompanied by a certificate of the chief executive
and
chief
financial
officers of the Company, stating that the Company has kept, observed, performed
and
fulfilled
each covenant, term and condition of this Agreement during such fiscal year
and
that no
Event
of
Default hereunder has occurred and is continuing, or
if an
Event of Default has occurred and is continuing, specifying the nature of same,
the period of existence of
same
and the
action the Company proposes to take in connection therewith;
7
(b)
within
thirty (30) days of the end of each calendar month, a balance sheet of
the
Company as of the close of such month, and statement of earnings and retained
earnings of the
Company as of the close of such month, all in reasonable detail, and prepared
substantially in accordance
with generally accepted accounting principles consistently applied, certified
by
the chief
executive and chief financial officers of the Company as being true and correct;
and
(c)
promptly
upon receipt thereof, copies of all accountants'
reports and accompanying
financial reports submitted to the Company
by independent accountants in connection
with each annual examination of the Company.
Section
6.3. Accounts
and Reports.
The
Company shall maintain a standard system of accounting in
accordance with generally
accepted accounting principles consistently applied and provide, at its
sole
expense, to the
Secured Party the following:
(a)
as
soon
as available, a copy of any notice or other communication alleging any
nonpayment or other material breach or default, or any foreclosure or other
action respecting any
material portion of its assets and properties, received respecting any of the
indebtedness of the
Company in excess of $15,000 (other than the Obligations), or any demand or
other request for
payment under any guaranty, assumption, purchase agreement
or similar agreement or arrangement
respecting the indebtedness or obligations of others in excess of $15,000,
including
any
received from any person acting on behalf of the Secured Party or beneficiary
thereof; and
(b)
within
fifteen (15) days after the making of each submission or filing, a copy
of
any report, financial statement, notice or other document, whether periodic
or
otherwise, submitted
to the shareholders of the Company, or submitted to or filed by the Company
with
any governmental
authority involving or affecting (i) the Company that could have a Material
Adverse Effect; (ii) the Obligations; (iii) any part of the Pledged Collateral;
or
(iv)
any of the transactions
contemplated in this Agreement or the Transaction Documents.
Section
6.4. Maintenance
of Books and Records; Inspection.
The
Company shall maintain its books, accounts
and records in accordance with generally
accepted accounting principles consistently applied, and permit the Secured
Party, its officers
and employees and any professionals designated by the Secured Party in writing,
at
any
time
to
visit and inspect any of its properties (including but not limited to the
collateral security
described
in the Transaction Documents), corporate books and financial records,
and
to
discuss its accounts, affairs and finances with any employee, officer or
director thereof.
8
Section
6.5. Maintenance
and Insurance.
(a)
The
Company shall maintain or cause to be maintained, at
its
own expense,
all of its assets and properties in good working order and
condition, making all necessary
repairs thereto and renewals and replacements thereof.
(b)
The
Company shall maintain or cause to be maintained, at
its
own expense,
insurance in form, substance and amounts (including deductibles), which the
Company
deems reasonably necessary to the Company's business, (i) adequate to insure
all
assets and properties
of the Company, which assets and properties are of a character usually
insured
by persons
engaged in the same or similar business against loss or damage resulting
from
fire
or other
risks included in an extended coverage policy; (ii) against public liability
and
other tort claims
that may be incurred by the Company; (iii) as may be required by
the
Transaction Documents
and/or applicable law and (iv) as may be reasonably requested by Secured Party,
all
with
adequate, financially sound and reputable insurers.
Section
6.6. Contracts
and Other Collateral.
The
Company shall perform all of its obligations under or with respect to each
instrument,
receivable, contract and other intangible included in the Pledged Property
to
which
the
Company is now or hereafter will be party on a timely basis and in the manner
therein
required,
including, without limitation, this Agreement.
Section
6.7. Defense
of Collateral, Etc.
The
Company shall defend and enforce its right, title and interest in and to any
part of: (a)
the
Pledged Property; and (b) if not included within the Pledged Property
,
those
assets and properties whose loss could have a Material Adverse Effect, the
Company shall defend the Secured
Party's right, title and interest in and to each and every part of the Pledged
Property,
each
against all manner of claims and demands on a timely basis to the full extent
permitted by applicable
law.
Section
6.8. Payment
of Debts, Taxes, Etc.
The
Company shall pay, or cause to be paid, all of its indebtedness and other
liabilities and
perform, or cause to be performed, all of its obligations in accordance with
the
respective terms thereof, and pay and discharge, or cause to be paid or
discharged, all taxes, assessments
and
other
governmental charges and levies imposed upon it, upon any of its assets and
properties on or before the last day on which the same may be paid without
penalty, as well as pay all other lawful claims (whether for services, labor,
materials, supplies or otherwise) as and when due
Section
6.9. Taxes
and Assessments: Tax Indemnity.
