EXHIBIT 10.24
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SECURITY AGREEMENT
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THIS SECURITY AGREEMENT (the "AGREEMENT"), is entered into and made
effective as of November 22, 2002, by and among ADVANCED COMMUNICATIONS
TECHNOLOGIES, INC., a Florida corporation (the "COMPANY"), and the BUYER(S)
listed on Schedule I attached to the Securities Purchase Agreement dated the
date hereof (collectively, the "SECURED PARTY").
WHEREAS, the Company shall issue and sell to the Secured Party, as
provided in the Securities Purchase Agreement dated the date hereof, and the
Secured Party shall purchase up to Two Hundred Fifty Thousand Dollars ($250,000)
of ten percent (10%) secured convertible debentures (the "SECURED CONVERTIBLE
DEBENTURES"), which shall be convertible into shares of the Company's common
stock, no par value (the "COMMON STOCK") (as converted, the "CONVERSION
SHARES"); and
WHEREAS, to induce the Secured Party to enter into the transaction
contemplated by the Securities Purchase Agreement, the Secured Convertible
Debentures, the Investor Registration Rights Agreement, the Irrevocable Transfer
Agent Instructions, and the Escrow Agreement (collectively referred to as the
"TRANSACTION DOCUMENTS"), the Company hereby grants to the Secured Party a
security interest in and to the pledged property identified on Exhibit "A"
hereto (collectively referred to as the "PLEDGED PROPERTY") pursuant to the
terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, and for other good and valuable consideration, the adequacy
and receipt of which are hereby acknowledged, the parties hereto hereby agree as
follows:
ARTICLE 1.
DEFINITIONS AND INTERPRETATIONS
Section 1.1. Recitals.
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The above recitals are true and correct and are incorporated herein, in
their entirety, by this reference.
Section 1.2. Interpretations.
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Nothing herein expressed or implied is intended or shall be construed to
confer upon any person other than the Secured Party any right, remedy or claim
under or by reason hereof.
Section 1.3. Obligations Secured.
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The obligations secured hereby are any and all obligations of the Company
to the Secured Party pursuant to the Securities Purchase Agreement, Secured
Convertible Debentures, Investor Registration Rights Agreement and Irrevocable
Transfer Agent Instructions, in the principal amounts thereof outstanding from
time to time, and any other amounts payable by or chargeable to the Company
thereunder (collectively, the "Secured Convertible Debenture Obligations") and
any and all other obligations of the Company to the Secured Party, whether oral
or written and whether arising before, on or after the date hereof including,
without limitation, those obligations of the Company to the Secured Party under
the Convertible Debentures dated January, 2002, and any other amounts payable by
or chargeable to the Company thereunder or hereunder (together with the Secured
Convertible Debenture Obligations, the "Obligations").
ARTICLE 2.
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PLEDGED COLLATERAL AND ADMINISTRATION OF COLLATERAL
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Section 2.1. Pledged Property.
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(a) Company hereby pledges to the Secured Party, and creates
in the Secured Party for its benefit, a security interest, for such time as the
Obligations shall remain outstanding, in and to all of the property of the
Company as set forth in EXHIBIT "A" attached hereto (collectively, the "PLEDGED
PROPERTY"); provided, however, that the Secured Party hereby agrees that upon
the payment in full by the Company to the Secured Party of the Secured
Convertible Debenture Obligations, the Secured Party shall release any and all
security interest it may then maintain on that certain wireless or territorial,
multi-protocols communication network technology known as Spectracell and any
security interest it may then maintain on any rights under or with respect to
that certain License and Distribution Agreement dated July 5, 2000, between the
Company and Advanced Communications Technologies (Australia) Pty., Ltd.:
The Pledged Property, as set forth in EXHIBIT "A" attached hereto, and the
products thereof and the proceeds of all such items are hereinafter collectively
referred to as the "PLEDGED COLLATERAL."
(b) Simultaneously with the execution and delivery of this
Agreement, the Company shall make, execute, acknowledge, file, record and
deliver to the Secured Party any documents reasonably requested by the Secured
Party to perfect its security interest in the Pledged Property. Simultaneously
with the execution and delivery of this Agreement, the Company shall make,
execute, acknowledge and deliver to the Secured Party such documents and
instruments, including, without limitation, financing statements, certificates,
affidavits and forms as may, in the Secured Party's reasonable judgment, be
necessary to effectuate, complete or perfect, or to continue and preserve, the
security interest of the Secured Party in the Pledged Property, and the Secured
Party shall hold such documents and instruments as secured party, subject to the
terms and conditions contained herein.
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Section 2.2. Rights; Interests; Etc.
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(a) So long as no Event of Default (as hereinafter defined)
shall have occurred and be continuing:
(i) the Company shall be entitled to exercise any and
all rights pertaining to the Pledged Property or any part thereof for any
purpose not inconsistent with the terms hereof; and
(ii) the Company shall be entitled to receive and
retain any and all payments paid or made in respect of the Pledged Property.
(b) Upon the occurrence and during the continuance of an Event
of Default:
(i) All rights of the Company to exercise the rights
which it would otherwise be entitled to exercise pursuant to Section 2.2(a)(i)
hereof and to receive payments which it would otherwise be authorized to receive
and retain pursuant to Section 2.2(a)(ii) hereof shall be suspended, and all
such rights shall thereupon become vested in the Secured Party who shall
thereupon have the sole right to exercise such rights and to receive and hold as
Pledged Collateral such payments; PROVIDED, HOWEVER, that if the Secured Party
shall become entitled and shall elect to exercise its right to realize on the
Pledged Collateral pursuant to Article V hereof, then all cash sums received by
the Secured Party, or held by Company for the benefit of the Secured Party and
paid over pursuant to Section 2.2(b)(ii) hereof, shall be applied against any
outstanding Obligations; and
(ii) All interest, dividends, income and other payments
and distributions which are received by the Company contrary to the provisions
of Section 2.2(b)(i) hereof shall be received in trust for the benefit of the
Secured Party, shall be segregated from other property of the Company and shall
be forthwith paid over to the Secured Party; or
(ii) The Secured Party in its sole discretion shall be
authorized to sell any or all of the Pledged Property at public or private sale
to satisfy the Obligations.
(c) Each of the following events shall constitute a default
under this Agreement (each an "EVENT OF DEFAULT"):
(i) any default, whether in whole or in part, shall
occur in the payment to the Secured Party of principal, interest or other item
comprising the Obligations as and when due or with respect to any other debt or
obligation of the Company to a party other than the Secured Party;
(ii) any default, whether in whole or in part, shall
occur in the due observance or performance of any obligations or other
covenants, terms or provisions to be performed under this Agreement or the
Transaction Documents;
(iii) the Company shall: (1) make a general assignment
for the benefit of its creditors; (2) apply for or consent to the appointment of
a receiver, trustee, assignee, custodian, sequestrator, liquidator or similar
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official for itself or any of its assets and properties; (3) commence a
voluntary case for relief as a debtor under the United States Bankruptcy Code;
(4) file with or otherwise submit to any governmental authority any petition,
answer or other document seeking: (A) reorganization, (B) an arrangement with
creditors or (C) to take advantage of any other present or future applicable law
respecting bankruptcy, reorganization, insolvency, readjustment of debts, relief
of debtors, dissolution or liquidation; (5) file or otherwise submit any answer
or other document admitting or failing to contest the material allegations of a
petition or other document filed or otherwise submitted against it in any
proceeding under any such applicable law, or (6) be adjudicated a bankrupt or
insolvent by a court of competent jurisdiction; or
(iv) any case, proceeding or other action shall be
commenced against the Company for the purpose of effecting, or an order,
judgment or decree shall be entered by any court of competent jurisdiction
approving (in whole or in part) anything specified in Section 2.2(c)(iii)
hereof, or any receiver, trustee, assignee, custodian, sequestrator, liquidator
or other official shall be appointed with respect to the Company, or shall be
appointed to take or shall otherwise acquire possession or control of all or a
substantial part of the assets and properties of the Company, and any of the
foregoing shall continue unstayed and in effect for any period of thirty (30)
days.
ARTICLE 3.
ATTORNEY-IN-FACT; PERFORMANCE
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Section 3.1. Secured Party Appointed Attorney-In-Fact.
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Upon the occurrence of an Event of Default, the Company hereby appoints
the Secured Party as its attorney-in-fact, with full authority in the place and
stead of the Company and in the name of the Company or otherwise, from time to
time in the Secured Party's discretion to take any action and to execute any
instrument which the Secured Party may reasonably deem necessary to accomplish
the purposes of this Agreement, including, without limitation, to receive and
collect all instruments made payable to the Company representing any payments in
respect of the Pledged Collateral or any part thereof and to give full discharge
for the same. The Secured Party may demand, collect, receipt for, settle,
compromise, adjust, xxx for, foreclose, or realize on the Pledged Property as
and when the Secured Party may determine. To facilitate collection, the Secured
Party may notify account debtors obligors on any Pledged Property or Pledged
Collateral to make payments directly to the Secured Party.
Section 3.2. Secured Party May Perform.
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If the Company fails to perform any agreement contained herein, the
Secured Party, at its option, may itself perform, or cause performance of, such
agreement, and the expenses of the Secured Party incurred in connection
therewith shall be included in the Obligations secured hereby and payable by the
Company under Section 8.3.
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ARTICLE 4.
REPRESENTATIONS AND WARRANTIES
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Section 4.1. Authorization; Enforceability.
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Each of the parties hereto represents and warrants that it has taken all
action necessary to authorize the execution, delivery and performance of this
Agreement and the transactions contemplated hereby; and upon execution and
delivery, this Agreement shall constitute a valid and binding obligation of the
respective party, subject to applicable bankruptcy, insolvency, reorganization,
moratorium and similar laws affecting creditors' rights or by the principles
governing the availability of equitable remedies. Section 4.2. Ownership of
Pledged Property. The Company warrants and represents that it is the legal and
beneficial owner of the Pledged Property free and clear of any lien, security
interest, option or other charge or encumbrance except for the security
interests identified on Exhibit B hereto and the security interest created by
this Agreement.
ARTICLE 5.
DEFAULT; REMEDIES; SUBSTITUTE COLLATERAL
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Section 5.1. Default and Remedies.
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(a) If an Event of Default described in Section 2.2(c)(i) or
(ii) occurs, then in each such case the Secured Party may declare the
Obligations to be due and payable immediately, by a notice in writing to the
Company, and upon any such declaration, the Obligations shall become immediately
due and payable. If an Event of Default described in Sections 2.2(c)(iii) or
(iv) occurs then the Obligations shall automatically become immediately due and
payable without declaration or other act on the part of the Secured Party.
(b) Upon the occurrence of an Event of Default, the Secured
Party shall: (i) be entitled to receive all distributions with respect to the
Pledged Collateral, (ii) to cause the Pledged Property to be transferred into
the name of the Secured Party or its nominee, (iii) to dispose of the Pledged
Property, and (iv) to realize upon any and all rights in the Pledged Property
then held by the Secured Party; provided, however, that the Secured Party hereby
agrees not to enforce any of the rights granted to it hereunder with respect to
that certain wireless or territorial, multi-protocols communication network
technology known as Spectracell or any rights under or with respect to that
certain License and Distribution Agreement dated July 5, 2000, between the
Company and Advanced Communications Technologies (Australia) Pty., Ltd., until
after December 15, 2002.
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Section 5.2. Method of Realizing Upon the Pledged Property: Other
Remedies.
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Upon the occurrence of an Event of Default, in addition to any rights and
remedies available at law or in equity, the following provisions shall govern
the Secured Party's right to realize upon the Pledged Property:
(a) Any item of the Pledged Property may be sold for cash or
other value in any number of lots at brokers board, public auction or private
sale and may be sold without demand, advertisement or notice (except that the
Secured Party shall give the Company ten (10) business days' prior written
notice of the time and place or of the time after which a private sale may be
made (the "SALE NOTICE")), which notice period shall in any event is hereby
agreed to be commercially reasonable. At any sale or sales of the Pledged
Property, the Company may bid for and purchase the whole or any part of the
Pledged Property and, upon compliance with the terms of such sale, may hold,
exploit and dispose of the same without further accountability to the Secured
Party. The Company will execute and deliver, or cause to be executed and
delivered, such instruments, documents, assignments, waivers, certificates, and
affidavits and supply or cause to be supplied such further information and take
such further action as the Secured Party reasonably shall require in connection
with any such sale.
(b) Any cash being held by the Secured Party as Pledged
Collateral and all cash proceeds received by the Secured Party in respect of,
sale of, collection from, or other realization upon all or any part of the
Pledged Collateral shall be applied as follows:
(i) to the payment of all amounts due the Secured
Party for the expenses reimbursable to it hereunder or owed to him pursuant to
Section 8.3 hereof;
(ii) to the payment of the Obligations then due and
unpaid.
(iii) the balance, if any, to the person or persons
entitled thereto, including, without limitation, the Company.
(c) In addition to all of the rights and remedies which the
Secured Party may have pursuant to this Agreement, the Secured Party shall have
all of the rights and remedies provided by law, including, without limitation,
those under the Uniform Commercial Code.
(d) If the Company fails to pay such amounts due upon the
occurrence of an Event of Default which is continuing, then the Secured Party
may institute a judicial proceeding for the collection of the sums so due and
unpaid, may prosecute such proceeding to judgment or final decree and may
enforce the same against the Company and collect the monies adjudged or decreed
to be payable in the manner provided by law out of the property of Company,
wherever situated.
(e) The Company agrees that it shall be liable for any
reasonable fees, expenses and costs incurred by the Secured Party in connection
with enforcement, collection and preservation of the Transaction Documents,
including, without limitation, reasonable legal fees and expenses, and such
amounts shall be deemed included as Obligations secured hereby and payable as
set forth in Section 8.3 hereof.
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Section 5.3. Proofs of Claim.
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In case of the pendency of any receivership, insolvency,
liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or
other judicial proceeding relating to the Company or the property of the Company
or of such other obligor or its creditors, the Secured Party (irrespective of
whether the Obligations shall then be due and payable as therein expressed or by
declaration or otherwise and irrespective of whether the Secured Party shall
have made any demand on the Company for the payment of the Obligations), shall
be entitled and empowered, by intervention in such proceeding or otherwise:
(i) to file and prove a claim for the whole amount of
the Obligations and to file such other papers or documents as may be necessary
or advisable in order to have the claims of the Secured Party (including any
claim for the reasonable legal fees and expenses and other expenses paid or
incurred by the Secured Party permitted hereunder and of the Secured Party
allowed in such judicial proceeding), and
(ii) to collect and receive any monies or other
property payable or deliverable on any such claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or
other similar official in any such judicial proceeding is hereby authorized by
the Secured Party to make such payments to the Secured Party and, in the event
that the Secured Party shall consent to the making of such payments directed to
the Secured Party, to pay to the Secured Party any amounts for expenses due it
hereunder.
Section 5.4. Duties Regarding Pledged Collateral.
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The Secured Party shall have no duty as to the collection or protection of
the Pledged Property or any income thereon or as to the preservation of any
rights pertaining thereto, beyond the safe custody and reasonable care of any of
the Pledged Property actually in the Secured Party's possession.
ARTICLE 6.
AFFIRMATIVE COVENANTS
The Company covenants and agrees that, from the date hereof and until the
Obligations have been fully paid and satisfied, unless the Secured Party shall
consent otherwise in writing (as provided in Section 8.4 hereof):
Section 6.1. Existence, Properties, Etc.
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(a) The Company shall do, or cause to be done, all things, or
proceed with due diligence with any actions or courses of action, that may be
reasonably necessary (i) to maintain Company's due organization, valid existence
and good standing under the laws of its state of incorporation, and (ii) to
preserve and keep in full force and effect all qualifications, licenses and
registrations in those jurisdictions in which the failure to do so could have a
Material Adverse Effect (as defined below); and (b) the Company shall not do, or
cause to be done, any act impairing the Company's corporate power or authority
(i) to carry on the Company's business as now conducted, and (ii) to execute or
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deliver this Agreement or any other document delivered in connection herewith,
including, without limitation, any UCC-1 Financing Statements required by the
Secured Party to which it is or will be a party, or perform any of its
obligations hereunder or thereunder. For purpose of this Agreement, the term
"Material Adverse Effect" shall mean any material and adverse affect as
determine by Secured Party in its sole discretion, whether individually or in
the aggregate, upon (a) the Company's assets, business, operations, properties
or condition, financial or otherwise; (b) the Company's ability to make payment
as and when due of all or any part of the Obligations; or (c) the Pledged
Property.
Section 6.2. Financial Statements and Reports.
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The Company shall furnish to the Secured Party such financial data as the
Secured Party may reasonably request. Without limiting the foregoing, the
Company shall furnish to the Secured Party (or cause to be furnished to the
Secured Party) the following:
(a) as soon as practicable and in any event within ninety (90)
days after the end of each fiscal year of the Company, the balance sheet of the
Company as of the close of such fiscal year, the statement of earnings and
retained earnings of the Company as of the close of such fiscal year, and
statement of cash flows for the Company for such fiscal year, all in reasonable
detail, prepared in accordance with generally accepted accounting principles
consistently applied, certified by the chief executive and chief financial
officers of the Company as being true and correct and accompanied by a
certificate of the chief executive and chief financial officers of the Company,
stating that the Company has kept, observed, performed and fulfilled each
covenant, term and condition of this Agreement and the other Transaction
Documents during such fiscal year and that no Event of Default hereunder has
occurred and is continuing, or if an Event of Default has occurred and is
continuing, specifying the nature of same, the period of existence of same and
the action the Company proposes to take in connection therewith;
(b) promptly upon receipt thereof, copies of all accountants'
reports and accompanying financial reports submitted to the Company by
independent accountants in connection with each annual examination of the
Company.
Section 6.3. Accounts and Reports.
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The Company shall maintain a standard system of accounting in accordance
with generally accepted accounting principles consistently applied and provide,
at its sole expense, to the Secured Party the following:
(a) as soon as available, a copy of any notice or other
communication alleging any nonpayment or other material breach or default, or
any foreclosure or other action respecting any material portion of its assets
and properties, received respecting any of the indebtedness of the Company in
excess of $15,000 (other than the Obligations), or any demand or other request
for payment under any guaranty, assumption, purchase agreement or similar
agreement or arrangement respecting the indebtedness or obligations of others in
excess of $15,000, including any received from any person acting on behalf of
the Secured Party or beneficiary thereof; and
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(b) within fifteen (15) business days after the making of each
submission or filing, a copy of any report, financial statement, notice or other
document, whether periodic or otherwise, submitted to the shareholders of the
Company, or submitted to or filed by the Company with any governmental authority
involving or affecting (i) the Company that could have a Material Adverse
Effect; (ii) the Obligations; (iii) any part of the Pledged Collateral; or (iv)
any of the transactions contemplated in this Agreement or the Transaction
Documents.
Section 6.4. Maintenance of Books and Records; Inspection.
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The Company shall maintain its books, accounts and records in accordance
with generally accepted accounting principles consistently applied, and permit
the Secured Party, its officers and employees and any professionals designated
by the Secured Party in writing, at any time to visit and inspect any of its
properties (including but not limited to the collateral security described in
the Transaction Documents), corporate books and financial records, and to
discuss its accounts, affairs and finances with any employee, officer or
director thereof.
Section 6.5. Maintenance and Insurance.
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(a) The Company shall maintain or cause to be maintained, at
its own expense, all of its assets and properties in good working order and
condition, making all necessary repairs thereto and renewals and replacements
thereof.
(b) The Company shall maintain or cause to be maintained, at
its own expense, insurance in form, substance and amounts (including
deductibles), which the Company deems reasonably necessary to the Company's
business, (i) adequate to insure all assets and properties of the Company, which
assets and properties are of a character usually insured by persons engaged in
the same or similar business against loss or damage resulting from fire or other
risks included in an extended coverage policy; (ii) against public liability and
other tort claims that may be incurred by the Company; (iii) as may be required
by the Transaction Documents or applicable law and (iv) as may be reasonably
requested by Secured Party, all with adequate, financially sound and reputable
insurers.
Section 6.6. Contracts and Other Collateral.
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The Company shall perform all of its obligations under or with respect to
each instrument, receivable, contract and other intangible included in the
Pledged Property to which the Company is now or hereafter will be party on a
timely basis and in the manner therein required, including, without limitation,
this Agreement.
Section 6.7. Defense of Collateral, Etc.
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The Company shall defend and enforce its right, title and interest in and
to any part of: (a) the Pledged Property; and (b) if not included within the
Pledged Property, those assets and properties whose loss could have a Material
Adverse Effect, the Company shall defend the Secured Party's right, title and
interest in and to each and every part of the Pledged Property, each against all
manner of claims and demands on a timely basis to the full extent permitted by
applicable law.
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Section 6.8. Taxes and Assessments; Tax Indemnity.
------------------------------------
The Company shall (a) file all tax returns and appropriate schedules
thereto that are required to be filed under applicable law, prior to the date of
delinquency, (b) pay and discharge all taxes, assessments and governmental
charges or levies imposed upon the Company, upon its income and profits or upon
any properties belonging to it, prior to the date on which penalties attach
thereto, and (c) pay all taxes, assessments and governmental charges or levies
that, if unpaid, might become a lien or charge upon any of its properties;
provided, however, that the Company in good faith may contest any such tax,
assessment, governmental charge or levy described in the foregoing clauses (b)
and (c) so long as appropriate reserves are maintained with respect thereto.
Section 6.9. Compliance with Law and Other Agreements.
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The Company shall maintain its business operations and property owned or
used in connection therewith in compliance with (a) all applicable federal,
state and local laws, regulations and ordinances governing such business
operations and the use and ownership of such property, and (b) all agreements,
licenses, franchises, indentures and mortgages to which the Company is a party
or by which the Company or any of its properties is bound.
Section 6.10. Notice of Default.
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The Company shall give written notice to the Secured Party of the
occurrence of any default or Event of Default under this Agreement, the
Transaction Documents or any other loan instrument or any other agreement of
Company for the payment of money, promptly upon the occurrence thereof.
Section 6.11. Notice of Litigation.
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The Company shall give notice, in writing, to the Secured Party of (a) any
actions, suits or proceedings wherein the amount at issue is in excess of
$15,000, instituted by any persons against the Company, or affecting any of the
assets of the Company, and (b) any dispute, not resolved within fifteen (15)
days of the commencement thereof, between the Company on the one hand and any
governmental or regulatory body on the other hand, which might reasonably be
expected to have a Material Adverse Effect on the business operations or
financial condition of the Company.
ARTICLE 7.
NEGATIVE COVENANTS
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The Company covenants and agrees that, from the date hereof until the
Obligations have been fully paid and satisfied, the Company shall not, unless
the Secured Party shall consent otherwise in writing:
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Section 7.1. Indebtedness.
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Except where one hundred percent (100%) of the proceeds are used to repay
the Obligations, the Company shall not directly or indirectly permit, create,
incur, assume, permit to exist, increase, renew or extend on or after the date
hereof any indebtedness on its part, including commitments, contingencies and
credit availabilities, or apply for or offer or agree to do any of the
foregoing.
Section 7.2. Liens and Encumbrances.
----------------------
The Company shall not directly or indirectly make, create, incur, assume
or permit to exist any assignment, transfer, pledge, mortgage, security interest
or other lien or encumbrance of any nature in, to or against any part of the
Pledged Property or of the Company's capital stock, or offer or agree to do so,
or own or acquire or agree to acquire any asset or property of any character
subject to any of the foregoing encumbrances (including any conditional sale
contract or other title retention agreement), or assign, pledge or in any way
transfer or encumber its right to receive any income or other distribution or
proceeds from any part of the Pledged Property; or enter into any sale-leaseback
financing respecting any part of the Pledged Property as lessee, or cause or
assist the inception or continuation of any of the foregoing.
Section 7.3. Articles, By-Laws, Mergers, Consolidations, Acquisitions
and Sales.
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Without the prior express written consent of the Secured Party, the
Company shall not: (a) Amend its Articles of Incorporation or By-Laws; (b) be a
party to any merger, consolidation or corporate reorganization, (c) purchase or
otherwise acquire all or substantially all of the assets or stock of, or any
partnership or joint venture interest in, any other person, firm or entity, (d)
sell, transfer, convey, grant a security interest in or lease all or any
substantial part of its assets, (e) convey any of its assets to any subsidiary,
(f) issue or sell shares of its common stock, (g) issue any warrant, option,
right, contract, call, or other security instrument granting the holder thereof,
the right to acquire common stock, or (h) file any registration statement on
Form S-8.
Section 7.4. Management, Ownership.
---------------------
Until after December 15, 2002, the Company shall not change its ownership,
executive staff or management without the prior written consent of the Secured
Party. Until after December 15, 2002, the ownership, executive staff and
management of the Company are material factors in the Secured Party's
willingness to institute and maintain a lending relationship with the Company.
Section 7.5. Dividends, Etc.
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The Company shall not declare or pay any dividend of any kind, in cash or
in property, on any class of its capital stock, nor purchase, redeem, retire or
otherwise acquire for value any shares of such stock, nor make any distribution
of any kind in respect thereof, nor make any return of capital to shareholders,
nor make any payments in respect of any pension, profit sharing, retirement,
stock option, stock bonus, incentive compensation or similar plan (except as
required or permitted hereunder), without the prior written consent of the
Secured Party.
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Section 7.6. Guaranties; Loans.
-----------------
The Company shall not guarantee nor be liable in any manner, whether
directly or indirectly, or become contingently liable after the date of this
Agreement in connection with the obligations or indebtedness of any person or
persons, except for the endorsement of negotiable instruments payable to the
Company for deposit or collection in the ordinary course of business. The
Company shall not make any loan, advance or extension of credit to any person
other than in the normal course of its business.
Section 7.7. Debt.
----
Except where one hundred percent (100%) of the proceeds are used to repay
the Obligations, the proceeds are The Company shall not create, incur, assume or
suffer to exist any additional indebtedness of any description whatsoever in an
aggregate amount in excess of $25,000 (excluding any indebtedness of the Company
to the Secured Party, trade accounts payable and accrued expenses incurred in
the ordinary course of business and the endorsement of negotiable instruments
payable to the Company, respectively for deposit or collection in the ordinary
course of business).
Section 7.8. Conduct of Business.
-------------------
The Company will continue to engage, in an efficient and economical
manner, in a business of the same general type as conducted by it on the date of
this Agreement.
Section 7.9. Places of Business.
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The location of the Company's chief place of business is 000 Xxxxxxxxx
Xxxxxx, Xxxxx 0000, Xxx Xxxx, Xxx Xxxx 00000. The Company shall not change the
location of its chief place of business, chief executive office or any place of
business disclosed to the Secured Party or move any of the Pledged Property from
its current location without thirty (30) days' prior written notice to the
Secured Party in each instance.
ARTICLE 8.
MISCELLANEOUS
Section 8.1. Notices.
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All notices or other communications required or permitted to be given
pursuant to this Agreement shall be in writing and shall be considered as duly
given on: (a) the date of delivery, if delivered in person, by nationally
recognized overnight delivery service or (b) five (5) days after mailing if
mailed from within the continental United States by certified mail, return
receipt requested to the party entitled to receive the same:
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If to the Company: Advanced Communications Technologies, Inc.
c/o Danson Partners, LLC
000 Xxxxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx Xxxxxx, President and
Chief Financial Officer
With a copy to: Xxxxxxxx & Xxxxxxxx, LLP
000 Xxxx Xxxxxxxx Xxxx Xxxx
Xxxxx 000
Xxxx Xxxxx, Xxxxxxx 00000
Attention: Xxxxxxxx X. Xxxxxxxx, Esq.
With a copy to: Xxxxxxx Xxxxxx, Esq.
Xxxxxxxxxxx & Xxxxxxxx LLP
000 Xxxxx Xxxxxxxx Xxxxxxxxx, Xxxxx 0000
Xxxxx, Xxxxxxx 00000
And if to the Party: Secured To the address of the Secured Party, and
its counsel, as set forth on Schedule I to the
Securities Purchase Agreement.
Any party may change its address by giving notice to the other party
stating its new address. Commencing on the tenth (10th) day after the giving of
such notice, such newly designated address shall be such party's address for the
purpose of all notices or other communications required or permitted to be given
pursuant to this Agreement.
Section 8.2. Severability.
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If any provision of this Agreement shall be held invalid or unenforceable,
such invalidity or unenforceability shall attach only to such provision and
shall not in any manner affect or render invalid or unenforceable any other
severable provision of this Agreement, and this Agreement shall be carried out
as if any such invalid or unenforceable provision were not contained herein.
Section 8.3. Expenses.
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In the event of an Event of Default, the Company will pay to the Secured
Party the amount of any and all reasonable expenses, including the reasonable
fees and expenses of its counsel, which the Secured Party may incur in
connection with: (i) the custody or preservation of, or the sale, collection
from, or other realization upon, any of the Pledged Property; (ii) the exercise
or enforcement of any of the rights of the Secured Party hereunder or (iii) the
failure by the Company to perform or observe any of the provisions hereof or any
of the Transaction Documents.
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Section 8.4. Waivers, Amendments, Etc.
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The Secured Party's delay or failure at any time or times hereafter to
require strict performance by Company of any undertakings, agreements or
covenants shall not waiver, affect, or diminish any right of the Secured Party
under this Agreement to demand strict compliance and performance herewith. Any
waiver by the Secured Party of any Event of Default shall not waive or affect
any other Event of Default, whether such Event of Default is prior or subsequent
thereto and whether of the same or a different type. None of the undertakings,
agreements and covenants of the Company contained in this Agreement, and no
Event of Default, shall be deemed to have been waived by the Secured Party, nor
may this Agreement be amended, changed or modified, unless such waiver,
amendment, change or modification is evidenced by an instrument in writing
specifying such waiver, amendment, change or modification and signed by the
Secured Party.
Section 8.5. Continuing Security Interest.
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This Agreement shall create a continuing security interest in the Pledged
Property and shall: (i) remain in full force and effect until payment in full of
the Obligations; and (ii) be binding upon the Company and its successors and
assigns and (iii) inure to the benefit of the Secured Party and its successors
and assigns. Upon the payment or satisfaction in full of the Obligations, the
Company shall be entitled to the return, at its expense, of such of the Pledged
Property as shall not have been sold in accordance with Section 5.2 hereof or
otherwise applied pursuant to the terms hereof.
Section 8.6. Independent Representation.
--------------------------
Each party hereto acknowledges and agrees that it has received or has had
the opportunity to receive independent legal counsel of its own choice and that
it has been sufficiently apprised of its rights and responsibilities with regard
to the substance of this Agreement.
Section 8.7. Applicable Law: Jurisdiction.
-----------------------------
This Agreement shall be governed by and interpreted in accordance with the
laws of the State of Florida without regard to the principles of conflict of
laws. The parties further agree that any action between them shall be heard in
Xxxxxx County, New Jersey and expressly consent to the jurisdiction and venue of
the Superior Court of New Jersey sitting in Xxxxxx County and the United States
District Court for the District of New Jersey sitting in Newark, New Jersey for
the adjudication of any civil action asserted pursuant to this Paragraph.
Section 8.8. Waiver of Jury Trial.
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AS A FURTHER INDUCEMENT FOR THE SECURED PARTY TO ENTER INTO THIS AGREEMENT
AND TO MAKE THE FINANCIAL ACCOMMODATIONS TO THE COMPANY, THE COMPANY HEREBY
WAIVES ANY RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING RELATED IN ANY WAY TO
THIS AGREEMENT AND/OR ANY AND ALL OTHER DOCUMENTS RELATED TO THIS TRANSACTION.
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Section 8.9. Entire Agreement.
----------------
This Agreement constitutes the entire agreement among the parties and
supersedes any prior agreement or understanding among them with respect to the
subject matter hereof.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
COMPANY:
ADVANCED COMMUNICATIONS
TECHNOLOGIES, INC.
By:
-----------------------------------------
Name: Xxxxx Xxxxxx
Title: President and Chief Financial Officer
SECURED PARTY:
CORNELL CAPITAL PARTNERS, LP
BY: YORKVILLE ADVISOR, LLC
ITS: GENERAL PARTNERS
By:
-----------------------------------------
Name: Xxxx Xxxxxx
Title: Portfolio Manager
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EXHIBIT A
DEFINITION OF PLEDGED PROPERTY
------------------------------
For the purpose of securing prompt and complete payment and performance by
the Company of all of the Obligations, the Company unconditionally and
irrevocably hereby grants to the Secured Party a continuing security interest in
and to, and lien upon, the following Pledged Property of the Company:
(a) all goods of the Company, including, without limitation,
machinery, equipment, furniture, furnishings, fixtures, signs, lights, tools,
parts, supplies and motor vehicles of every kind and description, now or
hereafter owned by the Company or in which the Company may have or may hereafter
acquire any interest, and all replacements, additions, accessions, substitutions
and proceeds thereof, arising from the sale or disposition thereof, and where
applicable, the proceeds of insurance and of any tort claims involving any of
the foregoing;
(b) all inventory of the Company, including, but not limited
to, all goods, wares, merchandise, parts, supplies, finished products, other
tangible personal property, including such inventory as is temporarily out of
Company's custody or possession and including any returns upon any accounts or
other proceeds, including insurance proceeds, resulting from the sale or
disposition of any of the foregoing;
(c) all contract rights and general intangibles of the Company,
including, without limitation, goodwill, trademarks, trade styles, trade names,
leasehold interests, partnership or joint venture interests, patents, patent
applications, copyrights, deposit accounts whether now owned or hereafter
created;
(d) all documents, warehouse receipts, instruments and chattel
paper of the Company whether now owned or hereafter created;
(e) all accounts and other receivables, instruments or other
forms of obligations and rights to payment of the Company (herein collectively
referred to as "ACCOUNTS"), together with the proceeds thereof, all goods
represented by such Accounts and all such goods that may be returned by the
Company's customers, and all proceeds of any insurance thereon, and all
guarantees, securities and liens which the Company may hold for the payment of
any such Accounts including, without limitation, all rights of stoppage in
transit, replevin and reclamation and as an unpaid vendor and/or lienor, all of
which the Company represents and warrants will be bona fide and existing
obligations of its respective customers, arising out of the sale of goods by the
Company in the ordinary course of business;
(f) to the extent assignable, all of the Company's rights under
all present and future authorizations, permits, licenses and franchises issued
or granted in connection with the operations of any of its facilities;
(g) all products and proceeds (including, without limitation,
insurance proceeds) from the above-described Pledged Property.
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