D/B/A TITAN GENERAL HOLDINGS, INC. SECURITY AGREEMENT March 30, 2004 To: Laurus Master Fund, Ltd. c/o Onshore Corporate Services, Ltd. Queensgate House South Church Street Grand Cayman, Cayman Islands Gentlemen:
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VENTURES-NATIONAL INCORPORATED |
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D/B/A TITAN GENERAL HOLDINGS, INC. |
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March 30, 2004
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| To: Laurus Master Fund, Ltd. |
| c/o Onshore Corporate Services, Ltd. |
| X.X. Xxx 0000 G.T |
| Queensgate House |
| South Church Street |
| Grand Cayman, Cayman Islands
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Gentlemen:
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| 1. To
secure the payment of all Obligations (as hereafter defined), we hereby
grant to you a continuing security interest in all of the following
property now owned or at any time hereafter acquired by us, or in which we
now have or at any time in the future may acquire any right, title or
interest (the "Collateral"): all 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 current in effect among our affiliates, but
not own intellectual property), chattel paper, supporting obligations,
investment property, letter-of-credit rights, trademarks and tradestyles
in which we 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 therefor In the event we wish to finance the
acquisition of any hereafter acquired equipment and have obtained a
commitment from a financing source to finance such equipment from an
unrelated third party, you agree to release your security interest on such
hereafter acquired equipment so financed by such third party financing
source.
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| 2. The
term "Obligations" as used herein shall mean and include all
debts, liabilities and obligations owing by us to you hereunder and under
whether arising under, out of, or in connection with that certain Securities
Purchase Agreement dated as of the date hereof by and between the
undersigned and Laurus Master Fund, Ltd. ("Laurus") (the
"Securities Purchase Agreement"), that certain Convertible
Term Note dated as of the date hereof made by in favor of Laurus (the
"Term Note"), the Warrant dated as of the date hereof
made by the undersigned in favor of Laurus in connection with the Term
Note (the "Term Note Warrant"), that certain Registration
Rights Agreement dated as of the date hereof by and between the
undersigned and Laurus in connection with the Term Note (the "Term
Note Registration Rights Agreement"), (the Securities Purchase
Agreement, the Term Note, the Term Note Warrant and the Term Note
Registration Rights Agreement, as each may be amended, modified, restated
or supplemented from time to time, are collectively referred to herein as
the "Documents").
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| 3. We
hereby represent, warrant and covenant to you that:
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| (a) we
are a company validly existing, in good standing and formed under the laws
of the State of Utah and we will provide you thirty (30) days' prior
written notice of any change in our state of formation;
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| (b) our
legal name is Ventures-National Incorporated d/b/a Titan General Holdings,
Inc., as set forth in our Certificate of Incorporation as amended through
the date hereof;
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| (c) we
are the lawful owner of the Collateral and have the sole right to grant a
security interest therein and will defend the Collateral against all
claims and demands of all persons and entities;
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| (d) we
will keep the Collateral free and clear of all attachments, levies, taxes,
liens, security interests and encumbrances of every kind and nature
("Encumbrances"), other than encumbrances set forth on Schedule
3(d) hereto, ("Permitted Encumbrances"), except 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;
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| (e) we
will at our own cost and expense 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 our business;
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| (f) we
will not without your 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 our ongoing needs, having an aggregate fair market value of
not more than $25,000 and only to the extent that:
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| (i) the
proceeds of any such disposition are used to acquire replacement
Collateral which is subject to your first priority security interest or
are used to repay Obligations or to pay general corporate expenses; or
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| (ii) following
the occurrence of an Event of Default (as hereinafter defined) which
continues to exist the proceeds of which are remitted to you (to be held
as cash collateral by you for the Obligations until such time as the Event
of Default no longer exists);
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| (g) we
will insure the Collateral in your name against loss or damage by fire,
theft, burglary, pilferage, loss in transit and such other hazards as you
shall specify in amounts and under policies by insurers acceptable to you
and all premiums thereon shall be paid by us and the policies delivered to
you. If we fail to do so, you may procure such insurance and the cost
thereof shall constitute Obligations;
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| (h) we
will at all reasonable times allow you or your representatives free access
to and the right of inspection of the Collateral;
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| 2 |
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| (i) we
hereby indemnify and save you harmless from all loss, costs, damage,
liability and/or expense, including reasonable attorneys' fees, that you
may sustain or incur to enforce payment, performance or fulfillment of any
of the Obligations and/or in the enforcement of this Agreement or in the
prosecution or defense of any action or proceeding either against you or
us concerning any matter growing out of or in connection with this
Agreement, and/or any of the Obligations and/or any of the Collateral
except to the extent caused by your own gross negligence or willful
misconduct.
