SECURITY AGREEMENT
1. Identification.
This
Security Agreement (the "Agreement"), dated as of June 15, 2007, is entered
into
by and between Hi-Tech Wealth Inc., a Nevada corporation (“Debtor”), and Xxxxx
Benz, as collateral agent acting in the manner and to the extent described
in
the Collateral Agent Agreement defined below (the "Collateral Agent"), for
the
benefit of the parties identified on Schedule A hereto (collectively, the
"Lenders").
2. Recitals.
2.1 The
Lenders have made, are making and will be making loans to Debtor (the "Loans").
It is beneficial to Debtor that the Loans were made and are being
made.
2.2 The
Loans are and will be evidenced by certain promissory notes (each a “Note”)
issued by Debtor on or about the date of and after the date of this Agreement
pursuant to subscription agreements (each a “Subscription Agreement”) to which
Debtor and Lenders are parties. The Notes are further identified on Schedule
A
hereto and were and will be executed by Debtor as “Borrower” or “Debtor” for the
benefit of each Lender as the “Holder” or “Lender” thereof.
2.3 In
consideration of the Loans made and to be made by Lenders to Debtor and for
other good and valuable consideration, and as security for the performance
by
Debtor of its obligations under the Notes and as security for the repayment
of
the Loans and all other sums due from Debtor to Lenders arising under the
Transaction Documents (as defined in the Subscription Agreement), and any other
agreement between or among them (collectively, the "Obligations"), the Debtor,
for good and valuable consideration, receipt of which is acknowledged, has
agreed to grant to the Collateral Agent, for the benefit of the Lenders, a
security interest in the Collateral (as such term is hereinafter defined),
on
the terms and conditions hereinafter set forth. Obligations include all future
advances by Lenders to Debtor made pursuant to the Subscription
Agreement.
2.4 The
Lenders have appointed Xxxxx Benz as Collateral Agent pursuant to that certain
Collateral Agent Agreement dated at or about the date of this Agreement
(“Collateral Agent Agreement”), among the Lenders and Collateral
Agent.
2.5 The
following defined terms which are defined in the Uniform Commercial Code in
effect in the State of New York on the date hereof are used herein as so
defined: Accounts, Chattel Paper, Documents, Equipment, General Intangibles,
Instruments, Inventory and Proceeds.
3. Grant
of General Security Interest in Collateral.
3.1 As
security for the Obligations of Debtor, Debtor hereby grants the Collateral
Agent, for the benefit of the Lenders, a security interest in the
Collateral.
“Collateral”
shall mean all of the following property of Debtor:
(A) All
now owned and hereafter acquired right, title and interest of Debtor in, to
and
in respect of the following:
(i) the
shares of stock of Magical Insight which the Debtor represents equal 100% of
the
equity ownership interest in Magical Insight, the certificates representing
such
shares together with a medallion guaranteed executed stock power, and other
rights, contractual or otherwise, in respect thereof and all dividends,
distributions, cash, instruments, investment property and other property from
time to time received, receivable or otherwise distributed in respect of or
in
exchange for any or all of such shares;
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(ii) all
additional shares of stock, partnership interests, member interests or other
equity interests from time to time acquired by Debtor, in any Subsidiary (as
defined in the Subscription Agreement) not a Subsidiary of the Debtor on the
date hereof (“Future Subsidiaries”), the certificates representing such
additional shares, and other rights, contractual or otherwise, in respect
thereof and all dividends, distributions, cash, instruments, investment property
and other property from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of such additional
shares, interests or equity; and
(iii) all
security entitlements of Debtor in, and all Proceeds of any and all of the
foregoing in each case, whether now owned or hereafter acquired by Debtor and
howsoever its interest therein may arise or appear (whether by ownership,
security interest, lien, claim or otherwise).
3.3 The
Collateral Agent is hereby specifically authorized, after an Event of Default
(as defined herein) and the expiration of any applicable cure period, to
transfer any Collateral into the name of the Collateral Agent and to take any
and all action deemed advisable to the Collateral Agent to remove any transfer
restrictions affecting the Collateral.
4. Perfection
of Security Interest.
4.1 Each
Debtor shall prepare, execute and deliver to the Collateral Agent UCC-1
Financing Statements. The Collateral Agent is instructed to prepare and file
at
each Debtor’s cost and expense, financing statements in such jurisdictions
deemed advisable to the Collateral Agent, including but not limited to the
State
of Nevada. The Financing Statements are deemed to have been filed for the
benefit of the Collateral Agent and Lenders identified on Schedule A
hereto.
