EXHIBIT 99.2
SECURITY AGREEMENT
SECURITY AGREEMENT
SECURITY AGREEMENT ("Security Agreement"), dated as of August 28, 2001,
made by eCom Capital, Inc., a Delaware corporation ("Obligor"), Franklin Capital
Corporation, a Delaware corporation ("Parent"), solely for purposes of Section 5
hereof, and Change Technology Partners, Inc., a Delaware corporation ("Lender").
WITNESSETH:
WHEREAS, the Obligor has executed a Promissory Note (the "Note"), dated
August 28, 2001, in favor of Lender in the principal amount of $2,250,000;
WHEREAS, the parties have agreed to enter into this Security Agreement
in consideration for and in connection with the Note; and
WHEREAS, the parties understand and acknowledge that the obligations of
Parent pursuant to Section 5 hereof are a material inducement to the execution
by Lender of this Agreement.
NOW, THEREFORE, for value received, the receipt and sufficiency of
which is hereby acknowledged, the parties intending to be legally bound do
hereby agree as follows:
1. SECURITY INTEREST.
a. To secure the payment and performance of all of the
Obligations (as defined below), Obligor hereby grants to
Lender a continuing security interest in, and assigns and
pledges to Lender, all of the Collateral (as defined below).
b. (i) "COLLATERAL" shall mean and include, except as
and to the extent specifically excluded in Schedule A
hereto, all personal property and fixtures of Obligor
or in which Obligor has an interest, wherever
located, of every kind, nature and description,
tangible or intangible, and whether or not subject to
Article 9 of the Uniform Commercial Code, including,
but not limited to, (A) all accounts receivable,
deposits and prepayments, and general intangibles
(including, but not limited to, in each case,
contract rights and, in the case of general
intangibles, tax refunds), instruments, investment
securities, chattel paper and documents, (B) all
inventory, (C) all equipment (including, but not
limited to, machinery, furniture and vehicles), (D)
all consumer goods, (E) all contracts with producers,
advertisers, employees and independent contractors,
(F) program archives, interviews and related rights,
(G) trademarks (other than those related to Winstar
Radio Networks, LLC, a Delaware limited liability
company, Winstar Global Media, Inc., a Delaware
corporation and Winstar Radio Productions, LLC, a
Delaware limited liability company) and license
agreements, (H) to the extent not otherwise included,
all claims, demands and rights (including, but not
limited to, claims to insurance proceeds, tort
claims, judgment claims, rights of set-off, rights to
payment under letters and advices of credit and
rights to any balance in any deposit account
maintained with any bank, including Lender, or
similar organization), (I) to the extent not
otherwise included, all money, other goods and other
rights in personal property and fixtures, and (J) the
proceeds, products and accessions of and to any of
the foregoing.
(ii) "OBLIGATIONS" shall mean and include the indebtedness
of Obligor to Lender incurred by Obligor pursuant to
the terms of the Note.
(iii) Certain other terms used herein are defined in
Section 13 hereof.
2. COVENANTS RELATING TO RANK AND PERFECTION OF SECURITY INTEREST. As long
as any of the Obligations remain outstanding, the Obligor covenants and
agrees with the Lender that:
a. It will not create or permit to exist, nor shall there exist,
any security interest in, lien, attachment, levy or
encumbrance upon, or assignment and pledge as security of, any
of the Collateral, except the security interest of and
assignment and pledge to Lender hereunder and Permitted Liens.
b. It will execute and file, if necessary to perfect the security
interest granted to the Lender hereunder, UCC-1 Financing
Statements evidencing such security interest and any
additional documents necessary to perfect a security interest
in the Collateral.
c. Upon the written request of the Lender, it will take all
reasonably necessary action requested by Lender to perfect,
continue, evidence, preserve, protect or validate the security
interest of and assignment and pledge to Lender hereunder or
to enable Lender to exercise and enforce its rights hereunder,
including, but not limited to, (i) executing and delivering
one or more notices, statements, agreements or other writings,
and (ii) delivering to Lender, endorsed or accompanied by such
instruments of assignment as Lender may reasonably require,
and stamping or otherwise marking, in such manner as Lender
may reasonably require, any and all chattel paper,
instruments, letters and advices of credit and documents.