The
Company shall (a) file all tax returns and appropriate schedules thereto
that are required
to be filed under applicable law, prior to the date of delinquency, (b) pay
and
discharge
all
taxes, assessments and governmental charges or levies imposed upon the Company,
upon
its
income
and profits or upon any properties belonging to it, prior to the date on which
penalties attach
thereto, and (c) pay all taxes, assessments and governmental charges or levies
that, if unpaid,
might become a lien or charge upon any of its properties; provided,
however, that
the
Company in good faith may contest any such tax, assessment, governmental charge
or levy described
in the foregoing
clauses
(b) and (c) so long as appropriate reserves are maintained with respect
thereto.
9
Section
6.10. Compliance
with Law and Other Agreements.
The
Company shall maintain its business operations and property owned or
used
in connection therewith in compliance with (a)
all
applicable federal, state and local laws,
regulations
and ordinances governing such business operations and the use and
ownership of such
property, and (b) all agreements, licenses, franchises, indentures and
mortgages to which the
Company is a party or by which the Company or any of its properties is bound.
Without
limiting
the foregoing,
the
Company shall pay all of its indebtedness promptly in accordance with
the
terms thereof.
Section
6.11. Notice
of Default.
The
Company shall give written notice to the Secured Party of the occurrence
of
any
default
or Event of Default under this Agreement, the Transaction Documents or any
other
Loan Instrument
or any other agreement of Company for the payment of money, promptly upon
the
occurrence thereof.
Section
6.12. Notice
of Litigation.
The
Company shall give notice, in writing, to the Secured Party of (a) any actions,
suits
or
proceedings wherein the amount at issue is in excess of $50,000, instituted
by
any persons against the Company, or affecting any of the assets of the Company,
and
(b)
any dispute, not resolved
within fifteen (15) days of the commencement thereof, between the Company on
the
one hand and any governmental or regulatory body on the other hand, which might
reasonably be expected
to have a Material Adverse Effect on the business operations or financial
condition
of the
Company.
ARTICLE
7.
NEGATIVE
COVENANTS
The
Company covenants and agrees that, from the date hereof until the Obligations
have been
fully paid and satisfied, the Company shall not, unless the Secured
Party shall consent otherwise
in writing:
Section
7.1. Indebtedness.
The
Company shall not directly or indirectly permit, create, incur,
assume, permit to exist,
increase, renew or extend on or after the date hereof any indebtedness on its
part, including commitments,
contingencies and credit availabilities, or apply for or offer or agree
to
do any
of the
foregoing.
10
Section
7.2. Liens
and Encumbrances.
The
Company shall not directly or indirectly make, create, incur, assume or permit
to exist
any
assignment, transfer, pledge, mortgage, security interest or other lien
or
encumbrance of
any
nature in, to or against any part of the Pledged Property or of the Company's
capital stock, or
offer
or agree to do so, or own or acquire or agree to acquire any asset or property
of
any
character
subject to any of the foregoing encumbrances (including any conditional sale
contract or
other
title retention agreement), or assign, pledge or in any way transfer or encumber
its right
to
receive any income or other distribution or proceeds from any part of the
Pledged Property or the
Company's capital stock; or enter into any sale-leaseback financing respecting
any part of the Pledged
Property as
lessee, or cause or assist the inception or continuation of any of the
foregoing.
Section
7.3. Articles,
By-Laws, Mergers, Consolidations, Acquisitions and Sales.
Without
the prior express written consent of the Secured Party, the Company shall not:
(a) Amend its Articles of Incorporation or By-Laws; (b) issue or sell its
stock,
stock options, bonds,
notes or other corporate securities or obligations; (c) be a party to any
merger, consolidation
or corporate reorganization, (d) purchase or otherwise acquire all
or
substantially all of the assets or stock of, or any partnership or joint venture
interest in, any other person, firm
or
entity, (e) sell, transfer, convey, grant a security interest in or lease all
or
any substantial part
of
its
assets, nor (f) create any subsidiaries nor convey any of its assets to any
subsidiary.
Section
7.4. Management,
Ownership.
The
Company shall not materially change its ownership, executive staff or management
without
the prior written consent of the Secured Party. The
ownership, executive staff and management
of the Company are material factors in the Secured Party's willingness
to
institute and
maintain a lending relationship with the Company.
Section
7.5. Dividends,
Etc.
