SECURITY AGREEMENT
THIS
SECURITY AGREEMENT,
dated
as of August 25, 2005, is between BSI2000, Inc., a Delaware Corporation
("BSI2000") and The New Sytron, Inc., a Colorado corporation ("New
Sytron").
RECITALS
WHEREAS,
New
Sytron has sold to BSI2000 all right, title and interest which New Sytron
and/or
DPI International Group, as debtor ("Debtor"), has or may have in the future
to
certain assets comprising the access control system commonly known as MAXX-NET,
MAXX-Net, Maxx-Net or any variation thereof (the "Maxx-Net System") pursuant
to
a private foreclosure sale conducted by New Sytron in its capacity as a secured
creditor of Debtor under and in full compliance with the Colorado Uniform
Commercial Code—Secured Transactions;
WHEREAS,
a
portion of the consideration paid by BSI2000 is in the form of a Promissory
Note
in the stated principal amount of $500,000 (the "Note") from BSI2000 payable
to
the order of New Sytron;
WHEREAS,
BSI2000
has agreed to grant New Sytron a security interest in certain of the Maxx-Net
System related assets owed by BSI2000 as collateral for its payment obligations
under the Note;
AGREEMENTS
NOW
THEREFORE,
in
consideration of the Recitals, and for other good and valuable consideration,
receipt of which is hereby acknowledged by BSI2000, it is hereby agreed as
follows:
1
Grant
of Security Interest; Intellectual Property Escrow.
As
security for the Secured Obligations (as defined below), BSI2000 hereby grants
to New Sytron a first security interest and lien on the property described
below
(collectively, the "Collateral"):
(a)
All
right, title and interest of BSI2000 in and to (a) any and all rights
to
possession, use and/or ownership of the Maxx-Net System and any and all assets
comprising components thereof, including any and all related software (source
and object code), algorithms, computer processing systems, techniques,
methodologies, formulae, processes, compilations of information, documentation,
drawings, proposals, recommendations, job notes, reports, records,
specifications, customer lists, customer contact information, trade names,
trademarks, and any goodwill associated therewith, along with the right to
apply
for registration of the copyright in any related software, the right to create
derivative works and the right to xxx for past infringement of the copyright,
trademark or any intellectual property right relating to the Maxx-Net System,
whether patentable or not (collectively, the "Assets"), including without
limitation all of the Maxx-Net System software/technology being transferred
by
New Sytron plus all of the core Maxx-Net System software/technology which
BSI2000 has heretofore acquired or will hereafter acquire from Cyber Country
Systems, LLC and/or any of its members or affiliates, or from any other source,
(b) any contracts existing between BSI2000 and any customers relating
to
the Maxx-Net System software, whether relating to the sale of products,
maintenance or service and (c) any accounts receivable owing to BSI2000
from any such customers relating to maintenance or service contracts
(collectively, the "Collateral"). Any copyrights or patents which have been
or
may be applied for or issued with respect to the Collateral shall also be
a part
of the Collateral.
(b)
Any
modifications, improvements, or enhancements to the core Maxx-Net System
software/technology (specifically excluding any biometrics enhancements
thereto)(to the extent of BSI2000's rights thereto).
All
of the software
(source and object code), gerber files, algorithms, computer processing systems,
compilations of information, documentation, drawings, proposals,
recommendations, job notes, reports, records, and specifications related
to the
Maxx-Net System shall be deposited within ninety (90) days of the execution
of
this Agreement into a software escrow established with Iron Mountain
Intellectual Property Management Inc. pursuant to a Three-Party Escrow Service
Agreement reasonably acceptable to the parties, and the initial deposit of
such
intellectual property shall be verified as to its completeness and accuracy
by
New Sytron in its reasonable discretion. BSI2000 covenants further that all
modifications, improvements and enhancements to the Maxx-Net System shall
be
timely deposited into the escrow as and when they are developed.
2
Secured
Obligations.
The
security interest hereby granted shall secure payment of all liabilities
and
obligations of BSI2000 to New Sytron under the Note and the performance by
BSI2000 of its representations, warranties and covenants contained herein
(collectively, the "Secured Obligations"):
3
Representations,
Warranties and Covenants.
BSI2000
hereby represents, warrants and covenants to New Sytron that:
(a)
Organization
and Continuation of Business.
