SECURITY AGREEMENT
1. Identification.
This Security Agreement (the "Agreement"), dated as of September ___,
2005, is entered into by and between SVC Financial Services, Inc., a Colorado
corporation ("Debtor"), and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, as collateral agent acting in the
manner and to the extent described in the Collateral Agent Agreement defined
below (the "Collateral Agent"), for the benefit of the parties identified on
Schedule A hereto (collectively, the "Lenders").
2. Recitals.
2.1 The Lenders have made, are making and will be making loans to Debtor
(the "Loans"). It is beneficial to Debtor that the Loans were made and are being
made.
2.2 The Loans are and will be evidenced by certain convertible promissory
notes (each a "Convertible Note") issued by Debtor on or about the date of and
after the date of this Agreement pursuant to subscription agreements (each a
"Subscription Agreement") to which Debtor and Lenders are parties. The Notes are
further identified on Schedule A hereto and were and will be executed by Debtor
as "Borrower" or "Debtor" for the benefit of each Lender as the "Holder" or
"Lender" thereof. Schedule A hereto may be amended to include such other Lenders
who become parties hereto and sign this Agreement, the Collateral Agent
Agreement and any other agreement reasonably requested by the Collateral Agent,
who will have purchased Notes pursuant to the Subscription Agreement.
2.3 In consideration of the Loans made and to be made by Lenders to Debtor
and for other good and valuable consideration, and as security for the
performance by Debtor of its obligations under the Notes and as security for the
repayment of the Loans and all other sums due from Debtor to Lenders arising
under the Transaction Documents (as defined in the Subscription Agreement), and
any other agreement between or among them (collectively, the "Obligations"),
Debtor, for good and valuable consideration, receipt of which is acknowledged,
has agreed to grant to the Collateral Agent, for the benefit of the Lenders, a
security interest in the Collateral (as such term is hereinafter defined), on
the terms and conditions hereinafter set forth. Obligations include all future
advances by Lenders to Debtor made pursuant to the Subscription Agreement.
2.4 The Lenders have appointed ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ as Collateral Agent
pursuant to that certain Collateral Agent Agreement dated at or about the date
of this Agreement ("Collateral Agent Agreement"), among the Lenders and
Collateral Agent.
2.5 The following defined terms which are defined in the Uniform
Commercial Code in effect in the State of New York on the date hereof are used
herein as so defined: Accounts, Chattel Paper, Documents, Equipment, General
Intangibles, Instruments, Inventory and Proceeds.
3. Grant of General Security Interest in Collateral.
3.1 As security for the Obligations of Debtor, Debtor hereby grants the
Collateral Agent, for the benefit of the Lenders, a security interest in the
Collateral.
3.2 "Collateral" shall mean all of the following property of Debtor:
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(A) All now owned and hereafter acquired right, title and interest of
Debtor in, to and in respect of all Accounts, Goods, real or personal property,
all present and future books and records relating to the foregoing and all
products and Proceeds of the foregoing, and as set forth below:
(i) All now owned and hereafter acquired right, title and interest of
Debtor in, to and in respect of all: Accounts, interests in goods represented by
Accounts, returned, reclaimed or repossessed goods with respect thereto and
rights as an unpaid vendor; contract rights; Chattel Paper; investment property;
General Intangibles (including but not limited to, tax and duty claims and
refunds, registered and unregistered patents, trademarks, service marks,
certificates, copyrights trade names, applications for the foregoing, trade
secrets, goodwill, processes, drawings, blueprints, customer lists, licenses,
whether as licensor or licensee, chooses in action and other claims, and
existing and future leasehold interests in equipment, real estate and fixtures);
Documents; Instruments; letters of credit, bankers' acceptances or guaranties;
cash moneys, deposits; securities, bank accounts, deposit accounts, credits and
other property now or hereafter owned or held in any capacity by Debtor, as well
as agreements or property securing or relating to any of the items referred to
above;
(ii) Goods: All now owned and hereafter acquired right, title and interest
of Debtor in, to and in respect of goods, including, but not limited to:
(a) All Inventory, wherever located, whether now owned or hereafter
acquired, of whatever kind, nature or description, including all raw materials,
work-in-process, finished goods, and materials to be used or consumed in Debtor'
business; finished goods, timber cut or to be cut, oil, gas, hydrocarbons, and
