MASTER SECURITY AGREEMENT
Exhibit
10.4
To:
Biometrics Investors, L.L.C., a Delaware limited liability company
0000
Xxxxxxxx Xxx, Xxxxx 000
Xxxxxxxxxx,
Xxxxxxxxx 00000
Date:
March 30, 2007
To
Whom
It May Concern:
Biometrics
Investors, L.L.C. (the "Lender") is
the
holder of a note which was made by Sequiam Corporation, a California Corporation
(the "Borrower") and which has an outstanding balance as of the date of this
Security Agreement, including principal and accrued interest, of $3,965,119.00
(the "Prior Note"). Subject to the terms and conditions of that certain
Agreement dated as of the date hereof (the "Agreement") among Lender, as lender,
and Borrower, as borrower, Lender has agreed to extend a term loan to Borrower
in the amount of $2,500,000 ("Term Loan A") which loan would be consolidated
with the indebtedness evidenced by the Prior Note and evidenced by a new note
in
the face amount of $6,500,000 ("Term Note A"). Subject to the terms and
conditions of the Agreement, Lender is scheduled to extend a separate term
loan
to Borrower in the amount of $5,000,000 ("Term Loan B" and collectively with
Term Loan A, the "Loans") evidenced by a note in such amount ("Term Note B").
As
security for the Loans, each of the undersigned (jointly and severally referred
to as "Guarantors" or "the undersigned"), pursuant to that certain Subsidiary
Guaranty dated as of the date hereof (the "Subsidiary Guaranty"), have
unconditionally guarantied to the Lender, its successors, endorsees and assigns
the prompt payment when due (whether by acceleration or otherwise) of all
present and future obligations and liabilities of any and all kinds of Borrower
to the Lender and of all instruments of any nature evidencing or relating to
any
such obligations and liabilities upon which Borrower or one or more parties
and
Borrower is or may become liable to the Lender, whether incurred by Borrower
as
maker, endorser, drawer, acceptor, guarantors, accommodation party or otherwise,
and whether due or to become due, secured or unsecured, absolute or contingent,
joint or several, and however or whenever acquired by the Lender. To secure
the
Guarantors obligations under the Subsidiary Gauranty, the Guarantors now wish
to
enter into this Master Security Agreement (the "Security Agreement").
Previously, the Guarantors and the Borrower had executed that certain Amended
and Restated Master Security Agreement in favor of Xxx Xxxxxxxx Xxxxxx, Attorney
in-Fact for the Trust Under the Will of Xxxx Xxxxxxxxxxx (“the Trust”) dated as
of May 18, 2005 (the “Prior Agreement”). The Trust has assigned all of its
rights under the Original Agreement to the Lender such that the Lender now
stands in place of the Trust thereunder. In connection with the Subsidiary
Guaranty and the Agreement, the Lender and the Guarantors now wish to enter
into
this new Security Agreement (in addition to, and not in replacement of, the
Prior Agreement) as provided herein.
1. To
secure
the payment of all Obligations (as hereafter defined), each of the undersigned
parties (other than Lender) and each other entity that is required to enter
into
this Master Security Agreement (each an "Assignor" and, collectively, the
"Assignors") hereby assigns and grants to Lender a continuing security interest
in all of the following property now owned or at any time hereafter acquired
by
any Assignor, or in which any Assignor now have or at any time in the future
may
acquire any right, title or interest (the "Collateral"): all cash, cash
equivalents, accounts, inventory, equipment, goods, documents, instruments
(including, without limitation, promissory notes), contract rights, general
intangibles (including, without limitation, payment intangibles and an absolute
right to license on terms no less favorable than those currently in effect
among
our affiliates), chattel paper, supporting obligations, investment property
(including, without limitation, all equity interests owned by any Assignor),
letter-of-credit rights, trademarks and tradestyles, patents, copyrights and
other intellectual property in which any Assignor now have or hereafter may
acquire any right, title or interest, all proceeds and products thereof
(including, without limitation, proceeds of insurance) and all additions,
accessions and substitutions thereto or therefore. In the event any Assignor
wishes to finance the acquisition in the ordinary course of business of any
hereafter acquired equipment and have obtained a commitment from a financing
source to finance such equipment from an unrelated third party, Lender agrees
to
release its security interest on such hereafter acquired equipment so financed
by such third party financing source. Except as otherwise defined herein, all
capitalized terms used herein shall have the meaning provided such terms in
the
Agreement.
