Exhibit 10.04
SECURITY AGREEMENT
SECURITY AGREEMENT (this "Agreement"), dated as of June 25, 2002, by and
among Universe2U Inc., a Nevada corporation (the "Company"), the subsidiaries of
the Company signature hereto, and the secured parties signatory hereto and their
respective endorsees, transferees and assigns (collectively, the "Secured
Party").
W I T N E S S E T H:
WHEREAS, pursuant to a Securities Purchase Agreement, dated the date
hereof between the Company and the Secured Party (the "Purchase Agreement"), the
Company has agreed to issue to the Secured Party and the Secured Party has
agreed to purchase from the Company certain of the Company's 12% Secured
Convertible Debentures, due one year from the date of issue (the "Debentures"),
which are convertible into shares of the Company's Common Stock, $.00001 par
value (the "Common Stock"). In connection therewith, the Company shall issue the
Secured Party certain Common Stock purchase warrants dated as of the date hereof
to purchase the number of shares of Common Stock indicated below each Secured
Party's name on the Purchase Agreement (the "Warrants");
WHEREAS, in order to induce the Secured Party to purchase the Debentures,
the Company has agreed to execute and deliver to the Secured Party this
Agreement for the benefit of the Secured Party and to grant to it a security
interest in certain property of the Company to secure the prompt payment,
performance and discharge in full of all of the Company's obligations under the
Debentures and exercise and discharge in full of the Company's obligations under
the Warrants; and
WHEREAS, the Company has agreed to fund the capital requirements of its
subsidiaries from time to time and the proceeds of this transaction will improve
the Company's ability to do so, thereby benefiting such subsidiaries.
NOW, THEREFORE, in consideration of the agreements herein contained and
for other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, the parties hereto hereby agree as follows:
11. Certain Definitions. As used in this Agreement, the following terms shall
have the meanings set forth in this Section 1. Terms used but not
otherwise defined in this Agreement that are defined in Article 9 of the
UCC (such as "general intangibles" and "proceeds") shall have the
respective meanings given such terms in Article 9 of the UCC.
A. "Collateral" means the collateral in which the Secured Party is granted
a security interest by this Agreement and which shall include the following,
whether presently owned or existing or hereafter acquired or coming into
existence, and all additions and accessions thereto and all substitutions and
replacements thereof, and all proceeds, products and accounts thereof,
including, without limitation, all proceeds from the sale or transfer of the
Collateral and of insurance covering the same and of any tort claims in
connection therewith:
1. All Goods of the Company, including, without limitations, all
machinery, equipment, computers, motor vehicles, trucks, tanks, boats, ships,
appliances, furniture, special and general tools, fixtures, test and quality
control devices and other equipment of every kind and nature and wherever
situated, together with all documents of title and documents representing the
same, all additions and accessions thereto, replacements therefor, all parts
therefor, and all substitutes for any of the foregoing and all other items used
and useful in connection with the Company's businesses and all improvements
thereto (collectively, the "Equipment"); and
2. All Inventory of the Company; and
3. All of the Company's contract rights and general intangibles,
including, without limitation, all partnership interests, stock or other
securities, licenses, distribution and other agreements, computer software
development rights, leases, franchises, customer lists, quality control
procedures, grants and rights, goodwill, trademarks, service marks, trade
styles, trade names, patents, patent applications, copyrights, deposit accounts,
and income tax refunds (collectively, the "General Intangibles"); and
4. All Receivables of the Company including all insurance proceeds,
and rights to refunds or indemnification whatsoever owing, together with all
instruments, all documents of title representing any of the foregoing, all
rights in any merchandising, goods, equipment, motor vehicles and trucks which
any of the same may represent, and all right, title, security and guaranties
with respect to each Receivable, including any right of stoppage in transit; and
5. All of the Company's documents, instruments and chattel paper,
files, records, books of account, business papers, computer programs and the
products and proceeds of all of the foregoing Collateral set forth in clauses
(i)-(iv) above.
B. "Company" shall mean, collectively, the Company and all of the
majority-owned subsidiaries of the Company, a list of which is contained on
Schedule A, attached hereto.