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d. It hereby authorizes Lender, at its option but without any
obligation so to do, to file financing and continuation
statements and amendments to financing statements, naming
Obligor as debtor, with respect to any of the Collateral,
without the signature of Obligor.
3. OBLIGOR COVENANTS RELATING TO COLLATERAL. As long as any of the
Obligations remain outstanding, the Obligor covenants and agrees with
the Lender that:
a. It shall: (i) be the sole owner of each and every item of
Collateral, (ii) defend the Collateral against the claims and
demands of all persons, (iii) in the case of tangible property
constituting part of the Collateral, (A) properly maintain and
keep in good order and repair such property and (B) keep such
property fully insured with responsible companies against such
risks as such Collateral may normally be subject to under
policies containing loss payable clauses naming Lender as loss
payee as its interest may appear, and providing that all
proceeds thereof shall be payable to Lender. Such policy and
loss payable clause may not be cancelled or amended except
upon ten days' prior written notice to Lender;
b. It will comply with the requirements of all leases, mortgages
and other instruments relating to premises where any
Collateral is located;
c. Except in the ordinary course of business, Obligor will not
sell or otherwise dispose of (i) any of its accounts, except
for purposes of collection, (ii) any of its inventory, or
(iii) any of its equipment, except equipment no longer useful
in the operation of Obligor's business; and
d. It will give Lender prompt notice of (i) any change in (A) its
name, identity or corporate structure, (B) its state of
incorporation or the location of its chief executive office or
any other place of business, or (C) the location of its books
and records concerning any of the Collateral, (ii) the
location of each new place of business opened by Obligor,
(iii) each new location of any Collateral, and (iv) any
substantial loss or depreciation in the value of any of the
Collateral, and will provide Lender with such other
information as to the Collateral as Lender may request.
4. LENDER COVENANTS RELATING TO COLLATERAL. The Lender covenants
and agrees with the Obligor that in the event the Obligor
requires accounts receivable to secure an accounts receivable
line of credit, the Lender shall (i) release its Lien on
accounts receivable to permit Obligor to secure an accounts
receivable line of credit, such line of credit in an amount
not to exceed 50% of the accounts receivable eligible to be
financed thereunder and (ii) release its Lien on accounts
receivable to permit Obligor to secure an accounts receivable
line of credit, such line of credit in an amount in excess of
fifty percent (50%) of the accounts receivable eligible to be
financed thereunder so long as such excess is used to prepay
the Note pursuant to the Optional Prepayment (as defined in
the Note) provisions thereof
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5. PARENT COVENANTS RELATING TO COLLATERAL. The Parent covenants
and agrees with the Lender that as long as any of the
Obligations remain outstanding, if Parent is not registered as
an "investment company" within the meaning of the Investment
Company Act of 1940, as amended, the Parent shall enter into
an agreement with the Lender granting the Lender an unsecured
guarantee of the Note.
6. PRE-EVENT OF DEFAULT RIGHTS.
a. At any time and from time to time: (i) Lender may and is
hereby authorized to transfer into or register in the name of
itself or its nominee any instruments or documents that
constitute a part of the Collateral without notice to Obligor;
and (ii) Obligor will: (A) permit representatives of Lender
during normal business hours to inspect its premises and books
and records pertaining to the Collateral and make extracts
from such books and records; and (B) upon request, enter into
warehousing, lock box or other custodial arrangements
satisfactory to Lender.
