SECURITY AGREEMENT
Exhibit
10.36
THIS
SECURITY AGREEMENT (the “Agreement”), is
entered into and made effective as of July 13, 2007, by and between
C-XXXX INTERNATIONAL, INC., (the “Company”), and the
BUYER(S) listed on Schedule I attached
to the Securities
Purchase Agreement dated the date hereof (the “Secured
Party”).
WHEREAS,
the Company shall issue and sell to the Secured Party, as provided
in
the Securities Purchase Agreement dated the date hereof, and the Secured Party
shall purchase up to One Million Dollars ($1,000,000) of secured
debentures (the “Secured Debentures”), for a total purchase price of
One Million Dollars ($1,000,000), in the respective amounts set forth opposite
each Buyer(s) name on Schedule I attached to the Securities Purchase
Agreement;
WHEREAS,
to induce the Secured Party to enter into the transaction contemplated
by the Securities Purchase Agreement, the Secured Debenture, the Investor
Registration Rights Agreement, the Irrevocable Transfer Agent Instructions,
and
the Escrow 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.
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Recitals.
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The
above
recitals are true and correct and are incorporated herein, in their entirety,
by
this reference.
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Section
1.2.
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Interpretations.
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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.
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Section
1.3.
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Obligations
Secured.
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The
obligations secured hereby are the 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 Securities Purchase
Agreement, the Secured Debenture, the Investor Registration Rights Agreement
and
Irrevocable Transfer Agent Instructions, and any other amounts now or hereafter
owed to the Secured Party by the Company thereunder or hereunder which are
a
direct result of C-Xxxx Job No. 4321 for Elmsdorf Air Force Base
(collectively, the “Obligations”).
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ARTICLE
2.
PLEDGED
COLLATERAL, ADMINISTRATION OF COLLATERAL
AND
TERMINATION OF SECURITY INTEREST
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Section
2.1.
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Pledged
Property.
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(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.
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Section
2.2.
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Rights;
Interests; Etc.
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(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
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(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 Secured
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.
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ARTICLE
3.
ATTORNEY-IN-FACT;
PERFORMANCE
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Section
3.1.
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Secured
Party Appointed
Attorney-In-Fact.
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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.
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Section
3.2.
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Secured
Party May Perform.
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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
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Section
4.1.
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Authorization;
Enforceability.
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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.
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Section
4.2.
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Ownership
of Pledged Property.
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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.
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ARTICLE
4.2.1.
DEFAULT;
REMEDIES; SUBSTITUTE COLLATERAL
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Section
4.3.
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Default
and Remedies.
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(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.
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Section
4.4.
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Method
of Realizing Upon the Pledged Property: Other
Remedies.
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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.
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Section
4.5.
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Proofs
of Claim.
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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.
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Section
4.6.
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Duties
Regarding Pledged Collateral.
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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.
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ARTICLE
5.
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):
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Section
5.1.
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Existence,
Properties, Etc.
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(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.
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Section
5.2.
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Financial
Statements and Reports.
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The
Company shall furnish to the Secured Party such financial data as the Secured
Party may reasonably request in writing. 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.
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Section
5.3.
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Accounts
and Reports.
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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 Loan
Instruments.
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Section
5.4.
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Maintenance
of Books and Records;
Inspection.
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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 and/or the Loan Instruments), corporate books and
financial records, and to discuss its accounts, affairs and finances with any
employee, officer or director thereof.
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Section
5.5.
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Maintenance
and Insurance.
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(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.
8
(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.
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Section
5.6.
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Contracts
and Other Collateral.
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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.
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Section
5.7.
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Defense
of Collateral, Etc.
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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.
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Section
5.8.
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Payment
of Debts, Taxes, Etc.
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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
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Section
5.9.
|
Taxes
and Assessments; Tax Indemnity.
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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.
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Section
5.9.1.
|
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.
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Section
5.10.
|
Notice
of Default.
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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.
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Section
5.11.
|
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
6.
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:
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Section
6.1.
|
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.
