Exhibit 10.4
SECURITY AGREEMENT
This Security Agreement ("Agreement") dated as of December 29, 2005, is
given by TelePlus Wireless Corp., a Nevada corporation ("Grantor") in favor of
Star Number, Inc., a Delaware corporation (the "Secured Party").
Background
A. Pursuant that certain Asset Purchase Agreement (the "Asset Purchase
Agreement") dated the date hereof between Grantor and the Secured Party, Grantor
acquired the Purchased Assets (as defined in the Asset Purchase Agreement). In
connection therewith, Grantor has executed and delivered to the Secured Party a
Promissory Note dated as of the date hereof in the original principal amount of
$500,000 (the "Note" and together with all other secured notes executed and
delivered from time to time after the date hereof by Grantor to Secured Party in
such other amounts and evidencing additional indebtedness by Grantor to Secured
Party, the "Notes").
B. To secure repayment of the indebtedness evidenced by the Notes and all
other undertakings of Grantor to the Secured Party thereunder (the
"Obligations"), Grantor desires to grant a security interest in certain property
of Grantor to the Secured Party as described herein.
NOW, THEREFORE, the parties hereto, intending to be legally bound hereby,
agree as follows:
SECTION 1 - SECURITY INTEREST
1.1 Description. As security for the payment of the Obligations and
undertakings of every kind or nature whatsoever of Grantor to the Secured Party,
whether now existing or hereafter incurred, matured or unmatured, due or to
become due, arising under the Notes, and any extensions, modifications,
substitutions, increases and renewals thereof, and substitutions therefore; the
payment of all amounts advanced by the Secured Party to preserve, protect,
defend, and enforce its rights hereunder and in the following property in
accordance with the terms of this Agreement, Grantor hereby assigns and grants
to the Secured Party, a continuing lien on and security interest in, all assets
of Grantor now owned or existing and hereafter acquired or arising, including,
without limitation, all now owned or existing and hereafter acquired or arising
accounts, chattel paper (including electronic chattel paper and tangible chattel
paper), contracts, deposit accounts, documents, equipment, general intangibles,
goods, healthcare insurance receivables, instruments, inventory, investment
property, books and records, letter of credit rights and supporting obligations
and records, in each case wheresoever located, but only to the extent the
foregoing assets constitute "Purchased Assets" under the Asset Purchase
Agreement, together with all accessions to, substitutions for and replacements,
products and proceeds of all of the foregoing (collectively, the "Collateral").
1.2 Lien Documents. As the Secured Party deems necessary, Grantor shall
execute and deliver to the Secured Party (all in form and substance satisfactory
to the Secured Party), any agreements, documents, instruments and writings,
reasonably required to evidence, perfect or protect the Secured Party's lien and
security interest in the Collateral required hereunder.
1.3 Other Actions.
(i) (a) The Secured Party is hereby authorized to file financing
statements and amendments to financing statements without
Grantor's signature in accordance with the Uniform Commercial
Code as in effect in the State of Delaware from time to time
(the "UCC"). Grantor hereby authorizes the Secured Party to
file all financing statements and amendments to financing
statements describing the Collateral in any filing office as
required to perfect the liens of the Secured Party, in the
Collateral. Grantor agrees to comply with the requirements of
all state and federal laws and requests of the Secured Party
in order for the Secured Party to have and maintain a valid
and perfected security interest in the Collateral.
(ii) (b) In addition to the foregoing, Grantor shall do anything
further that may be reasonably required by the Secured Party
to secure the Secured Party and effectuate the intentions and
objects of this Agreement, including, without limitation, the
execution and delivery of security agreements, contracts and
any other documents required hereunder.
1.4 Filing Security Agreement. A carbon, photographic or other
reproduction or other copy of this Agreement or of a financing statement is
sufficient as and may be filed in lieu of a financing statement.
1.5 Power of Attorney. The Secured Party or its representative are hereby
irrevocably made, constituted and appointed the true and lawful attorney for
Grantor (without requiring it to act as such) with full power of substitution to
do the following: (a) execute in the name of Grantor, schedules, assignments,
instruments, documents and statements that Grantor is obligated to give the
Secured Party hereunder or is necessary to perfect (or continue to evidence the
perfection of such security interest); (b) during the continuance of an Event of
Default, endorse the name of Grantor upon any and all checks, drafts, money
orders and other instruments for the payment of monies that are payable to
Grantor and constitute collections on Grantor's Collateral; and (c) during the
continuance of an Event of Default, do such other and further acts and deeds in
the name of Grantor that the Secured Party may reasonably deem necessary or
desirable to enforce any Collateral or perfect the Secured Party's security
interest or lien in the Collateral.