C. "Obligations" means all of the Company's obligations under this
Agreement and the Debentures, in each case, whether now or hereafter existing,
voluntary or involuntary, direct or indirect, absolute or contingent, liquidated
or unliquidated, whether or not jointly owed with others, and whether or not
from time to time decreased or extinguished and later decreased, created or
incurred, and all or any portion of such obligations or liabilities that are
paid, to the extent all or any part of such payment is avoided or recovered
directly or indirectly from the Secured Party as a preference, fraudulent
transfer or otherwise as such obligations may be amended, supplemented,
converted, extended or modified from time to time.
D. "UCC" means the Uniform Commercial Code, as currently in effect in the
State of New York.
12. Grant of Security Interest. As an inducement for the Secured Party to
purchase the Debentures and to secure the complete and timely payment,
performance and discharge in full, as the case may be, of all of the
Obligations, the Company hereby, unconditionally and irrevocably, pledges,
grants and hypothecates to the Secured Party, a continuing security
interest in, a continuing lien upon, an unqualified right to possession
and disposition of and a right of set-off against, in each case to the
fullest extent permitted by law, all of the Company's right, title and
interest of whatsoever kind and nature in and to the Collateral (the
"Security Interest").
13. Representations, Warranties, Covenants and Agreements of the Company. The
Company represents and warrants to, and covenants and agrees with, the
Secured Party as follows:
A. The Company has the requisite corporate power and authority to enter
into this Agreement and otherwise to carry out its obligations thereunder. The
execution, delivery and performance by the Company of this Agreement and the
filings contemplated therein have been duly authorized by all necessary action
on the part of the Company and no further action is required by the Company.
This Agreement constitutes a legal, valid and binding obligation of the Company
enforceable in accordance with its terms, except as enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditor's rights generally.
B. The Company represents and warrants that it has no place of business or
offices where its respective books of account and records are kept (other than
temporarily at the offices of its attorneys or accountants) or places where
Collateral is stored or located, except as set forth on Schedule A attached
hereto;
C. The Company is the sole owner of the Collateral (except for
non-exclusive licenses granted by the Company in the ordinary course of
business), free and clear of any liens, security interests, encumbrances, rights
or claims (except for liens on the Collateral held by Laurentian Bank of Canada
and ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, together, the "Existing Lenders" and the other parties
listed on Schedule C, and is fully authorized to grant the Security Interest in
and to pledge the Collateral. There is not on file in any governmental or
regulatory authority, agency or recording office an effective financing
statement, security agreement, license or transfer or any notice of any of the
foregoing (other than those that have been filed in favor of the Secured Party
pursuant to this Agreement and other than those that have been filed in favor of
the Existing Lenders and the other parties listed on Schedule C covering certain
equipment) covering or affecting any of the Collateral. So long as this
Agreement shall be in effect, the Company shall not execute and shall not
knowingly permit to be on file in any such office or agency any such financing
statement or other document or instrument (or except to the extent filed or
recorded in favor of the Secured Party pursuant to the terms of this Agreement,
referred to in the previous sentence or as may be consented to by Secured
Parties holding a majority-in-interest of the Debentures).
D. No part of the Collateral has been judged invalid or unenforceable. No
written claim has been received that any Collateral or the Company's use of any
Collateral violates the rights of any third party. There has been no adverse
decision to the Company's claim of ownership rights in or exclusive rights to
use the Collateral in any jurisdiction or to the Company's right to keep and
maintain such Collateral in full force and effect, and there is no proceeding
involving said rights pending or, to the best knowledge of the Company,
threatened before any court, judicial body, administrative or regulatory agency,
arbitrator or other governmental authority.
E. The Company shall at all times maintain its books of account and
records relating to the Collateral at its principal place of business and its
Collateral at the locations set forth on Schedule A attached hereto and may not
relocate such books of account and records or tangible Collateral unless it
delivers to the Secured Party at least 20 days prior to such relocation (i)
written notice of such relocation and the new location thereof (which must be
within the United States) and (ii) evidence that appropriate financing
statements and other necessary documents have been filed and recorded and other
steps have been taken to perfect the Security Interest to create in favor of the
Secured Party valid, perfected and continuing liens in the Collateral.