2. The
term
"Obligations" as used herein shall mean and include all debts, liabilities
and
obligations owing by each Assignor to Lender arising under, out of, or in
connection with the Subsidiary Guaranty and in connection with any documents,
instruments or agreements relating to or executed in connection with therewith
or any documents, instruments or agreements referred to therein or otherwise,
and in connection with any other indebtedness, obligations or liabilities of
any
Assignor to Lender, whether now existing or hereafter arising, direct or
indirect, liquidated or unliquidated, absolute or contingent, due or not due
and
whether under, pursuant to or evidenced by a note, agreement, guaranty,
instrument or otherwise, in each case, irrespective of the genuineness,
validity, regularity or enforceability of such Obligations, or of any instrument
evidencing any of the Obligations or of any collateral therefor or of the
existence or extent of such collateral, and irrespective of the allowability,
allowance or disallowance of any or all of the Obligations in any case commenced
by or against any Assignor under Xxxxx 00, Xxxxxx Xxxxxx Code, including,
without limitation, obligations or indebtedness of each Assignor for
post-petition interest, fees, costs and charges that would have accrued or
been
added to the Obligations but for the commencement of such case
3. Each
Assignor hereby jointly and severally represents, warrants and covenants to
Lender that:
(a)
it is a
corporation, partnership or limited liability company, as the case may be,
validly existing, in good standing and organized under the respective laws
of
its jurisdiction of organization set forth on Schedule A, and each Assignor
will
provide the Trust thirty (30) days' prior written notice of any change in any
of
its respective jurisdiction of organization;
(b) its
legal
name is as set forth in its respective Articles of Incorporation or other
organizational document (as applicable) as amended through the date hereof
and
as set forth on Schedule A, and it will provide the Trust thirty (30) days'
prior written notice of any change in its legal name;
(c) its
organizational identification number (if applicable) is as set forth on Schedule
A hereto, and it will provide the Trust thirty (30) days' prior written notice
of any change in any of its organizational identification number;
(d) the
Prior
Agreement is in full force and effect and, as of the date hereof, the
enforcement of the Prior Agreement against the Assignors is subject to no
defenses of any kind;
(e) it
is the
lawful owner of the respective Collateral and it has the sole right to grant
a
security interest therein and will defend the Collateral against all claims
and
demands of all persons and entities;
(f) it
will
keep its respective Collateral free and clear of all attachments, levies, taxes,
liens, security interests and encumbrances of every kind and nature
("Encumbrances"), except (i) Encumbrances securing the Obligations, (ii) to
the
extent said Encumbrance does not secure indebtedness in excess of $100,000
and
such Encumbrance is removed or otherwise released within ten (10) days of the
creation thereof, (iii) liens of warehousemen, mechanics, materialmen, workers,
repairmen, common carriers, or landlords, liens for taxes, assessments or other
governmental charges, and other similar liens arising by operation of law,
in
each case arising in the ordinary course of business and for amounts that are
not yet due and payable or which are being contested in good faith by
appropriate proceedings promptly instituted and diligently conducted and for
which an adequate reserve or other appropriate provision shall have been made
to
the extent required by generally accepted accounting principals, and (iv)
pledges or deposits in connection with workers' compensation, unemployment
insurance and other social security legislation (collectively, the "Permitted
Encumbrances");
(g) it
will,
at its and the other Assignors joint and several cost and expense use
commercially reasonable efforts to keep the Collateral in good state of repair
(ordinary wear and tear excepted) and will not waste or destroy the same or
any
part thereof other than ordinary course discarding of items no longer used
or
useful in its or such other Assignors’ business;
(h) it
will
not without Lender's prior written consent, sell, exchange, lease or otherwise
dispose of the Collateral, whether by sale, lease or otherwise, except for
the
sale of inventory in the ordinary course of business and for the disposition
or
transfer in the ordinary course of business during any fiscal year of obsolete
and worn-out equipment or equipment no longer necessary for its ongoing needs,
having an aggregate fair market value of not more than $25,000 and only to
the
extent that:
(i) the
proceeds of any such disposition are used to acquire replacement Collateral
which is subject to Lender's first priority perfected security interest, or
are
used to repay Obligations or to pay general corporate expenses; and
(ii) following
the occurrence of an Event of Default which continues to exist the proceeds