4.2 All
certificates and instruments constituting Collateral from time to time required
to be pledged to Collateral Agent pursuant to the terms hereof shall be
delivered to Collateral Agent promptly upon the earlier of the date hereof
and
the receipt thereof by or on behalf of Debtor. All such certificates and
instruments shall be held by or on behalf of Collateral Agent pursuant hereto
and shall be delivered in suitable form for transfer by delivery, or shall
be
accompanied by duly executed instruments of transfer or assignment or undated
stock powers executed in blank, all in form and substance satisfactory to
Collateral Agent. If any Collateral consists of uncertificated securities,
unless the immediately following sentence is applicable thereto, Debtor shall
cause Collateral Agent (or its custodian, nominee or other designee) to become
the registered holder thereof, or cause each issuer of such securities to agree
that it will comply with instructions originated by Collateral Agent with
respect to such securities without further consent by Debtor. If any Collateral
consists of security entitlements, Debtor shall transfer such security
entitlements to Collateral Agent (or its custodian, nominee or other designee)
or cause the applicable securities intermediary to agree that it will comply
with entitlement orders by Collateral Agent without further consent by Debtor.
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4.3 If
Debtor
shall receive, by virtue of Debtor being or having been an owner of any
Collateral, any (i) stock certificate (including, without limitation, any
certificate representing a stock dividend or distribution in connection with
any
increase or reduction of capital, reclassification, merger, consolidation,
sale
of assets, combination of shares, stock split, spin-off or split-off),
promissory note or other instrument, (ii) option or right, whether as an
addition to, substitution for, or in exchange for, any Collateral, or otherwise,
(iii) dividends payable in cash (except such dividends permitted to be retained
by Debtor pursuant to Section 5.2 hereof) or in securities or other property
or
(iv) dividends or other distributions in connection with a partial or total
liquidation or dissolution or in connection with a reduction of capital, capital
surplus or paid-in surplus, Debtor shall receive such stock certificate,
promissory note, instrument, option, right, payment or distribution in trust
for
the benefit of Collateral Agent, shall segregate it from Debtor's other property
and shall deliver it forthwith to Collateral Agent, in the exact form received,
with any necessary endorsement and/or appropriate stock powers duly executed
in
blank, to be held by Collateral Agent as Collateral and as further collateral
security for the Obligations.
4.4 Within
five (5) days after the receipt by a Debtor of any Additional Collateral, a
Pledge Amendment, duly executed by such Debtor, in substantially the form of
Annex I hereto (a "Pledge Amendment"), shall be delivered to Collateral Agent
in
respect of the Additional Collateral to be pledged pursuant to this Agreement.
Each Debtor hereby authorizes Collateral Agent to attach each Pledge Amendment
to this Agreement and agrees that all certificates or instruments listed on
any
Pledge Amendment delivered to Collateral Agent shall for all purposes hereunder
constitute Collateral.
5. Distribution.
5.1 So
long as an Event of Default does not exist, Debtor shall be entitled to exercise
all voting power pertaining to any of the Collateral, provided such exercise
is
not contrary to the interests of the Lenders and does not impair the
Collateral.
5.2. At
any time an Event of Default exists or has occurred, all rights of Debtor,
upon
notice given by Collateral Agent, to exercise the voting power and receive
payments, which it would otherwise be entitled to pursuant to Section 5.1,
shall
cease and all such rights shall thereupon become vested in Collateral Agent,
which shall thereupon have the sole right to exercise such voting power and
receive such payments.
5.3 All
dividends, distributions, interest and other payments which are received by
Debtor contrary to the provisions of Section 5.2 shall be received in trust
for
the benefit of Collateral Agent as security and Collateral for payment of the
Obligations shall be segregated from other funds of Debtor, and shall be
forthwith paid over to Collateral Agent as Collateral in the exact form received
with any necessary endorsement and/or appropriate stock powers duly executed
in
blank, to be held by Collateral Agent as Collateral and as further collateral
security for the Obligations.
6. Further
Action By Debtor; Covenants and Warranties.
6.1 Collateral
Agent at all times shall have a perfected security interest in the Collateral.
Debtor represents that it has and will continue to have full title to the
Collateral free from any liens, leases, encumbrances, judgments or other claims.
