SECURITY AGREEMENT
This SECURITY AGREEMENT is made as of this 2nd day of January, 2002, by and
between eB2B Commerce, Inc., a New Jersey corporation ("Debtor"), with its
principal place of business at 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, and
Xxxxxx Xxxxxx and Xxxxxxx Xxxxxx (each a "Secured Party and together, the
"Secured Parties"), with a principal place of business at 000 Xxxxxxxx, Xxx
Xxxx, Xxx Xxxx 00000.
WHEREAS, Debtor is acquiring Bac-Tech Systems, Inc., a New York corporation
("Bac-Tech"), pursuant to the terms of a merger agreement dated January 2, 2002
(the "Merger Agreement") by and among Debtor, Bac-Tech and the Secured Parties
(the "Transaction");
WHEREAS, as partial consideration for the Transaction, Debtor owes the
Secured Parties an aggregate of $600,000 pursuant to certain promissory notes of
even date herewith (the "Notes") made in favor of the Secured Parties;
WHEREAS, Debtor is willing to grant a security interest in certain of its
assets to secure payment of the Notes upon the terms and conditions contained
herein.
NOW, THEREFORE, in consideration of the mutual covenants contained herein,
and other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, it is hereby agreed as follows:
1. Security Interest. To secure the due payment by Debtor under the Notes,
Debtor hereby grants to the Secured Parties a [first priority, perfected]
security interest in the Collateral described in Paragraph 2 hereof.
2. Description of Collateral. The collateral subject to this Security
Agreement is all of Debtor's right, title and interest in and to the
Intellectual Property Assets (as defined and described in Section 2.21(a) of the
Merger Agreement) (the "Collateral").
3. Obligations of Debtor. Debtor hereby covenants, represents, warrants and
agrees that:
(a) The Collateral, or any part thereof, will not be sold, leased,
licensed, assigned, conveyed, transferred, disposed of or become subjected to
any subsequent interest, lien, security interest or encumbrance of any party,
created or suffered by Debtor, voluntarily or involuntarily, except in the
ordinary course of Debtor's business or as expressly authorized in writing by
Secured Parties;
(b) The obligations, liabilities and indebtedness of Debtor to Secured
Parties hereunder shall not be released, discharged or impaired in any manner or
to any extent if Secured Parties renew, extend, modify, change or waive the time
of payment and/or the manner, place or terms of payment of all or any part of
the indebtedness secured hereby or any renewal thereof, or Secured Parties make
any exchange, release, substitution, addition, surrender, settlement or
compromise with respect to the Collateral, the indebtedness secured hereby or
any party liable thereon; or Secured Parties subordinate such indebtedness or
Collateral, or both, to any other indebtedness of Debtor, or security therefor,
or both which may exist at any time hereafter; and
(c) Upon the execution hereof, Debtor and Secured Parties shall execute a
UCC-1 financing statement relating to the security interest granted in this
Security Agreement and Debtor shall promptly file (or cause to be filed) the
UCC-1 financing statement with the State of New York. At any time and from time
to time, upon the request of the Secured Parties, the Debtor shall execute,
deliver and acknowledge or cause to be executed, delivered and acknowledged,
such further documents, agreements and instruments, and do such other acts and
things as the Secured Parties may reasonably request in order to fully perfect
the security interest granted herein and otherwise effect the purposes of this
Agreement.
(d) Debtor has full power and capacity to execute, deliver and perform this
Agreement. No consent or approval of any entity is required as a condition to
the validity of this Agreement. The making and performance of this Agreement
will not (x) violate or conflict with any provision of law or any rule or
regulation, or (y) will not violate or conflict with or result in a breach of
any order, writ, injunction or decree of any court or governmental authority, or
create a default under or breach of any agreement, bond, note or indenture to
which it is a party or by which it is bound or to which any of its properties or
assets is affected.
(e) This Agreement has been duly executed and delivered, and constitutes
the valid and legally binding obligations of Debtor, enforceable in accordance
with its respective terms.
(f) Debtor will promptly notify the Secured Parties of any claim, lien,
security interest or other encumbrance made or asserted against any of the
Collateral.
4. Event of Default. The non-payment of the principal or interest of one or
both of the Notes beyond any grace period and if not waived shall constitute a
default on the part of Debtor hereunder (an "Event of Default"). Notwithstanding
the foregoing, an Event of Default shall not exist unless the Secured Parties
have given written notice to Debtor of non-payment and Debtor shall not have
made the requisite payment within ten business days of actual receipt of such
notice.
5. Secured Parties' Rights and Remedies. Upon the occurrence of an Event of
Default under either of the Notes, in addition to all other rights and remedies
provided hereunder, Secured Parties shall have and may exercise all of the
rights and remedies provided by the Uniform Commercial Code in effect in the
State of New York at the date of the execution of this Security Agreement, and
any other applicable law, and, in conjunction with, in addition to, or in
substitution therefor, Secured Parties shall have and may exercise the following
rights and remedies:
(a) Secured Parties may (but shall not be required), alone or in
conjunction with Debtor, take any or all action necessary to collect or receive
any money or property at any time payable or receivable on account of or in
exchange for the Collateral;
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(b) Secured Parties may require Debtor to pay and deliver to Secured
Parties, immediately upon collection and receipt thereof by Debtor, all proceeds
arising from the Collateral, or may require Debtor to deposit all such proceeds
in a bank selected by Secured Parties in a collateral account acceptable to
Secured Parties. Until the proceeds from the Collateral have been paid and
delivered to Secured Parties or deposited in the bank as hereinabove provided,
Debtor shall hold such proceeds for and on behalf of Secured Parties separate
and apart from Debtor's other funds or property, and shall not mingle such
proceeds with any other such funds or property; and
(c) The entire unpaid indebtedness of Debtor to Secured Parties secured
hereby, shall become immediately due and payable as provided in the Notes.
