SECURITY AGREEMENT
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1. Identification.
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This Security Agreement (the "Agreement"), dated for identification
purposes only July __, 2001, is entered into by and between e-VideoTV, Inc., a
Delaware corporation ("Debtor"), ▇▇▇ ▇. ▇▇▇▇▇▇▇ (the "Shareholder") and Laurus
Master Fund Ltd. (the "Lender").
2. Recitals.
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2.1 The Lender has made a loan to Debtor (the "Loan").
2.2 The Loan is evidenced by a certain Convertible Note in the
principal amount of $1,000,000 ("Note") and executed by Debtor as the "Borrower"
thereof, for the benefit of Lender as the "Holder" thereof.
2.3 In order to induce Lender to make the Loan and as security for
Debtor's performance of its obligations under the and an Subscription Agreement
entered into between Debtor and Lender relating to the Note (the "Subscription
Agreement"), or pursuant to other written instruments and agreements entered
into by the Debtor and Lender, (collectively, the "Obligations"), Shareholder
for good and valuable consideration, receipt of which is acknowledged, has
agreed to grant to the Lender, a security interest in the Collateral (as such
term is hereinafter defined), on the terms and conditions hereinafter set forth.
Such Loans are specifically made with recourse as to Debtor.
2.4 Shareholder shall be responsible for no other costs or fees to Lender.
Upon surrender or receipt by the Lender of the Collateral, all obligations of
Shareholder shall cease.
Defined Terms. The following defined terms which are defined in the
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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.
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3.1 As security for the Obligations, Shareholder hereby grants the
Lender a security interest in the Collateral.
3.2 "Collateral" shall mean all of the following property of the
Shareholder: the common stock of the Debtor as set forth on Schedule A hereto,
together with medallion signature guaranteed stock powers ("Security Shares").
3.3 The Lender is hereby specifically authorized to transfer any
Collateral into the name of the Lender and to take any and all action deemed
advisable to the Lender to remove any transfer restrictions affecting the
Collateral upon an Event of Default.
4. Perfection of Security Interest.
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The Collateral shall be delivered to the Lender. The Lender shall have a
perfected security interest in the Collateral.
5. Voting Power.
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5.1 Prior to any Event of Default (as defined herein), Shareholder
shall be entitled to exercise all voting power pertaining to any of the
Collateral
6. Further Action By Debtor; Covenants and Warranties.
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6.1 Lender at all times shall have a perfected security interest in the
Collateral which shall be prior to any other unperfected interest therein.
Lender's security interest in the Collateral constitutes and will continue to
constitute a first, prior and indefeasible security interest in favor of Lender.
Shareholder 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 Lender to
establish, maintain and continue the perfected security interest of Lender in
the Collateral.
6.2 Shareholder will not sell, transfer, assign or pledge those items
of Collateral and Debtor and Shareholder will not allow any such items to be
sold, transferred, assigned or pledged, without the prior written consent of
Lender.
6.3 Debtor and Shareholder will, at all reasonable times, allow Lender
or its representatives free and complete access to all of Debtor 's and
Shareholder's records which in any way relate to the Collateral, for such
inspection and examination as Lender deems necessary.
6.4 Debtor, at its sole cost and expense, will protect and defend this
Security Agreement, all of the rights of Lender hereunder, and the Collateral
against the claims and demands of all other parties.
6.5 Debtor will promptly notify Lender 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 might in any way affect or impair
any of the rights of Lender under this Security Agreement.
6.6 Lender 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, and all amounts expended by
Lender in so doing shall become part of the Obligations secured hereby, and
shall be immediately due and payable by Debtor to Lender upon demand and shall
bear interest at 18% per annum from the dates of such expenditures until paid.
6.7 Upon the request of Lender, Debtor will furnish within five (5)
days thereafter to Lender, or to any proposed assignee of this Security
Agreement, a written statement in form satisfactory to Lender, duly
acknowledged, certifying the amount of the principal and interest then owing
under the Obligations, whether 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.
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6.8 Shareholder represents and warrants that he is the true and lawful
exclusive owner of the Collateral, free and clear of any liens and encumbrances
and acquired the Security Shares for purposes of calculating the holding period
for purposes of Rule 144 under the Securities Act of 1933 ("Rule 144") on the
dates set forth on Schedule A. Shareholder makes the foregoing representation
to the Lender and any transfer agent of the Company's common stock as if
originally made to such transfer agent.
6.9 Shareholder hereby agrees not to divest himself of any right under
the Collateral absent prior written approval of the Lender.
6.10 Debtor and Shareholder will cooperate and provide such
certificate, resolutions, representations, legal opinions and all other matters
necessary to facilitate a transfer or sale of any part of the Collateral
pursuant to Rule 144. Debtor and Shareholder are unaware of any impediment to
the resale of the security by the Lender pursuant to Rule 144. Debtor and
Shareholder will take no action that would impede or limit the Lender's ability
to resell all the Security Shares pursuant to Rule 144. For so long as any
Security Shares are subject to this Security Agreement, the Shareholder will not
sell any security of the Debtor which sale would be aggregated with sales by the
Lender pursuant to Rule 144. Debtor shall issue written instructions to its
transfer agent to comply with the foregoing sentence. Debtor will not permit
the transfer of any security of the Debtor if such transfer would aggregate for
purposes of Rule 144 with sales of the Security Shares by the Lender or any
sales of the Security Shares. Shareholder represents and warrants that he has
not sold any security of the Debtor during the thirty (30) days prior to the
date of this Agreement.