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SECTION 2 - REPRESENTATIONS AND WARRANTIES
2.1 Grantor represents and warrants to the Secured Party that:
(a) Corporate Organization. Grantor (i) is duly organized and
validly existing under the laws of the State of Nevada, (ii) has the power and
authority to operate its business and to own its property and (iii) is duly
qualified, is validly existing and in good standing and has lawful power and
authority to engage in the business.
(b) Non-Contravention. The making and performance of this Agreement
and other agreements executed in connection herewith will not (immediately, with
the passage of time or with the giving of notice or both) violate the
certificate of incorporation or bylaws of Grantor or result in a default under
any contract, agreement or instrument to which Grantor is a party or by which
Grantor or its property is or may be bound, except as disclosed in the Asset
Purchase Agreement.
(c) Power and Authority. Grantor has the power and authority to
enter into and perform this Agreement and to incur the obligations herein and
therein provided for, and has taken all proper and necessary action, corporate
or otherwise, to authorize the execution, delivery and performance of this
Agreement.
(d) Enforceable. This Agreement is valid, binding and enforceable
against Grantor in accordance with its terms.
(e) Consents and Approvals. All necessary consents, approvals or
authorizations of, or filing, registration or qualification with, any person,
required to be obtained by Grantor in connection with the execution and delivery
of this Agreement or the undertaking or performance of any obligation hereunder
has been obtained, except as disclosed in the Asset Purchase Agreement.
(f) Title. The Collateral is free and clear of any and all liens,
claims, encumbrances or security interests, except for the security interests
referred to in paragraph 2.1(i) below.
(g) Governmental Consent. Neither the nature of Grantor or of its
business or property, nor any relationship between Grantor and any other person,
nor any circumstance affecting Grantor in connection with the issuance or
delivery of this Agreement is such as to require a consent, approval or
authorization of, or filing, registration or qualification with, any
governmental authority on the part of Grantor.
(h) Government Regulations. Grantor has obtained all licenses,
permits, franchises or other governmental authorizations necessary for the
ownership of its property and for the conduct of its business. Grantor is not in
violation of or receipt of written notice that it is in violation of any
applicable statute, regulation or ordinance of the United States of America, or
of any state, city, town, municipality, county or of any other jurisdiction, or
of any agency, or department thereof, a violation of which causes or could cause
a material adverse effect.
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(i) Perfection. This Agreement is effective to create in favor of
the Secured Party, a legal, valid and enforceable lien in all right, title and
interest of Grantor in the Collateral, and when a financing statement has been
filed in the State of Nevada under Grantor's name, the Secured Party will have a
perfected, first priority lien in the Collateral; provided, however, that such
security interest shall be second in priority to the security interest of
Cornell Capital Partners, LP ("Cornell") until such time as Cornell consents to
the Secured Party's security interest in the Collateral having priority over
Cornell's security interest in the Collateral, it being expressly understood
that Grantor does not undertake to obtain any such assignment of priority from
Cornell. The Grantor acknowledges and agrees that the failure by TelePlus
Enterprises, Inc. ("Parent"), the owner of all of the outstanding capital stock
of Grantor, to obtain the consent of Cornell Capital Partners, LP ("Cornell
Capital Partners") to the execution of this Agreement by Grantor and that
certain Guaranty Agreement of even date herewith by the Parent in favor of
Secured Party within 30 days after the date thereof shall constitute an event of
default under the Note.
SECTION 3 - COVENANTS
3.1 Grantor covenants that:
(a) Payment of Taxes and Claims - Grantor shall pay, before they
become delinquent,
(i) all taxes, assessments and governmental charges or levies
imposed upon it or upon Grantor's property, and
(ii) all claims or demands of materialmen, mechanics,
carriers, warehousemen, landlords and other persons entitled to the benefit of
statutory or common law liens, which, if unpaid, would result in the imposition
of a lien upon its property;
provided, however, that Grantor shall not be required to pay any such tax,
assessment, charge, levy, claim or demand if the amount, applicability or
validity thereof shall at the time be contested in good faith.