Collateral Agent's security interest in the Collateral constitutes and will
continue to constitute a first, prior and indefeasible security interest in
favor of Collateral Agent except as described on Schedule 6.1 hereto. Debtor
will do all acts and things, and will execute and file all instruments
(including, but not limited to, security agreements, financing statements,
continuation statements, etc.) reasonably requested by Collateral Agent to
establish, maintain and continue the perfected security interest of Collateral
Agent in the Collateral, and will promptly on demand, pay all costs and expenses
of filing and recording, including the costs of any searches reasonably deemed
necessary by Collateral Agent from time to time to establish and determine
the
validity and the continuing priority of the security interest of Collateral
Agent, and also pay all other claims and charges that, in the opinion of
Collateral Agent, exercised in good faith, are reasonably likely to materially
prejudice, imperil or otherwise affect the Collateral or Collateral Agent’s or
Lenders’ security interests therein.
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6.2 Other
than in the ordinary course of business, for fair value and in cash, and except
for Collateral which is substituted by assets of identical or greater value
(with the consent of the Collateral Agent) or which is inconsequential in value,
Debtor will not sell, transfer, assign or pledge those items of Collateral
(or
allow any such items to be sold, transferred, assigned or pledged), without
the
prior written consent of Collateral Agent other than a transfer of the
Collateral to a wholly-owned United States formed and located wholly-owned
subsidiary or to another Debtor on prior notice to Collateral Agent, and
provided the Collateral remains subject to the security interest herein
described. Although Proceeds of Collateral are covered by this Agreement, this
shall not be construed to mean that Collateral Agent consents to any sale of
the
Collateral, except as provided herein. Sales of Collateral in the ordinary
course of business shall be free of the security interest of Lenders and
Collateral Agent and Lenders and Collateral Agent shall promptly execute such
documents (including without limitation releases and termination statements)
as
may be required by Debtor to evidence or effectuate the same.
6.3 Debtor
will, at all reasonable times during regular business hours and upon reasonable
notice, allow Collateral Agent or its representatives free and complete access
to the Collateral and all of such Debtor's records which in any way relate
to
the Collateral, for such inspection and examination as Collateral Agent
reasonably deems necessary.
6.4 Debtor,
at its sole cost and expense, will protect and defend this Security Agreement,
all of the rights of Collateral Agent and Lenders hereunder, and the Collateral
against the claims and demands of all other persons.
6.5 Debtor
will promptly notify Collateral Agent of any levy, distraint or other seizure
by
legal process or otherwise of any part of the Collateral, and of any threatened
or filed claims or proceedings that are reasonably likely to affect or impair
any of the rights of Collateral Agent under this Security Agreement in any
material respect.
6.6 Debtor,
at its own expense, will obtain and maintain in force insurance policies
covering losses or damage to those items of Collateral which constitute physical
personal property, which insurance shall be of the types customarily insured
against by companies in the same or similar business, similarly situated, in
such amounts (with such deductible amounts) as is customary for such companies
under the same or similar circumstances, similarly situated. Debtor shall make
the Collateral Agent a loss payee thereon to the extent of its interest in
the
Collateral. Collateral Agent is hereby irrevocably (until the Obligations are
paid in full) appointed each Debtor’s attorney-in-fact to endorse any check or
draft that may be payable to such Debtor so that Collateral Agent may collect
the proceeds payable for any loss under such insurance. The proceeds of such
insurance, less any costs and expenses incurred or paid by Collateral Agent
in
the collection thereof, shall be applied either toward the cost of the repair
or
replacement of the items damaged or destroyed, or on account of any sums secured
hereby, whether or not then due or payable.
6.7 Collateral
Agent may, at its option, and without any obligation to do so, pay, perform
and
discharge any and all amounts, costs, expenses and liabilities herein agreed
to
be paid or performed by Debtor. Upon Debtor’s failure to do so, all
amounts expended by Collateral Agent in so doing shall become part of the
Obligations secured hereby, and shall be immediately due and payable by Debtor
to Collateral Agent upon demand and shall bear interest at the lesser of 15%
per
annum or the highest legal amount from the dates of such expenditures until
paid.
