SECURITY AGREEMENT
Exhibit
10.4
This Security Agreement (this “Agreement”) between Acceris
Communications Inc., a Florida corporation (“ACI”) and Acceris
Communications Corp. , a Delaware corporation (the “Company”)(ACI and the
Company are collectively, the “Debtors”), and Acceris Management and
Acquisition LLC, a Minnesota limited liability company (the “Secured
Party”) takes effect on the Execution Date. Capitalized terms used but not
otherwise defined in this Agreement shall have the meanings ascribed to them in
that certain Asset Purchase Agreement between the Debtors, Counsel Corporation
and the Secured Party (the “Purchase Agreement”).
RECITALS
| A. |
If
the Purchase Agreement is terminated before the Closing, Section 5.11 of
the Purchase Agreement provides that the Secured Party is entitled to
recover certain advances and fees pursuant to any written agreements
between the Secured Party and the Debtors (collectively, the “Break Up
Fee”). |
| B. |
As
security for the Break Up Fee that is owed or will be owed to the Secured
Party upon the termination of the Purchase Agreement, the Debtors have
delivered to the Secured Party a Note whereby the principal amount will be
equal to the Break Up Fee (the
“Note”). |
| C. |
As
a condition to entering into the Purchase Agreement, the Secured Party has
required that the Debtors deliver this Agreement as security for their
obligations under the Note. |
AGREEMENT
In consideration of
the above recitals, and the promises set forth in this Agreement, the parties
agree as follows:
| 1. |
Obligations.
For purposes of this Agreement, “Obligations” means collectively
the Note, this Agreement and the repayment or performance of any of the
foregoing if any such payment or performance is at any time avoided,
rescinded, set aside, or recovered from or repaid by Secured Party, in
whole or in part, in any bankruptcy, insolvency, or similar proceeding
instituted by or against the Debtors of any Obligation, or otherwise,
including but not limited to all principal, interest, fees, expenses and
other charges. |
| 2. |
Collateral.
For purposes of this Agreement, “Collateral” means collectively all
of the assets and property of ACI and the Company and any of the assets
upon which Xxxxx Fargo Foothills, Inc., a California corporation, has a
first lien, whether now owned or hereafter acquired and wherever located,
including without limitation the following types of assets and property:
(a) accounts (including, but not limited to, health-care-insurance
receivables), documents, instruments, investment property,
letter-of-credit rights, letters of credit, chattel paper, general
intangibles, other rights to payment, deposit accounts, money, patents,
patent applications, trademarks, trademark applications, copyrights,
copyright applications, trade names, other names, software, payment
intangibles, inventory, equipment, and fixtures; (b) accessions,
additions and improvements to, replacements of, and substitutions for any
of the foregoing; (c) all products and proceeds of any of the
foregoing; and (d) books, records and data in any form relating to
any of the foregoing. |
| 3. |
Security
Interest and Subordination. The Debtors hereby grant to the Secured
Party a security interest (the “Security Interest”) in the
Collateral to secure the payment and performance of the Obligations. The
Security Interest continues in effect until this Agreement is terminated
in writing by the Secured Party or until the Note is terminated in
accordance with its terms. |
| 4. |
Representations,
Warranties and Covenants. The Debtors represent, warrant and agree to
the following: |
| 4.1 |
Principal
Office. The Company’s chief executive office is located at the address
specified on Schedule 1 attached to this Agreement. The
Debtors will give the Secured Party written notice prior to any change in
the location of the Company’s principal office. The Company’s
organizational identification number and Federal Tax Identification Number
are as specified on Schedule 1. |
| 4.2 |
Organization;
Authority. Each of the Debtors is duly organized, validly existing and
in good standing under the laws of its state or province of its
organization and has full power and authority to enter into this
Agreement. ACI is a corporation organized under the laws of the State of
Florida and its exact legal name is as set forth in this Agreement. The
Company is a corporation organized under the laws of the State of Delaware
and its exact legal name is as set forth in this Agreement. The Debtors
will not change their state of organization, form of organization or name
without the Secured Party’s prior written
consent. |
| 4.3 |
Perfection
of Security Interest. Subject to the Permitted Liens, the Debtors will
execute and deliver and they irrevocably appoint the Secured Party (which
appointment is coupled with an interest) the Debtors’ attorney-in-fact to