F. This Agreement creates in favor of the Secured Party a valid security
interest in the Collateral securing the payment and performance of the
Obligations and, upon making the filings described in the immediately following
sentence, a perfected security interest in such Collateral. Except for the
filing of financing statements on Form-1 under the UCC with the jurisdictions
indicated on Schedule B, attached hereto, no authorization or approval of or
filing with or notice to any governmental authority or regulatory body is
required either (i) for the grant by the Company of, or the effectiveness of,
the Security Interest granted hereby or for the execution, delivery and
performance of this Agreement by the Company or (ii) for the perfection of or
exercise by the Secured Party of its rights and remedies hereunder.
G. On the date of execution of this Agreement, the Company will deliver to
the Secured Party one or more executed UCC financing statements on Form-1 with
respect to the Security Interest for filing with the jurisdictions indicated on
Schedule B, attached hereto and in such other jurisdictions as may be requested
by the Secured Party.
H. The execution, delivery and performance of this Agreement does not
conflict with or cause a breach or default, or an event that with or without the
passage of time or notice, shall constitute a breach or default, under any
agreement to which the Company is a party or by which the Company is bound.
Other than consents of the Existing Lenders, which consents have been obtained,
no consent (including, without limitation, from stock
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holders or creditors of the Company) is required for the Company to enter into
and perform its obligations hereunder.
I. The Company shall at all times maintain the liens and Security Interest
provided for hereunder as valid and perfected liens and security interests in
the Collateral in favor of the Secured Party until this Agreement and the
Security Interest hereunder shall terminate pursuant to Section 11. The Company
hereby agrees to defend the same against any and all persons. The Company shall
use commercially reasonable efforts to safeguard and protect all Collateral for
the account of the Secured Party. At the request of the Secured Party, the
Company will sign and deliver to the Secured Party at any time or from time to
time one or more financing statements pursuant to the UCC (or any other
applicable statute) in form reasonably satisfactory to the Secured Party and
will pay the cost of filing the same in all public offices wherever filing is,
or is deemed by the Secured Party to be, necessary or desirable to effect the
rights and obligations provided for herein. Without limiting the generality of
the foregoing, the Company shall pay all fees, taxes and other amounts necessary
to maintain the Collateral and the Security Interest hereunder, and the Company
shall obtain and furnish to the Secured Party from time to time, upon demand,
such releases and/or subordinations of claims and liens which may be required to
maintain the priority of the Security Interest hereunder.
J. The Company will not transfer, pledge, hypothecate, encumber, license
(except for non-exclusive licenses granted by the Company in the ordinary course
of business), sell or otherwise dispose of any of the Collateral without the
prior written consent of Secured Parties holding a majority-in-interest of the
Debentures, except in the ordinary course of business.
K. The Company shall keep and preserve its Equipment, Inventory and other
tangible Collateral in good condition, repair and order and shall not operate or
locate any such Collateral (or cause to be operated or located) in any area
excluded from insurance coverage.
L. The Company shall, within ten (10) days of obtaining knowledge thereof,
advise the Secured Party promptly, in sufficient detail, of any substantial
change in the Collateral, and of the occurrence of any event which would have a
material adverse effect on the value of the Collateral or on the Secured Party's
security interest therein.
M. The Company shall promptly execute and deliver to the Secured Party
such further deeds, mortgages, assignments, security agreements, financing
statements or other instruments, documents, certificates and assurances and take
such further action as the Secured Party may from time to time request and may
in its sole discretion deem necessary to perfect, protect or enforce its
security interest in the Collateral including, without limitation, the execution
and delivery of a separate security agreement with respect to the Company's
intellectual property ("Intellectual Property Security Agreement") in which the
Secured Party has been granted a security interest hereunder, substantially in a
form reasonably acceptable to the Secured Party, which Intellectual Property
Security Agreement, other than as stated therein, shall be subject to all of the
terms and conditions hereof.
N. The Company shall permit the Secured Party and its representatives and
agents to inspect the Collateral upon reasonable notice and at reasonable times,
and to make copies of records pertaining to the Collateral as may be requested
by the Secured Party from time to time.
O. The Company will take all steps reasonably necessary to diligently
pursue and seek to preserve, enforce and collect any rights, claims, causes of
action and accounts receivable in respect of the Collateral.