minerals extracted or to be extracted, and all names or marks affixed to or to
be affixed thereto for purposes of selling same by the seller, manufacturer,
lessor or licensor thereof and all Inventory which may be returned to any Debtor
by its customers or repossessed by any Debtor and all of Debtor' right, title
and interest in and to the foregoing (including all of a Debtor's rights as a
seller of goods);
(b) All Equipment and fixtures, wherever located, whether now owned or
hereafter acquired, including, without limitation, all machinery, furniture and
fixtures, and any and all additions, substitutions, replacements (including
spare parts), and accessions thereof and thereto (including, but not limited to
Debtor' rights to acquire any of the foregoing, whether by exercise of a
purchase option or otherwise);
(iii) Property: All now owned and hereafter acquired right, title and
interests of Debtor in, to and in respect of any other personal property in or
upon which a Debtor has or may hereafter have a security interest, lien or right
of setoff;
(iv) Books and Records: All present and future books and records relating
to any of the above including, without limitation, all computer programs,
printed output and computer readable data in the possession or control of the
Debtor, any computer service bureau or other third party; and
(v) Products and Proceeds: All products and Proceeds of the foregoing in
whatever form and wherever located, including, without limitation, all insurance
proceeds and all claims against third parties for loss or destruction of or
damage to any of the foregoing.
(B) All now owned and hereafter acquired right, title and interest of
Debtor in, to and in respect of the following:
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(i) the shares of stock, partnership interests, member interests or other
equity interests at any time and from time to time acquired by Debtor of any and
all entities now or hereafter existing, (such entities, being hereinafter
referred to collectively as the "Pledged Issuers" and individually as a "Pledged
Issuer"), the certificates representing such shares, partnership interests,
member interests or other interests all options and other rights, contractual or
otherwise, in respect thereof and all dividends, distributions, cash,
instruments, investment property and other property from time to time received,
receivable or otherwise distributed in respect of or in exchange for any or all
of such shares, partnership interests, member interests or other interests;
(ii) all additional shares of stock, partnership interests, member
interests or other equity interests from time to time acquired by Debtor, of any
Pledged Issuer, the certificates representing such additional shares, all
options and other rights, contractual or otherwise, in respect thereof and all
dividends, distributions, cash, instruments, investment property and other
property from time to time received, receivable or otherwise distributed in
respect of or in exchange for any or all of such additional shares, interests or
equity; and
(iii) all security entitlements of Debtor in, and all Proceeds of any and
all of the foregoing in each case, whether now owned or hereafter acquired by a
Debtor and howsoever its interest therein may arise or appear (whether by
ownership, security interest, lien, claim or otherwise).
Notwithstanding anything to the contrary contained herein or any
Transaction Document, Collateral shall not include any of the foregoing:
(A) motor vehicles;
(B) real property;
(C) any rights or interests in any contract, lease, permit, license,
charter or license agreement covering real or personal property, as such, if
under the terms of such contract, lease, permit, license, charter or license
agreement, or applicable law with respect thereto, the valid grant of a security
interest or lien therein to Collateral Agent and Lenders is prohibited; and
(D) any personal property which is, or at the time of a Debtor's
acquisition thereof shall be subject to a purchase money mortgage or other
purchase money lien or security interest (including capital leases).
3.3 The Collateral Agent is hereby specifically authorized, after the
Maturity Date (defined in the Notes) accelerated or otherwise, or after an Event
of Default (as defined herein) and the expiration of any applicable cure period,
to transfer any Collateral into the name of the Collateral Agent and to take any
and all action deemed advisable to the Collateral Agent to remove any transfer
restrictions affecting the Collateral.
4. Perfection of Security Interest.
4.1 Debtor shall prepare, execute and deliver to the Collateral Agent
UCC-1 Financing Statements. The Collateral Agent is instructed to prepare and
file at Debtor's cost and expense, financing statements in such jurisdictions
deemed advisable to the Collateral Agent, including but not limited to the State
of Colorado. The Financing Statements are deemed to have been filed for the
benefit of the Collateral Agent and Lenders identified on Schedule A hereto.