BSI2000
is duly organized, validly existing, and in good standing under the laws
of the
state of its incorporation, and shall do, or cause to be done, all things
reasonably necessary to continue its business.
(b)
Authority
and No Violations.
BSI2000
has taken all necessary action, corporate or otherwise, to authorize the
execution, delivery and performance of this Agreement. The execution and
delivery of the Agreement by BSI2000 hereunder will not violate any provisions
of law and will not result in a breach of any order, injunction, or similar
document or instrument of any court or governmental authority or BSI2000's
articles of incorporation or by-laws, or any agreement, contract or indenture
to
which BSI2000 is a party.
(c)
Enforceability.
This
Agreement constitutes the valid and legally binding obligation of BSI2000,
enforceable in accordance with its terms.
2
(d)
Priority
of Liens.
The
Collateral is free and clear of any security interest, lien or encumbrance
of
any nature whatsoever, except for a security interest granted in favor of
Cornell Capital Partners, LP. The security interest hereby granted to New
Sytron
shall be superior to and take precedence over any and all liens, charges
and
encumbrances which may exist on the Collateral, including without limitation
any
such lien, charge or encumbrance held by Cornell Capital Partners, LP.
(e)
Judgments,
Actions, Proceedings.
There
are no outstanding judgments, or actions or proceedings pending before any
court
or governmental authority with respect to or, to the best of BSI2000's
knowledge, threatened against or affecting BSI2000 or the Collateral, nor,
to
the best of BSI2000's knowledge, is there any reasonable basis for the
institution of any such action or proceeding which is probable of
assertion.
(f)
Claims.
BSI2000
shall promptly notify New Sytron of any claim against any of the
Collateral.
(g)
Compliance
With Laws.
BSI2000
is in material compliance with and shall continue to be in material compliance
with all applicable laws and regulations.
(h)
Taxes.
BSI2000
has filed and will continue to file all federal, state and local tax returns
required to be filed by it and has paid and will continue to pay all taxes
owed
by it on or before the applicable due dates.
(i)
State
of Incorporation and Name.
BSI2000's place of business, the office where it keeps its records concerning,
and the location of, the Collateral is set forth below. BSI2000 will give
thirty
days prior written notice to New Sytron of any change in its state of
incorporation, change of its name or merger with another
corporation.
(j)
Financing
Statements.
BSI2000
hereby authorizes New Sytron to file such financing statements, amendments,
certificates and other documents or instruments as may be necessary to enable
New Sytron to perfect or from time to time renew the security interest granted
hereby in the Collateral.
4
Events
of Default.
The
occurrence of any one or more of the following events or conditions shall
constitute an "Event of Default":
(a)
A
default
by BSI2000 of its obligations under the Note and an acceleration by New Sytron
of all amounts due under the Note; or
(b)
Material
failure of BSI2000 to comply with any covenant contained herein within twenty
(20) days after notice from New Sytron of such failure; or
(c)
Any
representation or warranty made by BSI2000 herein shall have been false or
misleading in any material respect when made; or
(d)
BSI2000
shall make an assignment for the benefit of creditors, file a petition in
bankruptcy, be adjudicated insolvent, or shall commence any proceeding under
any
bankruptcy, reorganization or dissolution.
3
5
Rights
of New Sytron.
Upon the
occurrence of any Event of Default, New Sytron may declare all of the Secured
Obligations immediately due and payable and shall then have the rights and
remedies of a creditor under the Uniform Commercial Code or under any other
applicable law. New Sytron will give BSI2000 at least ten (10) days prior
written notice at the address of BSI2000 set forth below (or at such other
address as BSI2000 shall specify in writing to New Sytron) of the time and
place
of any public sale thereof or of the time after which any private sale or
any
other intended disposition thereof is to be made. Any such notice shall be
deemed to meet any requirement hereunder or under any applicable law (including
the Uniform Commercial Code) that reasonable notification be given of the
time
and place of such sale or other disposition. After deducting all costs and
expenses of collection, storage, custody, sale or other disposition and delivery
(including reasonable costs and reasonable attorneys' fees) and all other
charges against the Collateral, the residue of the proceeds of any such sale
or
disposition shall be applied to the payment of the Secured Obligations in
such
order as New Sytron shall determine. In the event the proceeds of any sale
or
other disposition of the Collateral hereunder are insufficient to pay all
of the
Secured Obligations in full, BSI2000 will be liable for the deficiency, together
with interest thereon, at the lesser of 18% per annum or the maximum rate
permitted by law, and the cost and expenses of collection of such deficiency,
including (to the extent permitted by law), without limitation, reasonable
attorneys' fees, expenses and disbursements. The powers conferred on New
Sytron
under this Agreement are solely to protect its interest in the Collateral
and
shall not impose any duty upon it to exercise any such powers.