7. Power of Attorney.
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Shareholder hereby irrevocably constitutes and appoints the Lender as the
true and lawful attorney of Debtor and Shareholder, with full power of
substitution, in the place and stead of Debtor and Shareholder and in the name
of Debtor and Shareholder or otherwise, at any time or times, in the discretion
of the Lender, to take any action and to execute any instrument or document
which the Lender may deem necessary or advisable to accomplish the purposes of
this Agreement which Debtor or Shareholder fail to take or fail to execute
within five (5) business days of the Lender's reasonable request therefor. This
power of attorney is coupled with an interest, is irrevocable and shall not be
affected by any subsequent disability or incapacity of Debtor or Shareholder.
8. Performance By The Lender.
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If Debtor or Shareholder fail to perform any material covenant, agreement,
duty or obligation of Debtor or Shareholder under this Agreement, the Lender
may, at any time or times in its discretion, take action to effect performance
of such obligation. All reasonable expenses of the Lender 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 Lender under any part of this Agreement shall be deemed to impose
any obligation whatsoever on the Lender with respect thereto, such rights,
remedies and powers being solely for the protection of the Lender.
9. Event of Default.
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An event of default ("Event of Default") shall be deemed to have occurred
hereunder upon the occurrence of any event of default as defined in the Note or
Subscription Agreement. 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 Lender, for the benefit of the
Lender, and the Lender may dispose of Collateral as provided below. A default
by Debtor or Shareholder of any of their obligations pursuant to this Agreement
including but not limited to the obligations set forth in Section 6 of this
Agreement, or a misrepresentation by Debtor or Shareholder of a material fact
stated herein, shall be deemed an Event of Default hereunder and an event of
default as defined in the Obligations.
10. Disposition of Collateral.
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10.1 Upon and after any Event of Default which is then continuing,
(a) The Lender 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 or any other component of the
Collateral. In addition to other rights and remedies provided for herein or
otherwise available to it, the Lender 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.
(b) If any notice to Shareholder of the sale or other disposition
of Collateral is required by then applicable law, five (5) days' prior notice
(or, if longer, the shortest period of time permitted by then applicable law) to
Shareholder of the time and place of any public sale of Collateral or of the
time after which any private sale or any other intended disposition is to be
made, shall constitute reasonable notification.
(c) The Lender is authorized, at any such sale, if the Lender
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
Lender deems advisable to ensure such compliance. Sales made subject to such
restrictions shall be deemed to have been made in a commercially reasonable
manner.
(d) All cash proceeds received by the Lender in respect of any
sale, collection or other enforcement or disposition of Collateral, shall be
applied (after deduction of any amounts payable to the Lender pursuant to
Paragraph 12.1 hereof) against the Obligations. Upon payment in full of all
Obligations, Shareholder 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 Lender
incurred in connection with the liquidation of the Collateral (unless another
person is legally entitled thereto). Any assignment of Collateral by the Lender
to Shareholder shall be without representation or warranty of any nature
whatsoever and wholly without recourse. The Lender may purchase the Collateral
and pay for such purchase by offsetting any sums owed to such Lender by Debtor
or Shareholder arising under the Obligations or any other source.
(e) No exercise by the Lender of any right hereby given it, no
dealing by the Lender with Debtor, Shareholder or any other person, and no
change, impairment or suspension of any right or remedy of the Lender shall in
any way affect any of the obligations of Debtor or Shareholder hereunder or any
Collateral furnished by Shareholder or give Debtor or Shareholder any recourse
against the Lender.
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10.2 The Security Shares shall be released to the Shareholder upon the
sooner of (i) complete satisfaction of the Obligations, or (ii) the compliance
by the Debtor of its registration obligations set forth in Section 10.1(iv) of
the Subscription Agreement. Notwithstanding anything contained in this Security
Agreement, or in the Subscription Agreement to the contrary, the Security Shares
that have not been released pursuant to this Security Agreement shall be
released and returned promptly to the Shareholder upon the effectiveness of the
SB-2 registration statement required to be filed by the Company pursuant to
Section 10.1(iv) of the Subscription Agreement.
