Exhibit 10.5
DATALOGIC INTERNATIONAL, INC. AND CERTAIN OF ITS SUBSIDIARIES
MASTER SECURITY AGREEMENT
To: Laurus Master Fund, Ltd.
c/o Ironshore Corporate Services, Ltd.
▇.▇. ▇▇▇ ▇▇▇▇ G.T
Queensgate House
South Church Street
Grand Cayman, Cayman Islands
Date: January 20, 2006
To Whom It May Concern:
1. To secure the payment of all Obligations (as hereafter defined),
DataLogic International, 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 (including, without limitation, any Accounts (as defined
below)), deposit accounts, including, without limitation, the Lockbox Deposit
Account (as defined below), 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") and (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 ▇▇▇▇▇ ▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇ 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;
(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); and
(k) On or prior to the 30th day following the Closing Date, each
Assignor will (x) irrevocably direct all of its present and future
Account Debtors (as defined below) and other persons obligated to make
payments constituting Collateral to make such payments directly to the
lockboxes maintained by such Assignor (the "Lockboxes") with Commerce
Bank, N.A., with its principal place of business at ▇▇▇▇ ▇▇▇▇▇ ▇▇ ▇▇▇▇,
▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ or such other financial institution
accepted by Laurus in writing as may be selected by the Company (the
"Lockbox Bank") (each such direction pursuant to this clause (x), a
"Direction Notice") and (y) provide Laurus with copies of each Direction
Notice, each of which shall be agreed to and acknowledged by the
respective Account Debtor. Upon receipt of such payments, the Lockbox
Bank has agreed to deposit the proceeds of such payments in that certain
deposit account maintained at the Lockbox Bank and evidenced by the
account name of DataLogic International Inc. and the account number of
7916654713, or such other deposit accepted by Laurus in writing (the
"Lockbox Deposit Account"). On or prior to the Closing Date, the
Company shall and shall cause the Lockbox Bank to enter into all such
documentation acceptable to Laurus pursuant to which, among other
things, the Lockbox Bank agrees to, following notification by Laurus
(which notification Laurus shall only give following the occurrence and
during the continuance of an Event of Default), comply only with the
instructions or other directions of Laurus concerning the Lockbox and
the Lockbox Deposit Account. All of each Assignor's invoices, account
statements and other written or oral communications directing,
instructing, demanding or requesting payment of any Account of any such
Assignor or any other amount constituting Collateral shall conspicuously
direct that all payments be made to the Lockbox or such other address as
Laurus may direct in writing. If, notwithstanding the instructions to
Account Debtors, any Assignor receives any payments, such Assignor shall
immediately remit such payments to the Lockbox Deposit Account in their
original form with all necessary endorsements. Until so remitted, the
Assignors shall hold all such payments in trust for and as the property
of Laurus and shall not commingle such payments with any of its other
funds or property. For the purpose of this Master Security Agreement,
(x) "Accounts" shall mean all "accounts", as such term is defined in the
Uniform Commercial Code as in effect in the State of New York on the
date hereof, now owned or hereafter acquired by any Assignor and (y)
"Account Debtor" shall mean any person or entity who is or may be
obligated with respect to, or on account of, an Account
4. The occurrence of any of the following events or conditions shall
constitute an "Event of Default" under this Master Security Agreement:
(a) Breach of any covenant, warranty, representation or
statement made or furnished to Laurus by any Assignor or on any
Assignor's benefit was false or misleading in any material respect when
made or furnished, and 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;
(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 and if commenced against any
Assignor shall not be dismissed within thirty (30) 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 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.
At Laurus' election, following the occurrence of an Event of Default which is
continuing, (x) Laurus may notify each Assignor's Account Debtors of Laurus'
security interest in the Accounts, collect them directly and charge the
collection costs and expenses thereof to the Assignors joint and several
account and (y) direct the Lockbox Bank to send all monies contained, or in
the future deposited into, the Lockbox Account, to a deposit account
maintained by Laurus (with any such monies received by Laurus to be applied in
accordance with the terms of this Master Security Agreement). 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 each of the Restricted Account and/or
the Commerce Bank Accounts and apply same to the repayment of the Obligations
(in such order of application as Laurus may elect).
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 referred to in
the Restricted Account Agreement and/or the Commerce Bank Accounts.
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; 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.
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. 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,
DATALOGIC INTERNATIONAL, INC.
By: /s/▇▇▇▇▇ ▇▇▇▇▇
Name: ▇▇▇▇▇ ▇▇▇▇▇
Title: CEO
DATALOGIC CONSULTING, INC.
By: /s/▇▇▇▇▇ ▇▇▇▇▇▇
Name: ▇▇▇▇▇ ▇▇▇▇▇▇
Title: President
Address: ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: 949-260-0130
IPN COMMUNICATIONS, INC.
By: /s/▇▇▇▇▇ ▇▇▇▇▇▇
Name: ▇▇▇▇▇ ▇▇▇▇▇▇
Title: President
Address: ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: 949-260-0130
DATALOGIC CONSULTING INTERNATIONAL, INC.
By: /s/▇▇▇▇▇ ▇▇▇▇▇
Name: ▇▇▇▇▇ ▇▇▇▇▇
Title: President
Address: ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: 949-260-0130
DATALOGIC NEW MEXICO, INC.
By: /s/▇▇▇▇▇ ▇▇▇▇▇
Name: ▇▇▇▇▇ ▇▇▇▇▇
Title: President
Address: c/o DataLogic International, Inc.
▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: 949-260-0130
ACKNOWLEDGED:
LAURUS MASTER FUND, LTD.
By:/s/▇▇▇▇▇▇ Grin
Name: ▇▇▇▇▇▇ Grin
Title: Director
SCHEDULE A
Entity Jurisdiction of Organization Identification
Organization Number
DataLogic International,
Inc. Delaware 2658163
DataLogic Consulting, Inc. Texas 01281667
IPN Communications, Inc. California C2511214
DataLogic Consulting
International, Inc. Delaware 3919286
DataLogic New Mexico, Inc. ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