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4.2 The Debtor shall deliver to Collateral Agent promptly stock
certificates representing all of the shares of outstanding capital stock of each
Guarantor (the "Securities"). All such certificates shall be held by or on
behalf of Collateral Agent pursuant hereto and shall be delivered in suitable
form for transfer by delivery, or shall be accompanied by duly executed
instruments of transfer or assignment or undated stock powers executed in blank,
all in form and substance satisfactory to Collateral Agent.
4.3 All other certificates and instruments constituting Collateral from
time to time required to be pledged to Collateral Agent pursuant to the terms
hereof (the "Additional Collateral") shall be delivered to Collateral Agent
promptly upon receipt thereof by or on behalf of Debtor. All such certificates
and instruments shall be held by or on behalf of Collateral Agent pursuant
hereto and shall be delivered in suitable form for transfer by delivery, or
shall be accompanied by duly executed instruments of transfer or assignment or
undated stock powers executed in blank, all in form and substance satisfactory
to Collateral Agent. If any Collateral consists of uncertificated securities,
unless the immediately following sentence is applicable thereto, Debtor shall
cause Collateral Agent (or its custodian, nominee or other designee) to become
the registered holder thereof, or cause each issuer of such securities to agree
that it will comply with instructions originated by Collateral Agent with
respect to such securities without further consent by Debtor. If any Collateral
consists of security entitlements, Debtor shall transfer such security
entitlements to Collateral Agent (or its custodian, nominee or other designee)
or cause the applicable securities intermediary to agree that it will comply
with entitlement orders by Collateral Agent without further consent by Debtor.
4.4 Within five (5) days after the receipt by a Debtor of any Additional
Collateral, a Pledge Amendment, duly executed by such Debtor, in substantially
the form of Annex I hereto (a "Pledge Amendment"), shall be delivered to
Collateral Agent in respect of the Additional Collateral to be pledged pursuant
to this Agreement. Debtor hereby authorizes Collateral Agent to attach each
Pledge Amendment to this Agreement and agrees that all certificates or
instruments listed on any Pledge Amendment delivered to Collateral Agent shall
for all purposes hereunder constitute Collateral.
4.5 If Debtor shall receive, by virtue of Debtor being or having been an
owner of any Collateral, any (i) stock certificate (including, without
limitation, any certificate representing a stock dividend or distribution in
connection with any increase or reduction of capital, reclassification, merger,
consolidation, sale of assets, combination of shares, stock split, spin-off or
split-off), promissory note or other instrument, (ii) option or right, whether
as an addition to, substitution for, or in exchange for, any Collateral, or
otherwise, (iii) dividends payable in cash (except such dividends permitted to
be retained by Debtor pursuant to Section 5.1 hereof) or in securities or other
property or (iv) dividends or other distributions in connection with a partial
or total liquidation or dissolution or in connection with a reduction of
capital, capital surplus or paid-in surplus, Debtor shall receive such stock
certificate, promissory note, instrument, option, right, payment or distribution
in trust for the benefit of Collateral Agent, shall segregate it from Debtor's
other property and shall deliver it forthwith to Collateral Agent, in the exact
form received, with any necessary endorsement and/or appropriate stock powers
duly executed in blank, to be held by Collateral Agent as Collateral and as
further collateral security for the Obligations.
5. Distribution.
5.1 So long as no Event of Default exists, Debtor shall be entitled (i) to
exercise all voting power pertaining to any of the Collateral, provided such
exercise is not contrary to the interests of the
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Lenders and does not impair the Collateral and (ii) may receive and retain any
and all proceeds, dividends, interest payments or other distributions paid in
respect of the Collateral.
5.2. At any time an Event of Default exists or has occurred and is
continuing, all rights of Debtor, upon notice given by Collateral Agent, to
exercise the voting power and receive payments, which it would otherwise be
entitled to pursuant to Section 5.1, shall cease and all such rights shall
thereupon become vested in Collateral Agent, which shall thereupon have the sole
right to exercise such voting power and receive such payments.
5.3 All dividends, distributions, interest and other payments which are
received by Debtor contrary to the provisions of Section 5.2 shall be received
in trust for the benefit of Collateral Agent, shall be segregated from other
funds of Debtor, and shall be forthwith paid over to Collateral Agent as
Collateral in the exact form received with any necessary endorsement and/or
appropriate stock powers duly executed in blank, to be held by Collateral Agent
as Collateral and as further collateral security for the Obligations.
