SECURITY AGREEMENT
THIS SECURITY AGREEMENT ("AGREEMENT") is made as of the 31ST day of
December, 1997, by ORIX GLOBAL COMMUNICATIONS, INC. (hereinafter called
"DEBTOR", whether one or more), in favor of Infinity Investors Limited, as
agent for and representative of (in such capacity, "PLEDGEE") the Purchasers
(as hereinafter defined) under the Securities Purchase Agreement (as
hereinafter defined). Debtor hereby agrees with Pledgee as follows:
1. DEFINITIONS. As used in this Agreement, the following terms shall
have the meanings indicated below:
(a) The term "BORROWER" shall mean Debtor.
(b) The term "CODE" shall mean the Uniform Commercial Code as in
effect in the State of Nevada on the date of this Agreement or as it may
hereafter be amended from time to time.
(c) The term "COLLATERAL" shall mean all of the property set forth
below:
(i) All present and future accounts, chattel paper,
documents, instruments, cash, deposit accounts and general
intangibles (including any right to payment for goods sold or
services rendered arising out of the sale or delivery of personal
property or work done or labor performed by Debtor), now or hereafter
owned, held, or acquired by Debtor, together with any and all books
of account, customer lists and other records relating in any way to
the foregoing (including, without limitation, computer software,
whether on tape, disk, card, strip, cartridge or any other form), and
in any case where an account arises from the sale of goods, the
interest of Debtor in such goods.
(ii) All present and hereafter acquired inventory
(including without limitation, all raw materials, work in process and
finished goods) held, possessed, owned, held on consignment, or held
for sale, lease, return or to be furnished under contracts of
services, in whole or in part, by Debtor wherever located, all
records relating in any way to the foregoing (including, without
limitation, any computer software, whether on tape, disk, card,
strip, cartridge or any other form).
(iii) All equipment and fixtures of whatsoever kind and
character now or hereafter possessed, held, acquired, leased or owned
by Debtor and used or usable in Debtor's business, together with all
replacements, accessories, additions, substitutions and accessions to
all of the foregoing, all records relating in any way to the
foregoing (including, without limitation, any computer software,
whether on tape, disk, card, strip, cartridge or any other form). To
the extent that the foregoing property is located on, attached to,
annexed to, related to, or used in connection with, or otherwise made
a part of, and is or shall become fixtures upon, real property, such
real property and the record owner thereof is described on EXHIBIT
"A" attached hereto and made a part hereof.
(iv) All rights of Borrower in all deposits accounts
maintained by Borrower including any account established pursuant to
Section 4(j) of this Agreement.
The term Collateral, as used herein, shall also include all PRODUCTS
and PROCEEDS of all of the foregoing (including without limitation,
insurance payable by reason of loss or damage to the foregoing property)
and any property, securities, guaranties or monies of Debtor which may at
any time come into the possession of Secured Party (as hereinafter
defined). The designation of proceeds does not authorize Debtor to sell,
transfer or otherwise convey any of the foregoing property except finished
goods intended for sale in the ordinary course of Debtor's business or as
otherwise provided herein.
(d) The term "INDEBTEDNESS" shall mean (i) all indebtedness,
obligations and liabilities of Borrower to Secured Party to timely pay the
Rescission Price, as such term is defined in the Securities
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SECURITY AGREEMENT - Page 1
Purchase Agreement dated as of the date hereof (the "SECURITIES PURCHASE
AGREEMENT") among Borrower, Orix, and Infinity Investors Limited and
Infinity Emerging Opportunities Limited (the "PURCHASERS"); (ii) all
accrued but unpaid interest on any of the indebtedness described in
(i) above; (iii) all obligations owing to Secured Party under any
documents evidencing, securing, governing and/or pertaining to all or any
part of the indebtedness described in (i) and (ii) above; (iv) all costs
and expenses incurred by Secured Party in connection with the collection
and administration of all or any part of the indebtedness and obligations
described in (i), (ii) and (iii) above or the protection or preservation
of, or realization upon, the collateral securing all or any part of such
indebtedness and obligations, including without limitation all reasonable
attorneys' fees; and (v) all renewals, extensions, modifications and
rearrangements of the indebtedness and obligations described in (i), (ii),
(iii) and (iv) above.
(e) The term "LOAN DOCUMENTS" shall mean all instruments and
documents evidencing, securing, governing, guaranteeing and/or pertaining
to the Indebtedness, including without limitation the Securities Purchase
Agreement.
(f) The term "OBLIGATED PARTY" shall mean any party other than
Borrower who secures, guarantees and/or is otherwise obligated to pay all
or any portion of the Indebtedness.
(g) The term "SECURED PARTY" shall mean the Purchasers, and the
Pledgee as agent for the Purchasers, their successors and assigns,
including without limitation, any party to whom any Purchaser or the
Pledgee, or any of their successors or assigns, may assign all or any part
of the Indebtedness or any of its rights and interests under this
Agreement.
All words and phrases used herein which are expressly defined in Section
1-201 or Chapter 9 of the Code shall have the meaning provided for therein.
Other words and phrases defined elsewhere in the Code shall have the meaning
specified therein except to the extent such meaning is inconsistent with a
definition in Section 1-201 or Chapter 9 of the Code.
2. SECURITY INTEREST. As security for the Indebtedness, Debtor, for
value received, hereby grants to Secured Party a continuing security interest
in the Collateral.
3. REPRESENTATIONS AND WARRANTIES. Debtor hereby represents and
warrants the following to Secured Party:
(a) DUE AUTHORIZATION. The execution, delivery and performance of
this Agreement and all of the other Loan Documents by Debtor have been
duly authorized by all necessary corporate action of Debtor, to the extent
Debtor is a corporation, or by all necessary partnership action, to the
extent Debtor is a partnership.
