Exhibit 4.2
SECURITY AGREEMENT
DATE: May 31, 2002
DEBTOR: iExalt, Inc., a Nevada corporation
DEBTOR'S MAILING ADDRESS (INCLUDING COUNTY): iExalt, Inc.
12000 Aerospace Avenue #375
Houston, Texas 77034
County of Harris
SECURED PARTY: J.A.K. IV LP
SECURED PARTY'S MAILING ADDRESS (INCLUDING COUNTY): P.O. Box 1752
Alvin, Texas 77512
Brazoria County
CLASSIFICATION OF COLLATERAL: All assets and liabilities, and common stock of
the following wholly owned subsidiaries of
iExalt, Inc.
(1) ChristianSpeakers.com, Inc. (Christian
Speakers and Artists Agency)
(2) Keener Communications, Inc.
(Christian TimesNewspaper)
(3) Wordcross, Inc. (Christian Happenings,
Inc.)
(4) Church.com url, and all associated
urls of iExalt, Inc. (Nevada) or iExalt,
Inc. (Texas) - see attached listing.
COLLATERAL (INCLUDING ALL ACCESSIONS): Same as above
OBLIGATION: Convertible Debenture
DATE: May 31, 2002, three hundred sixty five days from the execution of
this agreement.
AMOUNT: $1,464,227 One million, four hundred sixty four thousand, two
hundred twenty seven dollars and no cents
MAKER/DEBTOR: iExalt, Inc., a Nevada corporation
FINAL MATURITY DATE: As stated herein, and as further defined within the
Loan Agreement dated May 31, 2003
TERMS OF PAYMENT (OPTIONAL): As stated therein.
DEBTOR'S REPRESENTATION CONCERNING LOCATION OF COLLATERAL (OPTIONAL):
Subject to the terms of this agreement, Debtor grants to Secured Party a
security interest in the collateral and all its proceeds to secure payment and
performance of Debtor's obligation in this security agreement and all renewals
and extensions of any of the obligation.
DEBTOR'S WARRANTIES
1. Financing Statement. Except for that in favor of Secured Party, no
financing statement covering the collateral is filed in any public office.
Debtor agrees to provide all information necessary for the filing of a form
UCC-1.
2. Ownership. Debtor owns the collateral and has the authority to
grant this security interest. Ownership is free from any setoff, claim,
restriction, lien, security interest, or encumbrance except this security
interest and liens for taxes not yet due.
3. Fixtures and Accessions. None of the collateral is affixed to real
estate, is an accession to any goods, is commingled with other goods, or will
become a fixture, accession, or part of a product or mass with other goods
except as expressly provided in this agreement.
4. Financial Statements. All information about Debtor's financial
condition provided to Secured Party was accurate when submitted, as will be any
information subsequently provided.
DEBTOR'S COVENANTS
1. Protection of Collateral. Debtor will defend the collateral against
all claims and demands adverse to Secured Party's interest in it and will keep
it free from all liens except those for taxes not yet due and from all security
interests except this one. The collateral will remain in Debtor's possession or
control at all times, except as otherwise provided in this agreement. Debtor
will maintain the collateral in good condition and protect it against misuse,
abuse, waste, and deterioration except for ordinary wear and tear resulting from
its intended use.
2. Insurance. Debtor will insure the collateral in accord with Secured
Party's reasonable requirements regarding choice of carrier, casualties insured
against, and amount of coverage. Policies will be written in favor of Debtor
and Secured Party according to their respective interests or according to
Secured Party's other requirements. All policies will provide that Secured
Party will receive at least ten days' notice before cancellation, and the
policies or certificates evidencing them will be provided to Secured Party when
issued. Debtor assumes all risk of loss and damage to the collateral to the
extent of any deficiency in insurance coverage. Debtor irrevocably appoints
Secured Party as attorney-in-fact to collect any return, unearned premiums, and
proceeds of any insurance on the collateral and to endorse any draft or check
deriving from the policies and made payable to Debtor.
3. Secured Party's Costs. Debtor will pay all expenses incurred by
Secured Party in obtaining, preserving, perfecting, defending, and enforcing
this security interest or the collateral and in collecting or enforcing the
note. Expenses for which Debtor is liable include, but are not limited to,
taxes, assessments, reasonable attorney's fees, and other legal expenses. These
expenses will bear interest from the dates of payments at the highest rate
stated in notes that are part of the obligation, and Debtor will pay Secured
Party this interest on demand at a time and place reasonably specified by
Secured Party. These expenses and interest will be part of the obligation and
will be recoverable as such in all respects.