6. Further Action By Debtor; Covenants and Warranties.
6.1 Collateral Agent at all times shall have a perfected security interest
in (a) the Collateral to the extent a security interest can be perfected by the
filing of a financial statement under the Uniform Commercial Code of the
relevant jurisdiction (b) the Securities and (c) Additional Collateral (the
"Perfected Collateral"). Debtor has and will continue to have full title to the
Collateral free from any liens, leases, encumbrances, judgments or other claims.
Collateral Agent's security interest in the Collateral constitutes and will
continue to constitute a first, prior and indefeasible security interest in
favor of Collateral Agent. Debtor will do all acts and things, and will execute
and file all instruments (including, but not limited to, security agreements,
financing statements, continuation statements, etc.) reasonably requested by
Collateral Agent to establish, maintain and continue the perfected security
interest of Collateral Agent in the Perfected Collateral, and will promptly on
demand, pay all costs and expenses of filing and recording, including the costs
of any searches reasonably deemed necessary by Collateral Agent from time to
time to establish and determine the validity and the continuing priority of the
security interest of Collateral Agent, and also pay all other claims and charges
that, in the opinion of Collateral Agent, exercised in good faith, are
reasonably likely to materially prejudice, imperil or otherwise affect the
Collateral or Collateral Agent's or Lenders' security interests therein.
6.2 Other than in the ordinary course of business, and except for
Collateral which is substituted by assets of identical or greater value or which
has become obsolete or is of inconsequential in value, Debtor will not sell,
transfer, assign or pledge those items of Collateral (or allow any such items to
be sold, transferred, assigned or pledged), without the prior written consent of
Collateral Agent other than a transfer of the Collateral to a wholly-owned
subsidiary or to another Debtor on prior notice to Collateral Agent, and
provided the Collateral remains subject to the security interest herein
described. Although Proceeds of Collateral are covered by this Agreement, this
shall not be construed to mean that Collateral Agent consents to any sale of the
Collateral, except as provided herein. Sales of Collateral in the ordinary
course of business shall be free of the security interest of Lenders and
Collateral Agent and Lenders and Collateral Agent shall promptly execute such
documents (including without limitation releases and termination statements) as
may be required by Debtor to evidence or effectuate the same.
6.3 Debtor will, at all reasonable times during regular business hours and
upon reasonable notice, allow Collateral Agent or its representatives free and
complete access to the Collateral and all of such Debtor's records which in any
way relate to the Collateral, for such inspection and examination as Collateral
Agent reasonably deems necessary.
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6.4 Debtor, at its sole cost and expense, will protect and defend this
Security Agreement, all of the rights of Collateral Agent and Lenders hereunder,
and the Collateral against the claims and demands of all other persons.
6.5 Debtor will promptly notify Collateral Agent of any levy, distraint or
other seizure by legal process or otherwise of any part of the Collateral, and
of any threatened or filed claims or proceedings that are reasonably likely to
affect or impair any of the rights of Collateral Agent under this Security
Agreement in any material respect.
6.6 Debtor, at its own expense, will obtain and maintain in force
insurance policies covering losses or damage to those items of Collateral which
constitute physical personal property, which insurance shall be of the types
customarily insured against by companies in the same or similar business,
similarly situated, in such amounts (with such deductible amounts) as is
customary for such companies under the same or similar circumstances, similarly
situated. Debtor shall make the Collateral Agent a loss payee thereon to the
extent of its interest in the Collateral. Collateral Agent is hereby irrevocably
(until the Obligations are paid in full) appointed Debtor's attorney-in-fact to
endorse any check or draft that may be payable to such Debtor so that Collateral
Agent may collect the proceeds payable for any loss under such insurance. The
proceeds of such insurance, less any costs and expenses incurred or paid by
Collateral Agent in the collection thereof, shall be applied either toward the
cost of the repair or replacement of the items damaged or destroyed, or on
account of any sums secured hereby, whether or not then due or payable.
6.7 Collateral Agent may, at its option, and without any obligation to do
so, pay, perform and discharge any and all amounts, costs, expenses and
liabilities herein agreed to be paid or performed by Debtor. Upon Debtor's
failure to do so, all amounts expended by Collateral Agent in so doing shall
become part of the Obligations secured hereby, and shall be immediately due and
payable by Debtor to Collateral Agent upon demand and shall bear interest at the
lesser of 15% per annum or the highest legal amount from the dates of such
expenditures until paid.