6.8 Upon
the request of Collateral Agent, Debtor will furnish to Collateral Agent within
five (5) business days thereafter, or to any proposed assignee of this Security
Agreement, a written statement in form reasonably satisfactory to Collateral
Agent, duly acknowledged, certifying the amount of the principal and interest
and any other sum then owing under the Obligations, whether to its knowledge
any
claims, offsets or defenses exist against the Obligations or against this
Security Agreement, or any of the terms and provisions of any other agreement
of
Debtor securing the Obligations. In connection with any assignment by Collateral
Agent of this Security Agreement, each Debtor hereby agrees to cause the
insurance policies required hereby to be carried by such Debtor, if any, to
be
endorsed in form satisfactory to Collateral Agent or to such assignee, with
loss
payable clauses in favor of such assignee, and to cause such endorsements to
be
delivered to Collateral Agent within ten (10) calendar days after request
therefor by Collateral Agent.
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6.9 Debtor
will, at its own expense, make, execute, endorse, acknowledge, file and/or
deliver to the Collateral Agent from time to time such vouchers, invoices,
schedules, confirmatory assignments, conveyances, financing statements, transfer
endorsements, powers of attorney, certificates, reports and other reasonable
assurances or instruments and take further steps relating to the Collateral
and
other property or rights covered by the security interest hereby granted, as
the
Collateral Agent may reasonably require to perfect its security interest
hereunder.
6.10 Debtor
represent and warrant that it is the true and lawful exclusive owner of the
Collateral, free and clear of any liens and encumbrances.
6.11 Debtor
hereby agrees not to divest itself of any right under the Collateral except
as
permitted herein absent prior written approval of the Collateral Agent, except
to a subsidiary organized and located in the United States on prior notice
to
Collateral Agent provided the Collateral remains subject to the security
interest herein described.
6.12 Debtor
shall, in respect of each Subsidiary of the Debtor not in existence on the
date
hereof, execute and deliver to Collateral Agent promptly and in any event within
10 days after the formation, acquisition or change in status thereof. (A) if
requested by Collateral Agent, a security and pledge agreement substantially
in
the form of this Agreement together with (x) certificates evidencing all of
the
capital stock of each such Subsidiary, (y) undated stock powers executed in
blank with signatures guaranteed, and (z) such opinion of counsel and such
approving certificate of such Subsidiary as Collateral Agent may reasonably
request in respect of complying with any legend on any such certificate or
any
other matter relating to such shares and (B) such other agreements, instruments,
approvals, legal opinions or other documents reasonably requested by Collateral
Agent in order to create, perfect, establish the first priority of or otherwise
protect any lien purported to be covered by any such pledge and security
agreement or otherwise to effect the intent that the shares of stock,
partnership interests, member interests or other equity interests from time
to
time acquired by Debtor, in such
Subsidiary shall become Collateral for the Obligations. The Subscription
Agreement contains
a list of all Subsidiaries of the Debtor as of the date of this
Agreement.
7. Power
of Attorney.
At
any time an Event of Default exists or has occurred, Debtor hereby irrevocably
constitutes and appoints the Collateral Agent as the true and lawful attorney
of
Debtor, with full power of substitution, in the place and stead of such Debtor
and in the name of such Debtor or otherwise, at any time or times, in the
discretion of the Collateral Agent, to take any action and to execute any
instrument or document which the Collateral Agent may deem necessary or
advisable to accomplish the purposes of this Agreement. This power of attorney
is coupled with an interest and is irrevocable until the Obligations are
satisfied.
8. Performance
By The Collateral Agent.
If
Debtor fails to perform any material covenant, agreement, duty or obligation
of
Debtor under this Agreement, the Collateral Agent may, after any applicable
cure
period, at any time or times in its discretion, take action to effect
performance of such obligation. All reasonable expenses of the Collateral Agent
incurred in connection with the foregoing authorization shall be payable by
Debtor as provided in Paragraph 12.1 hereof. No discretionary right, remedy
or
power granted to the Collateral Agent under any part of this Agreement shall
be
deemed to impose any obligation whatsoever on the Collateral Agent with respect
thereto, such rights, remedies and powers being solely for the protection of
the
Collateral Agent.
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9. Event
of Default.