4. Additional Documents. Debtor will sign any papers that Secured Party
considers necessary to
obtain, maintain, and perfect this security interest or to comply with any
relevant law.
5. Notice of Changes. Debtor will immediately notify Secured Party of
any material change in the collateral; change in Debtor's name, address, or
location; change in any matter warranted or represented in this agreement;
change that may affect this security interest; and any event of default.
6. Use and Removal of Collateral. Debtor will use the collateral
primarily according to the stated classification unless Secured Party consents
otherwise in writing. Debtor will not permit the collateral to the affixed to
any real estate, to become an accession to any goods, to be commingled with
other goods, or to become a fixture, accession, or part of a product or mass
with other goods except as expressly provided in this agreement.
7. Sale. Debtor will not sell, transfer, or encumber any of the
collateral without the prior written consent of Secured Party.
RIGHTS AND REMEDIES OF SECURED PARTY
1. Generally. Secured Party may exercise the following rights and
remedies either before or after default:
a. take control of any proceeds of the collateral;
b. release any collateral in Secured Party's possession to any
debtor, temporarily or otherwise;
c. take control of any funds generated by the collateral, such as
refunds from and proceeds of insurance, and reduce any part of
the obligation accordingly or permit Debtor to use such funds to
repair or replace damaged or destroyed collateral covered by
insurance; and
d. demand, collect, convert, redeem, settle, compromise, receipt
for, realize on, adjust, sue for, and foreclose on the collateral
either in Secured Party's or Debtor's name, as Secured Party
desires.
2. Insurance. If Debtor fails to maintain insurance as required by
this agreement or otherwise by Secured Party, then Secured Party may purchase
single-interest insurance coverage that will protect only Secured Party. If
Secured Party purchases this insurance, its premiums will become part of the
obligation.
EVENTS OF DEFAULT
Each of the following conditions is an event of default:
1. if Debtor defaults in timely payment or performance of any
obligation, covenant, or liability in any written agreement between Debtor and
Secured Party or in any other transaction secured by this agreement;
2. if any warranty, covenant, or representation made to Secured Party by
or on behalf of Debtor proves to have been false in any material respect when
made;
3. if a receiver is appointed for Debtor or any of the collateral;
4. if the collateral is assigned for the benefit of creditors or, to
the extent permitted by law, if bankruptcy or insolvency proceedings commence
against or by any of these parties: Debtor; any partnership of which Debtor is a
general partner; and any maker, drawer, acceptor, endorser, guarantor, surety,
accommodation party, or other person liable on or for any part of the
obligation;
5. if any financing statement regarding the collateral but not related
to this security interest and not favoring Secured Party is filed;
6. if any lien attaches to any of the collateral;
7. if any of the collateral is lost, stolen, damaged, or destroyed,
unless it is promptly replaced with collateral of like quality or restored to
its former condition.
REMEDIES OF SECURED PARTY ON DEFAULT
During the existence of any event of default, Secured Party may declare the
unpaid principal and earned interest of the obligation immediately due in whole
or part, enforce the obligation, and exercise any rights and remedies granted by
the Texas Uniform Commercial Code or by this agreement, including the following:
1. require Debtor to deliver to Secured Party all books and records
relating to the collateral;
2. require Debtor to assemble the collateral and make it available to
Secured Party at a place reasonably convenient to both parties;
3. take possession of any of the collateral and for this purpose enter
any premises where it is located if this can be done without breach of the
peace;
4. sell, lease, or otherwise dispose of any of the collateral in accord
with the rights, remedies, and duties of a secured party under chapters 2 and 9
of the Texas Uniform Commercial Code after giving notice as required by those
chapters; unless the collateral threatens to decline speedily in value, is
perishable, or would typically be sold on a recognized market, Secured Party
will give Debtor reasonable notice of any public sale of the collateral or of a
time after which it may be otherwise
disposed of without further notice to Debtor; in this event, notice will be
deemed reasonable if it is mailed, postage prepaid, to Debtor at the address
specified in this agreement at least ten days before any public sale or ten days
before the time when the collateral may be otherwise disposed of without further
notice to Debtor;
5. surrender any insurance policies covering the collateral and receive
the unearned premium;
6. apply any proceeds from disposition of the collateral after
default in the manner specified in
chapter 9 of the Texas Uniform Commercial Code, including payment of Secured
Party's reasonable attorney's fees and court expenses; and
7. if disposition of the collateral leaves the obligation unsatisfied,
collect the deficiency from Debtor.