11. Waiver of Automatic Stay. The Debtor and Shareholder acknowledge
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and agree that should a proceeding under any bankruptcy or insolvency law be
commenced by or against the Debtor or Shareholder, or if any of the Collateral
(as defined in the Security Agreement) should become the subject of any
bankruptcy or insolvency proceeding, then the Lender should be entitled to,
among other relief to which the Lender may be entitled under the Note, Security
Agreement, Subscription Agreement and any other agreement to which the Debtor,
Shareholder, or Lender are parties, (collectively "Loan Documents") and/or
applicable law, an order from the court granting immediate relief from the
automatic stay pursuant to 11 U.S.C. Section 362 to permit the Lender to
exercise all of its rights and remedies pursuant to the Loan Documents and/or
applicable law. THE DEBTOR AND SHAREHOLDER EXPRESSLY WAIVE THE BENEFIT OF THE
AUTOMATIC STAY IMPOSED BY 11 U.S.C. SECTION 362. FURTHERMORE, THE DEBTOR AND
SHAREHOLDER EXPRESSLY ACKNOWLEDGE AND AGREE THAT NEITHER 11 U.S.C. SECTION 362
NOR ANY OTHER SECTION OF THE BANKRUPTCY CODE OR OTHER STATUTE OR RULE
(INCLUDING, WITHOUT LIMITATION, 11 U.S.C. SECTION 105) SHALL STAY, INTERDICT,
CONDITION, REDUCE OR INHIBIT IN ANY WAY THE ABILITY OF THE LENDER TO ENFORCE ANY
OF ITS RIGHTS AND REMEDIES UNDER THE LOAN DOCUMENTS AND/OR APPLICABLE LAW. The
Debtor and Shareholder hereby consent to any motion for relief from stay which
may be filed by the Lender in any bankruptcy or insolvency proceeding initiated
by or against the Debtor and Shareholder, and further agree not to file any
opposition to any motion for relief from stay filed by the Lender. The Debtor
and Shareholder represent, acknowledge and agree that this provision is a
specific and material aspect of this Agreement, and that the Lender would not
agree to the terms of this Agreement if this waiver were not a part of this
Agreement. The Debtor and Shareholder further represent, acknowledge and agree
that this waiver is knowingly, intelligently and voluntarily made, that neither
the Lender nor any person acting on behalf of the Lender has made any
representations to induce this waiver, that the Debtor and Shareholder have been
represented (or has had the opportunity to be represented) in the signing of
this Agreement and in the making of this waiver by independent legal counsel
selected by the Debtor and Shareholder and that the Debtor and Shareholder have
had the opportunity to discuss this waiver with counsel. The Debtor and
Shareholder further agree that any bankruptcy or insolvency proceeding initiated
by the Debtor or Shareholder will only be brought in courts within the
geographic boundaries of New York State.
12. Miscellaneous.
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12.1 Expenses. Debtor shall pay to the Lender, on demand, the amount
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of any and all reasonable expenses, including, without limitation, attorneys'
fees, legal expenses and brokers' fees, which the Lender 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 Lender
hereunder or with respect to any or all of the Obligations; or (c) failure by
Debtor or Shareholder to perform and observe any agreements of Debtor or
Shareholder contained herein which are performed by the Lender.
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12.2 Waivers, Amendment and Remedies. No course of dealing by the
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Lender and no failure by the Lender to exercise, or delay by the Lender 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 Lender. No amendment, modification or waiver of any provision of this
Agreement and no consent to any departure by Debtor or Shareholder therefrom,
shall, in any event, be effective unless contained in a writing signed by the
Lender, 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 Lender, 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 Lender from time to time in such order
as the Lender may elect.
12.3 Notices. Any notice or other communications under the provisions
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of this Agreement shall be given in writing and delivered to the recipient in
person, by reputable overnight courier or delivery service, by facsimile machine
(receipt conformed) with a copy sent by first class mail on the date of
transmission, or by registered or certified mail, return receipt requested,
directed to its address set forth below (or to any new address of which a party
hereto shall have informed the other by the giving of notice in the manner
provided herein):
[ ]
Any party may change its address by written notice in accordance with this
paragraph.
12.4 Term: Binding Effect. This Agreement shall (a) remain in full
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force and effect until payment and satisfaction in full of all of the
Obligations; (b) be binding upon Debtor and Shareholder, and their successors
and assigns; and (c) inure to the benefit of the Lender, for the benefit of the
Lender and their respective heirs, legal representatives, and affiliates.
12.5 Captions. The captions of Paragraphs, Articles and Sections in
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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.
12.6 Governing Law; Venue; Severability. This Agreement shall be
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governed by and construed in accordance with the laws of the State of New York
without regard to principles of conflicts or choice of law, 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 the Debtor and Shareholder with respect to
this Agreement may be brought in the courts of 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, each of the Debtor and Shareholder hereby
irrevocably accepts for itself and in respect of its property, generally and
unconditionally, the jurisdiction of the aforesaid courts. The Debtor and
Shareholder hereby irrevocably waive 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.
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12.7 Counterparts/Execution. This Agreement may be executed in any
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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.
[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"
E-VIDEOTV, INC.
a Delaware corporation
By: _________________________________
Its: __________________________________
"SHAREHOLDER"
___________________________________
"THE LENDER"
___________________________________
LAURUS MASTER FUND LTD.
This Security Agreement may be executed by facsimile signature and delivered by
confirmed facsimile transmission..
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