An
event of default ("Event of Default") shall be deemed to have occurred hereunder
upon the occurrence of any event of default as defined and described in this
Agreement, in the Notes, the Subscription Agreement, and any other agreement
to
which Debtor and a Lender are parties. Upon and after any Event of Default,
after the applicable cure period, if any, any or all of the Obligations shall
become immediately due and payable at the option of the Collateral Agent, for
the benefit of the Lenders, and the Collateral Agent may dispose of Collateral
as provided below. A default by Debtor of any of its material obligations
pursuant to this Agreement and any of the Transaction Documents (as defined
in
the Subscription Agreement) shall be an Event of Default hereunder and an “Event
of Default” as defined in the Notes, and Subscription Agreement.
10. Disposition
of Collateral.
Upon
and after any Event of Default which is then continuing,
10.1 The
Collateral Agent may exercise its rights with respect to each and every
component of the Collateral, without regard to the existence of any other
security or source of payment for the Obligations. In addition to other rights
and remedies provided for herein or otherwise available to it, the Collateral
Agent shall have all of the rights and remedies of a lender on default under
the
Uniform Commercial Code then in effect in the State of New York.
10.2 If
any notice to Debtor of the sale or other disposition of Collateral is required
by then applicable law, five business (5) days prior written notice (which
Debtor agree is reasonable notice within the meaning of Section 9.612(a) of
the
Uniform Commercial Code) shall be given to Debtor of the time and place of
any
sale of Collateral which Debtor hereby agree may be by private sale. The rights
granted in this Section are in addition to any and all rights available to
Collateral Agent under the Uniform Commercial Code.
10.3 The
Collateral Agent is authorized, at any such sale, if the Collateral Agent deems
it advisable to do so, in order to comply with any applicable securities laws,
to restrict the prospective bidders or purchasers to persons who will represent
and agree, among other things, that they are purchasing the Collateral for
their
own account for investment, and not with a view to the distribution or resale
thereof, or otherwise to restrict such sale in such other manner as the
Collateral Agent deems advisable to ensure such compliance. Sales made subject
to such restrictions shall be deemed to have been made in a commercially
reasonable manner.
10.4 All
proceeds received by the Collateral Agent for the benefit of the Lenders in
respect of any sale, collection or other enforcement or disposition of
Collateral, shall be applied (after deduction of any amounts payable to the
Collateral Agent pursuant to Paragraph 12.1 hereof) against the Obligations
pro
rata among the Lenders in proportion to their interests in the Obligations.
Upon
payment in full of all Obligations, Debtor shall be entitled to the return
of
all Collateral, including cash, which has not been used or applied toward the
payment of Obligations or used or applied to any and all costs or expenses
of
the Collateral Agent incurred in connection with the liquidation of the
Collateral (unless another person is legally entitled thereto). Any assignment
of Collateral by the Collateral Agent to Debtor shall be without representation
or warranty of any nature whatsoever and wholly without recourse. To the extent
allowed by law, each Lender may purchase the Collateral and pay for such
purchase by offsetting up to such Lender’s pro rata portion of the purchase
price with sums owed to such Lender by Debtor arising under the Obligations
or
any other source.
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11. Waiver
of Automatic Stay.
Debtor acknowledges and agrees that should a proceeding under any bankruptcy
or
insolvency law be commenced by or against Debtor, or if any of the Collateral
should become the subject of any bankruptcy or insolvency proceeding, then
the
Collateral Agent should be entitled to, among other relief to which the
Collateral Agent or Lenders may be entitled under the Note, Subscription
Agreement and any other agreement to which the Debtor, Lenders or Collateral
Agent are parties, (collectively "Loan Documents") and/or applicable law, an
order from the court granting immediate relief from the automatic stay pursuant
to 11 U.S.C. Section 362 to permit the Collateral Agent to exercise all of
its
rights and remedies pursuant to the Loan Documents and/or applicable law. Debtor
EXPRESSLY WAIVES THE BENEFIT OF THE AUTOMATIC STAY IMPOSED BY 11 U.S.C. SECTION
362. FURTHERMORE, Debtor EXPRESSLY ACKNOWLEDGES AND AGREES THAT NEITHER 11
U.S.C. SECTION 362 NOR ANY OTHER SECTION OF THE BANKRUPTCY CODE OR OTHER STATUTE
OR RULE (INCLUDING, WITHOUT LIMITATION, 11 U.S.C. SECTION 105) SHALL STAY,
INTERDICT, CONDITION, REDUCE OR INHIBIT IN ANY WAY THE ABILITY OF THE COLLATERAL
AGENT TO ENFORCE ANY OF ITS RIGHTS AND REMEDIES UNDER THE LOAN DOCUMENTS AND/OR
APPLICABLE LAW. Debtor hereby consents to any motion for relief from stay which
may be filed by the Collateral Agent in any bankruptcy or insolvency proceeding
initiated by or against Debtor, and further agrees not to file any opposition
to
any motion for relief from stay filed by the Collateral Agent. Debtor
represents, acknowledges and agrees that this provision is a specific and
material aspect of this Agreement, and that the Collateral Agent would not
agree
to the terms of this Agreement if this waiver were not a part of this Agreement.
