Exhibit 10.27
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (this "AGREEMENT"), dated as of February 5,
2004, is made by Innovative Computing Group, Inc., an Ohio corporation (the
"DEBTOR"), in favor of IA Global, Inc. (the "LENDER"), and is executed by the
Debtor in connection with the issuance of a Secured Promissory Note to Lender,
dated as of the date hereof (the "NOTE"). The Debtor and the Lender hereby agree
as follows:
SECTION 1. DEFINITIONS:
(a) As used in this Agreement, the following terms shall have the
following meanings:
"COLLATERAL" has the meaning set forth in Section 2.
"DOCUMENTS" means this Agreement, the Note, the Escrow Agreement by and
among the Debtor and the Lender to hold the Security pending repayment of the
Note (the "ESCROW AGREEMENT"), and all other certificates, documents, agreements
and instruments delivered to the Lender under or in connection with the Note.
"EVENT OF DEFAULT" has the meaning given to such term in the Note.
"OBLIGATIONS" means all indebtedness, liabilities and other obligations
of the Debtor to the Lender under the Documents.
"UCC" means the Uniform Commercial Code as the same may, from time to
time, be in effect in the State of New York; provided; however, in the event
that, by reason of mandatory provisions of law, any or all of the attachment,
perfection or priority of the security interest in any Collateral is governed by
the Uniform Commercial Code (or such other set of laws and statutes) as in
effect in a jurisdiction other than the State of New York, the term "UCC" shall
mean the Uniform Commercial Code as in effect in such other jurisdiction (or
such other set of laws and statutes) for purposes of the provisions hereof
relating to such attachment, perfection or priority and for purposes of
definitions related to such provisions.
(b) Where applicable and except as otherwise defined herein, terms used
in this Agreement shall have the meanings assigned to them in the UCC.
SECTION 2. SECURITY INTEREST; PERFECTION.
(a) In order to secure the full and punctual payment and performance of the
Obligations, the Debtor hereby grants to the Lender a continuing security
interest in and to all right, title and interest of the Debtor in, to or under
the property set forth on SCHEDULE 2(A) hereto, including all Proceeds and
products thereof (collectively, the "COLLATERAL"). The security interest granted
hereby is granted as security only and shall not subject the Lender to, or
transfer or in any way affect or modify, any obligation or liability of the
Debtor with respect to any of the Collateral or any transaction in connection
therewith. Notwithstanding the foregoing, so long as there has not occurred an
Event of Default, QC shall have the right to distribute the Security pursuant to
the
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terms of a license agreement between QC and the Debtor, PROVIDED, that such
distribution shall only be made on a non-exclusive basis and shall only consist
of the object code of the Security.
(b) In order to perfect the Lender's security interest in the Collateral, the
Debtor shall sign all financing statements, or other documents reasonably
requested by the Lender for the purpose of perfecting and maintaining the
security interest in the Collateral granted pursuant to Section 2(a) above. The
Debtor authorizes the Lender to file financing statements describing the
Collateral.
SECTION 3. FINANCING STATEMENTS; ETC.
(a) The Lender may perform any and all its duties and exercise its
rights and powers by or through any one or more sub-agents appointed by the
Lender.
(b) The Lender acknowledges that it has, independently and without
reliance upon any other party and based on such documents and information, as it
has deemed appropriate, made its own credit analysis and decision to enter into
this Agreement. The Lender also acknowledges that it will, independently and
without reliance upon any other party and based on such documents and
information as it shall from time to time deem appropriate, continue to make its
own decisions in taking or not taking action under or based upon this Agreement,
any other Document or related agreement or any document furnished hereunder or
thereunder.
SECTION 4. REPRESENTATIONS AND WARRANTIES. The Debtor represents and warrants to
the Lender that:
(a) The Debtor is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation and has
all requisite corporate power and authority to execute, deliver and perform its
obligations under this Agreement.