(d) Secured Parties shall have the right to sell, lease, or otherwise
dispose of all or any part of the Collateral, whether in its then existing
condition or after further preparation or processing, either at public or
private sale or at any broker's board, in lots or in bulk, for cash or for
credit, with or without warranties or representations, and upon such terms and
conditions, all as Secured Parties, in their sole discretion, may deem
advisable, and Secured Parties shall have the right to purchase at any such
sale; and, if any Collateral shall require rebuilding, repairing, maintenance or
preparation, Secured Parties shall have the right, at their option, to do such
rebuilding, repairing, preparation or processing for the purpose of putting the
Collateral in such saleable or disposable form as they shall deem appropriate.
6. Other Provisions.
(a) Secured Parties may waive any default, or remedy any default in any
reasonable manner, without waiving such default remedied and without waiving any
other prior or subsequent default; and Secured Parties may waive or delay the
exercise of any right or remedy under this Security Agreement without waiving
that right or remedy or any other right or remedy hereunder.
(b) This Security Agreement shall be binding upon, and shall inure to the
benefit of, the respective heirs, executors, administrators, successors and
assigns of the parties hereto.
(c) Each of the foregoing instruments, covenants, representations and
warranties on the part of the Debtor shall be deemed and construed to be on a
continuing basis and shall survive the execution and delivery of this Security
Agreement.
(d) In the event that the Secured Parties exercise their rights under
Section 5 hereof in the event of an Event of Default, Debtor and the Secured
parties shall negotiate in good faith (a) non-exclusive license for Debtor to
utilize the Collateral as appropriate for use in its business and in any case,
Debtor may utilize such Collateral for a period of 45 days immediately following
the date Debtor otherwise loses its rights to use the Collateral and (b) if
requested by the Secured Parties, a non-exclusive license for the Secured
Parties to utilize modifications to the Collateral made subsequent to the
Closing Date and owned by Debtor as appropriate for use by the Secured Parties
and, in any case, the Secured Parties may utilize such modifications for a
period of 45 days.
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(e) All notices, demands, requests and other communications required or
otherwise given under this Security Agreement shall be in writing and shall be
deemed to have been duly given if: (i) delivered by hand against written receipt
therefor, (ii) forwarded by a third party company or governmental entity
providing delivery services in the ordinary course of business which guarantees
delivery the following business day, (iii) mailed by registered or certified
mail, return receipt requested, postage prepaid, or (iv) transmitted by
facsimile transmission electronically confirmed for receipt, in full, by the
other party no later than 5:00 p.m., local time, on the date of transmission,
addressed as follows:
If to Debtor to: eB2B Commerce, Inc.
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Chief Executive Officer
Facsimile: (000) 000-0000
with a copy to: Xxxxxxx & Xxxxxxxx, LLC
00 Xxxxxxx Xxxxxxxxx Xxxxxxxxx - Xxxxx 000
Xxxxxxx Field, New York 11553
Attention: Xxxx X. Xxxxxxxx, Esq.
Facsimile: (000) 000-0000
If to Secured Xxxxxx Xxxxxx
Parties to: c/o Bac-Tech Systems, Inc.
000 Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile: (000) 000-0000
with a copy to: Kasowitz, Benson, Xxxxxx & Xxxxxxxx, LLP
0000 Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx Xxxxxxxx, Esq.
Facsimile: (000) 000-0000
or at such other address as such party shall have furnished to each of the
other parties hereto in accordance with this Section 6. Each such notice,
demand, request or other communication shall be deemed given (i) on the date of
such delivery by hand, (ii) on the first business day following the date of such
delivery to the overnight delivery service or facsimile transmission, or (iii)
three business days following such mailing.
(f) The provisions of this Security Agreement shall be deemed severable, so
that if any provision hereof is declared invalid under the laws of any state
where it is in effect or of the United States, all other provisions of this
Security Agreement shall continue in full force and effect.
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(g) This Security Agreement shall not be modified or amended or any
provision hereof waived except in writing executed by both parties hereto.
(h) The security interest granted herein shall terminate when all the
obligations of Debtor under the Note have been fully paid and performed. Upon
such termination, the Secured Parties shall return the Note to the Debtor.
(i) This Security Agreement shall be construed in accordance with and
governed by the laws of the State of New York, without regard to its conflicts
of law principles.
The parties hereto hereby agree that any legal action or proceeding with
respect to this Security Agreement or any amendments hereto may be brought in
any court of the State of New York sitting in the County of New York or in the
United States District Court for the Sourthern District of New York. Each party
hereto hereby irrevocably assents and submits to the personal jurisdiction of
any of such courts in any such action or service. Each party hereto hereby
expressly and irrevocably waives any claim or defense in any such action or
proceeding based on any alleged lack of personal jurisdiction, improper venue or
forum non conveniens or any similar basis. Nothing in this Agreement shall
affect, or impair in any manner or to any extent the right of any party hereto
to commence legal proceedings or otherwise proceed against any other party in
any jurisdiction or to serve process in any manner otherwise permitted by law.
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound
hereby, have executed and delivered this Security Agreement as of the day and
year first above written.
eB2B COMMERCE, INC.
By: /s/ Xxxxxxx X. Xxxxx
---------------------------------
Name: Xxxxxxx X. Xxxxx
Title: CEO
/s/ Xxxxxx Xxxxxx
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Xxxxxx Xxxxxx
/s/ Xxxxxxx Xxxxxx
---------------------------------
Xxxxxxx Xxxxxx