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| 4. We
shall be in default under this Agreement upon the happening of any of the
following events or conditions, each such event or condition an
"Event of Default:"
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| (a) we
shall fail to pay when due or punctually perform any of the Obligations
and such failure shall continue for a period of three (3) days following
such failure to pay or punctually perform, or for a period of thirty (30)
days following default for any other such failure;
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| (b) any
covenant, warranty, representation or statement made or furnished to you
by us or on our behalf was false in any material respect when made or
furnished;
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| (c) the
loss, theft, substantial damage, destruction, sale or encumbrance not
permitted hereunder to or of any of the Collateral or the making of any
levy, seizure or attachment thereof or thereon except to the extent:
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| (i) such
loss, theft, substantial damage, or destruction is covered by insurance
proceeds which are used to replace the item or repay us; or
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| (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 thirty (30) days after the creation or the
assertion thereof;
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| (d) we
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 our property;
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| (e) any
proceedings under any bankruptcy or insolvency law shall be commenced by
or against us and if commenced against us shall not be dismissed within
sixty (60) days after the commencement thereof;
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| (f) we
shall repudiate, purport to revoke or fail to perform any of our
obligations under the Note (after passage of applicable cure period, if
any); or
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| (g) an
Event of Default shall have occurred under and as defined in the Notes.
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3 |
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| 5. Upon
the occurrence of any Event of Default and at any time thereafter, you may
declare all Obligations immediately due and payable and you 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,
you 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. Upon your
request, we shall assemble the Collateral and make it available to you at
a place designated by you. 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 us, Attention:
President, either at our address shown herein or as may be amended by us
in writing to you from time to time. Any proceeds of any disposition of
any of the Collateral shall be applied by you to the payment of all
expenses in connection with the sale of the Collateral, including
reasonable attorneys' fees 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 you toward the payment of the
Obligations in such order of application as you may elect, and we shall be
liable for any deficiency.
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| 6. If
we default in any material respect 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, you may, at your option without waiving your right to
enforce this Agreement according to its terms, immediately or at any time
thereafter and without notice to us, perform or fulfill the same or cause
the performance or fulfillment of the same for our account and at our 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 or,
at your option, debited by you from the account pledged to you in
connection with this Agreement (the "Pledged Account"), the
details of which are set forth on Schedule 6, attached hereto.
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| 7. We
appoint you, any of your officers, employees or any other person or entity
whom you may designate as our attorney-in-fact, with power to execute such
documents in our behalf and to supply any omitted information and correct
patent errors in any documents executed by us or on our behalf; to file
financing statements against us covering the Collateral; to sign our name
on public records; and to do all other things you deem necessary to carry
out this Agreement. We hereby ratify and approve all acts of the
attorney-in-fact and neither you nor the attorney-in-fact 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.
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 your 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 you and then only to the extent therein set forth,
and no waiver by you of any default shall operate as a waiver of any other
default or of the same default on a future occasion. Your books and
records containing entries with respect to the Obligations shall be
admissible in evidence in any action or proceeding, shall be binding upon
us for the purpose of establishing the items therein set forth and shall
constitute prima facie proof thereof. You shall have the right to enforce
any one or more of the remedies available to you, successively,
alternately or concurrently. We agree to join with you in executing
financing statements or other instruments to the extent required by the
Uniform Commercial Code in form satisfactory to you and in executing such
other documents or instruments as may be required or deemed necessary by
you for purposes of affecting or continuing your security interest in the
Collateral.