(b) The execution, delivery and performance by the Debtor of this
Agreement have been duly authorized by all necessary corporate action of the
Debtor, and this Agreement constitutes the legal, valid and binding obligation
of the Debtor, enforceable against the Debtor in accordance with its terms,
subject to bankruptcy and similar laws and equitable principles.
(c) The Debtor's chief executive office and principal place of business
(as of the date of this Agreement) as well as other locations of Collateral, if
any, are located at the addresses set forth in SCHEDULE 4(C).
(d) The security interests created hereby constitute valid security
interests under the UCC securing the Obligations. When UCC financing statements
shall have been filed with the Secretary of State of the State of Ohio, the
security interests created hereby with respect to Collateral which can be
perfected by filing shall constitute a perfected security interest in the
Collateral, ranking prior to all other liens, encumbrances, and rights of others
therein (other than liens that by statute are given a priority senior to that of
the Lender).
SECTION 5. COVENANTS. The Debtor agrees that:
(a) The Debtor shall do and perform all reasonable acts that may be
necessary and appropriate to maintain, preserve and protect the Collateral. In
furtherance and not in limitation of
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the foregoing, in order to perfect the Lender's security interest in the
Collateral, the Debtor covenants and agrees to provide any required notice of
the provisions of this Agreement to, and to use its reasonable commercial
efforts to enter into a control agreement with, any financial institution
holding deposits or investments of the Debtor.
(b) The Debtor shall comply with all laws, regulations and ordinances,
and all policies of insurance, relating to the possession, operation,
maintenance and control of the Collateral except to the extent that such
noncompliance would not be reasonably likely to have a material adverse effect
on the value of the Collateral or any material portion thereof or the Debtor's
ability to perform its obligations under the Documents (a "COLLATERAL MATERIAL
ADVERSE EFFECT").
(c) The Debtor shall give prompt written notice to the Lender (and in
any event not later than ten (10) days prior to any change described below in
this subsection) of: (i) any change in the location of the Debtor's chief
executive office or principal place of business, (ii) any change in its name,
and (iii) any changes in its identity or structure in any manner which might
make any financing statement filed hereunder incorrect or misleading.
(d) The Debtor shall not surrender or lose possession of (other than to
Lender), sell, lease, rent, or otherwise dispose of or transfer any of the
Collateral or any right or interest therein.
(e) The Debtor shall pay and discharge all taxes, fees, assessments and
governmental charges or levies imposed upon it with respect to the Collateral
prior to the date on which penalties attach thereto, except to the extent such
taxes, fees, assessments or governmental charges or levies are being contested
in good faith by appropriate proceedings and except to the extent that the
failure to do so would not be reasonably likely to have a Collateral Material
Adverse Effect.
(f) The Debtor shall place the Collateral in escrow, with the escrow
agent of Recall Pty Ltd. (the "ESCROW AGENT").
SECTION 6. REMEDIES.
(a) Upon the occurrence and during the continuance of any Event of
Default, the Lender may declare any of the then outstanding monetary Obligations
to be immediately due and payable and shall have, in addition to all other
rights and remedies granted to the Lender in this Agreement, all rights and
remedies of a secured party with a first priority security interest under the
UCC and other applicable laws.
(b) Subject to those procedures set forth in the Note with respect to
remedies upon an Event of Default, any and all cash proceeds actually received
from the sale or other disposition or collection of Collateral, and any other
amounts received in respect of the Collateral the application of which is not
otherwise provided for herein, shall be applied by the Lender to the payment of
the Obligations. Any surplus thereof which exists after payment and performance
in full of the then outstanding monetary Obligations shall be promptly paid over
to the Debtor or otherwise disposed of in accordance with the UCC or other
applicable law. The Debtor shall remain liable to the Lender for any deficiency
which exists after any sale or other disposition or collection of Collateral.