of
which are remitted to Lender to be held as cash collateral for the
Obligations;
(i) it
will
insure or cause the Collateral to be insured in Lender's name against loss
or
damage by fire, theft, burglary, pilferage, loss in transit and such other
hazards as Lender shall specify, in amounts and under policies which are
customary for similarly situated businesses, and by insurers acceptable to
Lender, and all premiums thereon shall be paid by such Assignor and the policies
delivered to Lender. If any such Assignor fails to do so, Lender may procure
such insurance and the cost thereof shall be promptly reimbursed by the
Assignors, jointly and severally, and shall constitute Obligations;
(j) it
will
at all reasonable times and upon reasonable advance notice to such Assignor
allow Lender or Lender's representatives free access to and the right of
inspection of the Collateral;
(k) such
Assignor (jointly and severally with each other Assignor) hereby indemnifies
and
holds Lender harmless from all loss, costs, damage, liability and/or expense,
including reasonable attorneys' fees, that Lender may sustain or incur to
enforce payment, performance or fulfillment of any of the Obligations and/or
in
the enforcement of this Master Security Agreement or in the prosecution or
defense of any action or proceeding either against Lender or any Assignor
concerning any matter growing out of or in connection with this Master Security
Agreement, and/or any of the Obligations and/or any of the Collateral except
to
the extent caused by Lender's own gross negligence or willful misconduct (as
determined by a court of competent jurisdiction in a final and nonappealable
decision).
4. The
occurrence of any of the following events or conditions shall constitute an
"Event of Default” under this Master Security Agreement:
(a) Breach
of
any covenant, warranty, representation or statement made or furnished to Lender
by any Assignor or on any Assignor’s benefit was false or misleading in any
material respect when made or furnished, and if subject to cure, shall not
be
cured for a period of thirty (30) days;
(b)
the
loss, theft, substantial damage, destruction, sale or encumbrance to or of
any
of the Collateral or the making of any levy, seizure or attachment thereof
or
thereon except to the extent:
(i) such
loss
is covered by insurance proceeds which are used to replace the item or repay
Lender; or
(ii) said
levy, seizure or attachment does not secure indebtedness in excess of $100,000
and such levy, seizure or attachment has not been removed or otherwise released
within ten (10) days of the creation or the assertion thereof;
(b) any
Assignor shall become insolvent, cease operations, dissolve, terminate our
business existence, make an assignment for the benefit of creditors, suffer
the
appointment of a receiver, trustee, liquidator or custodian of all or any part
of Assignors’ property;
(c) any
proceedings under any bankruptcy or insolvency law shall be commenced by or
against any Assignor and if commenced against any Assignor shall not be
dismissed within forty-five (45) days;
(d) the
Borrower shall repudiate, purport to revoke or fail to perform any or all of
its
obligations under Term Note A, Term Note B, or the Agreement (after passage
of
applicable cure period, if any); or
(e) an
Event
of Default shall have occurred under and as defined in any Document, after
giving effect to any applicable cure or grace period.
5. Upon
the
occurrence of any Event of Default and at any time thereafter, Lender may
declare all Obligations immediately due and payable and Lender shall have the
remedies of a secured party provided in the Uniform Commercial Code as in effect
in the State of Illinois, Security Agreement and other applicable law. Upon
the
occurrence of any Event of Default and at any time thereafter Lender will have
the right to take possession of the Collateral and to maintain such possession
on our premises or to remove the Collateral or any part thereof to such other
premises as Lender may desire. Upon Lender's request, each of the Assignors
shall assemble or cause the Collateral to be assembled and make it available
to
Lender at a place designated by Lender. If any notification of intended
disposition of any Collateral is required by law, such notification, if mailed,
shall be deemed properly and reasonably given if mailed at least ten (10) days
before such disposition, postage prepaid, addressed to any Assignor either
at
such Assignor’s address shown herein or at any address appearing on Lender's
records for such Assignor. Any proceeds of any disposition of any of the
Collateral shall be applied by Lender to the payment of all expenses in
connection with the sale of the Collateral, including reasonable attorneys'
fees
and other legal expenses and disbursements and the reasonable expense of
retaking, holding, preparing for sale, selling, and the like, and any balance
of
such proceeds may be applied by Lender toward the payment of the Obligations
in
such order of application as Lender may elect, and each Assignor shall be liable
for any deficiency.