b. Should Lender at any time and for any reason deem itself to be
insecure or the risk of non-payment or non-performance of any
of the Obligations increased: (i) Lender may, without notice
to Obligor: (A) notify account debtors and all other persons
against whom Obligor has claims or rights of Lender's rights
hereunder, collect all amounts payable with respect to such
accounts, claims and rights directly and apply such
collections to the repayment of the Obligations in such order
as it may elect; (B) in its own or Obligor's name, demand, xxx
for, collect or receive any money or property payable or
receivable on account of or in exchange for, make any
compromise or settlement with respect to, or modify any of the
terms of any of, the Collateral as Lender may in its sole
discretion elect; (C) receive and open mail addressed to
Obligor and change the address for delivery of Obligor's mail
to an address designated by Lender and notify the postal
authorities of any such change; (D) in the name and on behalf
of Obligor, endorse instruments and other evidences of
payment; (E) appropriate and hold, or apply (directly or by
way of set-off) to the payment of the Obligations (whether or
not then due), all money of Obligor then or thereafter in
possession of Lender, the balance of every deposit account
(demand or time, matured or unmatured) of Obligor then or
thereafter with Lender and every other claim of Obligor then
or thereafter against Lender; and (F) with respect to any
securities constituting part of the Collateral, in its own or
Obligor's name, exercise any and all powers with respect
thereto with the same force and effect as could Obligor; and
(ii) Obligor will, upon request of Lender: (A) receive and
hold all proceeds of Collateral in trust for Lender and not
commingle any collections with any of its other funds; (B)
immediately deliver such collections to Lender in the
identical form received; and (C) deliver to Lender additional
property as security for, or make one or more payments on
account of, the Obligations in an amount satisfactory to
Lender.
c. Lender may obtain the appointment of a receiver of any or all
of the Collateral and Obligor consents to and waives any right
to notice of such appointment.
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7. EVENTS OF DEFAULT. Each of the following events shall constitute an
Event of Default hereunder:
a. if the Obligor fails to pay any principal of or interest on
the Note when the same shall become due and payable;
b. if the Obligor shall generally not pay its debts as such debts
become due, or shall admit in writing its inability to pay its
debts generally, or shall make a general assignment for the
benefit of creditors;
c. if any proceeding is instituted by or against the Obligor
seeking to adjudicate it a bankrupt or insolvent, or seeking
liquidation, winding up, reorganization, arrangement,
adjustment, protection, relief or composition of it or its
debt under any law relating to bankruptcy, insolvency,
reorganization or relief of debtors, or seeking the entry of
an order for relief or for any substantial part of its
property (and, in the case of any such proceeding instituted
against the Obligor, should the same remain undismissed,
unstayed or unbonded for a period of 120 days), or should the
Obligor take corporate action to authorize any of the actions
set forth in this clause (c);
d. if the Obligor is liquidated or dissolved;
e. if default by the Obligor shall be made in the due observance
or performance of any other covenant, condition or agreement
on the part of the Obligor to be observed or performed
pursuant to the terms hereof or to the terms of the Note; f.
if any representation, warranty, certification or statement
made by or on behalf of the Obligor in this Security Agreement
or the Note, or in any certificate or other document delivered
pursuant thereto, shall have been incorrect in any material
respect when made, unless the same is capable of being cured
or corrected and is promptly cured or corrected as soon as the
Borrower has received notification in writing by the Lender
and prior to being cured or corrected does not have a material
adverse effect on the Obligor;
g. if the Obligor shall: (i) fail to pay any indebtedness the
aggregate outstanding principal amount of which is in excess
of $300,000, including but not limited to indebtedness for
borrowed money (other than the payment obligations relating to
payments made pursuant to the terms of the Note) of the
Obligor, as the case may be, or any interest or premium
thereon, when due and such failure shall continue after any
applicable grace period; or (ii) fail to perform or observe,
and such failure shall continue after any applicable grace
period, any term, covenant or condition on its part to be
performed or observed under any agreement or instrument
relating to any such indebtedness the aggregate outstanding
principal amount of which as to any or all of the Company is
in excess of $300,000, when required to be performed or
observed, if the effect of such failure to perform or observe
is to accelerate, or to permit the acceleration of, after the
giving of notice
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or passage of time, or both, the maturity of such indebtedness
and such indebtedness is so accelerated; or (iii) permit any
such indebtedness, the aggregate outstanding principal amount
of which is in excess of $300,000, to have been declared to be
due and payable, or required to be prepaid (other than by a
regularly scheduled required prepayment), prior to the stated
maturity thereof; or
h. if one or more final judgments with no right of appeal for the
payment of money in an aggregate amount in excess of $300,000
(to the extent not covered by insurance) shall be rendered
against the Company and such judgments remain undischarged for
thirty (30) days, or any action shall be legally taken by a
judgment creditor to levy upon assets or properties of the
Company to enforce any such judgment.