P. The Company shall promptly notify the Secured Party in sufficient
detail upon becoming aware of any attachment, garnishment, execution or other
legal process levied against any Collateral and of any other information
received by the Company that may materially affect the value of the Collateral,
the Security Interest or the rights and remedies of the Secured Party hereunder.
Q. All information heretofore, herein or hereafter supplied to the Secured
Party by or on behalf of the Company with respect to the Collateral is accurate
and complete in all material respects as of the date furnished.
R. Schedule A attached hereto contains a list of all of the majority-owned
subsidiaries of The Company.
14. Defaults. The following events shall be "Events of Default":
A. The occurrence of an Event of Default (as defined in the Debentures)
under the Debentures;
B. Any representation or warranty of the Company in this Agreement or in
the Intellectual Property Security Agreement shall prove to have been incorrect
in any material respect when made;
C. The failure by the Company to observe or perform any of its obligations
hereunder or in the Intellectual Property Security Agreement for ten (10) days
after receipt by the Company of notice of such failure from the Secured Party;
and
D. Any breach of, or default under, the Warrants.
15. Duty To Hold In Trust. Upon the occurrence of any Event of Default and at
any time thereafter, the Company shall, upon receipt by it of any revenue,
income or other sums subject to the Security Interest, whether payable
pursuant to the Debentures or otherwise, or of any check, draft, note,
trade acceptance or other instrument evidencing an obligation to pay any
such sum, hold the same in trust for the Secured Party and shall forthwith
endorse and transfer any such sums or instruments, or both, to the Secured
Party for application to the satisfaction of the Obligations.
16. Rights and Remedies Upon Default. Upon occurrence of any Event of Default
and at any time thereafter, the Secured Party shall have the right to
exercise all of the remedies conferred hereunder and under the Debentures,
and the Secured Party shall
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have all the rights and remedies of a secured party under the UCC and/or
any other applicable law (including the Uniform Commercial Code of any
jurisdiction in which any Collateral is then located). Without limitation,
the Secured Party shall have the following rights and powers:
A. The Secured Party shall have the right to take possession of the
Collateral and, for that purpose, enter, with the aid and assistance of any
person, any premises where the Collateral, or any part thereof, is or may be
placed and remove the same, and the Company shall assemble the Collateral and
make it available to the Secured Party at places which the Secured Party shall
reasonably select, whether at the Company's premises or elsewhere, and make
available to the Secured Party, without rent, all of the Company's respective
premises and facilities for the purpose of the Secured Party taking possession
of, removing or putting the Collateral in saleable or disposable form.
B. The Secured Party shall have the right to operate the business of the
Company using the Collateral and shall have the right to assign, sell, lease or
otherwise dispose of and deliver all or any part of the Collateral, at public or
private sale or otherwise, either with or without special conditions or
stipulations, for cash or on credit or for future delivery, in such parcel or
parcels and at such time or times and at such place or places, and upon such
terms and conditions as the Secured Party may deem commercially reasonable, all
without (except as shall be required by applicable statute and cannot be waived)
advertisement or demand upon or notice to the Company or right of redemption of
the Company, which are hereby expressly waived. Upon each such sale, lease,
assignment or other transfer of Collateral, the Secured Party may, unless
prohibited by applicable law which cannot be waived, purchase all or any part of
the Collateral being sold, free from and discharged of all trusts, claims, right
of redemption and equities of the Company, which are hereby waived and released.
17. Applications of Proceeds. The proceeds of any such sale, lease or other
disposition of the Collateral hereunder shall be applied first, to the
expenses of retaking, holding, storing, processing and preparing for sale,
selling, and the like (including, without limitation, any taxes, fees and
other costs incurred in connection therewith) of the Collateral, to the
reasonable attorneys' fees and expenses incurred by the Secured Party in
enforcing its rights hereunder and in connection with collecting, storing
and disposing of the Collateral, and then to satisfaction of the
Obligations, and to the payment of any other amounts required by
applicable law, after which the Secured Party shall pay to the Company any
surplus proceeds. If, upon the sale, license or other disposition of the
Collateral, the proceeds thereof are insufficient to pay all amounts to
which the Secured Party is legally entitled, the Company will be liable
for the deficiency, together with interest thereon, at the rate of 15% per
annum (the "Default Rate"), and the reasonable fees of any attorneys
employed by the Secured Party to collect such deficiency. To the extent
permitted by applicable law, the Company waives all claims, damages and
demands against the Secured Party arising out of the repossession,
removal, retention or sale of the Collateral, unless due to the gross
negligence or willful misconduct of the Secured Party.