(b) ENFORCEABILITY. This Agreement and the other Loan Documents
constitute legal, valid and binding obligations of Debtor, enforceable in
accordance with their respective terms, except as limited by bankruptcy,
insolvency or similar laws of general application relating to the
enforcement of creditors' rights and except to the extent specific
remedies may generally be limited by equitable principles.
(c) OWNERSHIP AND LIENS. Debtor has good and marketable title to
the Collateral free and clear of all liens, security interests,
encumbrances or adverse claims, except for the security interest created
by this Agreement. No dispute, right of setoff, counterclaim or defense
exists with respect to all or any part of the Collateral. Debtor has not
executed any other security agreement currently affecting the Collateral
and no effective financing statement or other instrument similar in effect
covering all or any part of the Collateral is on file in any recording
office except as may have been executed or filed in favor of Secured
Party.
(d) NO CONFLICTS OR CONSENTS. Neither the ownership, the intended
use of the Collateral by Debtor, the grant of the security interest by
Debtor to Secured Party herein nor the exercise by Secured Party of its
rights or remedies hereunder, will (i) conflict with any provision of (A)
any domestic or foreign law, statute, rule or regulation, (B) the articles
or certificate of incorporation, charter, bylaws or partnership
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agreement, as the case may be, of Debtor, or (C) any agreement,
judgment, license, order or permit applicable to or binding upon Debtor,
or (ii) result in or require the creation of any lien, charge or
encumbrance upon any assets or properties of Debtor or of any person
except as may be expressly contemplated in the Loan Documents. Except
as expressly contemplated in the Loan Documents, no consent, approval,
authorization or order of, and no notice to or filing with, any court,
governmental authority or third party is required in connection with the
grant by Debtor of the security interest herein or the exercise by
Secured Party of its rights and remedies hereunder.
(e) SECURITY INTEREST. Debtor has and will have at all times full
right, power and authority to grant a security interest in the Collateral
to Secured Party in the manner provided herein, free and clear of any
lien, security interest or other charge or encumbrance. This Agreement
creates a legal, valid and binding security interest in favor of Secured
Party in the Collateral securing the Indebtedness. Possession by Secured
Party of all certificates, instruments and cash constituting Collateral
from time to time and/or the filing of the financing statements delivered
prior hereto and/or concurrently herewith by Debtor to Secured Party will
perfect and establish the first priority of Secured Party's security
interest hereunder in the Collateral.
(f) LOCATION. Debtor's residence or chief executive office, as the
case may be, and the office where the records concerning the Collateral
are kept is located at its address set forth on the signature page hereof.
Except as specified elsewhere herein, all Collateral shall be kept at such
address and such other addresses as may be listed in SCHEDULE "A" attached
hereto and made a part hereof.
(g) SOLVENCY OF DEBTOR. As of the date hereof, and after giving
effect to this Agreement and the completion of all other transactions
contemplated by Debtor at the time of the execution of this Agreement, (i)
Debtor is and will be solvent, (ii) the fair saleable value of Debtor's
assets exceeds and will continue to exceed Debtor's liabilities (both
fixed and contingent), (iii) Debtor is paying and will continue to be able
to pay its debts as they mature, and (iv) if Debtor is not an individual,
Debtor has and will have sufficient capital to carry on Debtor's
businesses and all businesses in which Debtor is about to engage.
(h) COMPLIANCE WITH ENVIRONMENTAL LAWS. Except as disclosed in
writing to Secured Party: (i) Debtor is conducting Debtor's businesses in
material compliance with all applicable federal, state and local laws,
statutes, ordinances, rules, regulations, orders, determinations and court
decisions, including without limitation, those pertaining to health or
environmental matters such as the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended by the Superfund
Amendments and Reauthorization Act of 1986 (collectively, together with
any subsequent amendments, hereinafter called "CERCLA"), the Resource
Conservation and Recovery Act of 1976, as amended by the Used Oil
Recycling Act of 1980, the Solid Waste Disposal Act Amendments of 1980,
and the Hazardous Substance Waste Amendments of 1984 (collectively,
together with any subsequent amendments, hereinafter called "RCRA"), the
Texas Water Code and the Texas Solid Waste Disposal Act; (ii) none of the
operations of Debtor is the subject of a federal, state or local
investigation evaluating whether any material remedial action is needed to
respond to a release or disposal of any toxic or hazardous substance or
solid waste into the environment; (iii) Debtor has not filed any notice
under any federal, state or local law indicating that Debtor is
responsible for the release into the environment, the disposal on any
premises in which Debtor is conducting its businesses or the improper
storage, of any material amount of any toxic or hazardous substance or
solid waste or that any such toxic or hazardous substance or solid waste
has been released, disposed of or is improperly stored, upon any premise
on which Debtor is conducting its businesses; and (iv) Debtor otherwise
does not have any known material contingent liability in connection with
the release into the environment, disposal or the improper storage, of any
such toxic or hazardous substance or solid waste. The terms "HAZARDOUS
SUBSTANCE" and "RELEASE", as used herein, shall have the meanings
specified in CERCLA, and the terms "SOLID WASTE" and "DISPOSAL", as used
herein, shall have the meanings specified in RCRA; provided, however, that
to the extent that the laws of the State of Texas establish meanings for
such terms which are broader than that specified in either CERCLA or RCRA,
such broader meanings shall apply.
Page 3
(i) INVENTORY. The security interest in the inventory shall
continue through all stages of manufacture and shall, without further
action, attach to the accounts or other proceeds resulting from the sale
or other disposition thereof and to all such inventory as may be returned
to Debtor by its account debtors.
(j) ACCOUNTS. Each account represents the valid and legally binding
indebtedness of a bona fide account debtor arising from the sale or lease
by Debtor of goods or the rendition by Debtor of services and is not
subject to contra accounts, setoffs, defenses or counterclaims by or
available to account debtors obligated on the accounts except as disclosed
by Debtor to Secured Party from time to time in writing. The amount shown
as to each account on Debtor's books is the true and undisputed amount
owing and unpaid thereon, subject only to discounts, allowances, rebates,
credits and adjustments to which the account debtor has a right and which
have been disclosed to Secured Party in writing.