Debtor further represents, acknowledges and agrees that this waiver is
knowingly, intelligently and voluntarily made, that neither the Collateral
Agent
nor any person acting on behalf of the Collateral Agent has made any
representations to induce this waiver, that Debtor has been represented (or
has
had the opportunity to be represented) in the signing of this Agreement and
in
the making of this waiver by independent legal counsel selected by Debtor and
that Debtor has had the opportunity to discuss this waiver with counsel. Debtor
further agrees that any bankruptcy or insolvency proceeding initiated by Debtor
will only be brought in the Federal Court within the Southern District of New
York.
12. Miscellaneous.
12.1 Expenses.
Debtor shall pay to the Collateral Agent, on demand, the amount of any and
all
reasonable expenses, including, without limitation, attorneys' fees, legal
expenses and brokers' fees, which the Collateral Agent may incur in connection
with (a) sale, collection or other enforcement or disposition of Collateral;
(b)
exercise or enforcement of any the rights, remedies or powers of the Collateral
Agent hereunder or with respect to any or all of the Obligations upon breach
or
threatened breach; or (c) failure by Debtor to perform and observe any
agreements of Debtor contained herein which are performed by the Collateral
Agent.
12.2 Waivers,
Amendment and Remedies.
No course of dealing by the Collateral Agent and no failure by the Collateral
Agent to exercise, or delay by the Collateral Agent in exercising, any right,
remedy or power hereunder shall operate as a waiver thereof, and no single
or
partial exercise thereof shall preclude any other or further exercise thereof
or
the exercise of any other right, remedy or power of the Collateral Agent. No
amendment, modification or waiver of any provision of this Agreement and no
consent to any departure by Debtor therefrom, shall, in any event, be effective
unless contained in a writing signed by the Collateral Agent, and then such
waiver or consent shall be effective only in the specific instance and for
the
specific purpose for which given. The rights, remedies and powers of the
Collateral Agent, not only hereunder, but also under any instruments and
agreements evidencing or securing the Obligations and under applicable law
are
cumulative, and may be exercised by the Collateral Agent from time to time
in
such order as the Collateral Agent may elect.
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12.3 Notices.
All notices or other communications given or made hereunder shall be in writing
and shall be personally delivered or deemed delivered the first business day
after being faxed (provided that a copy is delivered by first class mail) to
the
party to receive the same at its address set forth below or to such other
address as either party shall hereafter give to the other by notice duly made
under this Section:
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To
Debtor:
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Hi-Tech
Wealth Inc.
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Xxxxx
0000, Xxxx Xxxxx
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000-000
Xxxxxxxxxx Xxxx
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Xxxxxxxx
Xxx, Xxxx Xxxx
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Attn:
Ma Qing, Chief Financial Officer
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Fax:
x000 0000 0000
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With
an additional copy by telecopier only to:
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Loeb
& Loeb, LLP
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000
Xxxx Xxxxxx
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Xxx
Xxxx, XX 00000
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Attn:
Xxxxxxxx Xxxxxxxx, Esq.
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Fax:
(000) 000-0000
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To
Lenders:
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To
the addresses and telecopier numbers set forthon
Schedule A
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To
the Collateral Agent:
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Xxxxx
Benz
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000
Xxxxxxxxxx Xxxxxx, 00xx
Xxxxx
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Xxx
Xxxxxxxxx, XX 00000
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Fax:
(000) 000-0000
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If
to Debtor, Lender or Collateral Agent,with a copy by telecopier
only
to:
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Grushko
& Xxxxxxx, P.C.
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000
Xxxxx Xxxxxx, Xxxxx 0000
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Xxx
Xxxx, Xxx Xxxx 00000
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Fax:
(000) 000-0000
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Any
party may change its address by written notice in accordance with this
paragraph.
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12.4 Term;
Binding Effect.