6.8 Upon the request of Collateral Agent, Debtor will furnish to
Collateral Agent within five (5) business days thereafter, or to any proposed
assignee of this Security Agreement, a written statement in form reasonably
satisfactory to Collateral Agent, duly acknowledged, certifying the amount of
the principal and interest and any other sum then owing under the Obligations,
whether to its knowledge any claims, offsets or defenses exist against the
Obligations or against this Security Agreement, or any of the terms and
provisions of any other agreement of Debtor securing the Obligations. In
connection with any assignment by Collateral Agent of this Security Agreement,
Debtor hereby agrees to cause the insurance policies required hereby to be
carried by such Debtor, if any, to be endorsed in form satisfactory to
Collateral Agent or to such assignee, with loss payable clauses in favor of such
assignee, and to cause such endorsements to be delivered to Collateral Agent
within ten (10) calendar days after request therefor by Collateral Agent.
6.9 Debtor will, at its own expense, make, execute, endorse, acknowledge,
file and/or deliver to the Collateral Agent from time to time such vouchers,
invoices, schedules, confirmatory assignments, conveyances, financing
statements, transfer endorsements, powers of attorney, certificates, reports and
other reasonable assurances or instruments and take further steps relating to
the Collateral and other property or rights covered by the security interest
hereby granted, as the Collateral Agent may reasonably require to perfect its
security interest hereunder.
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6.10 Debtor represent and warrant that they are the true and lawful
exclusive owners of the Collateral, free and clear of any liens and
encumbrances.
6.11 Debtor hereby agrees not to divest itself of any right under the
Collateral except as permitted herein absent prior written approval of the
Collateral Agent, except to a subsidiary organized and located in the United
States on prior notice to Collateral Agent provided the Collateral remains
subject to the security interest herein described.
6.12 Debtor shall cause each Subsidiary of such Debtor in existence on the
date hereof and each Subsidiary not in existence on the date hereof to execute
and deliver to Collateral Agent promptly and in any event within 10 days after
the formation, acquisition or change in status thereof (A) a guaranty
guaranteeing the Obligations and (B) if requested by Collateral Agent, a
security and pledge agreement substantially in the form of this Agreement
together with (x) certificates evidencing all of the capital stock of each
Subsidiary of and any entity owned by such Subsidiary, (y) undated stock powers
executed in blank with signatures guaranteed, and (z) such opinion of counsel
and such approving certificate of such Subsidiary as Collateral Agent may
reasonably request in respect of complying with any legend on any such
certificate or any other matter relating to such shares and (C) such other
agreements, instruments, approvals, legal opinions or other documents reasonably
requested by Collateral Agent in order to create, perfect, establish the first
priority of or otherwise protect any lien purported to be covered by any such
pledge and security agreement or otherwise to effect the intent that all
property and assets of such Subsidiary shall become Collateral for the
Obligations. For purposes of this Agreement, "Subsidiary" means, with respect to
any entity at any date, any corporation, limited or general partnership, limited
liability company, trust, estate, association, joint venture or other business
entity) of which more than 50% of (A) the outstanding capital stock having (in
the absence of contingencies) ordinary voting power to elect a majority of the
board of directors or other managing body of such entity, (B) in the case of a
partnership or limited liability company, the interest in the capital or profits
of such partnership or limited liability company or (C) in the case of a trust,
estate, association, joint venture or other entity, the beneficial interest in
such trust, estate, association or other entity business is, at the time of
determination, owned or controlled directly or indirectly through one or more
intermediaries, by such entity. Annex I annexed hereto contains a list of all
Subsidiaries of the Debtor as of the date of this Agreement.
7. Power of Attorney.
At any time an Event of Default exists or has occurred and is continuing,
Debtor hereby irrevocably constitutes and appoints the Collateral Agent as the
true and lawful attorney of such Debtor, with full power of substitution, in the
place and stead of such Debtor and in the name of such Debtor or otherwise, at
any time or times, in the discretion of the Collateral Agent, to take any action
and to execute any instrument or document which the Collateral Agent may deem
necessary or advisable to accomplish the purposes of this Agreement. This power
of attorney is coupled with an interest and is irrevocable until the Obligations
are satisfied.