(k) CHATTEL PAPER, DOCUMENTS AND INSTRUMENTS. The chattel paper,
documents and instruments of Debtor pledged hereunder have only one
original counterpart and no party other than Debtor or Secured Party is in
actual or constructive possession of any such chattel paper, documents or
instruments.
4. AFFIRMATIVE COVENANTS. Debtor will comply with the covenants
contained in this Section 4 at all times during the period of time this
Agreement is effective unless Secured Party shall otherwise consent in writing.
(a) OWNERSHIP AND LIENS. Debtor will maintain good and marketable
title to all Collateral free and clear of all liens, security interests,
encumbrances or adverse claims, except for the security interest created
by this Agreement and the security interests and other encumbrances
expressly permitted by the other Loan Documents. Debtor will not permit
any dispute, right of setoff, counterclaim or defense to exist with
respect to all or any part of the Collateral. Debtor will cause any
financing statement or other security instrument with respect to the
Collateral to be terminated, except as may exist or as may have been filed
in favor of Secured Party. Debtor will defend at its expense Secured
Party's right, title and security interest in and to the Collateral
against the claims of any third party.
(b) FURTHER ASSURANCES. Debtor will from time to time at its
expense promptly execute and deliver all further instruments and documents
and take all further action necessary or appropriate or that Secured Party
may request in order (i) to perfect and protect the security interest
created or purported to be created hereby and the first priority of such
security interest, (ii) to enable Secured Party to exercise and enforce
its rights and remedies hereunder in respect of the Collateral, and (iii)
to otherwise effect the purposes of this Agreement, including without
limitation: (A) executing and filing such financing or continuation
statements, or amendments thereto; and (B) furnishing to Secured Party
from time to time statements and schedules further identifying and
describing the Collateral and such other reports in connection with the
Collateral, all in reasonable detail satisfactory to Bank.
(c) INSPECTION OF COLLATERAL. Debtor will keep adequate records
concerning the Collateral and will permit Secured Party and all
representatives and agents appointed by Secured Party to inspect any of
the Collateral and the books and records of or relating to the Collateral
at any time during normal business hours, to make and take away
photocopies, photographs and printouts thereof and to write down and
record any such information.
(d) PAYMENT OF TAXES. Debtor (i) will timely pay all property and
other taxes, assessments and governmental charges or levies imposed upon
the Collateral or any part thereof, (ii) will timely pay all lawful claims
which, if unpaid, might become a lien or charge upon the Collateral or any
part thereof, and (iii) will maintain appropriate accruals and reserves
for all such liabilities in a timely fashion in accordance with generally
accepted accounting principles. Debtor may, however, delay paying or
discharging any such taxes, assessments, charges, claims or liabilities so
long as the validity thereof is contested in good faith by proper
proceedings and provided Debtor has set aside on Debtor's books adequate
reserves therefor; provided, however, Debtor understands and agrees that
in the event of any such delay in payment or discharge and upon Secured
Party's written request, Debtor will establish with Secured Party an
escrow acceptable to Secured Party adequate to cover the payment of such
taxes, assessments and governmental charges with interest, costs
Page 4
and penalties and a reasonable additional sum to cover possible costs,
interest and penalties (which escrow shall be returned to Debtor upon
payment of such taxes, assessments, governmental charges, interests,
costs and penalties or disbursed in accordance with the resolution of
the contest to the claimant) or furnish Secured Party with an indemnity
bond secured by a deposit in cash or other security acceptable to
Secured Party. Notwithstanding any other provision contained in this
Subsection, Secured Party may at its discretion exercise its rights
under Subsection 6(c) at any time to pay such taxes, assessments,
governmental charges, interest, costs and penalties.
(e) MORTGAGEE'S AND LANDLORD'S WAIVERS. Debtor shall cause each
mortgagee of real property owned by Debtor and each landlord of real
property leased by Debtor to execute and deliver agreements satisfactory
in form and substance to Secured Party by which such mortgagee or landlord
waives or subordinates any rights it may have in the Collateral.
(f) CONDITION OF GOODS. Debtor will maintain, preserve, protect and
keep all Collateral which constitutes goods in good condition, repair and
working order and will cause such Collateral to be used and operated in
good and workmanlike manner, in accordance with applicable laws and in a
manner which will not make void or cancelable any insurance with respect
to such Collateral. Debtor will promptly make or cause to be made all
repairs, replacements and other improvements to or in connection with the
Collateral which Secured Party may request from time to time.
(g) INSURANCE. Debtor will, at its own expense, maintain insurance
with respect to all Collateral which constitutes goods in such amounts,
against such risks, in such form and with such insurers, as shall be
satisfactory to Secured Party from time to time. Each policy for property
damage insurance shall provide for all losses to be paid directly to
Secured Party. Each policy of insurance maintained by Debtor shall (i)
name Debtor and Secured Party as insured parties thereunder (without any
representation or warranty by or obligation upon Secured Party) as their
interests may appear, (ii) contain the agreement by the insurer that any
loss thereunder shall be payable to Secured Party notwithstanding any
action, inaction or breach of representation or warranty by Debtor, (iii)
provide that there shall be no recourse against Secured Party for payment
of premiums or other amounts with respect thereto, and (iv) provide that
at least thirty (30) days prior written notice of cancellation or of lapse
shall be given to Secured Party by the insurer. Debtor will, if requested
by Secured Party, deliver to Secured Party original or duplicate policies
of such insurance and, as often as Secured Party may reasonably request, a
report of a reputable insurance broker with respect to such insurance.
Debtor will also, at the request of Secured Party, duly execute and
deliver instruments of assignment of such insurance policies and cause the
respective insurers to acknowledge notice of such assignment. All
insurance payments in respect of loss of or damage to any Collateral shall
be paid to Secured Party and applied as Secured Party in its sole
discretion deems appropriate.