18. Costs and Expenses. The Company agrees to pay all out-of-pocket fees,
costs and expenses incurred in connection with any filing required
hereunder, including without limitation, any financing statements,
continuation statements, partial releases and/or termination statements
related thereto or any expenses of any searches reasonably required by the
Secured Party. The Company shall also pay all other claims and charges
which in the reasonable opinion of the Secured Party might prejudice,
imperil or otherwise affect the Collateral or the Security Interest
therein. The Company will also, upon demand, pay to the Secured Party the
amount of any and all reasonable expenses, including the reasonable fees
and expenses of its counsel and of any experts and agents, which the
Secured Party may incur in connection with (i) the enforcement of this
Agreement, (ii) the custody or preservation of, or the sale of, collection
from, or other realization upon, any of the Collateral, or (iii) the
exercise or enforcement of any of the rights of the Secured Party under
the Debentures. Until so paid, any fees payable hereunder shall be added
to the principal amount of the Debentures and shall bear interest at the
Default Rate.
19. Responsibility for Collateral. The Company assumes all liabilities and
responsibility in connection with all Collateral, and the obligations of
the Company hereunder or under the Debentures and the Warrants shall in no
way be affected or diminished by reason of the loss, destruction, damage
or theft of any of the Collateral or its unavailability for any reason.
20. Security Interest Absolute. All rights of the Secured Party and all
Obligations of the Company hereunder, shall be absolute and unconditional,
irrespective of: (a) any lack of validity or enforceability of this
Agreement, the Debentures, the Warrants or any agreement entered into in
connection with the foregoing, or any portion hereof or thereof; (b) any
change in the time, manner or place of payment or performance of, or in
any other term of, all or any of the Obligations, or any other amendment
or waiver of or any consent to any departure from the Debentures, the
Warrants or any other agreement entered into in connection with the
foregoing; (c) any exchange, release or nonperfection of any of the
Collateral, or any release or amendment or waiver of or consent to
departure from any other collateral for, or any guaranty, or any other
security, for all or any of the Obligations; (d) any action by the Secured
Party to obtain, adjust, settle and cancel in its sole discretion any
insurance claims or matters made or arising in connection with the
Collateral; or (e) any other circumstance which might otherwise constitute
any legal or equitable defense available to the Company, or a discharge of
all or any part of the Security Interest granted hereby. Until the
Obligations shall have
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been paid and performed in full, the rights of the Secured Party shall
continue even if the Obligations are barred for any reason, including,
without limitation, the running of the statute of limitations or
bankruptcy. The Company expressly waives presentment, protest, notice of
protest, demand, notice of nonpayment and demand for performance. In the
event that at any time any transfer of any Collateral or any payment
received by the Secured Party hereunder shall be deemed by final order of
a court of competent jurisdiction to have been a voidable preference or
fraudulent conveyance under the bankruptcy or insolvency laws of the
United States, or shall be deemed to be otherwise due to any party other
than the Secured Party, then, in any such event, the Company's obligations
hereunder shall survive cancellation of this Agreement, and shall not be
discharged or satisfied by any prior payment thereof and/or cancellation
of this Agreement, but shall remain a valid and binding obligation
enforceable in accordance with the terms and provisions hereof. The
Company waives all right to require the Secured Party to proceed against
any other person or to apply any Collateral which the Secured Party may
hold at any time, or to marshal assets, or to pursue any other remedy. The
Company waives any defense arising by reason of the application of the
statute of limitations to any obligation secured hereby.
21. Term of Agreement. This Agreement and the Security Interest shall
terminate on the date on which all payments under the Debentures have been
made in full and all other Obligations have been paid or discharged. Upon
such termination, the Secured Party, at the request and at the expense of
the Company, will join in executing any termination statement with respect
to any financing statement executed and filed pursuant to this Agreement.