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Section
6.2.
|
Liens
and Encumbrances.
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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.
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|
Section
6.3.
|
Certificate
of Incorporation, By-Laws, Mergers, Consolidations, Acquisitions
and
Sales.
|
Without
the prior express written consent of the Secured Party, the Company shall
not: (a) Amend its Certificate 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.
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Section
6.4.
|
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
6.5.
|
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
6.6.
|
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, without the express written consent of the Secured
Party.
11
|
Section
6.6.1.
|
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)
without the express written consent of the Secured Party.
|
Section
6.7.
|
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
6.8.
|
Places
of Business.
|
The
location of the Company’s chief place of business is Phoenix, AZ. 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
7.
MISCELLANEOUS
|
Section
7.1.
|
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 Secured Party:
|
Trafalgar
Capital Specialized Investment Fund
|
|
|
0-00
Xxx Xxxxxxx Xxxxx
|
||
|
XX
0000
|
||
|
X-0000
Xxxxxxxxxx
|
||
|
Attention:
Xxxxxx Xxxxx, Chairman of the Board of
|
||
|
Trafalgar
Capital Sarl,
General Partner
|
||
|
Facsimile: 011-44-207-405-0161
and
000-000-000-0000
|
12
|
With
a copy to:
|
Xxxxx
X. Xxxxxxx XX, P.A.
|
|
|
0000
Xxxxxxxx Xxx
|
||
|
Xxxx
Xxxxx, XX 00000
|
||
|
Attention: Xxxxx
Xxxxxxx, Esq.
|
||
|
Telephone: (000)
000-0000
|
||
|
Facsimile: (000)
000-0000
|
||
|
And
if to the Company:
|
C-Xxxx
International, Inc.
|
|
|
0000
X. Xxx Xxxxx, Xxxxx 000
|
||
|
Xxxxxxx,
XX 00000
|
||
|
Attn:
Xx. Xxxxxxx Xxxxx, CEO
|
||
|
Telephone:
(000) 000-0000
|
||
|
Facsimile:
(000) 000-0000
|
||
|
With
a copy to:
|
The
X’Xxxx Law Firm, P.C.
|
|
|
00000
X. Xxxx Xxxx., Xxxxx 000-X
|
||
|
Xxxxxxxx
Xxxxx, XX 00000
|
||
|
Attention: Xxxxxxx
X. X’Xxxx, Esq.
|
||
|
Telephone:
(000) 000-0000
|
||
|
Facsimile:
(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
7.2.
|
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
7.3.
|
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.
13
|
Section
7.3.1.
|
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.
|
Section
7.4.
|
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
7.5.
|
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
7.6.
|
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
Florida State Court sitting in _Broward County, Florida and the United States
District Court for the Southern District of Florida for the adjudication of
any
civil action asserted pursuant to this Paragraph.
|
Section
7.7.
|
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.
14
|
Section
7.7.1.
|
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.
IN
WITNESS WHEREOF, the parties hereto have executed this Security
Agreement as of the date first above written.
|
COMPANY:
|
|
|
CMARK
INTERNATIONAL, INC.
|
|
|
By: /s/
Xxxxxxx X. Xxxxx,
Xx.
|
|
|
Name:
Xxxxxxx X. Xxxxx, Xx.
|
|
|
Title:
President
|
|
|
SECURED
PARTY:
|
|
|
TRAFALGAR
CAPITAL SPECIALIZED
|
|
|
INVESTMENT
FUND, LUXEMBOURG
|
|
|
By: Trafalgar
Capital Sarl
|
|
|
Its: General
Partner
|
|
|
By: /s/
Xxxxxx
Xxxxx
|
|
|
Name: Xxxxxx
Xxxxx
|
|
|
Title: Chairman
of the Board
|
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, and a direct right of participation in and the direct right of redirection
of the payments relating to C-Xxxx Job No. 4232 for Fort Bliss, Job No. 4357
for
Twenty-Nine Palms Marine Corp Air Station and Job No. 4401 for Afghanistan
via
Dover Air Force Base.
A-1