(h) ACCOUNTS AND GENERAL INTANGIBLES. Debtor will, except as
otherwise provided in Subsection 6(f), collect, at Debtor's own expense,
all amounts due or to become due under each of the accounts and general
intangibles. In connection with such collections, Debtor may and, at
Secured Party's direction, will take such action not otherwise forbidden
by Subsection 5(e) as Debtor or Secured Party may deem necessary or
advisable to enforce collection or performance of each of the accounts and
general intangibles. Debtor will also duly perform and cause to be
performed all of its obligations with respect to the goods or services,
the sale or lease or rendition of which gave rise or will give rise to
each account and all of its obligations to be performed under or with
respect to the general intangibles. Debtor also covenants and agrees to
take any action and/or execute any documents that Secured Party may
request in order to comply with the Federal Assignment of Claims Act, as
amended.
(i) CHATTEL PAPER, DOCUMENTS AND INSTRUMENTS. Debtor will take such
action as may be requested by Secured Party in order to cause any chattel
paper, documents or instruments to be valid and enforceable and will cause
all chattel paper to have only one original counterpart. Upon request by
Secured Party, Debtor will deliver to Secured Party all originals of
chattel paper, documents or instruments and will xxxx all chattel paper
with a legend indicating that such chattel paper is subject to the
security interest granted hereunder.
Page 5
(j) COLLECTIONS. After the occurrence of an Event of Default (as
hereinafter defined), Debtor will cause all proceeds of and collections
with respect to all Collateral to be deposited in a bank account
established at a bank acceptable to Pledgee, with any such proceeds and
collections to be subject to withdrawal by Pledgee only, and until so
turned over shall be deemed to be held in trust by Borrower for Secured
Party and shall not be commingled with Borrower's other funds or
properties. Such proceeds and collections, when deposited, shall continue
to be collateral security for all of the Indebtedness and shall not
constitute payment thereof until applied as hereinafter provided. At any
time after the occurrence of any Event of Default, Secured Party shall be
entitled to apply all or a part of the funds on deposit in said account to
the principal of or interest on or both in respect of any of the
Indebtedness in accordance with the provisions of Section 8(b) hereof.
5. NEGATIVE COVENANTS. Debtor will comply with the covenants contained
in this Section 5 at all times during the period of time this Agreement is
effective, unless Secured Party shall otherwise consent in writing.
(a) TRANSFER OR ENCUMBRANCE. Debtor will not (i) sell, assign (by
operation of law or otherwise), transfer, exchange, lease or otherwise
dispose of any of the Collateral, (ii) xxxxx x xxxx or security interest
in or execute, file or record any financing statement or other security
instrument with respect to the Collateral to any party other than Secured
Party, or (iii) deliver actual or constructive possession of any of the
Collateral to any party other than Secured Party, except for (A) sales and
leases of inventory in the ordinary course of business, and (B) the sale or
other disposal of any item of equipment which is worn out or obsolete and
which has been replaced by an item of equal suitability and value, owned by
Debtor and made subject to the security interest under this Agreement, but
which is otherwise free and clear of any lien, security interest,
encumbrance or adverse claim; provided, however, the exceptions permitted
in clauses (A) and (B) above shall automatically terminate upon the
occurrence of an Event of Default.
(b) IMPAIRMENT OF SECURITY INTEREST. Debtor will not take or fail
to take any action which would in any manner impair the value or
enforceability of Secured Party's security interest in any Collateral.
(c) POSSESSION OF COLLATERAL. Debtor will not cause or permit the
removal of any Collateral from its possession, control and risk of loss,
nor will Debtor cause or permit the removal of any Collateral from the
address on the signature page hereof and the addresses specified on
SCHEDULE "A" to this Agreement other than (i) as permitted by Subsection
5(a), or (ii) in connection with the possession of any Collateral by
Secured Party or by its bailee.
(d) GOODS. Debtor will not permit any Collateral which constitutes
goods to at any time (i) be covered by any document except documents in the
possession of the Secured Party, (ii) become so related to, attached to or
used in connection with any particular real property so as to become a
fixture upon such real property, or (iii) be installed in or affixed to
other goods so as to become an accession to such other goods unless such
other goods are subject to a perfected first priority security interest
under this Agreement.
(e) COMPROMISE OF COLLATERAL. Debtor will not adjust, settle,
compromise, amend or modify any Collateral, except an adjustment,
settlement, compromise, amendment or modification in good faith and in the
ordinary course of business; provided, however, this exception shall
automatically terminate upon the occurrence of an Event of Default or upon
Secured Party's written request. Debtor shall provide to Secured Party
such information concerning (i) any adjustment, settlement, compromise,
amendment or modification of any Collateral, and (ii) any claim asserted by
any account debtor for credit, allowance, adjustment, dispute, setoff or
counterclaim, as Secured Party may request from time to time.
(f) FINANCING STATEMENT FILINGS. Debtor recognizes that financing
statements pertaining to the Collateral have been or may be filed where
Debtor maintains any Collateral, has its records concerning any Collateral
or has its residence or chief executive office, as the case may be. Without
limitation of any other covenant herein, Debtor will not cause or permit
any change in the location of (i) any Collateral, (ii) any records
concerning any Collateral, or (iii) Debtor's residence or chief executive
office, as the case may be, to a
Page 6
jurisdiction other than as represented in Subsection 3(f) unless Debtor
shall have notified Secured Party in writing of such change at least thirty
(30) days prior to the effective date of such change, and shall have first
taken all action required by Secured Party for the purpose of further
perfecting or protecting the security interest in favor of Secured Party in
the Collateral. In any written notice furnished pursuant to this
Subsection, Debtor will expressly state that the notice is required by this
Agreement and contains facts that may require additional filings of
financing statements or other notices for the purpose of continuing
perfection of Secured Party's security interest in the Collateral.
