Exhibit 10.9
CREATIVE VISTAS, 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),
Creative Vistas, Inc., an Arizona 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, (x) the Restricted Account (the
"Restricted Account") maintained at North Fork Bank (Account Name: Creative
Vistas, Inc., Account Number: 2704053277) referred to in the Restricted Account
Agreement) and (y) any deposit accounts related to the lockbox maintained at the
Lockbox Bank (as defined in the Security Agreement referred to below) or any
other financial institution), 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 and the Security Agreement
referred to below, as applicable.
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") and (ii) the Related Agreements referred to in the
Securities Purchase Agreement, (iii) that certain Security Agreement dated as of
the date hereof by and between the Company and Laurus (the "Security Agreement")
and (iv) the Ancillary Agreements referred to in the Security Agreement (the
Securities Purchase Agreement and each Related Agreement, the Security Agreement
and each Ancillary 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, the Bankruptcy and Insolvency Act
(Canada), or the Companies' Creditors Arrangement Act (Canada), 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, trust, partnership or limited liability
company, as the case may be, validly existing, in good standing and
organized or established 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, (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 and (iii)
Permitted Liens (as defined in the Security Agreement);
(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 $50,000 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).
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4. The occurrence of any of the following events or conditions shall
constitute an "Event of Default" under this Master Security Agreement:
(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 (other than to the extent otherwise
permitted hereunder) 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;
(b) 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;
(c) any proceedings under any bankruptcy or insolvency law shall be
commenced by or against any Assignor which, in the case of a proceeding
commenced against any such Assignor, remains undismissed for a period of
60 days;
(d) 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
(e) an Event of Default shall have occurred under and as defined in
any Document.
5. Upon the occurrence of any Event of Default and the expiration of any
applicable grace periods, 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, the Personal Property Security Act as in effect in the Province of
Ontario, or any other applicable federal or provincial personal property
security act, 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, after any applicable cure period 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.
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
(i) following the occurrence of an Event of Default and any notice and cure
provisions, and only during the continuance of such Event of Default, 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. (ii) 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)); (iii) following the occurrence of an Event of Default and any notice
and cure provisions, and only during the continuance of such Event of Default,
to sign our name on public records; and (iv) 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.
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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. Without limiting the foregoing, 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 appoint or reappoint by instrument in writing, any person
or persons, whether an officer or officers or any employee or employees of
Laurus or not, to be a receiver or receivers (hereinafter called a "Receiver",
which term when used herein shall include a receiver and manager) of any
Collateral of Company or any Assignor (including any interest, income or profits
therefrom) and may remove any Receiver so appointed and appoint another in
his/her stead. Any such Receiver shall, so far as concerns responsibility for
his/her acts, be deemed the agent of such Assignor and not Laurus, and Laurus
shall not be in any way responsible for any misconduct, negligence or non
feasance on the part of any such Receiver, his/her servants, agents or
employees. Subject to the provisions of the instrument appointing him/her, any
such Receiver shall have power to take possession of Collateral, to preserve
Collateral or its value, to carry on or concur in carrying on all or any part of
the business of such Assignor and to sell, lease, license or otherwise dispose
of or concur in selling, leasing, licensing or otherwise disposing of
Collateral. To facilitate the foregoing powers, any such Receiver may, to the
exclusion of all others, including Laurus, enter upon, use and occupy all
premises owned or occupied such Assignor wherein Collateral may be located,
maintain Collateral upon such premises, borrow money on a secured or unsecured
basis and use Collateral directly in carrying on such Assignor's business or as
security for loans or advances to enable the Receiver to carry on such
Assignor's business or otherwise, as such Receiver shall, in its discretion,
determine. Except as may be otherwise directed by Laurus, all proceeds of
Collateral received from time to time by such Receiver in carrying out his/her
appointment shall be received in trust for and paid over to Laurus. Every such
Receiver may, in the discretion of Laurus be vested with all or any of the
rights and powers of Laurus. Laurus may, either directly or through its agents
or nominees, exercise any or all powers and rights given to a Receiver by virtue
of the foregoing provisions of this paragraph.
8. 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 or the Ontario Superior Court of Justice, as Laurus may
elect in its sole discretion and (c) waive any objection Laurus or each Assignor
may have as to the bringing or maintaining of such action with any such court.
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9. 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.
10. 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,
CREATIVE VISTAS, INC.
By: /s/ Xxxxx Xxxxxxxxxx
-----------------------------------
Name: Xxxxx Xxxxxxxxxx
Title: CEO
Address:
A.C. TECHNICAL SYSTEMS LTD.
By:/s/ Xxxxxxx Xxxxx
-----------------------------------
Name: Xxxxxxx Xxxxx
Title: President
Address:
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A.C. TECHNICAL ACQUISTION CORP.
By: /s/ Xxxxx Xxxxxxxxxx
-----------------------------------
Name: Xxxxx Xxxxxxxxxx
Title: CEO
Address:
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ACKNOWLEDGED:
LAURUS MASTER FUND, LTD.
By: /s/ Xxxxx Grin
-----------------------------------
Name: Xxxxx Grin
Title:
Address:
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SCHEDULE A
Entity Jurisdiction of Organization
Organization Identification
Number
[Assignors]
10