8. POST-EVENT OF DEFAULT RIGHTS. Upon the occurrence of an Event of
Default and at any time or from time to time thereafter:
a. Upon the occurrence of any Event of Default under clauses 5.c.
or 5.d. above, then all outstanding principal under the Note
and interest thereon shall, without notice, demand or any
other action on the part of the Lender, become immediately due
and payable. Upon the occurrence of any other Event of
Default, then at the Lender's option, by written notice to the
Obligor, all outstanding principal under the Note and interest
thereon shall become immediately due and payable; PROVIDED,
HOWEVER, that -------- ------- prior to all outstanding
principal under the Note and interest thereon becoming due and
payable the Obligor must have received written notice of the
Event of Default from the Lender; PROVIDED, FURTHER, that upon
the occurrence of any Event of Default under -------- -------
(I) clause 5.a. such Event of Default shall not have been
cured for a period of 5 days after receipt of such notice by
the Obligor and (II) clauses 5.e., 5.f., 5.g. and 5.h. such
Event of Default shall not have been cured for a period of 30
days after receipt of such notice by the Obligor.
b. Subject to Section 7(a) hereof, Lender may exercise all other
rights to which it is entitled hereunder, including but not
limited to those specified in section 4 hereof; and
c. Subject to Section 7(a) hereof, Obligor shall, upon request of
Lender, assemble the Collateral and maintain or deliver it
into the possession of Lender at such place or places as
Lender may designate and as are reasonably convenient to both
Lender and Obligor.
9. GENERAL REPRESENTATIONS, WARRANTIES AND AGREEMENTS. Obligor hereby
represents, warrants and agrees that:
a. The execution, delivery and performance of this Security
Agreement are within its powers, corporate or otherwise, have
been duly authorized by all required action and do not and
will not contravene any law or any agreement or undertaking to
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which it is a party or by which it may in any way be bound or
its certificate of incorporation or by-laws;
b. Except for any liens granted to the Lender pursuant to this
Agreement and except for Permitted Liens (as defined below),
(i) the Obligor is the owner of the Collateral and (ii) all
such Collateral is owned free and clear of any and all liens.
c. Appropriate financing statements have been or are concurrently
herewith being filed by the Obligor in the jurisdictions on
Schedule B hereto, and upon such filing (which all such
filings and other related documents, have been or are
concurrently being delivered to the Lender in completed and
executed form), the security interest granted pursuant to this
Agreement shall constitute a valid and continuing perfected
security interest in favor of the Lender, in the Collateral
for which perfection is governed by the UCC . Such security
interest will be prior to all other liens on the Collateral
except for liens which have priority over the Lender's lien by
operation of law and any Permitted Liens existing as of the
date hereof.
d. On the date hereof, the Obligor's jurisdiction of organization
and the location of the Obligor's chief executive office or
sole place of business is specified on Schedule C.
e. On the date hereof, the Collateral (other than Collateral in
transit) are kept at the locations listed on Schedule D
hereto.
f. The exact legal name of the Obligor is as set forth on page
one hereof. Except as set forth on Schedule E hereto, the
Obligor has no trade names, fictitious names or other names
except its legal name, and does not operate in any
jurisdiction under, and has not had or operated in any
jurisdiction within the five-year period preceding the date
hereof under, any trade name, fictitious name or other name
other than its legal name.
g. To the Obligor's actual knowledge, the representations and
warranties made by the Obligor in this Agreement and the
documents and certificates furnished to the Lender by the
Obligor in connection therewith, taken as a whole, do not
contain any untrue statement of a material fact or to the
Obligor's actual knowledge omit to state a material fact
necessary in order to make the statements contained herein or
therein, in the light of the circumstances under which they
were made, not misleading.
h. Obligor will furnish Lender with all information concerning
its business and financial condition as Lender may request.
i. Schedule F accurately sets forth the Obligor's organizational
identification number or, if applicable, accurately states
that the Obligor has no organizational identification number.