6. If
any
Assignor defaults in the performance or fulfillment of any of the terms,
conditions, promises, covenants, provisions or warranties on such Assignor’s
part to be performed or fulfilled under or pursuant to this Master Security
Agreement, Lender may, at its option without waiving its right to enforce this
Master Security Agreement according to its terms, immediately or at any time
thereafter and without notice to any Assignor, perform or fulfill the same
or
cause the performance or fulfillment of the same for each Assignor’s joint and
several account and at each Assignor’s joint and several cost and expense, and
the cost and expense thereof (including reasonable attorneys' fees) shall be
added to the Obligations and shall be payable on demand with interest thereon
at
the highest rate permitted by law.
7. Each
Assignor appoints Lender, any of Lender's officers, employees or any other
person or entity whom Lender may designate as our attorney, with power to
execute such documents in each of our behalf and to supply any omitted
information and correct patent errors in any documents executed by any Assignor
or on any Assignor’s behalf; to file financing statements against us covering
the Collateral; to sign our name on public records; and to do all other things
Lender deems necessary to carry out this Master Security Agreement. Each
Assignor hereby ratifies and approves all acts of the attorney and neither
lender nor the attorney will be liable for any acts of commission or omission,
nor for any error of judgment or mistake of fact or law other than gross
negligence or willful misconduct (as determined by a court of competent
jurisdiction in a final and non-appealable decision). This power being coupled
with an interest, is irrevocable so long as any Obligations remains unpaid.
Furthermore, in connection with the filing of any financing statements, the
Collateral may be described in any such financing statements as "all assets"
and/or "all personal property", whether now owned and/or hereafter acquired.
8. No
delay
or failure on Lender's part in exercising any right, privilege or option
hereunder shall operate as a waiver of such or of any other right, privilege,
remedy or option, and no waiver whatever shall be valid unless in writing,
signed by Lender and then only to the extent therein set forth, and no waiver
by
Lender of any default shall operate as a waiver of any other default or of
the
same default on a future occasion. Lender's books and records containing entries
with respect to the Obligations shall be admissible in evidence in any action
or
proceeding, shall be binding upon each Assignor for the purpose of establishing
the items therein set forth and shall constitute prima
facie
proof
thereof. Lender shall have the right to enforce any one or more of the remedies
available to Lender, successively, alternately or concurrently. Each Assignor
agrees to join with Lender in executing financing statements or other
instruments to the extent required by the Uniform Commercial Code in form
satisfactory to Lender and in executing such other documents or instruments
as
may be required or deemed necessary by Lender for purposes of affecting or
continuing Lender's security interest in the Collateral.
9. This
Master Security Agreement shall be governed by and construed in accordance
with
the laws of the State of Illinois and cannot be terminated orally. All of the
rights, remedies, options, privileges and elections given to Lender hereunder
shall inure to the benefit of Lender's successors and assigns. The term "Lender"
as herein used shall include Lender, any parent of Lender, any of the Lender's
subsidiaries and any co-subsidiaries of the Lender's parent, whether now
existing or hereafter created or acquired, and all of the terms, conditions,
promises, covenants, provisions and warranties of this Security Agreement shall
inure to the benefit of and shall bind the representatives, successors and
assigns of each Assignor and each of the foregoing. Lender and each Assignor
hereby (a) waive any and all right to trial by jury in litigation relating
to
this Security Agreement and the transactions contemplated hereby and each
Assignor agrees not to assert any counterclaim in such litigation, (b) submit
to
the nonexclusive jurisdiction of any Illinois State court sitting in the County
of Xxxx, the city of Chicago and (c) waive any objection Lender or each Assignor
may have as to the bringing or maintaining of such action with any such
court.