The
Company shall not declare or pay any dividend of any kind, in cash or in
property, on
any
class of its capital stock, nor purchase, redeem, retire or otherwise acquire
for
value
any shares of such stock, nor make any distribution of any kind in respect
thereof, nor
make
any return
of
capital to shareholders, nor make any payments in respect of
any
pension, profit sharing, retirement, stock option, stock bonus, incentive
compensation or similar plan (except as required
or permitted hereunder), without the prior written consent of the Secured
Party.
Section
7.6. Guaranties;
Loans.
The
Company shall not guarantee nor be liable in any manner, whether
directly or indirectly,
or become contingently liable after the date of this Agreement in connection
with
the
obligations
or indebtedness of any person or persons, except for (i) the indebtedness
currently
secured by the liens identified on the Pledged Property identified on Exhibit
A
hereto and
(ii)
the endorsement
of negotiable instruments payable to the Company for deposit or collection
in
the
ordinary course of business. The Company shall not make any loan, advance or
extension of credit
to
any person other than in the normal course of its business.
11
Section
7.7. Debt.
The
Company shall not create, incur,
assume or suffer to exist any additional
indebtedness of any description whatsoever in an aggregate amount
in
excess of $25,000 (excluding
any indebtedness of the Company to the Secured Party, trade accounts payable
and
accrued
expenses incurred in the ordinary course of business and the endorsement of
negotiable instruments
payable to the Company, respectively for deposit or collection in the ordinary
course of business).
Section
7.8. Conduct
of Business.
The
Company will continue to engage, in an efficient and economical manner,
in a business
of the same general type as conducted by it on the date of this
Agreement.
Section
7.9. Places
of Business.
The
location of the Company's chief place of business is 000 0xx
Xxxxxx,
Xxxxx 0000, Xxx
Xxxx,
XX 00000. The Company shall not change the location of its chief place of
business, chief
executive office or any place of business disclosed to the Secured Party or
move
any of the Pledged
Property from its current location without thirty (30) days' prior written
notice
to
the Secured
Party in each instance.
ARTICLE
8.
MISCELLANEOUS
Section
8.1. Notices.
All
notices or other communications required or permitted to be given pursuant
to this Agreement shall be in writing and shall be considered as duly given
on:
(a)
the
date
of
delivery, if delivered in person, by nationally recognized overnight
delivery
service or (b)
five
(5) days after mailing if mailed from within the continental United States
by
certified mail,
return receipt requested to the party entitled to receive the same:
|
If
to the Company, to:
|
Global IT Holdings Inc |
| 000 0xx Xxxxxx, Xxxxx 0000 | |
|
Xxx
Xxxx, XX 00000
|
|
Attention:
|
Xxxxx
Xxxxx, President
|
|
|
Telephone:
|
(000)
000-0000
|
|
|
Facsimile:
|
(000)
000-0000
|
12
| If to the Secured Party, to: |
Advantage
Capital Development Corp.
0000
XX 000xx
Xxxxxx, Xxxxxxxxx 0
Xxxxxxxx,
Xxxxxxx 00000
Attention:
Xxxx Xxxxxxxxx, President
Telephone:
(000)000-0000
Telefax:
(000)000-0000
|
Any
party
may change its address by giving notice to the other party stating its
new
address.
Commencing on the tenth (10th)day
after the giving of such notice, such newly designated
address shall be such party's address for
the
purpose of all notices or other communications
required or permitted to be given pursuant to this Agreement.
Section
8.2. Severability.
If
any
provision of this Agreement shall be held invalid or unenforceable, such
invalidity or
unenforceability shall attach only to such provision and shall not in
any
manner affect or render
invalid or unenforceable any other severable provision of this Agreement, and
this Agreement shall be carried out as if any such invalid or unenforceable
provision were not contained herein.
Section
8.3. Expenses.
In
the
event of an Event of Default, the Company will pay to the Secured Party the
amount of any and all reasonable expenses, including the reasonable fees
and
expenses of its counsel,
which the Secured Party may incur in connection with: (i)
the
custody or preservation of,
or
the sale, collection from, or other realization upon, any of the Pledged
Property;
(ii) the exercise or enforcement of any of the rights of the Secured Party
hereunder or (iii) the failure
by the
Company to perform or observe any of the provisions hereof.
Section
8.4. Waivers,
Amendments, Etc.
The
Secured Party's delay or failure at any time or times hereafter to require
strict performance by Company of any undertakings, agreements or covenants
shall
not waiver, affect,
or
diminish any right of the Secured Party under this Agreement to demand strict
compliance and
performance
herewith. Any waiver by the Secured Party of any Event of Default shall not
waive or affect any other Event of Default, whether such Event of Default is
prior or subsequent thereto and
whether of the same or a different type. None of the undertakings, agreements
and covenants of the Company contained in this Agreement, and no Event
of
Default, shall be deemed
to
have been waived by the Secured Party, nor may this Agreement
be amended, changed or modified, unless such waiver, amendment, change or
modification is evidenced by an instrument
in writing specifying such waiver, amendment, change or modification and signed
by the
Secured Party.