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10. EXPENSES OF OBLIGOR'S DUTIES; LENDER'S RIGHT TO PERFORM ON OBLIGOR'S
BEHALF; LENDER'S EXPENSES AND INDEMNIFICATION.
a. Obligor's agreements and duties hereunder shall be performed
by it at its sole cost and expense.
b. If Obligor shall fail to do any act or thing which it has
covenanted to do hereunder, Lender may (but shall not be
obligated to) do the same or cause it to be done, either in
its name or in the name and on behalf of Obligor and Obligor
hereby irrevocably authorizes Lender so to act.
c. Obligor agrees to reimburse Lender for all reasonable costs
and expenses, including reasonable attorney's fees and
disbursements, incurred, and to indemnify and hold Lender
harmless from and against all losses suffered, by Lender in
connection with (i) Lender's exercise of any right or remedy
granted to it hereunder, (ii) any claim and the prosecution or
defense thereof arising out of or in any way connected with
this Security Agreement, and (iii) the collection or
enforcement of the Obligations.
d. Amounts payable by Obligor under this Section 8 shall
constitute Obligations which shall be payable on demand.
11. NO WAIVERS OF RIGHTS HEREUNDER; RIGHTS CUMULATIVE.
a. No delay by Lender in exercising any right hereunder, or under
any of the other Obligations, shall operate as a waiver
thereof, nor shall any single or partial exercise of any right
preclude other or further exercises thereof or the exercise of
any other right. No waiver or amendment of any provision of
this Security Agreement or of any of the other Obligations
shall be enforceable against either Obligor or Lender unless
in writing and signed by Obligor and Lender, and unless it
expressly refers to the provision affected; any such waiver
shall be limited solely to the specific event waived.
b. All rights granted Lender hereunder shall be cumulative and
shall be supplementary of and in addition to those granted or
available to Lender with respect to the other Obligations or
under applicable law and nothing herein shall be construed as
limiting any such other right.
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12. ASSIGNMENT; PARTICIPATIONS. Lender may not assign any or all of the
Obligations or transfer therewith any or all of the Collateral therefor
without the prior written consent of the Obligor, which consent shall
not be unreasonably withheld. Upon such transfer, Lender shall be
released from all responsibility for the Collateral so transferred. The
Obligor may not assign or transfer any of its rights or obligations
under this Security Agreement without the prior written consent of the
Lender, which consent shall not be unreasonably withheld.
13. CONTINUING AGREEMENT; TERMINATION.
a. This Security Agreement shall be a continuing agreement and
shall apply to all future Obligations, notwithstanding that at
any particular time all of the Obligations then outstanding
shall have been paid in full.
b. This Security Agreement shall continue in full force and
effect until written notice of termination shall have been
received by Lender at its address stated below, but,
notwithstanding any such notice, this Security Agreement shall
continue in full force and effect until all Obligations then
outstanding (whether absolute or contingent) shall have been
paid in full and all rights of Lender hereunder shall have
been satisfied or other arrangements for the securing of such
rights satisfactory to Lender shall have been made. Upon
receipt of any such notice, Lender shall have no obligation to
make further loans, extensions of credit or other financial
accommodations to or on behalf of Obligor, anything in any
other agreement to the contrary notwithstanding. Upon the
irrevocable payment in full in cash of the Obligations, the
security interest granted hereby shall terminate as to all
Collateral and all such Collateral shall revert to Obligor.
Upon any termination of this Security Agreement, the Lender
shall return to the Obligor such of the Collateral in its
possession as shall not have been sold or otherwise applied
pursuant to the terms hereof and execute and deliver to
Obligor such documents as it shall reasonably request to
evidence such termination, including without limitation one or
more releases of the security interest granted hereby (which
releases shall be in proper form for filing by Obligor in all
necessary locations).
14. GOVERNING LAW; JURISDICTION; CERTAIN WAIVERS.
a. This Security Agreement shall be governed by and interpreted
and enforced in accordance with the laws of the State of New
York, and Lender shall have the rights and remedies of a
secured party under applicable law, including but not limited
to the Uniform Commercial Code of New York.
b. Obligor agrees that all actions and proceedings relating
directly or indirectly to this Security Agreement or any other
Obligations shall be litigated in courts located in the State
of New York or elsewhere as Lender may select and that such
courts are convenient forums and submits to the personal
jurisdiction of such courts.
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c. Obligor waives personal service of process and consents that
service of process upon it may be made by certified or
registered mail, return receipt requested, directed to Obligor
at its address last specified for notices hereunder, and
service so made shall be deemed completed two days after the
same shall have been so mailed.
d. Obligor waives the right to a trial by jury in any action or
proceeding between it and Lender and waives the right to
assert in any action or proceeding with regard to this
Security Agreement or any of the Obligations any offsets or
counterclaims which it may have.
e. Lender shall not be required to take any steps necessary to
preserve rights against prior parties.