22. Power of Attorney; Further Assurances.
A. The Company authorizes the Secured Party, and does hereby make,
constitute and appoint it, and its respective officers, agents, successors or
assigns with full power of substitution, as the Company's true and lawful
attorney-in-fact, with power, in its own name or in the name of the Company, to,
after the occurrence and during the continuance of an Event of Default, (i)
endorse any notes, checks, drafts, money orders, or other instruments of payment
(including payments payable under or in respect of any policy of insurance) in
respect of the Collateral that may come into possession of the Secured Party;
(ii) to sign and endorse any UCC financing statement or any invoice, freight or
express ▇▇▇▇, ▇▇▇▇ of lading, storage or warehouse receipts, drafts against
debtors, assignments, verifications and notices in connection with accounts, and
other documents relating to the Collateral; (iii) to pay or discharge taxes,
liens, security interests or other encumbrances at any time levied or placed on
or threatened against the Collateral; (iv) to demand, collect, receipt for,
compromise, settle and ▇▇▇ for monies due in respect of the Collateral; and (v)
generally, to do, at the option of the Secured Party, and at the Company's
expense, at any time, or from time to time, all acts and things which the
Secured Party deems necessary to protect, preserve and realize upon the
Collateral and the Security Interest granted therein in order to effect the
intent of this Agreement, the Debentures and the Warrants, all as fully and
effectually as the Company might or could do; and the Company hereby ratifies
all that said attorney shall lawfully do or cause to be done by virtue hereof.
This power of attorney is coupled with an interest and shall be irrevocable for
the term of this Agreement and thereafter as long as any of the Obligations
shall be outstanding.
B. On a continuing basis, the Company will make, execute, acknowledge,
deliver, file and record, as the case may be, in the proper filing and recording
places in any jurisdiction, including, without limitation, the jurisdictions
indicated on Schedule B, attached hereto, all such instruments, and take all
such action as may reasonably be deemed necessary or advisable, or as reasonably
requested by the Secured Party, to perfect the Security Interest granted
hereunder and otherwise to carry out the intent and purposes of this Agreement,
or for assuring and confirming to the Secured Party the grant or perfection of a
security interest in all the Collateral.
C. The Company hereby irrevocably appoints the Secured Party as the
Company's attorney-in-fact, with full authority in the place and stead of the
Company and in the name of the Company, from time to time in the Secured Party's
discretion, to take any action and to execute any instrument which the Secured
Party may deem necessary or advisable to accomplish the purposes of this
Agreement, including the filing, in its sole discretion, of one or more
financing or continuation statements and amendments thereto, relative to any of
the Collateral without the signature of the Company where permitted by law.
23. Notices. All notices, requests, demands and other communications hereunder
shall be in writing, with copies to all the other parties hereto, and
shall be deemed to have been duly given when (i) if delivered by hand,
upon receipt, (ii) if sent by facsimile, upon receipt of proof of sending
thereof, (iii) if sent by nationally recognized overnight delivery service
(receipt requested), the next business day or (iv) if mailed by
first-class registered or certified mail, return receipt requested,
postage prepaid, four days after posting in the U.S. mails, in each case
if delivered to the following addresses:
If to the Company: Universe2U Inc.
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Attention: ▇▇▇ ▇▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
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With copies to: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Esq.
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Facsimile: 212-986-2399
If to the Secured Party: AJW Partners, LLC
New Millennium Capital Partners II, LLC
AJW/New Millennium Offshore, Ltd.
Pegasus Capital Partners, LLC
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Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
With copies to: ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, LLP
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Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
24. Other Security. To the extent that the Obligations are now or hereafter
secured by property other than the Collateral or by the guarantee,
endorsement or property of any other person, firm, corporation or other
entity, then the Secured Party shall have the right, in its sole
discretion, to pursue, relinquish, subordinate, modify or take any other
action with respect thereto, without in any way modifying or affecting any
of the Secured Party's rights and remedies hereunder.
25. Miscellaneous.
A. No course of dealing between the Company and the Secured Party, nor any
failure to exercise, nor any delay in exercising, on the part of the Secured
Party, any right, power or privilege hereunder or under the Debentures shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right, power or privilege hereunder or thereunder preclude any other or further
exercise thereof or the exercise of any other right, power or privilege.