(b) Property Insurance. Grantor shall continue to maintain the
insurance or such similar insurance as is reasonably prudent. Grantor further
covenants that all insurance premiums owing under its current policies have been
paid. Grantor shall notify the Secured Party, immediately, upon Grantor's
receipt of a notice of termination, cancellation, or non-renewal from its
insurance company of any such policy.
(c) Financial Records. Grantor shall keep current and accurate books
of records and accounts in which full and correct entries will be made of all of
its business transactions, and will reflect in its financial statements adequate
accruals and appropriations to reserves, and Grantor shall provide the Secured
Party with a right to inspect such records upon request during normal business
hours.
(d) Corporate Existence and Rights. Grantor shall do (or cause to be
done) all things necessary to preserve and keep in full force and effect its
existence, good standing, rights and franchises. Grantor shall maintain any and
all licenses, permits, franchises or other governmental authorizations necessary
to the ownership of its property or to the conduct of its businesses.
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(e) Compliance with Laws. Grantor: (i) shall be in compliance with
any and all laws, ordinances, governmental rules and regulations, and court or
administrative orders or decrees to which it is subject, whether federal, state
or local, and (ii) shall obtain any and all licenses, permits, franchises or
other governmental authorizations necessary to the ownership of its property or
to the conduct of its businesses, which violation or failure to obtain causes or
could cause a material adverse effect. Grantor shall timely satisfy all
assessments, fines, costs and penalties imposed (after exhaustion of all
appeals, provided a stay has been put in effect during such appeal) by any
governmental authority against Grantor or any property of Grantor.
(f) Location of Collateral; Inspection. Upon the request of the
Secured Party, Grantor shall provide the Secured Party with the locations of the
Collateral and the right to inspect such Collateral during normal business
hours.
(h) Merger, Consolidation, Dissolution or Liquidation. Grantor may
not consolidate or merge with or into, or sell, assign, transfer, lease, convey
or otherwise dispose of all or substantially all of its properties or assets in
one or more related transactions to another corporation, person or entity.
(i) Other Agreements. Grantor shall not become or be a party to any
contract or agreement which at the time of becoming a party to such contract or
agreement materially impairs Grantor's ability to perform under this Agreement,
or under any other instrument, agreement or document to which Grantor is a party
or by which it is or may be bound.
(j) Change of Location or Jurisdiction of Organization. Grantor
shall not change its name or jurisdiction of organization without thirty (30)
days prior written notice to the Secured Party.
(k) Perfection. Grantor shall notify the Secured Party if it
acquires or makes any change to any Collateral with respect to which additional
action is required to perfect or maintain perfection of the Secured Party's
security interest therein, and Grantor shall take such actions as the Secured
Party may request to maintain a perfected security interest in the Collateral.
SECTION 4 - DEFAULT
4.1 Default. Grantor shall be in default under this Agreement upon the
occurrence of any of the following events or conditions (each, an "Event of
Default"):
(a) Failure to pay when due any of the Obligations.
(b) Failure or refusal to observe, keep and perform any of the
covenants, agreements and obligations contained in the Notes or this Agreement
and such refusal or failure continues for 30 days after notice by Secured Party
to Grantor
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(c) Any warranty, representation or statement made by Grantor in
this Agreement proves to have been incorrect in any material respect as of the
date made or deemed made or any representation or statement, certificate,
request or other document furnished to Secured Party pursuant to the Notes or
this Agreement proves to have been incorrect in any material respect as of the
date made or deemed made.
(d) Grantor (i) has applied for or consented to the appointment of a
receiver, custodian, trustee, intervenor or liquidator of all or a substantial
part of its assets, (ii) has voluntarily become the subject of a bankruptcy,
reorganization or insolvency proceeding or is insolvent or has admitted in
writing that it is unable to pay its debts as they become due, (iii) has made a
general assignment for the benefit of creditors, (iv) has filed a petition or
answer seeking reorganization or an arrangement with creditors or attempted to
take advantage of any bankruptcy or insolvency laws, (v) has filed an answer
admitting the material allegations of, or consented to, or defaulted in
answering, a petition filed against it in any bankruptcy, reorganization or
insolvency proceeding, or (vi) is the subject of an order for relief under any
bankruptcy, reorganization or insolvency proceeding.
(e) Parent fails to obtain the consent of Cornell Capital Partners
to the execution of this Agreement by Grantor and that certain Guaranty
Agreement of even date herewith by the Parent in favor of Secured Party within
30 days after the date thereof.
