EXHIBIT 10.4
SECURITY AGREEMENT
This Security Agreement, made as of the 13th day of December, 2002 is
entered into by and between Laurus Master Fund, Ltd. ("Laurus") and Netguru,
Inc., a Delaware company (the "Company").
1. To secure the payment of all Obligations (as hereafter defined), the
Company hereby grants to Laurus a continuing security interest in all of the
following property now owned or at any time hereafter acquired by the Company,
or in which the Company now has or at any time in the future may acquire any
right, title or interest (the "Collateral"): all accounts (the "Accounts"),
inventory, equipment, goods, documents, instruments (including, without
limitation, promissory notes), contract rights, general intangibles (including,
without limitation, payment intangibles), chattel paper, supporting obligations,
investment property, letter-of-credit rights, trademarks and tradestyles in
which the Company now has 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 therefor.
Terms used in this paragraph which are defined in the Uniform Commercial Code as
enacted and in effect from time to time in the State of New York (the "Code")
are used herein as so defined in the Code.
2. The term "Obligations" as used herein shall mean and include all
debts, liabilities and obligations owing by the Company to Laurus and all loans,
advances, extensions of credit, endorsements, guaranties, benefits and/or
financial accommodations heretofore or hereafter made, granted or extended by
Laurus to the Company or which Laurus has or will become obligated to make,
grant or extend to us or for the Company's account or any of its accounts and
any and all interest, charges and/or expenses heretofore or hereafter owing by
the Company to Laurus and any and all renewals or extensions of any of the
foregoing, no matter how or when arising, direct or indirect, absolute or
contingent, liquidated or unliquidated, and whether under any present or future
agreement or instruments between the Company, Laurus and any or all subsidiaries
or otherwise, including, without limitation, all obligations owing by the
Company to Laurus under the Purchase Agreement dated December 13, 2002 and
related Note in the principal amount of $2,000,000 (as amended, modified and
supplemented from time to time, the "Note").
3. The Company hereby warrants and covenants to Laurus that: (a) it is
a corporation validly existing, in good standing and formed under the laws of
the State of Delaware and it will provide Laurus thirty days prior written
notice of any change in its state of formation; (b) it is the lawful owner of
the Collateral, and 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; (c) it will keep the Collateral free and clear of all attachments,
levies, taxes, liens, security interests and encumbrances of every kind and
nature; (d) it will not without Laurus' prior written consent, sell, exchange or
otherwise dispose of the Collateral or any of the Company's rights therein or
permit any lien or security interest to attach to same, except that created by
this Agreement; (e) it will allow Laurus and/or Laurus' representatives free
access to and the right of inspection of the Company's premises where the books
and records relating to the Collateral are located; and (f) it hereby
indemnifies and saves Laurus and the Designated Agent harmless from all loss,
costs, damage, liability and/or expense, including reasonable attorneys' fees,
that Laurus and the Designated Agent may sustain or incur to enforce payment,
performance or fulfillment of any of the Obligations or in the enforcement of
this Agreement or in the prosecution or defense of any action or proceeding
either against Laurus, the Designated Agent or the Company concerning any matter
growing out of or in connection with this Agreement and/or any of the
Obligations and/or any of the Collateral.
4. The Company shall be in default under this Agreement upon the
happening of any of the following events or conditions (each, a "Default"): (a)
it shall fail to pay when due or punctually perform any of the Obligations; (b)
any covenant, warranty, representation or statement made or furnished to Laurus
by the Company or on its behalf was false in any material respect when made or
furnished; (c) it shall fail to comply with any term or provision set forth in
this Agreement and such failure (to the extent not covered by any other clause
of this Section 4) shall remain uncured for a period of two (2) business days
after the date on which Laurus notified the Company of such failure; and (d) a
default shall occur under the Note.
5. Upon the occurrence of any Event of Default and at any time
thereafter, Laurus may declare all Obligations immediately due and payable and
Laurus shall have the remedies of a secured party provided in the Uniform
Commercial Code as in effect in the State of New York, this Agreement and other
applicable law. Upon the occurrence of any Event of Default and at any time
thereafter, Laurus 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 you may desire, including, without
limitation, the right to contact account debtors liable in respect of the
Accounts for the purpose of engaging in collection activities with respect
thereto. Upon Laurus' request, the Company shall assemble the Collateral and
make it available to Laurus at a place designated by Laurus. 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
days before such disposition, postage prepaid, addressed to us either at our
address shown herein or at any address appearing on Laurus' records for the
Company. Any proceeds of any disposition of any of the Collateral shall be
applied by Laurus 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
Laurus toward the payment of the Obligations in such order of application as
Laurus may elect, and the Company shall be liable for any deficiency.