15. DEFINITIONS. As used herein:
a. All terms defined in Article 1 or 9 of the New York Uniform
Commercial Code as in effect on the date of this Security
Agreement (other than the term "Collateral") are used herein
with the meanings therein given; such terms include but are
not limited to "account," "chattel paper," "deposit account,"
"document," "equipment," "general intangibles," "goods,"
"instrument," "inventory," "money" and "security interest."
b. The following terms shall have the indicated meanings:
"PERMITTED LIENS" shall mean (i) the lien of any real estate
mortgage in effect on the date of this Security Agreement to
the extent that it is at any time a lien on any Collateral
that constitutes a "fixture"; (ii) liens for taxes not yet
due; (iii) other liens incurred in the ordinary course of
business that do not (A) arise under the Employee Retirement
Income Security Act of 1974 or (B) secure obligations which
are due and payable or obligations for borrowed money; (iv)
easements, rights-of-way and other similar encumbrances on
real property which do not interfere with the ordinary conduct
of the business of the Obligor; (v) a first priority lien in
accounts receivable to secure an accounts receivable line of
credit, such line of credit in an amount not to exceed 50% of
the accounts receivable eligible to be financed thereunder;
(vi) a first priority lien in accounts receivable to secure an
accounts receivable line of credit, such line of credit in an
amount in excess of fifty percent (50%) of the accounts
receivable eligible to be financed thereunder so long as such
excess is used to prepay the Note pursuant to the Optional
Prepayment (as defined in the Note) provisions thereof; and
(vii) liens consented to by Lender in writing.
c. The words "it" or "its" as used herein shall be deemed to
refer to individuals and to business entities.
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16. NOTICES.
Any notice or request hereunder may be given to Obligor or to Lender at
their respective addresses set forth below or at such other address as
may hereafter be specified in a notice designated as a notice of change
of address under this Section. Any notice or request hereunder may be
given by, in the case of notices or requests to Obligor, mail, telex or
telegram, or by telephone subsequently confirmed by mail, telex or
telegram, and, in the case of notices to Lender, registered mail,
return receipt requested, or by telex or telegram, subsequently
confirmed by such registered mail. Notices and requests to Obligor
shall, in the case of those by mail, telex or telegram, be deemed to
have been given when deposited in the mail, first-class postage
prepaid, or delivered to the telegraph office or telex operator,
addressed as provided in this Section, and in the case of those by
telephone, when so communicated to Obligor; notices to Lender shall be
deemed to have been given only when actually received by Lender at its
address determined as provided in this Section. Any requirement under
applicable law of reasonable notice by Lender to Obligor of any event
shall be met if notice is given to Obligor in the manner prescribed
above at least seven days before (a) the date of such event or (b) the
date after which such event will occur.
17. GENERAL.
a. This Security Agreement shall be binding upon the assigns or
successors of the undersigned Obligor and shall inure to the
benefit of and be enforceable by Lender, its successors,
transferees and assigns.
b. Any provision of this Security 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 hereof in that jurisdiction or affecting the
validity or enforceability of such provision in any other
jurisdiction.
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IN WITNESS WHEREOF, the parties hereto have executed this Security
Agreement as of the day and year first above written.
DATED, IN NY, NY ____________ ; August 28th , 2001
--------------------------------
eCom Capital, Inc.
/S/ XXXXXXX X. XXXXX
------------------------------------
By: Xxxxxxx X. Xxxxx
Title: Snr. V.P./ Sect
DATED, IN NEW YORK __________ ; August 28, 2001
--------------------------------
Change Technology Partners Inc.
/S/ XXXXXXX XXXXX
------------------------------------
By: Xxxxxxx Xxxxx
Title: CEO
DATED, IN NEW YORK, NY ________ ; August 28, 2001
-------------------------------
Franklin Capital Corporation
(Agreed to solely with respect to Section 5)
/S/ XXXXXXX X. XXXXX
------------------------------------
By: Xxxxxxx X. Xxxxx
Title: Chairman