6. RIGHTS OF SECURED PARTY. Secured Party shall have the rights
contained in this Section 6 at all times during the period of time this
Agreement is effective.
(a) ADDITIONAL FINANCING STATEMENTS FILINGS. Debtor hereby
authorizes Secured Party to file, without the signature of Debtor, one or
more financing or continuation statements, and amendments thereto, relating
to the Collateral. Debtor further agrees that a carbon, photographic or
other reproduction of this Security Agreement or any financing statement
describing any Collateral is sufficient as a financing statement and may be
filed in any jurisdiction Secured Party may deem appropriate.
(b) POWER OF ATTORNEY. Debtor hereby irrevocably appoints Secured
Party as Debtor's attorney-in-fact, such power of attorney being coupled
with an interest, with full authority in the place and stead of Debtor and
in the name of Debtor or otherwise, from time to time in Secured Party's
discretion, to take any action and to execute any instrument which Secured
Party may deem necessary or appropriate to accomplish the purposes of this
Agreement, including without limitation: (i) to obtain and adjust insurance
required by Secured Party hereunder; (ii) to demand, collect, xxx for,
recover, compound, receive and give acquittance and receipts for moneys due
and to become due under or in respect of the Collateral; (iii) to receive,
endorse and collect any drafts or other instruments, documents and chattel
paper in connection with clause (i) or (ii) above; and (iv) to file any
claims or take any action or institute any proceedings which Secured Party
may deem necessary or appropriate for the collection and/or preservation of
the Collateral or otherwise to enforce the rights of Secured Party with
respect to the Collateral.
(c) PERFORMANCE BY SECURED PARTY. If Debtor fails to perform any
agreement or obligation provided herein, Secured Party may itself perform,
or cause performance of, such agreement or obligation, and the expenses of
Secured Party incurred in connection therewith shall be a part of the
Indebtedness, secured by the Collateral and payable by Debtor on demand.
(d) REQUEST FOR ENVIRONMENTAL INSPECTIONS. Upon Secured Party's
reasonable request from time to time, Debtor will obtain at Debtor's sole
expense an inspection or audit of Debtor's operations from an engineering
or consulting firm approved by Secured Party, indicating the presence or
absence of toxic or hazardous substances and solid wastes on any premises
in which Debtor is conducting its business; provided, however, Debtor will
be obligated to pay for the cost of any such inspection or audit no more
than one time in any twelve (12) month period unless Secured Party has
reason to believe that toxic or hazardous substances or solid wastes have
been dumped on any such premises. If Debtor fails to order or obtain an
inspection or audit within ten (10) days after Secured Party's request,
Secured Party may at its option order such inspection or audit, and Debtor
grants to Secured Party and its agents, employees, contractors and
consultants access to the premises in which it is conducting its business
and a license (which is coupled with an interest and is irrevocable) to
obtain inspections and audits. Debtor agrees to promptly provide Secured
Party with a copy of the results of any such inspection or audit received
by Debtor. The cost of such inspections and audits shall be a part of the
Indebtedness, secured by the Collateral and payable by Debtor on demand.
(e) DEBTOR'S RECEIPT OF PROCEEDS. All amounts and proceeds
(including instruments and writings) received by Debtor in respect of such
accounts or general intangibles shall be received in trust for the benefit
of Secured Party hereunder and, upon request of Secured Party, shall be
segregated from other property of Debtor and shall be forthwith delivered
to Secured Party in the same form as so received (with any necessary
endorsement) and applied to the Indebtedness in such manner as Secured
Party deems appropriate in its sole discretion.
Page 7
(f) NOTIFICATION OF ACCOUNT DEBTORS. Secured Party may at its
discretion from time to time notify any or all obligors under any
accounts or general intangibles (i) of Secured Party's security interest
in such accounts or general intangibles and direct such obligors to make
payment of all amounts due or to become due to Debtor thereunder
directly to Secured Party, and (ii) to verify the accounts or general
intangibles with such obligors. Secured Party shall have the right, at
the expense of Debtor, to enforce collection of any such accounts or
general intangibles and to adjust, settle or compromise the amount or
payment thereof, in the same manner and to the same extent as Debtor.
7. EVENTS OF DEFAULT. Each of the following constitutes an "EVENT OF
DEFAULT" under this Agreement:
(a) DEFAULT UNDER SECURITIES PURCHASE AGREEMENT. The occurrence
of any Event of Default under the Securities Purchase Agreement or
Convertible Debenture (as defined therein); or
(b) NON-PERFORMANCE OF COVENANTS. The failure of Borrower or any
Obligated Party to timely and properly observe, keep or perform any
covenant, agreement, warranty or condition required herein or in any of
the other Loan Documents; or
(c) DEFAULT UNDER OTHER LOAN DOCUMENTS. The occurrence of an
event of default under any of the other Loan Documents; or
(d) FALSE REPRESENTATION. Any representation contained herein or
in any of the other Loan Documents made by Borrower or any Obligated
Party is false or misleading in any material respect; or
(e) DEFAULT TO THIRD PARTY. The occurrence of any event which
permits the acceleration of the maturity of any indebtedness owing by
Borrower or any Obligated Party to any third party under any agreement
or undertaking; or
(f) BANKRUPTCY OR INSOLVENCY. If Borrower or any Obligated Party:
(i) becomes insolvent, or makes a transfer in fraud of creditors, or
makes an assignment for the benefit of creditors, or admits in writing
its inability to pay its debts as they become due; (ii) generally is not
paying its debts as such debts become due; (iii) has a receiver, trustee
or custodian appointed for, or take possession of, all or substantially
all of the assets of such party or any of the Collateral, either in a
proceeding brought by such party or in a proceeding brought against such
party and such appointment is not discharged or such possession is not
terminated within sixty (60) days after the effective date thereof or
such party consents to or acquiesces in such appointment or possession;
(iv) files a petition for relief under the United States Bankruptcy Code
or any other present or future federal or state insolvency, bankruptcy
or similar laws (all of the foregoing hereinafter collectively called
"APPLICABLE BANKRUPTCY LAW") or an involuntary petition for relief is
filed against such party under any Applicable Bankruptcy Law and such
involuntary petition is not dismissed within sixty (60) days after the
filing thereof, or an order for relief naming such party is entered
under any Applicable Bankruptcy Law, or any composition, rearrangement,
extension, reorganization or other relief of debtors now or hereafter
existing is requested or consented to by such party; (v) fails to have
discharged within a period of sixty (60) days any attachment,
sequestration or similar writ levied upon any property of such party; or
(vi) fails to pay within thirty (30) days any final money judgment
against such party; or
(g) EXECUTION ON COLLATERAL. The Collateral or any portion
thereof is taken on execution or other process of law in any action
against Debtor; or
(h) ABANDONMENT. Debtor abandons the Collateral or any portion
thereof; or
(i) ACTION BY OTHER LIENHOLDER. The holder of any lien or
security interest on any of the assets of Debtor, including without
limitation, the Collateral (without hereby implying the consent of
Secured Party to the existence or creation of any such lien or security
interest on the Collateral), declares a default thereunder or institutes
foreclosure or other proceedings for the enforcement of its remedies
thereunder; or
Page 8
(j) LIQUIDATION, DEATH AND RELATED EVENTS. If Borrower or any
Obligated Party is an entity, the liquidation, dissolution, merger or
consolidation of any such entity or, if Borrower or any Obligated Party
is an individual, the death or legal incapacity of any such individual.