This Agreement shall (a) remain in full force and effect until payment and
satisfaction in full of all of the Obligations; (b) be binding upon Debtor,
and
its successors and permitted assigns; and (c) inure to the benefit of the
Collateral Agent, for the benefit of the Lenders and their respective successors
and assigns.
12.5 Captions.
The captions of Paragraphs, Articles and Sections in this Agreement have been
included for convenience of reference only, and shall not define or limit the
provisions hereof and have no legal or other significance
whatsoever.
12.6 Governing
Law; Venue; Severability. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York without regard to conflicts
of laws principles that would result in the application of the substantive
laws
of another jurisdiction, except to the extent that the perfection of the
security interest granted hereby in respect of any item of Collateral may be
governed by the law of another jurisdiction. Any legal action or proceeding
against Debtor with respect to this Agreement may be brought in the courts
in
the State of New York or of the United States for the Southern District of
New
York, and, by execution and delivery of this Agreement, Debtor hereby
irrevocably accepts for itself and in respect of its property, generally and
unconditionally, the jurisdiction of the aforesaid courts. Debtor hereby
irrevocably waives any objection which they may now or hereafter have to the
laying of venue of any of the aforesaid actions or proceedings arising out
of or
in connection with this Agreement brought in the aforesaid courts and hereby
further irrevocably waives and agrees not to plead or claim in any such court
that any such action or proceeding brought in any such court has been brought
in
an inconvenient forum. If any provision of this Agreement, or the application
thereof to any person or circumstance, is held invalid, such invalidity shall
not affect any other provisions which can be given effect without the invalid
provision or application, and to this end the provisions hereof shall be
severable and the remaining, valid provisions shall remain of full force and
effect.
12.7 Entire
Agreement.
This Agreement contains the entire agreement of the parties and supersedes
all
other agreements and understandings, oral or written, with respect to the
matters contained herein.
12.8 Counterparts/Execution.
This Agreement may be executed in any number of counterparts and by the
different signatories hereto on separate counterparts, each of which, when
so
executed, shall be deemed an original, but all such counterparts shall
constitute but one and the same instrument. This Agreement may be executed
by
facsimile signature and delivered by facsimile transmission.
13. Intercreditor
Terms.
As between the Lenders, any distribution under paragraph 10.4 shall be made
proportionately based upon the remaining principal amount (plus accrued and
unpaid interest) to each as to the total amount then owed to the Lenders as
a
whole. The rights of each Lender hereunder are pari
passu
to the rights of the other Lenders hereunder. Any recovery hereunder shall
be
shared ratably among the Lenders according to the then remaining principal
amount owed to each (plus accrued and unpaid interest) as to the total amount
then owed to the Lenders as a whole.
14. Termination;
Release.
When the Obligations have been indefeasibly paid and performed in full, this
Agreement shall terminated, and the Collateral Agent, at the request and sole
expense of the Debtor, will promptly execute and deliver to the Debtor the
proper instruments (including UCC termination statements) acknowledging the
termination of the Security Agreement, and promptly duly assign, transfer and
deliver to the Debtor, without recourse, representation or warranty of any
kind
whatsoever, such of the Collateral, including, without limitation, Securities
and any Additional Collateral, as may be in the possession of the Collateral
Agent.
9
15. Collateral
Agent.
15.1 Collateral
Agent Powers.
The powers conferred on the Collateral Agent hereunder are solely to protect
its
interest (on behalf of the Lenders) in the Collateral and shall not impose
any
duty on it to exercise any such powers.
15.2 Reasonable
Care.
The Collateral Agent is required to exercise reasonable care in the custody
and
preservation of any Collateral in its possession; provided, however, that the
Collateral Agent shall be deemed to have exercised reasonable care in the
custody and preservation of any of the Collateral if it takes such action for
that purposes as any owner thereof reasonably requests in writing at times
other
than upon the occurrence and during the continuance of any Event of Default,
but
failure of the Collateral Agent, to comply with any such request at any time
shall not in itself be deemed a failure to exercise reasonable
care.