8. Performance By The Collateral Agent.
If a Debtor fails to perform any material covenant, agreement, duty or
obligation of such Debtor under this Agreement, the Collateral Agent may, after
any applicable cure period, at any time or times in its discretion, take action
to effect performance of such obligation. All reasonable expenses of the
Collateral Agent incurred in connection with the foregoing authorization shall
be payable by Debtor as provided in Paragraph 12.1 hereof. No discretionary
right, remedy or power granted to the Collateral Agent under any part of this
Agreement shall be deemed to impose any obligation whatsoever on the Collateral
Agent with respect thereto, such rights, remedies and powers being solely for
the protection of the Collateral Agent.
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9. Event of Default.
An event of default ("Event of Default") shall be deemed to have occurred
hereunder upon the occurrence of any event of default as defined and described
in this Agreement, in the Notes, Subscription Agreement, and any other agreement
to which Debtor and a Lender are parties. Upon and after any Event of Default,
after the applicable cure period, if any, any or all of the Obligations shall
become immediately due and payable at the option of the Collateral Agent, for
the benefit of the Lenders, and the Collateral Agent may dispose of Collateral
as provided below. A default by Debtor of any of its material obligations
pursuant to this Agreement and any of the Transaction Documents (as defined in
the Subscription Agreement) shall be an Event of Default hereunder and an "Event
of Default" as defined in the Notes, and Subscription Agreement.
10. Disposition of Collateral.
Upon and after any Event of Default which is then continuing,
10.1 The Collateral Agent may exercise its rights with respect to each and
every component of the Collateral, without regard to the existence of any other
security or source of payment for the Obligations. In addition to other rights
and remedies provided for herein or otherwise available to it, the Collateral
Agent shall have all of the rights and remedies of a lender on default under the
Uniform Commercial Code then in effect in the State of New York.
10.2 If any notice to Debtor of the sale or other disposition of
Collateral is required by then applicable law, five business (5) days prior
written notice (which Debtor agree is reasonable notice within the meaning of
Section 9.612(a) of the Uniform Commercial Code) shall be given to Debtor of the
time and place of any sale of Collateral which Debtor hereby agree may be by
private sale. The rights granted in this Section are in addition to any and all
rights available to Collateral Agent under the Uniform Commercial Code.
10.3 The Collateral Agent is authorized, at any such sale, if the
Collateral Agent deems it advisable to do so, in order to comply with any
applicable securities laws, to restrict the prospective bidders or purchasers to
persons who will represent and agree, among other things, that they are
purchasing the Collateral for their own account for investment, and not with a
view to the distribution or resale thereof, or otherwise to restrict such sale
in such other manner as the Collateral Agent deems advisable to ensure such
compliance. Sales made subject to such restrictions shall be deemed to have been
made in a commercially reasonable manner.
10.4 All proceeds received by the Collateral Agent for the benefit of the
Lenders in respect of any sale, collection or other enforcement or disposition
of Collateral, shall be applied (after deduction of any amounts payable to the
Collateral Agent pursuant to Paragraph 12.1 hereof) against the Obligations pro
rata among the Lenders in proportion to their interests in the Obligations. Upon
payment in full of all Obligations, Debtor shall be entitled to the return of
all Collateral, including cash, which has not been used or applied toward the
payment of Obligations or used or applied to any and all costs or expenses of
the Collateral Agent incurred in connection with the liquidation of the
Collateral (unless another person is legally entitled thereto). Any assignment
of Collateral by the Collateral Agent to Debtor shall be without representation
or warranty of any nature whatsoever and wholly without recourse. To the extent
allowed
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by law, each Lender may purchase the Collateral and pay for such purchase by
offsetting up to such Lender's pro rata portion of the purchase price with sums
owed to such Lender by Debtor arising under the Obligations or any other source.
11. Miscellaneous.
11.1 Expenses. Debtor shall pay to the Collateral Agent, on demand, the
amount of any and all reasonable expenses, including, without limitation,
attorneys' fees, legal expenses and brokers' fees, which the Collateral Agent
may incur in connection with (a) sale, collection or other enforcement or
disposition of Collateral; (b) exercise or enforcement of any the rights,
remedies or powers of the Collateral Agent hereunder or with respect to any or
all of the Obligations upon breach or threatened breach; or (c) failure by
Debtor to perform and observe any agreements of Debtor contained herein which
are performed by the Collateral Agent.