execute, deliver and file in the Debtors’ name, all financing statements
(including, but not limited to, amendments, terminations and terminations
of other security interests in any of the Collateral), control agreements
and other agreements which the Secured Party may at any time reasonably
request in order to secure, protect, perfect, collect or enforce the
Security Interest. Subject to the Permitted Liens, the Debtors have
delivered all of the Collateral consisting of instruments, documents and
chattel paper to the Secured Party or, at the time the Debtors acquires an
interest therein, will deliver all after acquired Collateral consisting of
instruments, documents and chattel paper to the Secured Party. Subject to
the Permitted Liens, the Debtors shall, at any time and from time to time,
take such steps as the Secured Party may reasonably request for Secured
Party (a) to obtain an acknowledgement, in form and substance reasonably
satisfactory to the Secured Party, of any bailee having possession of any
of the Collateral that such bailee holds such Collateral for Secured
Party, (b) to obtain “control” of any investment property, deposit
accounts, letter-of-credit rights or electronic chattel paper (as such
terms are defined in the UCC, as hereinafter defined), with any agreements
establishing control to be in form and substance reasonably satisfactory
to Secured Party, and (c) otherwise to insure the continued perfection and
priority of the Security Interest in any of the Collateral and the
preservation of the rights of the Secured Party therein.
|
2
| 4.4 |
Enforceability
of Collateral. To the extent the Collateral consists of accounts,
instruments, documents, chattel paper, letter-of-credit rights, letters of
credit or general intangibles, the Collateral is enforceable in accordance
with its terms, is genuine, complies with applicable laws concerning form,
content and manner of preparation and execution, and all persons appearing
to be obligated on the Collateral have authority and capacity to contract
and are in fact obligated as they appear to be on the
Collateral. |
| 4.5 |
Title
to Collateral. The Company holds, or will hold at the time the Company
acquires an interest in after acquired Collateral, good and marketable
title to the Collateral free of all security interests and encumbrances
except for the Security Interest and the security interests and
encumbrances specified on Schedule 1 (the “Permitted
Liens”). The Debtors will keep the Collateral free of all security
interests and encumbrances except for the Security Interest and the
Permitted Liens. The Debtors will defend the Secured Party’s rights in the
Collateral against the claims and demands of all other
persons. |
| 4.6 |
Collateral
Location. The Debtors will keep all tangible Collateral at the
principal office and at the locations specified on Schedule 1.
|
| 4.7 |
Collateral
Use. The Debtors will use the Collateral only for business purposes.
The Debtors will not use or keep any Collateral for any unlawful purpose
or in violation of any federal, state or local law, statute or
ordinance. |
| 4.8 |
Maintenance
of Collateral. The Debtors will maintain all tangible Collateral in
good condition and repair. The Debtors will not commit or permit damage to
or destruction of any of the Collateral. The Debtors will give the Secured
Party prompt written notice of any material loss of or damage to any
tangible Collateral and of any other happening or event that materially
affects the existence, value or amount of the
Collateral. |
| 4.9 |
Disposition
of Collateral. The Debtors will not sell or otherwise dispose of any
Collateral or any interest in any Collateral without the prior written
consent of the Secured Party, except that until the occurrence of an Event
of Default (as defined in Section 5 below), the Company may sell any
inventory constituting Collateral in the ordinary course of the Company’s
business. |
| 4.10 |
Taxes,
Assessments and Liens. Other than the Assumed Liabilities, the Debtors
will promptly pay all taxes and other governmental charges levied or
assessed upon or against any Collateral. |
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| 4.11 |
Records;
Access. The Debtors will keep accurate and complete records pertaining
to the Collateral and to the Company’s business and financial condition
and will submit to the Secured Party all reports regarding the Collateral
and the Debtor’s business and financial condition as and when the Secured
Party may reasonably request. During normal business hours, the Debtors
will permit the Secured Party and its representatives to examine or
inspect any Collateral, wherever located, and to examine, inspect and copy
the Company’s books and records relating to the Collateral and the
Company’s business and financial condition. |
| 4.12 |
Insurance.