8. REMEDIES AND RELATED RIGHTS. If an Event of Default shall have
occurred, and without limiting any other rights and remedies provided herein,
under any of the other Loan Documents or otherwise available to Secured Party,
Secured Party may exercise one or more of the rights and remedies provided in
this Section.
(a) REMEDIES. Secured Party may from time to time at its
discretion, without limitation and without notice except as expressly
provided in any of the Loan Documents:
(i) exercise in respect of the Collateral all the
rights and remedies of a secured party under the Code (whether or
not the Code applies to the affected Collateral);
(ii) require Debtor to, and Debtor hereby agrees
that it will at its expense and upon request of Secured Party,
assemble the Collateral as directed by Secured Party and make it
available to Secured Party at a place to be designated by Secured
Party which is reasonably convenient to both parties;
(iii) reduce its claim to judgment or foreclose or
otherwise enforce, in whole or in part, the security interest
granted hereunder by any available judicial procedure;
(iv) sell or otherwise dispose of, at its office,
on the premises of Debtor or elsewhere, the Collateral, as a unit
or in parcels, by public or private proceedings, and by way of one
or more contracts (it being agreed that the sale or other
disposition of any part of the Collateral shall not exhaust Secured
Party's power of sale, but sales or other dispositions may be made
from time to time until all of the Collateral has been sold or
disposed of or until the Indebtedness has been paid and performed
in full), and at any such sale or other disposition it shall not be
necessary to exhibit any of the Collateral;
(v) buy the Collateral, or any portion thereof,
at any public sale;
(vi) buy the Collateral, or any portion thereof,
at any private sale if the Collateral is of a type customarily sold
in a recognized market or is of a type which is the subject of
widely distributed standard price quotations;
(vii) apply for the appointment of a receiver for
the Collateral, and Debtor hereby consents to any such appointment;
and
(viii) at its option, retain the Collateral in
satisfaction of the Indebtedness whenever the circumstances are
such that Secured Party is entitled to do so under the Code or
otherwise.
Debtor agrees that in the event Debtor is entitled to receive any notice
under the Uniform Commercial Code, as it exists in the state governing
any such notice, of the sale or other disposition of any Collateral,
reasonable notice shall be deemed given when such notice is deposited in
a depository receptacle under the care and custody of the United States
Postal Service, postage prepaid, at Debtor's address set forth on the
signature page hereof, five (5) days prior to the date of any public
sale, or after which a private sale, of any of such Collateral is to be
held. Secured Party shall not be obligated to make any sale of
Collateral regardless of notice of sale having been given. Secured
Party may adjourn any public or private sale from time to time by
announcement at the time and place fixed therefor, and such sale may,
without further notice, be made at the time and place to which it was so
adjourned.
Page 9
(b) APPLICATION OF PROCEEDS. If any Event of Default shall have
occurred, Secured Party may at its discretion apply or use any cash held
by Secured Party as Collateral, and any cash proceeds received by Secured
Party in respect of any sale or other disposition of, collection from, or
other realization upon, all or any part of the Collateral as follows in
such order and manner as Secured Party may elect:
(i) to the repayment or reimbursement of the
reasonable costs and expenses (including, without limitation,
reasonable attorneys' fees and expenses) incurred by Secured Party in
connection with (A) the administration of the Loan Documents, (B) the
custody, preservation, use or operation of, or the sale of,
collection from, or other realization upon, the Collateral, and (C)
the exercise or enforcement of any of the rights and remedies of
Secured Party hereunder;
(ii) to the payment or other satisfaction of any liens
and other encumbrances upon the Collateral;
(iii) to the satisfaction of the Indebtedness;
(iv) by holding such cash and proceeds as Collateral;
(v) to the payment of any other amounts required by
applicable law (including without limitation, Section 9-504 of the
Code or any other applicable statutory provision); and
(vi) by delivery to Debtor or any other party lawfully
entitled to receive such cash or proceeds whether by direction of a
court of competent jurisdiction or otherwise.
(c) DEFICIENCY. In the event that the proceeds of any sale of,
collection from, or other realization upon, all or any part of the
Collateral by Secured Party are insufficient to pay all amounts to which
Secured Party is legally entitled, Borrower and any party who guaranteed
or is otherwise obligated to pay all or any portion of the Indebtedness
shall be liable for the deficiency, together with interest thereon as
provided in the Loan Documents.