[THIS
SPACE INTENTIONALLY LEFT BLANK]
10
IN
WITNESS WHEREOF, the
undersigned have executed and delivered this Security Agreement, as of the
date
first written above.
|
"DEBTOR"
|
"THE
COLLATERAL AGENT"
|
|
|
HI-TECH
WEALTH INC.
|
XXXXX
BENZ
|
|
|
a
Nevada corporation
|
||
|
By:
|
||
|
Its:
|
APPROVED
BY “LENDERS”:
|
|
|
|
|
LONGVIEW
FUND, XX
|
XXXXX
MULTI-STRATEGY HOLDING FUND LTD.
|
|
|
|
||
|
|
|
|
|
BASSO
FUND LTD.
|
IROQUOIS
MASTER FUND LTD.
|
|
|
|
|
|
|
XXXXXX
PARTNERS, LP
|
INSIGNIA
PARTNERS LP
|
|
|
|
|
|
|
NORTHWOOD
CAPITAL PARTNERS, LP
|
ALPHA
CAPITAL ANSTALT
|
This
Security Agreement may be signed by facsimile signature
and
delivered
by confirmed facsimile transmission.
11
SCHEDULE
A TO SECURITY AGREEMENT
|
LENDER
|
PRINCIPAL
AMOUNT OF NOTE TO BE ISSUED ON CLOSING DATE
|
PRINCIPAL
AMOUNT OF NOTE TO BE ISSUED ON SUBSEQUENT ISSUANCE CLOSING
DATE
|
|
LONGVIEW
FUND, LP
000
Xxxxxxxxxx Xxxxxx, 00xx Xxxxx
Xxx
Xxxxxxxxx, XX 00000
Fax:
(000) 000-0000
|
$2,925,000.00
|
$2,925,000.00
|
|
BASSO
MULTI-STRATEGY HOLDING FUND LTD.
A
Cayman Islands Exempted Company
x/x
X&X Xxxxxxxxx Xxxxxxxx
Xxx
000 XX, Xxxxxx House
South
Church Street, Xxxxxx Town
Grand
Cayman, Cayman Islands
Fax:
(000) 000-0000
|
$850,000.00
|
$850,000.00
|
|
BASSO
FUND LTD.
A
Cayman Islands Exempted Company
x/x
X&X Xxxxxxxxx Xxxxxxxx
Xxx
000 XX, Xxxxxx House
South
Church Street, Xxxxxx Town
Grand
Cayman, Cayman Islands
Fax:
(000) 000-0000
|
$150,000.00
|
$150,000.00
|
|
IROQUOIS
MASTER FUND LTD.
000
Xxxxxxxxx Xxxxxx, 00xx
Xxxxx
Xxx
Xxxx, XX 00000
Fax:
(000) 000-0000
|
$375,000.00
|
$375,000.00
|
|
XXXXXX
PARTNERS, LP
000
Xxxxx Xxxxxx, 00xx
Xxxxx
Xxx
Xxxx, XX 00000
Fax:
(000) 000-0000
|
$200,000.00
|
$200,000.00
|
|
INSIGNIA
PARTNERS, LP
0000
Xxxxx Xxxxxx, Xxxxx 000
Xxxx
xx Xxxxxxx, XX 00000
Fax:
(000) 000-0000
|
$150,000.00
|
$150,000.00
|
|
NORTHWOOD
CAPITAL PARTNERS, LP
0000
Xxxxx Xxxxxx, Xxxxx 000
Xxxx
xx Xxxxxxx, XX 00000
Fax:
(000) 000-0000
|
$150,000.00
|
$150,000.00
|
|
ALPHA
CAPITAL XXXXXXX
Xxxxxxxxx
0
0000
Xxxxxxxxxxx
Xxxxx,
Xxxxxxxxxxxx
Fax:
000-00-00000000
|
$200,000.00
|
$200,000.00
|
|
TOTAL
|
$5,000,000.00
|
$5,000,000.00
|
12
ANNEX
I
TO
SECURITY
AGREEMENT
PLEDGE
AMENDMENT
This
Pledge Amendment, dated _________ __ 200_, is delivered pursuant to Section
4.3
of the Security Agreement referred to below. The undersigned hereby agrees
that
this Pledge Amendment may be attached to the Security Agreement, dated June
____, 2007, as it may heretofore have been or hereafter may be amended,
restated, supplemented or otherwise modified from time to time and that the
shares listed on this Pledge Amendment shall be hereby pledged and assigned
to
Collateral Agent and become part of the Collateral referred to in such Security
Agreement and shall secure all of the Obligations referred to in such Security
Agreement.
|
Name
of Issuer
|
Number
of
Shares
|
Class
|
Certificate
Number(s)
|
|
HI-TECH
WEALTH INC.
By: _____________________________________
|
13