B. All of the rights and remedies of the Secured Party with respect to the
Collateral, whether established hereby or by the Debentures or by any other
agreements, instruments or documents or by law shall be cumulative and may be
exercised singly or concurrently.
C. This Agreement constitutes the entire agreement of the parties with
respect to the subject matter hereof and is intended to supersede all prior
negotiations, understandings and agreements with respect thereto. Except as
specifically set forth in this Agreement, no provision of this Agreement may be
modified or amended except by a written agreement specifically referring to this
Agreement and signed by the Company and Secured Parties holding a
majority-in-interest of the Debentures.
D. In the event that any provision of this Agreement is held to be
invalid, prohibited or unenforceable in any jurisdiction for any reason, unless
such provision is narrowed by judicial construction, this Agreement shall, as to
such jurisdiction, be construed as if such invalid, prohibited or unenforceable
provision had been more narrowly drawn so as not to be invalid, prohibited or
unenforceable. If, notwithstanding the foregoing, any provision of this
Agreement is held to be invalid, prohibited or unenforceable in any
jurisdiction, such provision, as to such jurisdiction, shall be ineffective to
the extent of such invalidity, prohibition or unenforceability without
invalidating the remaining portion of such provision or the other provisions of
this Agreement and without affecting the validity or enforceability of such
provision or the other provisions of this Agreement in any other jurisdiction.
E. No waiver of any breach or default or any right under this Agreement
shall be considered valid unless in writing and signed by the party giving such
waiver, and no such waiver shall be deemed a waiver of any subsequent breach or
default or right, whether of the same or similar nature or otherwise.
F. This Agreement shall be binding upon and inure to the benefit of each
party hereto and its successors and assigns.
G. Each party shall take such further action and execute and deliver such
further documents as may be necessary or appropriate in order to carry out the
provisions and purposes of this Agreement.
H. This Agreement shall be construed in accordance with the laws of the
State of New York, except to the extent the validity, perfection or enforcement
of a security interest hereunder in respect of any particular Collateral which
are governed by a jurisdiction other than the State of New York in which case
such law shall govern. Each of the parties hereto irrevocably submit to the
exclusive jurisdiction of any New York State or United States Federal court
sitting in Manhattan county over any action or proceeding arising out of or
relating to this Agreement, and the parties hereto hereby irrevocably agree that
all claims in respect of such action or proceeding may be heard and determined
in such New York State or Federal court. The parties hereto agree that a final
judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law. The parties hereto further waive any objection to venue in the
State of New York and any objection to an action or proceeding in the State of
New York on the basis of forum non conveniens.
I. EACH PARTY HERETO HEREBY AGREES TO WAIVE ITS RESPECTIVE RIGHTS TO A
JURY TRAIL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS
AGREEMENT. THE SCOPE
6
OF THIS WAIVER IS INTENDED TO BE ALL ENCOMPASSING OF ANY DISPUTES THAT MAY BE
FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATER OF THIS AGREEMENT,
INCLUDING WITHOUT LIMITATION CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS
AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS. EACH PARTY HERETO ACKNOWLEDGES
THAT THIS WAIVER IS A MATERIAL INDUCEMENT FOR EACH PARTY TO ENTER INTO A
BUSINESS RELATIONSHIP, THAT EACH PARTY HAS ALREADY RELIED ON THIS WAIVER IN
ENTERING INTO THIS AGREEMENT AND THAT EACH PARTY WILL CONTINUE TO RELY ON THIS
WAIVER IN THEIR RELATED FUTURE DEALINGS. EACH PARTY FURTHER WARRANTS AND
REPRESENTS THAT IT HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL, AND THAT
SUCH PARTY HAS KNOWINGLY AND VOLUNTARILY WAIVES ITS RIGHTS TO A JURY TRIAL
FOLLOWING SUCH CONSULTATION. THIS WAIVER IS IRREVOCABLE, MEANING THAT,
NOTWITHSTANDING ANYTHING HEREIN TO THE CONTRARY, IT MAY NOT BE MODIFIED EITHER
ORALLY OR IN WRITING, AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS AND SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT. IN THE EVENT OF A
LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE
COURT.