4.2 Rights and Remedies on Default. In addition to all other rights,
options and remedies granted to the Secured Party under this Agreement, the
Secured Party upon the occurrence of an Event of Default, exercise any other
rights granted to it under the UCC and any other applicable law, including,
without limitation, the following rights and remedies: assemble, sell, take
possession of, send notices, and collect directly the Collateral, with or
without judicial process.
4.3 Nature of Remedies. The Secured Party shall have the right to proceed
against all or any portion of the Collateral in any order and may apply such
Collateral to the liabilities and obligations of Grantor to the Secured Party in
any order. All rights and remedies granted to the Secured Party hereunder and
under any agreement referred to herein, or otherwise available at law or in
equity, shall be deemed concurrent and cumulative, and not alternative remedies,
and the Secured Party may proceed with any number of remedies at the same time
until the Obligations are satisfied in full. The exercise of any one right or
remedy shall not be deemed a waiver or release of any other right or remedy, and
the Secured Party, upon the occurrence of an Event of Default, may proceed
against the Grantor, and the Collateral, at any time, under any agreement, with
any available remedy and in any order.
SECTION 5 - MISCELLANEOUS
5.1 Governing Law: This Agreement, and all related agreements and
documents shall be governed by and construed in accordance with the laws of the
State of Delaware, without regard to its otherwise applicable principles of
conflicts of laws.
5.2 Notices. Any notice required or permitted by or in connection with
this Agreement shall be in writing and shall be made by facsimile, or by hand
delivery, or by electronic transmission (that is, "e-mail"), or by overnight
delivery service, or by certified mail, return receipt requested, postage
prepaid, addressed to Secured Party (or Seller) or Grantor (or Buyer) at the
address set forth in the Asset Purchase Agreement for Seller and Buyer. Notice
shall be considered given as of the earlier of the date of actual receipt, or
the date of the facsimile transmission without error, or the date of hand
delivery, or the date of delivery to the recipient's computer, or one business
day after delivery to a nationally recognized overnight delivery service, or
three business days after the date of mailing, independent of the date of actual
delivery or whether delivery is ever in fact made, as the case may be, provided
the giver of notice can establish that notice was given as provided herein.
Notwithstanding the aforesaid procedures, any notice or demand upon Grantor in
fact received by Grantor shall be sufficient notice or demand.
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5.3 Waiver; Time of Essence.
(a) No omission or delay by the Secured Party in exercising any
right or power under this Agreement or any other document will impair such right
or power or be construed to be a waiver of any Event of Default or an
acquiescence therein, and any single or partial exercise of any such right or
power will not preclude other or further exercise thereof or the exercise of any
other right, and no waiver of the Secured Party's rights hereunder will be valid
unless in writing and signed by the Secured Party, and then only to the extent
specified.
(b) Time is of the essence with respect to Grantor's obligations
hereunder.
5.4 Modification. No modification hereof or any agreement referred to
herein shall be binding or enforceable unless in writing and signed on behalf of
the party against whom enforcement is sought.
5.5 Counterpart Originals. The parties may sign any number of copies of
this Agreement. Each signed copy shall be an original, but all of them together
represent the same agreement.
5.6 Successors and Assigns. All provisions herein shall inure to, become
binding upon the successors, representatives, trustees, administrators,
executors, heirs and assigns of the parties hereto.
5.7 Headings, etc. Any cross-reference, table and headings of the Articles
and Sections of this Agreement have been inserted for convenience of reference
only, are not to be considered a part hereof and shall in no way modify or
restrict any of the terms or provisions thereof.
5.8 Waiver of Jury Trial: Grantor and the Secured Party hereby waive any
and all rights any may have to a jury trial in connection with any litigation
commenced by or against the Secured Party with respect to rights and obligations
of the parties hereto.
{Signatures appear on following page.}
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IN WITNESS WHEREOF, the undersigned parties have executed this Agreement
the day and year first above written.
GRANTOR:
TELEPLUS WIRELESS, CORP.
By: /s/ Marius Silvasan
--------------------------------
Name:
Title:
I have the authority to bind the
Corporation
SECURED PARTY:
STAR NUMBER, INC.
By: /s/ Frank C. Bennett
--------------------------------
Name:
Title:
I have the authority to bind the
Corporation
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