GENERAL PROVISIONS
1. Parties Bound. Secured Party's rights under this agreement shall
inure to the benefit of its successors and assigns. Assignment of any part of
the obligation and delivery by Secured Party of any part of the collateral will
fully discharge Secured Party from responsibility for that part of the
collateral. If Debtor is more than one, all their representations, warranties,
and agreements are joint and several. Debtor's obligations under this agreement
shall bind Debtor's personal representatives, successors, and assigns.
2. Waiver. Neither delay in exercise nor partial exercise of any of
Secured Party's remedies or rights shall waive further exercise of those
remedies or rights. Secured Party's failure to exercise remedies or rights does
not waive subsequent exercise of those remedies or rights. Secured Party's
waiver of any default does not waive further default. Secured Party's waiver of
any right in this agreement or of any default is binding only if it is in
writing. Secured Party may remedy any default without waiving it.
3. Reimbursement. If Debtor fails to perform any of Debtor's
obligations, Secured Party may perform those obligations and be reimbursed by
Debtor on demand at the place where the note is payable for any sums so paid,
including attorney's fees and other legal expenses, plus interest on those sums
from the dates of payment at the rate stated in the note for matured, unpaid
amounts. The sum to be reimbursed shall be secured by this security agreement.
4. Interest Rate. Interest included in the obligations shall not
exceed the maximum amount of non-usurious interest that may be contracted for,
taken, reserved, charged, or received under law; any interest in excess of that
maximum amount shall be credited to the principal of the obligation or, if that
has been paid, refunded. On any acceleration or required or permitted
prepayment of the obligation, any such excess shall be canceled automatically as
of the acceleration or prepayment or, if already paid, credited on the principal
amount of the obligation or, if the principal amount has been paid, refunded.
This provision overrides other provisions in this and all other instruments
concerning the obligation.
5. Modifications. No provisions of this agreement shall be modified or
limited except by written agreement.
6. Severability. The unenforceability of any provision of this
agreement will not affect the enforceability or validity of any other provision.
7. After-Acquired Consumer Goods. This security interest shall attach
to after-acquired consumer goods only to the extent permitted by law.
8. Applicable Law. This agreement will be construed according to Texas
laws.
9. Place of Performance. This agreement is to be performed in the
county of Secured Party's mailing address.
10. Financing Statement. A carbon, photographic, or other reproduction
of this agreement or any financing statement covering the collateral is
sufficient as a financing statement.
11. Presumption of Truth and Validity. If the collateral is sold after
default, recitals in the bill of sale or transfer will be prima facie evidence
of their truth, and all prerequisites to the sale specified by this agreement
and by the Texas Uniform Commercial Code will be presumed satisfied.
12. Singular and Plural. When the context requires, singular nouns and
pronouns include the plural.
13. Priority of Security Interest. This security interest shall
neither affect nor be affected by any other security for any of the obligation.
Neither extensions of any of the obligation nor releases of any of the
collateral will affect the priority or validity of this security interest with
reference to any third person.
14. Cumulative Remedies. Foreclosure of this security interest by suit
does not limit Secured Party's remedies, including the right to sell the
collateral under the terms of this agreement. All remedies of Secured Party may
be exercised at the same or different times, and no remedy shall be a defense to
any other. Secured Party's rights and remedies include all those granted by law
or otherwise, in addition to those specified in this agreement.
15. Agency. Debtor's appointment of Secured Party as Debtor's agent is
coupled with an interest and will survive any disability of Debtor.
16. Attachments Incorporated. The addendum indicated below is attached
to this agreement and incorporated into it for all purposes:
17. All matters herein shall be construed under the laws of the state of
Texas. Venue on any dispute herein shall be in Harris County, Texas.
SECURED PARTY: DEBTOR:
J.A.K. IV LP iExalt, Inc., a Nevada corporation
By: /s/ Jay Gubert By: /s/ Donald W. Sapaugh
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Title: President Title: Chairman & CEO
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Date: July 1, 2002 Date: July 1, 2002
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AFTER RECORDING RETURN TO:
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James W. Christian
Christian, Smith, Wulkeson, and Jewel, L.L.P.
2302 Fannin, Suite 500
Houston, Texas 77002