J. This Agreement may be executed in any number of counterparts, each of
which when so executed shall be deemed to be an original and, all of which taken
together shall constitute one and the same Agreement. In the event that any
signature is delivered by facsimile transmission, such signature shall create a
valid binding obligation of the party executing (or on whose behalf such
signature is executed) the same with the same force and effect as if such
facsimile signature were the original thereof.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
7
IN WITNESS WHEREOF, the parties hereto have caused this Security Agreement
to be duly executed on the day and year first above written.
UNIVERSE2U INC.
By: /s/ ▇▇▇ ▇▇▇▇▇
------------------------------------
▇▇▇ ▇▇▇▇▇
Chief Executive Officer
1418276 ONTARIO INC.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Chairman
UNIVERSE2U CANADA INC.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Chairman
CABLETEC COMMUNICATIONS INC.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Chairman
UNIVERSE2U RIGHT-OF-WAYS AGENCY INC.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Chairman
COASTAL NETWORK SERVICES INC.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Chairman
COASTAL NETWORKS INC.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Chairman
MULTILINK NETWORK SERVICES INC.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Chairman
MULTILINK NETWORKS INC.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Chairman
AJW PARTNERS, LLC
By: SMS Group, LLC
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Manager
NEW MILLENNIUM CAPITAL PARTNERS II, LLC
By: First Street Manager II, LLC
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Manager
AJW/NEW MILLENNIUM OFFSHORE, LTD.
By: First Street Manager II, LLC
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Manager
PEGASUS CAPITAL PARTNERS, LLC
By: Pegasus Manager, LLC
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Manager
8
SCHEDULE A
Principal Place of Business of the Company:
▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇
Locations Where Collateral is Located or Stored:
▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇
List of Subsidiaries of the Company:
1418276 Ontario Inc., incorporated in ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ Inc., incorporated in Ontario
CableTec Communications Inc., incorporated in Ontario
Universe2U Right-of-ways Agency Inc., incorporated in Delaware
Coastal Network Services Inc., incorporated in Delaware
Coastal Networks Inc., incorporated in Nevada
MultiLink Network Services Inc., incorporated in Delaware
MultiLink Networks Inc., incorporated in Nevada
The following subsidiaries were merged into Universe2U Canada Inc.,
January 1, 2002:
Fiber Optics Corporation of Canada Inc., incorporated in Ontario
Canadian Cable Consultants Inc., incorporated in Ontario
Photonics Engineering & Design, Inc., incorporated in Ontario
SCHEDULE B
Jurisdictions:
Province of Ontario
State of Nevada
SCHEDULE C
Other Liens:
6. The Company has granted security interests in certain of its assets in
favor of Laurentian Bank of Canada (General Security Agreement dated February
22, 2002, PPSA registration 2002 0221 1412 00044476) and ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
(General Security Agreement dated February 19, 1999 PPSA registration 19990319
1647 0043 6372) in connection with loan facilities entered into with each of
them.
7. Certain of the Company's vehicles and equipment is held pursuant to
specific leases (including leases with GMAC Leaseco Limited, Summit Lease, a
division of Summit Ford (1982) Limited, Wajax Finance Ltd., Newcourt Financial
Ltd, ▇▇▇▇▇▇ Industries Ltd, AT&T Capital Canada, Royal Bank of Canada, Ford
Credit Canada Leasing Ltd, Ford Credit Canada Ltd and GT Group Telecom Services
Corp.). The Company has granted security interests in certain of its assets in
favor of the lessors.
8. The Company has granted a security interest in an insurance policy in
favor of AIG Corporatoin Canada.
9. There are a number of liens that have been filed against certain of the
Company's assets in respect of leased vehicles and equipment that have been
returned to the respective lessor and for which we have no continuing
obligation. The Company is entitled to have these liens discharged and released.
The Company will endeavor to cause the same to be released as soon as
practicable.
10. In 2002, a judgment was rendered in the amount of approximately
$34,579.00 CDN in favor of Her Majesty the Queen, as represented by the Ministry
of Finance, against Cabletec Communications Inc. for unpaid taxes. A lien has
been filed against certain of the Company's assets in respect of such judgment.
9