13
Section
8.5. Continuing
Security Interest.
This
Agreement shall create a continuing security interest in the Pledged Property
and
shall:
(i) remain in full force and effect until payment in full of the Obligations;
and (ii) be binding
upon the Company and its successors and heirs and (iii) inure to the
benefit of the Secured
Party and its successors and assigns. Upon the payment or satisfaction in full
of the Obligations,
the Company shall be entitled to the return, at its expense, of such of the
Pledged
Property
as shall not have been sold in accordance with Section 5.2 hereof or otherwise
applied pursuant
to the terms hereof.
Section
8.6. Independent
Representation.
Each
party hereto acknowledges and agrees that it has received or has had the
opportunity to
receive independent legal counsel of its own choice and that it has been
sufficiently apprised of
its
rights and responsibilities with regard to the substance of this
Agreement.
Section
8.7. Applicable
Law: Jurisdiction.
This
Agreement shall be governed by and interpreted in accordance with the laws
of
the State
of
Florida without regard to the principles of conflict of laws. The
parties further agree that any
action between them shall be heard in Florida, and expressly consent to the
jurisdiction and
venue
of
the Superior Court of Florida and the United States District Court for the
District of Florida
for the adjudication of any civil action asserted pursuant to this
Paragraph.
Section
8.8. Waiver
of Jury Trial.
AS
A
FURTHER INDUCEMENT FOR THE SECURED PARTY TO ENTER INTO THIS
AGREEMENT AND TO MAKE THE FINANCIAL ACCOMMODATIONS TO THE COMPANY, THE COMPANY
HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY IN ANY
LEGAL
PROCEEDING RELATED IN ANY WAY TO THIS AGREEMENT AND/OR ANY AND ALL OTHER
DOCUMENTS RELATED TO THIS TRANSACTION.
Section
8.9. Entire
Agreement.
This
Agreement constitutes the entire agreement among the parties and supersedes
any
prior
agreement or understanding among them with respect to the subject matter
hereof.
[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]
14
IN
WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
 |
15
EXHIBIT
A
DEFINITION
OF PLEDGED PROPERTY
For
the
purpose of securing prompt and complete payment and performance by the
Company
of all of the Obligations, the Company unconditionally and irrevocably hereby
grants to
the
Secured Party a continuing security interest in and to, and lien upon, the
following Pledged Property
of the Company:
(a)
all
goods
of the Company, including, without limitation, machinery,
equipment, furniture, furnishings, fixtures, signs, lights, tools, parts,
supplies and
motor
vehicles of
every
kind and description, now or hereafter owned by the Company
or in which the Company
may have or may hereafter acquire any interest, and
all
replacements, additions, accessions, substitutions and proceeds thereof, arising
from the sale or disposition thereof,
and where
applicable, the proceeds of insurance and of
any
tort claims involving any of the foregoing;
(b)
all
inventory of the Company, including, but not limited to, all goods, wares,
merchandise, parts, supplies, finished products, other tangible personal
property, including such inventory as is temporarily out of
Company's custody or possession and including
any returns upon any accounts or other proceeds, including
insurance proceeds, resulting
from the sale or disposition of any of the foregoing;
(c)
all
contract rights and general intangibles of the Company, including,
without limitation, goodwill, trademarks, trade styles, trade names,
leasehold
interests, partnership
or joint venture interests, patents and patent applications, copyrights,
deposit
accounts
whether now owned or hereafter created;
(d) all
documents, warehouse receipts, instruments and chattel paper of the Company
whether now owned or hereafter created;
(e)
all
accounts and other receivables, instruments
or other forms of
obligations
and rights to payment of
the
Company (herein collectively referred to
as
"Accounts"), together
with the proceeds thereof, all goods represented by such Accounts and all
such
goods that may be returned by the Company's customers, and all proceeds of
any
insurance thereon,
and all guarantees, securities and liens which the Company may hold for the
payment of
any
such
Accounts including, without limitation, all rights of stoppage in transit,
replevin
and reclamation
and as an unpaid vendor and/or lienor, all of which the Company represents
and
warrants
will be bona fide and existing obligations of its respective customers,
arising
out of the sale
of
goods by the Company in the ordinary course of business;
(f)
to
the
extent assignable, all of the Company's rights under all present and
future
authorizations, permits, licenses and franchises issued or granted in connection
with the operations
of any of its facilities;
(g) all
products and proceeds (including,
without limitation, insurance
proceeds)
from the above-described Pledged Property.
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