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4 |
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| 9. This
Agreement shall be governed by and construed in accordance with the laws
of the State of New York, without giving effect to conflicts of law
principles and cannot be terminated orally. All of the rights, remedies,
options, privileges and elections given to you hereunder shall inure to
the benefit of your successors and assigns. The term "you" as
herein used shall include your company, any parent of your company, any of
your subsidiaries and any co-subsidiaries of your parent, whether now
existing or hereafter created or acquired, and all of the terms,
conditions, promises, covenants, provisions and warranties of this
Agreement shall inure to the benefit of and shall bind the
representatives, successors and assigns of each of us and them. You and we
hereby (a) waive any and all right to trial by jury in litigation relating
to this Agreement and the transactions contemplated hereby and we agree
not to assert any counterclaim in such litigation, (b) submit to the
nonexclusive jurisdiction of any New York State court sitting in the
borough of Manhattan, the city of New York and (c) waive any objection you
or we may have as to the bringing or maintaining of such action with any
such court.
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| 10. All notices from you to us shall be sufficiently given if mailed or delivered to us at our address set forth below |
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Very truly yours, |
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Ventures-National Incorporated d/b/a |
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By: /s/ Xxxxxx X.
Xxxxxxx |
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ACKNOWLEDGED: Laurus Master Fund, Ltd. |
Address: |
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By: /s/ Xxxxx
Grin |
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EXHIBIT 1(A) COMMERCIAL TORT CLAIMS
NOT APPLICABLE |
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EXHIBIT 2 PERMITTED LIENS Enovation Graphics - equipment lien |
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EXHIBIT 7(c) ACTIONS FOR PERFECTION NOT APPLICABLE |
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EXHIBIT 7(p) BANK ACCOUNTS
TITAN GENERAL HOLDINGS: COMMERCE BANK: ACCOUNT
# 7916375160 SILICON VALLEY BANK: ACCOUNT # 3300356971
TITAN PCB WEST, INC.: SILICON VALLEY BANK OPERATING ACCOUNT # 3300356948
TITAN PCB EAST, INC.: CITIZENS BANK OPERATING ACCOUNT # 3304008928 XXXXXX UNITED BANK LOCKBOX ACCOUNT # 3981234620
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EXHIBIT 12(d) LOCATIONS VENTURES NATIONAL INCORPORATED |
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EXHIBIT 12(e) PENSION PLANS NOT APPLICABLE |
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EXHIBIT 12(f) LITIGATION On June 15, 2003, the Company was served with a summons from National Laminate Sales ("NLS"); whereby NLS is alleging that the Company's subsidiary, Titan PCB East, Inc. is liable for certain liabilities of Eastern Manufacturing Corporation ("EMC"), an entity from whose secured creditor the Company acquired certain former assets of EMC. The Company feels that this case is without merit and is strongly defending the action. |
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EXHIBIT 12(j) SEC REPORTS NOT APPLICABLE |
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EXHIBIT 12(h) INTELLECTUAL PROPERTY NOT APPLICABLE |
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EXHIBIT 13(e)(i) PERMITTED INDEBTEDNESS |
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AMOUNT |
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Xxxxxx Corporation
I.E.C. Electrochemicals Xxxxxxx Xxxx Technica Irrevocable Children's Trust Irrevocable Children's Trust Irrevocable Children's Trust Ohio Investors Phoenix Investors Xxxxxx & Xxxxxx Xxxxxxx Xxxxxxx Xxxxxxxx Xxxxxxx Xxxxx, Jr. Xxxxxxx Xxxxxxx Xxxxxxx Xxxxxxx Trust Xxxxxx & Xxxxx Xxxxxx Enovation Graphics ("EG") ITEQ Corporation |
6% A/P Note
5% A/P Note 3% A/P Note 3% A/P Note 5% A/P Note 10% Convertible Note 10% Convertible Note 10% Convertible Note 10% Convertible Note 10% Convertible Note 10% Convertible Note 10% Convertible Note 10% Convertible Note 10% Convertible Note 10% Convertible Note 10% Convertible Note UCC against EG's Equipment* UCC filed for consigment inventory |
$ 22,089.39
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*Represents UCC-1 filed with respect to EG equipment located on the Company's premises. |
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EXHIBIT 13(e(ii) EXISTING SUBSIDIARIES TITAN PCB EAST,
INC Incorporated
in Delaware |
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