Exhibit 4.6
SUBSIDIARY SECURITY AGREEMENT
April 26, 2004
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
Gentlemen:
1. To secure the payment of all Obligations (as hereafter defined), the
undersigned hereby grants to you a continuing security interest in all of the
following property now owned or at any time hereafter acquired , or in which the
undersigned now has or at any time in the future may acquire any right, title or
interest (the "Collateral"): all goods (including but not limited to equipment
but expressly excluding inventory in which the undersigned 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.
2. The term "Obligations" as used herein shall mean and include all debts,
liabilities and obligations owing by (a) the undersigned to you hereunder and
under the Guaranty (as amended, modified and supplemented from time to time, the
"Guaranty") dated as of the date hereof made by the undersigned in favor of you
pursuant to which the undersigned guarantied to you all of Conolog Corporation's
("Conolog") obligations to you pursuant to the Securities Purchase Agreement
dated as of the date hereof between Conolog and you (as the same may be amended,
modified and supplemented from time to time, the "Conolog Security Agreement")
and by (b) Conolog to you whether under the Conolog Security Agreement, the
Convertible Note dated as of the date hereof made by Conolog in favor of you in
the original principal amount of $1,200,000 as amended, modified and
supplemented from time to time or otherwise (the "Note") and the Related
Agreements (as such term is defined in the Conolog Security Agreement.)
3. The undersigned hereby represents, warrants and covenants to you that
(a) it is a company validly existing, in good standing under the law of the
jurisdiction of its incorporation and will provide you thirty days prior written
notice of any change in our jurisdiction of formation; (b) its legal name is
"Nologoc Corp." as set forth in its certificate of incorporation as amended
through the date hereof; (c) 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; (d) the undersigned
will keep the Collateral free and clear of all attachments, levies, taxes,
liens, security interests and encumbrances of every kind and nature
("Encumbrances")except to the extent said Encumbrance does not secure
indebtedness in excess of $20,000 and such Encumbrance is removed or otherwise
released within 10 days of the creation thereof; (e) the undersigned will at its
own respective cost and expense keep the Collateral in good state of repair and
will not waste or destroy the same or any part thereof; (f) the undersigned will
not without your prior written consent, sell, exchange, lease or otherwise
dispose of any part of the Collateral (except for sales or inventory in the
ordinary course of business) or our rights therein; (g) the undersigned will
insure the Collateral jointly in our names 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 the undersigned and the policies delivered to
you. If the undersigned fails to do so, you may procure such insurance and the
cost thereof shall constitute Obligations; (h) the undersigned will at all times
allow you or your representatives free access to and the right of inspection of
the Collateral; (i) the undersigned hereby
indemnifies and saves 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 the Guaranty or in the
prosecution or defense of any action or proceeding either against you or the
undersigned concerning any matter growing out of or in connection with this
Agreement, the Guaranty and/or any of the Obligations and/or any of the
Collateral.
4. Following the occurrence and during the continuance of an Event of
Default, you shall have the right to instruct all of my account debtors to remit
payments on all accounts in accordance with your express written instructions.
If, despite such instructions, the undersigned shall receive any payments with
respect to accounts, such undersigned shall receive such payments in trust for
your benefit, shall segregate such payments from its other funds and shall
deliver or cause to be delivered to you, in the same form as so received with
all necessary endorsements, all such payments as soon as practicable, but in no
event later than two (2) business days after its receipt thereof. You shall have
full power and authority to collect each account, through legal action or
otherwise, and may settle, compromise, or assign (in whole or in part) the claim
for any account, or otherwise exercise any other right now existing or hereafter
arising with respect to any account if such action will facilitate collection.
5. The undersigned 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" (a) the undersigned shall fail to pay when due
or punctually perform any of the Obligations; (b) any covenant, warranty,
representation or statement made or furnished to you by the undersigned or on
our behalf was false in any material respect when made or furnished; (c) 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 said levy, seizure or attachment does not secure
indebtedness in excess of $20,000 and such levy, seizure or attachment has not
been removed or otherwise released within 10 days of the creation or the
assertion thereof; (d) the undersigned 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; (e) any proceedings under any
bankruptcy or insolvency law shall be commenced by or against the undersigned
and if commenced against the undersigned shall not be dismissed within 30 days;
(f) the undersigned shall repudiate, purport to revoke or fail to perform any of
its obligations under the Guaranty or hereunder; or (g) an Event of Default
shall have occurred under and as defined in the Conolog Security Agreement, the
Note or the Related Agreements.
6. 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, the undersigned 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 days before such disposition, postage prepaid, addressed to the
undersigned either at our address shown herein or at any address appearing on
your records for the undersigned. 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 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 you toward the payment of the Obligations in such
order of application as you may elect, and the undersigned shall be liable for
any deficiency.
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7. If the undersigned default 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 the
undersigned, 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 .
8. the undersigned appoints you, any of your officers, employees or any
other person or entity whom you may designate as our attorney, 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. the undersigned hereby ratifies and approves all acts of the attorney
and neither you 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 remain
unpaid.
9. 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. the undersigned 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.
10. This Agreement shall be governed by and construed in accordance with
the laws of the State of New York without reference to its conflict of laws
provisions and cannot be terminated orally. All of the rights, remedies,
options, privileges and elections given to you hereunder shall enure 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 enure to the benefit of and shall bind the
representatives, successors and assigns of the undersigned and them. You and the
undersigned hereby (a) waive any and all right to trial by jury in litigation
relating to this Agreement and the transactions contemplated hereby and the
undersigned 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
the undersigned may have as to the bringing or maintaining of such action with
any such court.
11. All notices from you to the undersigned shall be sufficiently given if
mailed or delivered to us at our address set forth below.
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, the parties hereof have executed this Security
Agreement this ___ day of April 26, 2004.
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NOLOGOC CORP.
By:_____________________________
Name:______________________
Title:_____________________
Address:
Telephone No.:__________________
Facsimile No.:__________________
Address:
Telephone No.:__________________
Facsimile No.:__________________
ACKNOWLEDGED:
LAURUS MASTER FUND, LTD.
By:_______________________
Name:
Title:
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