(d) NON-JUDICIAL REMEDIES. In granting to Secured Party the power
to enforce its rights hereunder without prior judicial process or judicial
hearing, Debtor expressly waives, renounces and knowingly relinquishes any
legal right which might otherwise require Secured Party to enforce its
rights by judicial process. Debtor recognizes and concedes that
non-judicial remedies are consistent with the usage of trade, are
responsive to commercial necessity and are the result of a bargain at
arm's length. Nothing herein is intended to prevent Secured Party or
Debtor from resorting to judicial process at either party's option.
(e) OTHER RECOURSE. Debtor waives any right to require Secured
Party to proceed against any third party, exhaust any Collateral or other
security for the Indebtedness, or to have any third party joined with
Debtor in any suit arising out of the Indebtedness or any of the Loan
Documents, or pursue any other remedy available to Secured Party. Debtor
further waives any and all notice of acceptance of this Agreement and of
the creation, modification, rearrangement, renewal or extension of the
Indebtedness. Debtor further waives any defense arising by reason of any
disability or other defense of any third party or by reason of the
cessation from any cause whatsoever of the liability of any third party.
Until all of the Indebtedness shall have been paid in full, Debtor shall
have no right of subrogation and Debtor waives the right to enforce any
remedy which Secured Party has or may hereafter have against any third
party, and waives any benefit of and any right to participate in any other
security whatsoever now or hereafter held by Secured Party. Debtor
authorizes Secured Party, and without notice or demand and without any
reservation of rights against Debtor and without affecting Debtor's
liability hereunder or on the Indebtedness to (i) take or hold any other
property of any type from any third party as security for the
Indebtedness, and exchange, enforce, waive and release any or all of such
other property, (ii) apply such other property and direct the order or
manner of sale thereof as Secured Party may in its discretion determine,
(iii) renew, extend, accelerate, modify, compromise, settle or release any
of the Indebtedness or other security for the Indebtedness, (iv) waive,
enforce or modify any of the
Page 10
provisions of any of the Loan Documents executed by any third party, and
(v) release or substitute any third party.
9. INDEMNITY. Debtor hereby indemnifies and agrees to hold harmless
Secured Party, and its officers, directors, employees, agents and
representatives (each an "INDEMNIFIED PERSON") from and against any and all
liabilities, obligations, claims, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or nature
(collectively, the "CLAIMS") which may be imposed on, incurred by, or
asserted against, any Indemnified Person arising in connection with the Loan
Documents, the Indebtedness or the Collateral (including without limitation,
the enforcement of the Loan Documents and the defense of any Indemnified
Person's actions and/or inactions in connection with the Loan Documents).
WITHOUT LIMITATION, THE FOREGOING INDEMNITIES SHALL APPLY TO EACH INDEMNIFIED
PERSON WITH RESPECT TO ANY CLAIMS WHICH IN WHOLE OR IN PART ARE CAUSED BY OR
ARISE OUT OF THE NEGLIGENCE OF SUCH AND/OR ANY OTHER INDEMNIFIED PERSON,
except to the limited extent the Claims against an Indemnified Person are
proximately caused by such Indemnified Person's gross negligence or willful
misconduct. If Debtor or any third party ever alleges such gross negligence
or willful misconduct by any Indemnified Person, the indemnification provided
for in this Section shall nonetheless be paid upon demand, subject to later
adjustment or reimbursement, until such time as a court of competent
jurisdiction enters a final judgment as to the extent and effect of the
alleged gross negligence or willful misconduct. The indemnification provided
for in this Section shall survive the termination of this Agreement and shall
extend and continue to benefit each individual or entity who is or has at any
time been an Indemnified Person hereunder.
10. MISCELLANEOUS.
(a) ENTIRE AGREEMENT. This Agreement contains the entire agreement
of Secured Party and Debtor with respect to the Collateral. If the
parties hereto are parties to any prior agreement, either written or oral,
relating to the Collateral, the terms of this Agreement shall amend and
supersede the terms of such prior agreements as to transactions on or
after the effective date of this Agreement, but all security agreements,
financing statements, guaranties, other contracts and notices for the
benefit of Secured Party shall continue in full force and effect to secure
the Indebtedness unless Secured Party specifically releases its rights
thereunder by separate release.
(b) AMENDMENT. No modification, consent or amendment of any
provision of this Agreement or any of the other Loan Documents shall be
valid or effective unless the same is in writing and signed by the party
against whom it is sought to be enforced.
(c) ACTIONS BY SECURED PARTY. The lien, security interest and other
security rights of Secured Party hereunder shall not be impaired by (i)
any renewal, extension, increase or modification with respect to the
Indebtedness, (ii) any surrender, compromise, release, renewal, extension,
exchange or substitution which Secured Party may grant with respect to the
Collateral, or (iii) any release or indulgence granted to any endorser,
guarantor or surety of the Indebtedness. The taking of additional
security by Secured Party shall not release or impair the lien, security
interest or other security rights of Secured Party hereunder or affect the
obligations of Debtor hereunder.
(d) WAIVER BY SECURED PARTY. Secured Party may waive any Event of
Default without waiving any other prior or subsequent Event of Default.
Secured Party may remedy any default without waiving the Event of Default
remedied. Neither the failure by Secured Party to exercise, nor the delay
by Secured Party in exercising, any right or remedy upon any Event of
Default shall be construed as a waiver of such Event of Default or as a
waiver of the right to exercise any such right or remedy at a later date.
No single or partial exercise by Secured Party of any right or remedy
hereunder shall exhaust the same or shall preclude any other or further
exercise thereof, and every such right or remedy hereunder may be
exercised at any time. No waiver of any provision hereof or consent to
any departure by Debtor therefrom shall be effective unless the same shall
be in writing and signed by Secured Party and then such waiver or consent
shall be effective only in the specific instances, for the purpose for
which given and to the extent therein specified. No notice to or
Page 11
demand on Debtor in any case shall of itself entitle Debtor to any other or
further notice or demand in similar or other circumstances.