11.2 Waivers, Amendment and Remedies. No course of dealing by the
Collateral Agent and no failure by the Collateral Agent to exercise, or delay by
the Collateral Agent in exercising, any right, remedy or power hereunder shall
operate as a waiver thereof, and no single or partial exercise thereof shall
preclude any other or further exercise thereof or the exercise of any other
right, remedy or power of the Collateral Agent. No amendment, modification or
waiver of any provision of this Agreement and no consent to any departure by
Debtor therefrom, shall, in any event, be effective unless contained in a
writing signed by the Collateral Agent, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given. The rights, remedies and powers of the Collateral Agent, not only
hereunder, but also under any instruments and agreements evidencing or securing
the Obligations and under applicable law are cumulative, and may be exercised by
the Collateral Agent from time to time in such order as the Collateral Agent may
elect.
11.3 Notices. All notices or other communications given or made hereunder
shall be in writing and shall be personally delivered or deemed delivered the
first business day after being faxed (provided that a copy is delivered by first
class mail) to the party to receive the same at its address set forth below or
to such other address as either party shall hereafter give to the other by
notice duly made under this Section:
To Debtor:
SVC Financial Services, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, CEO and President
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy by telecopier only to:
Sichenzia ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇, Esq.
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
To Lenders: To the addresses and telecopier numbers set
forth on Schedule A
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To the Collateral Agent: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Grushko & ▇▇▇▇▇▇▇, P.C.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Any party may change its address by written notice in accordance with this
paragraph.
11.4 Term; Binding Effect. This Agreement shall (a) remain in full force
and effect until payment and satisfaction in full of all of the Obligations; (b)
be binding upon Debtor, and its successors and permitted assigns; and (c) inure
to the benefit of the Collateral Agent, for the benefit of the Lenders and their
respective successors and assigns.
11.5 Captions. The captions of Paragraphs, Articles and Sections in this
Agreement have been included for convenience of reference only, and shall not
define or limit the provisions hereof and have no legal or other significance
whatsoever.
11.6 Governing Law; Venue; Severability. This Agreement shall be governed
by and construed in accordance with the laws of the State of New York without
regard to conflicts of laws principles that would result in the application of
the substantive laws of another jurisdiction, except to the extent that the
perfection of the security interest granted hereby in respect of any item of
Collateral may be governed by the law of another jurisdiction. Any legal action
or proceeding against a Debtor with respect to this Agreement may be brought in
the courts in the State of New York or of the United States for the Southern
District of New York, and, by execution and delivery of this Agreement, Debtor
hereby irrevocably accepts for itself and in respect of its property, generally
and unconditionally, the jurisdiction of the aforesaid courts. Debtor hereby
irrevocably waives any objection which they may now or hereafter have to the
laying of venue of any of the aforesaid actions or proceedings arising out of or
in connection with this Agreement brought in the aforesaid courts and hereby
further irrevocably waives and agrees not to plead or claim in any such court
that any such action or proceeding brought in any such court has been brought in
an inconvenient forum. If any provision of this Agreement, or the application
thereof to any person or circumstance, is held invalid, such invalidity shall
not affect any other provisions which can be given effect without the invalid
provision or application, and to this end the provisions hereof shall be
severable and the remaining, valid provisions shall remain of full force and
effect.
11.7 Entire Agreement. This Agreement contains the entire agreement of the
parties and supersedes all other agreements and understandings, oral or written,
with respect to the matters contained herein.
11.8 Counterparts/Execution. This Agreement may be executed in any number
of counterparts and by the different signatories hereto on separate
counterparts, each of which, when so executed, shall be deemed an original, but
all such counterparts shall constitute but one and the same instrument. This
Agreement may be executed by facsimile signature and delivered by facsimile
transmission.
12. Intercreditor Terms. As between the Lenders, any distribution under
paragraph 10.4 shall be made proportionately based upon the remaining principal
amount (plus accrued and unpaid interest) to each as to the total amount then
owed to the Lenders as a whole. The rights of each Lender hereunder are pari
passu to the rights of the other Lenders hereunder. Any recovery hereunder shall
be shared ratably
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among the Lenders according to the then remaining principal amount owed to each
(plus accrued and unpaid interest) as to the total amount then owed to the
Lenders as a whole.