6. If the Company defaults in the performance or fulfillment of any of
the terms, conditions, promises, covenants, provisions or warranties on our part
to be performed or fulfilled under or pursuant to this Agreement, Laurus may, at
its sole option without waiving its right to enforce this Agreement according to
its terms, immediately or at any time thereafter and without notice to the
Company, perform or fulfill the same or cause the performance or fulfillment of
the same for the Company's account and at its sole 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. The Company appoint Laurus, any of its officers, employees or any
other person or entity whom Laurus may designate as the Company's attorney, with
power to execute such documents in its behalf and to supply any omitted
information and correct patent errors in any documents executed by the Company
or on its behalf; to file financing statements against the Company covering the
Collateral; to sign our name on public records; and to do all other things
Laurus deem necessary to carry out this Agreement. The Company hereby ratifies
and approves all acts of the attorney and neither Laurus 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. This power being coupled with an interest, is
irrevocable so long as any Obligations remains unpaid.
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8. No delay or failure on Laurus' 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 Laurus and then only to the extent therein set forth, and
no waiver by Laurus of any default shall operate as a waiver of any other
default or of the same default on a future occasion. Laurus' books and records
containing entries with respect to the Obligations shall be admissible in
evidence in any action or proceeding, shall be binding upon the Company for the
purpose of establishing the items therein set forth and shall constitute prima
facie proof thereof. Laurus shall have the right to enforce any one or more of
the remedies available to Laurus, successively, alternately or concurrently. The
Company agrees to join with Laurus in executing financing statements or other
instruments pursuant to the Code in form satisfactory to Laurus and in executing
such other documents or instruments as may be required or deemed necessary by
Laurus for purposes of affecting or continuing Laurus' security interest in the
Collateral.
9. This Agreement shall be governed by and construed in accordance with
the laws of the State of New York and cannot be terminated orally. All of the
rights, remedies, options, privileges and elections given to Laurus hereunder
shall enure to the benefit of its successors and assigns. The term "Laurus" as
herein used shall include Laurus, any parent of Laurus, any of Laurus'
subsidiaries and any co-subsidiaries of its parent, whether now existing or
hereafter created or acquired, and all of the terms, conditions, promises,
covenants, provisions and warranties of this Agreement shall enure to the
benefit of and shall bind the representatives, successors and assigns of each of
the Company and them. Laurus and the Company hereby (a) waive any and all right
to trial by jury in litigation relating to this Agreement and the Company agrees
not to assert any counterclaim in such litigation, (b) submit to the
nonexclusive jurisdiction of the state and federal courts located in the State
of New York and (c) waive any objection Laurus or the Company may have as to the
bringing or maintaining of such action with any such court.
10. All notices and other communications hereunder shall be deemed
given three (3) business days after delivered or deposited in the mails, first
class postage prepaid (provided, however, that notices given by telegram, telex
or telefax shall be deemed given when dispatched by telegram, telex or telefax,
as the case may be) and if to (a) us addressed as set forth beneath the
Company's name at the foot hereof unless the Company shall give notice in
writing of a different address or telefax number in the manner provided herein
and (b) Laurus, at the address set forth for Laurus on the last page of this
Agreement unless Laurus shall give the Company notice in writing of a different
address.
11. No amendment, modification, termination, or waiver of any provision
of this Agreement shall in be effective unless the same shall be in writing and
signed by Laurus, and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given.
12. No course of dealing between Laurus and the Company, nor any
failure or delay on Laurus' part in exercising any right, power, or remedy under
this Agreement shall operate as a waiver thereof; nor shall any single or
partial exercise of any such right, power, or remedy preclude any other or
further exercise thereof or the exercise of any other right, power, or remedy
under this Agreement. The rights and remedies provided in this Agreement and the
Note are cumulative, and are not exclusive of any other rights, powers,
privileges, or remedies, now or hereafter existing, at law or in equity or
otherwise. The Company hereby waives in favor of Laurus all suretyship defenses
and waive notice of (a) acceptance hereof and of all notices and demands of any
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kind to which the Company may be entitled and (b) presentment to or demand of
payment from anyone whomsoever liable upon the Accounts or the Obligations,
protest, notices of presentment, non-payment or protest and notice of any sale
of the Collateral or any default of any sort. The Company further waives (a)
notice of and hereby consent to any agreement or arrangements whatsoever with
Laurus or any one else and (b) all of the Company's rights of subrogation,
reimbursement, indemnity, exoneration, contribution or any other claim which any
of the Company or Laurus may now or hereafter have against any party liable for
the Obligations.
13. Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions of this Agreement or affecting the validity or
enforceability of such provision in any other jurisdiction. In no event shall
any payments hereunder (if deemed interest under applicable law or regulation)
exceed the maximum rate permitted under applicable law or regulation. If any
provision of this Agreement is in contravention of any such law or regulation,
then such provision shall be deemed amended to provide for interest at said
maximum rate and any excess amount shall be applied to the Obligations in such
order as Laurus shall elect.
NETGURU, INC.
By:/s/ Xxxxx Xxxxxxxxxx
Name: XXXXX XXXXXXXXXX
Title: President
Address: 00000 Xxxx Xxxxx Xxxxxxx
Xxxxx Xxxxx, Xxxxxxxxxx 00000
LAURUS MASTER FUND, LTD.
By:/s/ LAURUS MASTER FUND, LTD.
Name:
Title:
Address: c/o Ironshore Corporate Services, Ltd.
X.X. Xxx 0000 G.T.
Queensgate House
South Church Street
Grand Cayman, Cayman Islands
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