(e) COSTS AND EXPENSES. Debtor will upon demand pay to Secured
Party the amount of any and all costs and expenses (including without
limitation, attorneys' fees and expenses), which Secured Party may incur
in connection with (i) the transactions which give rise to the Loan
Documents, (ii) the preparation of this Agreement and the perfection and
preservation of the security interests granted under the Loan Documents,
(iii) the administration of the Loan Documents, (iv) the custody,
preservation, use or operation of, or the sale of, collection from, or
other realization upon, the Collateral, (v) the exercise or enforcement of
any of the rights of Secured Party under the Loan Documents, or (vi) the
failure by Debtor to perform or observe any of the provisions hereof.
(F) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEVADA AND
APPLICABLE FEDERAL LAWS, EXCEPT TO THE EXTENT PERFECTION AND THE EFFECT OF
PERFECTION OR NON-PERFECTION OF THE SECURITY INTEREST GRANTED HEREUNDER,
IN RESPECT OF ANY PARTICULAR COLLATERAL, ARE GOVERNED BY THE LAWS OF A
JURISDICTION OTHER THAN THE STATE OF NEVADA.
(g) APPOINTMENT OF PLEDGEE AS AGENT. Pledgee has been appointed to
act as Pledgee hereunder by and for the benefit of the Purchasers.
(h) SEVERABILITY. If any provision of this Agreement is held by a
court of competent jurisdiction to be illegal, invalid or unenforceable
under present or future laws, such provision shall be fully severable,
shall not impair or invalidate the remainder of this Agreement and the
effect thereof shall be confined to the provision held to be illegal,
invalid or unenforceable.
(i) NO OBLIGATION. Nothing contained herein shall be construed as
an obligation on the part of Secured Party to extend or continue to extend
credit to Borrower.
(j) NOTICES. All notices, requests, demands or other communications
required or permitted to be given pursuant to this Agreement shall be in
writing and given by (i) personal delivery, (ii) expedited delivery
service with proof of delivery, or (iii) United States mail, postage
prepaid, registered or certified mail, return receipt requested, sent to
the intended addressee at the address set forth on the signature page
hereof or to such different address as the addressee shall have designated
by written notice sent pursuant to the terms hereof and shall be deemed to
have been received either, in the case of personal delivery, at the time
of personal delivery, in the case of expedited delivery service, as of the
date of first attempted delivery at the address and in the manner provided
herein, or in the case of mail, upon deposit in a depository receptacle
under the care and custody of the United States Postal Service. Either
party shall have the right to change its address for notice hereunder to
any other location within the continental United States by notice to the
other party of such new address at least thirty (30) days prior to the
effective date of such new address.
(k) BINDING EFFECT AND ASSIGNMENT. This Agreement (i) creates a
continuing security interest in the Collateral, (ii) shall be binding on
Debtor and the heirs, executors, administrators, personal representatives,
successors and assigns of Debtor, and (iii) shall inure to the benefit of
Secured Party and its successors and assigns. Without limiting the
generality of the foregoing, Secured Party may pledge, assign or otherwise
transfer the Indebtedness and its rights under this Agreement and any of
the other Loan Documents to any other party. Debtor's rights and
obligations hereunder may not be assigned or otherwise transferred without
the prior written consent of Secured Party.
(l) TERMINATION. It is contemplated by the parties hereto that from
time to time there may be no outstanding Indebtedness, but notwithstanding
such occurrences, this Agreement shall remain valid and shall be in full
force and effect as to subsequent outstanding Indebtedness. Upon (i) the
satisfaction in full of the Indebtedness, (ii) the termination or
expiration of any commitment of Secured Party to extend credit to
Page 12
Borrower, (iii) written request for the termination hereof delivered by
Debtor to Secured Party, and (iv) written release or termination delivered
by Secured Party to Debtor, this Agreement and the security interests
created hereby shall terminate. Upon termination of this Agreement and
Debtor's written request, Secured Party will, at Debtor's sole cost and
expense, return to Debtor such of the Collateral as shall not have been
sold or otherwise disposed of or applied pursuant to the terms hereof and
execute and deliver to Debtor such documents as Debtor shall reasonably
request to evidence such termination.
(m) CUMULATIVE RIGHTS. All rights and remedies of Secured Party
hereunder are cumulative of each other and of every other right or remedy
which Secured Party may otherwise have at law or in equity or under any of
the other Loan Documents, and the exercise of one or more of such rights
or remedies shall not prejudice or impair the concurrent or subsequent
exercise of any other rights or remedies.
(n) GENDER AND NUMBER. Within this Agreement, words of any gender
shall be held and construed to include the other gender, and words in the
singular number shall be held and construed to include the plural and
words in the plural number shall be held and construed to include the
singular, unless in each instance the context requires otherwise.
(o) DESCRIPTIVE HEADINGS. The headings in this Agreement are for
convenience only and shall in no way enlarge, limit or define the scope or
meaning of the various and several provisions hereof.
[SIGNATURE PAGE FOLLOWS]
Page 13
EXECUTED as of the date first written above.
Debtor's Address: DEBTOR:
ORIX GLOBAL COMMUNICATIONS, INC.
------------------------
------------------------
------------------------
By: /s/ Xxxxx Xxxxxx
----------------------------------
Its: President
----------------------------------
Secured Party's Address:
c/o Infinity Investors Limited
0000 Xxx Xxxxxx
0000 Xxxxxxxxxxxx Xxxxx
Xxxxxx, Xxxxx 00000
Fax: 214/000-0000
Attn: Xxxxxxx Xxxxxxx
Page 14
SCHEDULE "A"
TO
SECURITY AGREEMENT
DATED DECEMBER __, 1997
The other addresses referenced in Subsection 3(f) are as follows:
EXHIBIT "A"
TO
SECURITY AGREEMENT
DATED DECEMBER ___, 1997
Location:
Owner of Record:
Legal Description:
