EXHIBIT 10.5
CATALYST LIGHTING GROUP, INC. AND CERTAIN OF ITS SUBSIDIARIES
MASTER SECURITY AGREEMENT
To: Laurus Master Fund, Ltd.
c/o M&C Corporate Services Limited
X.X. Xxx 000 XX
Xxxxxx House
South Church Street
Xxxxxx Town
Grand Cayman, Cayman Islands
Date: September 30, 2004
To Whom It May Concern:
1. To secure the payment of all Obligations (as hereafter defined),
Catalyst Lighting Group, Inc., a Delaware corporation (the "Company"), each of
the other undersigned parties (other than Laurus Master Fund, Ltd, "Laurus"))
and each other entity that is required to enter into this Master Security
Agreement (each an "Assignor" and, collectively, the "Assignors") hereby assigns
and grants to Laurus a continuing security interest in all of the following
property now owned or at any time hereafter acquired by any Assignor, or in
which any Assignor now have or at any time in the future may acquire any right,
title or interest (the "Collateral"): all cash, cash equivalents, accounts,
accounts receivable, deposit accounts (including, without limitation, the
Restricted Account (the "Restricted Account") maintained at North Fork Bank
(Account Name: Catalyst Lighting Group, Inc., Account Number: 2704053228)
referred to in the Restricted Account Agreement), inventory, equipment, goods,
documents, instruments (including, without limitation, promissory notes),
contract rights, general intangibles (including, without limitation, payment
intangibles and an absolute right to license on terms no less favorable than
those current in effect among our affiliates), chattel paper, supporting
obligations, investment property (including, without limitation, all equity
interests owned by any Assignor), letter-of-credit rights, trademarks, trademark
applications, tradestyles, patents, patent applications, copyrights, copyright
applications and other intellectual property in which any Assignor now have or
hereafter may acquire any right, title or interest, all proceeds and products
thereof (including, without limitation, proceeds of insurance) and all
additions, accessions and substitutions thereto or therefore. In the event any
Assignor wishes to finance the acquisition in the ordinary course of business of
any hereafter acquired equipment and have obtained a commitment from a financing
source to finance such equipment from an unrelated third party, Laurus agrees to
release its security interest on such hereafter acquired equipment so financed
by such third party financing source. Except as otherwise defined herein, all
capitalized terms used herein shall have the meaning provided such terms in the
Securities Purchase Agreement referred to below.
2. The term "Obligations" as used herein shall mean and include all debts,
liabilities and obligations owing by each Assignor to Laurus arising under, out
of, or in connection with: (i) that certain Securities Purchase Agreement dated
as of the date hereof by and between the Company and Laurus (the "Securities
Purchase Agreement"), or (ii) the Related Agreements referred to in the
Securities Purchase Agreement (the Securities Purchase Agreement and each
Related Agreement, as each may be amended, modified, restated or supplemented
from time to time, are collectively referred to herein as the "Documents"), and
in connection with any documents, instruments or agreements relating to or
executed in connection with the Documents or any documents, instruments or
agreements referred to therein or otherwise, and in connection with any other
indebtedness, obligations or liabilities of any Assignor to Laurus, whether now
existing or hereafter arising, direct or indirect, liquidated or unliquidated,
absolute or contingent, due or not due and whether under, pursuant to or
evidenced by a note, agreement, guaranty, instrument or otherwise, in each case,
irrespective of the genuineness, validity, regularity or enforceability of such
Obligations, or of any instrument evidencing any of the Obligations or of any
collateral therefor or of the existence or extent of such collateral, and
irrespective of the allowability, allowance or disallowance of any or all of the
Obligations in any case commenced by or against any Assignor under Xxxxx 00,
Xxxxxx Xxxxxx Code, including, without limitation, obligations or indebtedness
of each Assignor for post-petition interest, fees, costs and charges that would
have accrued or been added to the Obligations but for the commencement of such
case.
3. Each Assignor hereby jointly and severally represents, warrants and
covenants to Laurus that:
(a) it is a corporation, partnership or limited liability company,
as the case may be, validly existing, in good standing and organized under the
respective laws of its jurisdiction of organization set forth on Schedule A, and
each Assignor will provide Laurus thirty (30) days' prior written notice of any
change in any of its respective jurisdiction of organization;
(b) its legal name is as set forth in its respective Certificate of
Incorporation or other organizational document (as applicable) as amended
through the date hereof and as set forth on Schedule A, and it will provide
Laurus thirty (30) days' prior written notice of any change in its legal name;
(c) its organizational identification number (if applicable) is as
set forth on Schedule A hereto, and it will provide Laurus thirty (30) days'
prior written notice of any change in any of its organizational identification
number;
(d) it is the lawful owner of the respective Collateral and it has
the sole right to grant a security interest therein and will defend the
Collateral against all claims and demands of all persons and entities;
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(e) it will keep its respective Collateral free and clear of all
attachments, levies, taxes, liens, security interests and encumbrances of every
kind and nature ("Encumbrances"), except (i) Encumbrances securing the
Obligations and (ii) to the extent said Encumbrance does not secure indebtedness
in excess of $50,000 and such Encumbrance is removed or otherwise released
within ten (10) days of the creation thereof;
(f) it will, at its and the other Assignors joint and several cost
and expense keep the Collateral in good state of repair (ordinary wear and tear
excepted) and will not waste or destroy the same or any part thereof other than
ordinary course discarding of items no longer used or useful in its or such
other Assignors' business;
(g) it will not without Laurus' prior written consent, sell,
exchange, lease or otherwise dispose of the Collateral, whether by sale, lease
or otherwise, except for the sale of inventory in the ordinary course of
business and for the disposition or transfer in the ordinary course of business
during any fiscal year of obsolete and worn-out equipment or equipment no longer
necessary for its ongoing needs, having an aggregate fair market value of not
more than $25,000 and only to the extent that:
(i) the proceeds of any such disposition are used to acquire
replacement Collateral which is subject to Laurus' first priority perfected
security interest, or are used to repay Obligations or to pay general corporate
expenses; and
(ii) following the occurrence of an Event of Default which
continues to exist the proceeds of which are remitted to Laurus to be held as
cash collateral for the Obligations;
(h) it will insure or cause the Collateral to be insured in Laurus'
name against loss or damage by fire, theft, burglary, pilferage, loss in transit
and such other hazards as Laurus shall specify in amounts and under policies by
insurers acceptable to Laurus and all premiums thereon shall be paid by such
Assignor and the policies delivered to Laurus. If any such Assignor fails to do
so, Laurus may procure such insurance and the cost thereof shall be promptly
reimbursed by the Assignors, jointly and severally, and shall constitute
Obligations;
(i) it will at all reasonable times allow Laurus or Laurus'
representatives free access to and the right of inspection of the Collateral;
(j) such Assignor (jointly and severally with each other Assignor)
hereby indemnifies and saves Laurus harmless from all loss, costs, damage,
liability and/or expense, including reasonable attorneys' fees, that Laurus may
sustain or incur to enforce payment, performance or fulfillment of any of the
Obligations and/or in the enforcement of this Master Security Agreement or in
the prosecution or defense of any action or proceeding either against Laurus or
any Assignor concerning any matter growing out of or in connection with this
Master Security Agreement, and/or any of the Obligations and/or any of the
Collateral except to the extent caused by Laurus' own gross negligence or
willful misconduct (as determined by a court of competent jurisdiction in a
final and nonappealable decision).
4. The occurrence of any of the following events or conditions shall
constitute an "Event of Default" under this Master Security Agreement:
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(a) any covenant, warranty, representation or statement made or
furnished to Laurus by the Assignor or on the Assignor's behalf was breached in
any material respect or false in any material respect when made or furnished, as
the case may be, and, in the case of a covenant, if subject to cure, shall not
be cured for a period of fifteen (15) days;
(b) the loss, theft, substantial damage, destruction, sale or
encumbrance to or of any of the Collateral or the making of any levy, seizure or
attachment thereof or thereon except to the extent:
(i) such loss is covered by insurance proceeds which are used
to replace the item or repay Laurus; or
(ii) said levy, seizure or attachment does not secure
indebtedness in excess of $100,000 and such levy, seizure or attachment has not
been removed or otherwise released within ten (10) days of the creation or the
assertion thereof;
(c) any Assignor shall become insolvent, cease operations, dissolve,
terminate our business existence, make an assignment for the benefit of
creditors, suffer the appointment of a receiver, trustee, liquidator or
custodian of all or any part of Assignors' property;
(d) any proceedings under any bankruptcy or insolvency law shall be
commenced by or against any Assignor and, in the case of an involuntary case or
proceeding, such case or proceeding is not dismissed within forty-five (45) days
following commencement thereof;
(e) the Company shall repudiate, purport to revoke or fail to
perform any or all of its obligations under any Note (after passage of
applicable cure period, if any); or
(f) an Event of Default shall have occurred under and as defined in
any Document and/or under the Security Agreement by and among the Company,
Whitco Company LP and Laurus, as the same may be amended, modified or
supplemented from time to time.
5. Upon the occurrence of any Event of Default and at any time thereafter,
Laurus may declare all Obligations immediately due and payable and Laurus shall
have the remedies of a secured party provided in the Uniform Commercial Code as
in effect in the State of New York, this Agreement and other applicable law.
Upon the occurrence of any Event of Default and at any time thereafter, Laurus
will have the right to take possession of the Collateral and to maintain such
possession on our premises or to remove the Collateral or any part thereof to
such other premises as Laurus may desire. Upon Laurus' request, each of the
Assignors shall assemble or cause the Collateral to be assembled and make it
available to Laurus at a place designated by Laurus. If any notification of
intended disposition of any Collateral is required by law, such notification, if
mailed, shall be deemed properly and reasonably given if mailed at least ten
(10) days before such disposition, postage prepaid, addressed to any Assignor
either at such Assignor's address shown herein or at any address appearing on
Laurus' records for such Assignor. Any proceeds of any disposition of any of the
Collateral shall be applied by Laurus to the payment of all expenses in
connection with the sale of the Collateral, including reasonable attorneys' fees
and other legal expenses and disbursements and the reasonable expense of
retaking, holding, preparing for sale, selling, and the like, and any balance of
such proceeds may be applied by Laurus toward the payment of the Obligations in
such order of application as Laurus may elect, and each Assignor shall be liable
for any deficiency. For the avoidance of doubt, following the occurrence and
during the continuance of an Event of Default, Laurus shall have the immediate
right to withdraw any and all monies contained in the Restricted Account or any
other deposit accounts in the name of the Assignor and controlled by Laurus and
apply same to the repayment of the Obligations (in such order of application as
Laurus may elect).
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6. If any Assignor defaults in the performance or fulfillment of any of
the terms, conditions, promises, covenants, provisions or warranties on such
Assignor's part to be performed or fulfilled under or pursuant to this Master
Security Agreement, Laurus may, at its option without waiving its right to
enforce this Master Security Agreement according to its terms, immediately or at
any time thereafter and without notice to any Assignor, perform or fulfill the
same or cause the performance or fulfillment of the same for each Assignor's
joint and several account and at each Assignor's joint and several cost and
expense, and the cost and expense thereof (including reasonable attorneys' fees)
shall be added to the Obligations and shall be payable on demand with interest
thereon at the highest rate permitted by law, or, at Laurus' option, debited by
Laurus from the Restricted Account or any other deposit accounts in the name of
the Assignor and controlled by Laurus. Laurus shall provide the applicable
Assignor written notice of any such action taken by Laurus under this Section 6
7. Each Assignor appoints Laurus, any of Laurus' officers, employees or
any other person or entity whom Laurus may designate as our attorney, with power
to execute such documents in each of our behalf and to supply any omitted
information and correct patent errors in any documents executed by any Assignor
or on any Assignor's behalf; to file financing statements against us covering
the Collateral (and, in connection with the filing of any such financing
statements, describe the Collateral as "all assets and all personal property,
whether now owned and/or hereafter acquired" (or any substantially similar
variation thereof)); to sign our name on public records, but solely in
connection with the transactions contemplated hereby; and to do all other things
Laurus deem necessary to carry out this Master Security Agreement. Each Assignor
hereby ratifies and approves all acts of the attorney and neither Laurus nor the
attorney will be liable for any acts of commission or omission, nor for any
error of judgment or mistake of fact or law other than gross negligence or
willful misconduct (as determined by a court of competent jurisdiction in a
final and non-appealable decision). This power being coupled with an interest,
is irrevocable so long as any Obligations remains unpaid.
8. No delay or failure on Laurus' part in exercising any right, privilege
or option hereunder shall operate as a waiver of such or of any other right,
privilege, remedy or option, and no waiver whatever shall be valid unless in
writing, signed by Laurus and then only to the extent therein set forth, and no
waiver by Laurus of any default shall operate as a waiver of any other default
or of the same default on a future occasion. Laurus' books and records
containing entries with respect to the Obligations shall be admissible in
evidence in any action or proceeding, shall be binding upon each Assignor for
the purpose of establishing the items therein set forth and shall constitute
prima facie proof thereof. Laurus shall have the right to enforce any one or
more of the remedies available to Laurus, successively, alternately or
concurrently. Each Assignor agrees to join with Laurus in executing financing
statements or other instruments to the extent required by the Uniform Commercial
Code in form satisfactory to Laurus and in executing such other documents or
instruments as may be required or deemed necessary by Laurus for purposes of
affecting or continuing Laurus' security interest in the Collateral.
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9. This Master Security Agreement shall be governed by and construed in
accordance with the laws of the State of New York and cannot be terminated
orally. All of the rights, remedies, options, privileges and elections given to
Laurus hereunder shall inure to the benefit of Laurus' successors and assigns.
The term "Laurus" as herein used shall include Laurus, any parent of Laurus',
any of Laurus' subsidiaries and any co-subsidiaries of Laurus' parent, whether
now existing or hereafter created or acquired, and all of the terms, conditions,
promises, covenants, provisions and warranties of this Agreement shall inure to
the benefit of each of the foregoing, and shall bind the representatives,
successors and assigns of each Assignor. Laurus and each Assignor hereby (a)
waive any and all right to trial by jury in litigation relating to this
Agreement and the transactions contemplated hereby and each Assignor agrees not
to assert any counterclaim in such litigation, (b) submit to the nonexclusive
jurisdiction of any New York State court sitting in the borough of Manhattan,
the city of New York and (c) waive any objection Laurus or each Assignor may
have as to the bringing or maintaining of such action with any such court.
10. It is understood and agreed that any person or entity that desires to
become an Assignor hereunder, or is required to execute a counterpart of this
Master Security Agreement after the date hereof pursuant to the requirements of
any Document, shall become an Assignor hereunder by (x) executing a Joinder
Agreement in form and substance satisfactory to Laurus, (y) delivering
supplements to such exhibits and annexes to such Documents as Laurus shall
reasonably request and (z) taking all actions as specified in this Agreement as
would have been taken by such Assignor had it been an original party to this
Agreement, in each case with all documents required above to be delivered to
Laurus and with all documents and actions required above to be taken to the
reasonable satisfaction of Laurus.
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11. All notices from Laurus to any Assignor shall be sufficiently given if
mailed or delivered to such Assignor's address set forth below.
Very truly yours,
CATALYST LIGHTING GROUP, INC.
By:
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Name:
Title:
Address:
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WHITCO COMPANY, LP
By: Whitco Management, LLC, its General Partner
By:
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Name:
Title:
Address:
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ACKNOWLEDGED:
LAURUS MASTER FUND, LTD.
By:
----------------------
Name:
Title:
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SCHEDULE A
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Entity Jurisdiction of Organization Identification Number
Organization
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Catalyst Lighting Group, Inc.
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Whitco Company, LP
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