The Debtors will keep all tangible Collateral insured against risks of
fire (including so-called extended coverage), theft and other risks and in
such amounts as the Secured Party may reasonably request, with any loss
payable to the Secured Party to the extent of its interest. Subject to the
Permitted Liens, the Debtors assigns to the Secured Party all money due or
to become due with respect to, and all other rights of the Debtors with
respect to, all insurance concerning the Collateral and the Debtors direct
the issuer of any such insurance to pay all such money directly to the
Secured Party. |
| 4.13 |
Collection
Costs. The Debtors will reimburse the Secured Party on demand for all
costs of collection of any of the Obligations and all other expenses
incurred by the Secured Party in connection with the perfection,
protection, defense or enforcement of the Security Interest and this
Agreement, including all reasonable attorneys’ fees incurred by the
Secured Party whether or not any litigation or bankruptcy or insolvency
proceeding is commenced. |
| 4.14 |
Financing
Statements. The Debtors authorize the Secured Party to file one or
more financing or continuation statements, and amendments thereto,
relative to all or any part of the Collateral without Debtor’s signature
where permitted by law, in each case in such form and substance as the
Secured Party may determine. The Debtors shall pay all filing,
registration and recording fees and any taxes, duties, imports,
assessments and charges arising out of or in connection with the execution
and delivery of this Agreement, any agreement supplemental hereto, any
financing statements, and any instruments of further assurance.
|
| 5. |
Events
of Default. It shall be an “Event of Default” under this
Agreement if any of the Debtors fails to pay any of the Obligations
when due and any applicable grace period lapses without cure by the
Debtors. |
| 6. |
Remedies
Upon Event of Default. Upon the occurrence of an Event of Default and
at any time thereafter, the Secured Party may exercise one or more of the
following rights and remedies, subject to the priority of the Permitted
Liens: (a) declare any or all unmatured Obligations to be immediately
due and payable without presentment or any other notice or demand and
immediately enforce payment of any or all of the Obligations;
(b) require any of the Debtors to make the Collateral available to
the Secured Party at a place to be designated by the Secured Party;
(c) exercise and enforce any rights or remedies available upon
default to a secured party under the Uniform Commercial Code as amended
from time to time, enacted in any applicable jurisdiction (the
“UCC”), and, if notice to the Debtors of the intended disposition
of Collateral or any other intended action is required by law, such notice
shall be commercially reasonable if given at least ten calendar days prior
to the intended disposition or other action; and (d) exercise and
enforce any other rights or remedies available to the Secured Party by law
or agreement against the Collateral, the Debtors, or any other person or
property. The Secured Party’s duty of care with respect to the Collateral
in its possession will be fulfilled if the Secured Party exercises
reasonable care in physically safekeeping the Collateral or, in the case
of Collateral in the possession of a bailee or other third person,
exercises reasonable care in the selection of the bailee or other third
person. Mere delay or failure to act will not preclude the exercise or
enforcement of any of Secured Party’s rights or remedies. All rights and
remedies of the Secured Party are cumulative and may be exercised
singularly or concurrently, at the Secured Party’s
option. |
4
| 7. |
Miscellaneous.
The following miscellaneous provisions are a part of this
Agreement: |
| 7.1 |
Definitions.
Terms not otherwise defined in this Agreement shall have the meanings
ascribed to them, if any, under the UCC and such meanings shall
automatically change at the time that any amendment to the UCC, which
changes such meanings, shall become
effective. |
| 7.2 |
Notices.
All notices under this Agreement must be in writing and will be deemed
given when delivered or placed in the United States mail, registered or
certified, postage prepaid, addressed to the respective party at the
address set forth in the Management Agreement. Any party may change its
address for notices under this Agreement by giving written notice to the
other parties. |
| 7.3 |
Amendments/Waivers.
This Agreement may be waived, amended, modified or terminated and the
Security Interest may be released only in a writing signed by the Secured
Party. Any waiver signed by the Secured Party will be effective only in
the specific instance and for the specific purpose
given. |
| 7.4 |
Applicable
Law. This Agreement is governed by the laws of the State of Illinois
without regard to the conflict of law principles. If any provision of this
Agreement is held unlawful or unenforceable in any respect, such
illegality or unenforceability will not affect other provisions or
applications that can be given effect and this Agreement will be construed
and enforced as if the unlawful or unenforceable provision or application
had never been contained in or prescribed by this
Agreement. |
| 7.5 |
Caption
Headings. Caption headings in this Agreement are for convenience
purposes only and are not to be used to interpret or define the provisions
of this Agreement. |
| 7.6 |
Successors
and Assigns. This Agreement is binding upon and will inure to the
benefit of the parties and their successors and
assigns. |
| 7.7 |
Counterparts.