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(c) Subject to paragraph (b) of this Section 6, the Debtor waives, to
the fullest extent permitted by law, (i) any right of redemption with respect to
the Collateral, whether before or after sale hereunder, and all rights, if any,
of marshalling of the Collateral or other collateral or security for the
Obligations; (ii) any right to require the Lender (A) to proceed against any
person, (B) to exhaust any other collateral or security for any of the
Obligations, (C) to pursue any remedy in the Lender's power, or (D) to make or
give any presentments, demands for performance, notices of nonperformance,
protests, notices of protests or notices of dishonor in connection with any of
the Collateral; and (iii) all claims, damages, and demands against the Lender
arising out of the repossession, retention, sale or application of the proceeds
of any sale of the Collateral.
SECTION 7. NOTICES. All notices, approvals, requests, demands and other
communications hereunder shall be given in accordance with Section 9(d) of the
Note.
SECTION 8. NO WAIVER: CUMULATIVE REMEDIES. No failure on the part of the Lender
to exercise, and no delay in exercising, any right, remedy, power or privilege
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise of any such right, remedy, power or privilege preclude any other or
further exercise thereof or the exercise of any other right, remedy, power or
privilege. The rights and remedies under this Agreement are cumulative and not
exclusive of any rights, remedies, powers and privileges that may otherwise be
available to the Lender.
SECTION 9. BINDING EFFECT. This Agreement shall be binding upon, inure to the
benefit of and be enforceable by and against the Debtor, the Lender and their
respective successors and assigns. The Debtor may not assign, transfer,
hypothecate or otherwise convey its rights, benefits, obligations or duties
hereunder without the prior express written consent of the Lender. Any such
purported assignment, transfer, hypothecation or other conveyances by the Debtor
without the prior express written consent of the Lender shall be void. The
Debtor acknowledges and agrees that in connection with an assignment of the
Obligations, to the extent permitted under the Note, the Lender may assign all
or a portion of its rights and obligations hereunder. Upon any assignment of the
Lender's rights hereunder, such assignee shall have, to the extent of such
assignment, all rights of the Lender hereunder and may in turn assign such
rights. The Debtor agrees that, upon any such assignment such assignee may
enforce directly, without joinder of the assigning Lender, the rights of such
Lender set forth in this Agreement and any such assignee shall be entitled to
enforce such Lender's rights and remedies under this Agreement to the same
extent as if it were a Lender party hereunder.
SECTION 10. GOVERNING LAW. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York, except for its conflicts of
law provisions and as required by mandatory provisions of law and to the extent
the validity or perfection of the security interests hereunder, or the remedies
hereunder, in respect of any Collateral are governed by the law of a
jurisdiction other than the State of New York.
SECTION 11. ENTIRE AGREEMENT; AMENDMENT. This Agreement contains the entire
agreement of the parties with respect to the subject matter hereof and shall not
be amended except by the written agreement of the Debtor and the Lender.
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SECTION 12. SEVERABILITY. Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under all
applicable laws and regulations. If, however, any provision of this Agreement
shall be prohibited by or invalid under any such law or regulation in any
jurisdiction, it shall, as to such jurisdiction, be deemed modified to conform
to the minimum requirements of such law or regulation, or, if for any reason it
is not deemed so modified, it shall be ineffective and invalid only to the
extent of such prohibition or invalidity without affecting the remaining
provisions of this Agreement, or the validity or effectiveness of such provision
in any other jurisdiction.
SECTION 13. COUNTERPARTS; FACSIMILE SIGNATURES. This Agreement may be executed
by the parties hereto individually or in combination, in one or more
counterparts, each of which shall be an original and all of which shall
constitute one and the same agreement. Delivery of an executed counterpart of a
signature page by facsimile shall be effective as delivery of a manually
executed counterpart.