13. Termination; Release. When the Obligations have been indefeasibly paid
and performed in full or all outstanding Convertible Notes have been converted
to common stock pursuant to the terms of the Convertible Notes and the
Subscription Agreements, this Agreement shall terminated, and the Collateral
Agent, at the request and sole expense of the Debtor, will execute and deliver
to the Debtor the proper instruments (including UCC termination statements)
acknowledging the termination of the Security Agreement, and duly assign,
transfer and deliver to the Debtor, without recourse, representation or warranty
of any kind whatsoever, such of the Collateral, including, without limitation,
Securities and any Additional Collateral, as may be in the possession of the
Collateral Agent.
14. Collateral Agent.
14.1 Collateral Agent Powers. The powers conferred on the Collateral Agent
hereunder are solely to protect its interest (on behalf of the Lenders) in the
Collateral and shall not impose any duty on it to exercise any such powers.
14.2 Reasonable Care. The Collateral Agent is required to exercise
reasonable care in the custody and preservation of any Collateral in its
possession; provided, however, that the Collateral Agent shall be deemed to have
exercised reasonable care in the custody and preservation of any of the
Collateral if it takes such action for that purposes as any owner thereof
reasonably requests in writing at times other than upon the occurrence and
during the continuance of any Event of Default, but failure of the Collateral
Agent, to comply with any such request at any time shall not in itself be deemed
a failure to exercise reasonable care.
[THIS SPACE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the undersigned have executed and delivered this
Security Agreement, as of the date first written above.
"DEBTOR" "THE COLLATERAL AGENT"
SVC FINANCIAL SERVICES, INC. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
a Colorado corporation
By: _____________________________________ ____________________________________
Its: ____________________________________
APPROVED BY "LENDERS":
_____________________________________ ____________________________________
ALPHA CAPITAL AKTIENGESELLSCHAFT WHALEHAVEN CAPITAL FUND LIMITED
This Security Agreement may be signed by facsimile signature and
delivered by confirmed facsimile transmission.
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SCHEDULE A TO SECURITY AGREEMENT
--------------------------------- ------------------------------- ------------------------------
LENDER INITIAL CLOSING PURCHASE PRICE SECOND CLOSING PURCHASE PRICE
--------------------------------- ------------------------------- ------------------------------
ALPHA CAPITAL AKTIENGESELLSCHAFT $375,000.00 $375,000.00
▇▇▇▇▇▇▇▇▇ ▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇
Fax: ▇▇▇-▇▇-▇▇▇▇▇▇▇▇
--------------------------------- ------------------------------- ------------------------------
WHALEHAVEN CAPITAL FUND LIMITED $375,000.00 $375,000.00
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇-▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
--------------------------------- ------------------------------- ------------------------------
TOTAL $750,000.00 $750,000.00
--------------------------------- ------------------------------- ------------------------------
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ANNEX I
TO
SECURITY AGREEMENT
PLEDGE AMENDMENT
This Pledge Amendment, dated _________ __ 200_, is delivered pursuant to
Section 4.3 of the Security Agreement referred to below. The undersigned hereby
agrees that this Pledge Amendment may be attached to the Security Agreement,
dated September ____, 2005, as it may heretofore have been or hereafter may be
amended, restated, supplemented or otherwise modified from time to time and that
the shares listed on this Pledge Amendment shall be hereby pledged and assigned
to Collateral Agent and become part of the Collateral referred to in such
Security Agreement and shall secure all of the Obligations referred to in such
Security Agreement.
---------------------------------- ---------------------- --------------------------------- ----------------
Number Certificate
Name of Issuer of Shares Class Number(s)
-------------- --------- ----- ---------
---------------------------------- ---------------------- --------------------------------- ----------------
---------------------------------- ---------------------- --------------------------------- ----------------
---------------------------------- ---------------------- --------------------------------- ----------------
---------------------------------- ---------------------- --------------------------------- ----------------
---------------------------------- ---------------------- --------------------------------- ----------------
SVC FINANCIAL SERVICES, INC.
By: ______________________________
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