This Agreement may be executed in several counterparts, each of which will
be an original, and all of which will constitute one and the same
instrument. |
[REMAINDER OF THIS PAGE BLANK. SIGNATURE PAGE FOLLOWS.]
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The parties have
executed this Agreement to be made effective as of the Execution Date, as that
term is used and defined in the Purchase Agreement.
| DEBTORS: | ||
| ACCERIS COMMUNICATIONS INC. | ||
| |
|
|
| By: | /s/ | |
|
Name: | ||
| Title: | ||
| ACCERIS COMMUNICATIONS CORP. | ||
| |
|
|
| By: | /s/ | |
|
Name: | ||
| Title: | ||
| SECURED PARTY: | ||
|
ACCERIS
MANAGEMENT AND ACQUISITION LLC | ||
| |
|
|
| By: | /s/ | |
|
Name: | ||
| Title: | ||
[Signature Page to Security Agreement]
6
SCHEDULE 1
TO
|
DEBTOR’S
CHIEF EXECUTIVE OFFICE: |
SECURED
PARTY’S ADDRESS: |
|
0000
Xxxxxxx Xxxx |
00
Xxxxx 0xx Xxxxxx, Xxxxx 0000 |
|
Xxxxxxxxxx,
XX 00000 |
Xxxxxxxxxxx,
Xxxxxxxxx 00000 |
|
Attn:
Chief Operating Officer |
Attn:
Xxxx Xxxx/Xxxx Xxxxxxxxxx |
|
Fax#:
000-000-0000 |
Fax#:
000-000-0000 |
The Company’s Delaware Organizational and Federal Tax Identification
Numbers:
Delaware Organizational Number: 3234808
Federal Tax Identification Number:________
Permitted Liens:
Secured
Party |
Collateral |
|
Xxxxx
Fargo Foothill, Inc. |
All
of the Collateral |
|
Laurus |
All
of the collateral set forth in the Laurus Credit Documents, expressly
subordinated to Xxxxx Fargo Foothills, Inc. by an Intercreditor
Agreement |
Collateral Locations in addition to the Company’s Principal Office:
000 Xxxxxxxx Xxxx, XX, XX
00000
0000 Xxxxxxxx Xxxx Xxxxxx, Xxx
Xxxxx, XX 00000
0000 X Xxxxxx, XX, Xxxxxxxxxx,
D. C. 20005
0000 XX
00xx Xxxxxx, Xxxxx, Xxxxxxx
00000
Printers Square, 000 X.
Xxxxxxx, Xxxxx 000, Xxxxxxx, Xxxxxxxx 00000
0 Xxxx Xxxxxx, Xxxxx 000,
Xxxxxxxxx, XX 00000
000 Xxxxxx
Xxxxx, Xxxxxxxx, XX
00 Xxxxxx
Xxxxxx, Xxxxx 0000, XX, XX 00000
7
Energy Center
Fax Bay 145D, 0000 Xxxxxxxx Xxxx, Xxxxxxxxxxx, XX 00000
Hill behind
Xxxxxxx Road office, Microwave Tower, Pittsburg, PA 15221
Green Hills
Corporate Center, 000 Xxxxxx Xxxx, Xxxxx 0000, Xxxxxxx, XX 00000
0000 Xxxxx
Xxxxxx, Xxxxx 0000, Xxxxxx, Xxxxx 00000
0000 Xxxx
Xxxxx Xxxxxx, Xxxx Xxxx Xxxx , XX 00000
000 Xxxxxxxx
Xxxxxx, Xxxxxxx, XX 00000
000 Xxxxxxx,
Xxxxxxxx Xxxxx, XX 00000
0000
Xxxxxxxxxx Xxxxxx Xxxx, Xxxxxxxxxxxx, XX 00000
8