SECTION 14. TERMINATION. Upon payment in full of all then outstanding principal
under the Note and all interest accrued thereon, this Agreement shall terminate
and be of no further force or effect, and all rights to the Collateral shall
revert to the Debtor, and the Lender shall promptly execute and deliver to the
Debtor such documents and instruments reasonably requested by the Debtor as
shall be necessary to evidence termination of all security interests given by
the Debtor to the Lender hereunder. In addition, at any time and from time to
time prior to such termination, if any Collateral is sold, leased, exchanged,
assigned or otherwise disposed of in accordance with and as not prohibited by
this Agreement, the security interests created hereby in such item (but not in
any Proceeds arising from such sale or exchange) shall terminate immediately
without any further action on the part of the Lender, and such Collateral shall
no longer be deemed to be "Collateral" for purposes of this Agreement, and the
covenants contained herein.
SECTION 15. COSTS AND EXPENSES. In the event any action is taken to enforce the
rights of the Lender under this Agreement, in addition to such other relief as
may be granted, the Debtor shall be responsible for all reasonable costs and
expenses, including reasonable attorneys' fees incurred in such action unless
the taking of such enforcement action constitutes willful misconduct by the
person taking such action.
[Signatures appear on the following page]
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IN WITNESS WHEREOF, the parties hereto have duly executed this Security
Agreement, as of the date first above written.
DEBTOR:
INNOVATIVE COMPUTING GROUP, INC.
By: /s/ Xx. Xxx Xxxx
Name: Xx. Xxx Xxxx
Title: CEO
LENDER:
IA GLOBAL, INC.
By: /s/ Xxxx Xxxxxxxxxx
Name: Xxxx Xxxxxxxxxx
Title: President
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SCHEDULE 2(A)
Debtor hereby conveys, assigns, pledges and grants a continuing and
unconditional security interest to the Lender, its successors and assigns, in
and to the source code (and any dictionaries or other keys or codes necessary to
read the source code) to the Miliki SuperCompressor .The property set forth in
the preceding sentence, together with property of a similar nature which Debtor
hereafter owns or in which Debtor hereafter acquires any interest, is referred
to herein as the "COLLATERAL."
Notwithstanding the foregoing, the security interest granted herein
shall not extend to and the term "Collateral" shall not include any property,
right or interest to the extent that the grant of a security interest therein
would be contrary to applicable law. Furthermore, the term Collateral shall not
include any "Excluded Assets."
As used in this SCHEDULE 2(A), the following terms shall have the
following meanings:
"EXCLUDED ASSETS" shall mean the following Intellectual Property owned
by the Debtor:.
1. Biometrics Technology - Methods, applications and apparatus using
dynamical systems such as Cellular Automata for measuring and analyzing human
body characteristics such as fingerprints, eye retinas and irises, voice
patterns, gait, facial patterns, and hand measurements, especially for but not
limited to authentication purposes.
2. CA-Based Computer - Methods, applications and apparatus that make
use of Cellular Automata as the basis of processing information according to a
well defined procedure.
3. Modeling/Forecasting - Methods, applications and apparatus using
mathematical and computational techniques to represent and forecast processes
(including but not limited to those derived from physical, chemical, biological,
financial, geologic etc events).
4. Any future DARPA projects - Methods, applications and apparatus
using swarm intelligence for mobile data routing systems referred to as MANET
(Mobile Ad Hoc Networks) - shall be deemed part of the ECA.
5. The current DARPA contract shall be considered an Excluded Asset
that is not immediately subject to an ECA. However, should this contract move to
a larger scale or move to the next stage of its development, then ICG agrees to
negotiate in good faith to establish an ECA with Newco on the basis of the
agreed framework, including obtaining any required consent from DARPA.
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SCHEDULE 4(C)
Chief Executive Office and Principal Place of Business:
Innovative Computing Group, Inc.
000 Xxxx Xxxxx
Xxxxxxxx Xxxxxxx, Xxxx 00000
Telephone: _________________
Facsimile: __________________
Other locations of Collateral, if any:
At the location specified in the Escrow Agreement.
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