6
Collection
of Accounts Receivable.
Upon the
occurrence of any Event of Default, New Sytron may notify or require BSI2000
to
notify account debtors on any or all of BSI2000's accounts receivable
constituting part of the Collateral, whether now existing or hereafter arising,
to make payment directly to New Sytron, and may take possession of all proceeds
of any accounts in BSI2000's possession, and may take any other steps which
New
Sytron deems necessary or advisable to collect any or all such accounts
receivable or other Collateral or proceeds thereof, including the delivery
to
New Sytron of a complete account receivables list with the names and addresses
of all debtors noted thereon. BSI2000 hereby irrevocably appoints New Sytron
as
its attorney-in-fact, with full authority in the place, name and stead of
BSI2000 from time to time in New Sytron's discretion, to take any action
and to
execute any instrument which New Sytron may deem necessary or advisable to
accomplish the purposes of this Security Agreement. BSI2000 hereby ratifies
all
that New Sytron may do by virtue hereof.
7
Notices,
etc.
All
notices and other communications pursuant to this Security Agreement shall
be in
writing, either by letter (delivered by hand or commercial messenger services
or
sent by registered or certified mail, return receipt requested) or telecopy,
addressed as set forth below. Any notice or other communication hereunder
shall
be deemed to have been given on: (i) the day on which it is sent by facsimile
to
such party at its facsimile number specified above (provided such notice
shall
be effective only if followed by one of the other methods of delivery set
forth
herein) or delivered by receipted hand or such commercial messenger service
to
such party at its address specified above, or (ii) on the day received if
sent
by mail. Any party may change the person, address or facsimile number to
whom or
which notices are to be given hereunder, by notice duly given hereunder;
provided, however, that any such notice shall be deemed to have been given
hereunder only when actually received by the party to which it is
addressed.
4
8
Survival.
This
Security Agreement shall inure to the benefit of and be binding upon BSI2000
and
New Sytron and their respective heirs, successors and assigns, including
any
subsequent holder or holders of any Secured Obligation.
9
Captions.
The
captions used in this Agreement have been inserted for convenience only and
shall not be deemed to limit or otherwise affect the construction of any
provision hereof.
10
Reinstatement.
This
Security Agreement shall continue to be effective, or be reinstated, as the
case
may be, if at any time any amount received by New Sytron hereunder is rescinded
or must otherwise be restored or returned by New Sytron upon the insolvency,
bankruptcy, dissolution, liquidation or reorganization of BSI2000 or upon
the
appointment of any intervenor or conservator of, or trustee or similar official
for, BSI2000 or any substantial part of their respective properties, or
otherwise, all as though such payments had not been made.
11
Counterparts.
This
Security Agreement may be executed in any number of counterparts and by the
different parties hereto on separate counterparts, each of which when so
executed and delivered shall be an original, but all of which shall together
constitute one and the same instrument.
12
Governing
Law; Jurisdiction.
The
respective rights and obligations of the parties hereto shall be governed
by and
construed and enforced in accordance with the laws of the State of Colorado
applicable to contracts made and to be performed wholly within such state.
Each
party hereto consents to the jurisdiction of the courts of Colorado and the
United States District Court for the District of Colorado, over such persons,
and waives any claim that any such court is an inconvenient forum or has
no
personal jurisdiction over the same.
IN
WITNESS WHEREOF,
BSI2000
and New Sytron have executed this Security Agreement as of the date set forth
above.
| Address: | ||
| 11959 Discovery Court | The New Sytron, Inc., a Colorado corporation | |
|
Xxxxxxxx,
XX 00000
Facsimile No.: (000)
000-0000
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|
|
By: | |
|
Xxxxx Xxxxxxx
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||
|
President
|
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| Address: | ||
| 00000 Xxxx Xxxxxx Xxx. | XXX0000, Inc., a Delaware corporation | |
| Xxxxx
X000 Xxxxxxxx, XX 00000 |
|
|
| Facsimile No.: 000-000-0000 | By: | |
|
Xxxx Xxxxxx |
||
| President | ||
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