10. All
notices from Lender to any Assignor shall be sufficiently given if mailed or
delivered to such Assignor’s address set forth below.
11. This
Master Security Agreement and the security interests granted by the Assignors
hereunder shall terminate upon the provision by Lender of written confirmation
to the Borrower that (x) all indebtedness obligations owed by any Assignor
to
Lender have been repaid in full (including, without limitation, all principal,
interest and fees related to the Term Note, any indebtedness referred to in
the
Agreement and any other indebtedness outstanding at such time and owed toLender)
and (y) all commitments by Lender to fund any indebtedness have been terminated
in their entirety.
12. This
Security Agreement may be executed in any number of counterparts, each of which
when so executed shall be deemed to be an original and, all of which taken
together shall constitute one and the same Agreement. In the event that any
signature is delivered by facsimile transmission, such signature shall create
a
valid binding obligation of the party executing (or on whose behalf such
signature is executed) the same with the same force and effect as if such
facsimile signature were the original thereof.
Very
truly yours,
SEQUIAM
SOFTWARE, INC.
By:
Name: Xxxxxxxx
XxxxxxXxxxxx
Title: CEO
Address:
000 Xxxxxxx Xxxx
Xxxxxxx,
XX 00000
SEQUIAM
BIOMETRICS, INC.
By:
Name: Xxxxxxxx
XxxxxxXxxxxx
Title: CEO
Address:
000 Xxxxxxx Xxxx
Xxxxxxx,
XX 00000
SEQUIAM
EDUCATION, INC.
By:
Name: Xxxxxxxx
XxxxxxXxxxxx
Title: CEO
Address:
000 Xxxxxxx Xxxx
Xxxxxxx,
XX 00000
SEQUIAM
SPORTS, INC.
By:
Name: Xxxxxxxx
XxxxxxXxxxxx
Title: CEO
Address:
000 Xxxxxxx Xxxx
Xxxxxxx,
XX 00000
FINGERPRINT
DETECTION TECHNOLOGIES, INC.
By:
Name: Xxxxxxxx
XxxxxxXxxxxx
Title: CEO
Address:
000 Xxxxxxx Xxxx
Xxxxxxx,
XX 00000
CONSTELLATION
BIOMETRICS CORPORATION
By:
Name: Xxxxxxxx
XxxxxxXxxxxx
Title: CEO
Address:
000 Xxxxxxx Xxxx
Xxxxxxx,
XX 00000
BIOMETRIC
SECURITY (PTY) LTD.
By:
Name: Xxxxxxxx
XxxxxxXxxxxx
Title: Director
Address:
000 Xxxxxxx Xxxx
Xxxxxxx,
XX 00000
SEQUIAM
EAST, INC. (F/K/A MAGSTONE INNOVATION, INC.)
By:
Name: Xxxxxxxx
XxxxxxXxxxxx
Title: Deputy
General Manager
Address:
000 Xxxxxxx Xxxx
Xxxxxxx,
XX 00000
ACKNOWLEDGED:
BIOMETRICS
INVESTORS, L.L.C.
By:
Name: Xxxxx
Xxxxx
Title: Manager
SCHEDULE
A
|
Entity
|
Employer
Identification #
|
Place
of Incorporation
|
|
|
Sequiam
Software, Inc.
|
00-0000000
|
CA
|
|
|
Sequiam
Biometrics, Inc.
|
00-0000000
|
FL
|
|
|
Sequiam
Education, Inc.
|
00-0000000
|
FL
|
|
|
Sequiam
Sports, Inc.
|
00-0000000
|
DE
|
|
|
Fingerprint
Detection Technologies, Inc.
|
00-0000000
|
FL
|
|
|
Constellation
Biometrics
Corporation
|
00-0000000
|
FL
|
|
|
Biometric
Security (Pty) Ltd.
|
2005/005066/07
|
South
Africa
|
|
|
Sequiam
East, Inc. (f/k/a Magstone Innovation, Inc.)
|
1164611
|
China
|
|
