SECURITY AGREEMENT
AGREEMENT, dated as of February 4, 1997, between NET TELECOMMUNICATIONS,
INC., a Nevada corporation, having an address at 000 Xxxxxxxxxx Xxxxxx Xxxxx,
Xxx Xxxxx, Xxxxxx ("Debtor"), and BENTLEY KING ASSOCIATES, INC., a Delaware
corporation, having and address at 0000 X. Xxxxxxxx Xxxx, Xxx Xxxxx, Xxxxxx
("Secured Party").
WITNESSETH:
WHEREAS, concurrently herewith Secured Party is lending to Debtor the
sum of $300,000.00, as evidenced by a promissory note and loan agreement dated
as of February 4, 1997 herewith (the "Note" and "Loan Agreement"); and
WHEREAS, in order to induce Secured Party to make said loan, Debtor has
agreed to pledge to Secured Party certain property as security for the loan;
NOW THEREFORE, in consideration of Ten Dollars, and other valuable
consideration, the receipt and sufficiency of which is hereby acknowledged,
the parties hereto agree as follows:
1. Definitions. The following terms as used in this Agreement shall have
the meaning set forth below:
"Collateral" shall mean all of the property set forth in Exhibit A
attached hereto and made a part hereto, and all property of the same class or
character acquired by Debtor subsequent to the date hereof, and all proceeds
thereof, and all substitutions, replacements and accessions thereto.
"Obligations" shall mean all principal and interest due or to become due
under the aforesaid Note, and any other indebtedness or liability of Debtor to
Secured Party, direct or indirect, absolute or contingent, due or to become
due, now existing or hereafter arising.
2. Creation Of The Security Interest. Debtor hereby grants to Secured
Party a security interest in all of the right, title and interest of Debtor in
and to the Collateral to secure the full and prompt payment and performance of
all of the Obligations.
3. Debtor's Obligations To Pay. Debtor shall pay and perform all of the
Obligations of Debtor to Secured Party as the same may become due according to
their terms. Debtor shall be liable for, and shall reimburse to Secured Party,
all expenses, including reasonable attorneys' fees, incurred or paid in
connection with establishing, perfecting, maintaining, protecting or enforcing
any of Secured Party's rights and remedies hereunder.
4. Protection Of The Collateral. Debtor shall defend the title to the
collateral against all claims and demands whatsoever. Debtor shall keep the
collateral free and clear of all liens, charges, encumbrances, taxes and
assessments, and shall pay all taxes, assessments and fees relating to the
Collateral. Upon request by Secured Party, Debtor shall furnish further
assurances of title, execute any further instruments and do any other acts
necessary to effectuate the purpose and provisions of this Agreement. Debtor
shall not sell, exchange, assign, transfer or otherwise dispose of the
Collateral, and shall not encumber, hypothecate, mortgage, create a lien on or
security interest in the Collateral, without the prior written consent of
Secured Party in each instance. The risk of loss of the Collateral at all
times shall be borne by Debtor. Debtor shall keep the Collateral in good
repair and condition and shall not misuse, abuse or waste the Collateral or
allow the Collateral to deteriorate except for normal wear and tear.
Debtor at all times shall maintain: (a) insurance covering the
Collateral and all other property of Debtor against loss or damage by fire and
other hazards; (b) insurance against liability on account of damage to persons
and property; (c) all insurance required under applicable workmen's
compensation laws; and (d) insurance covering such other risks as Secured
Party reasonably may request. Such insurance shall be in amounts satisfactory
to Secured Party, shall be maintained with responsible insurance carriers,
shall name Debtor and Secured Party as their interests may appear as insured,
and shall provided for at least ten days' notice to Secured Party prior to
cancellation. Debtor, from time to time, upon Secured Party's written request,
promptly shall furnish or cause to be furnished to Secured Party evidence of
the maintenance of all insurance required to be maintained hereunder,
including such originals or copies of policies, certificates of insurance,
riders and endorsements relating thereto and proof of payment of premiums as
Secured Party may request. If Debtor shall fail to maintain any such
insurance, Secured Party may, but shall not be obligated to, do so at the
expense of Debtor, in addition to the other rights and remedies of Secured
Party. Debtor hereby appoints Secured Party the attorney of Debtor for purpose
of obtaining, adjusting and canceling any such insurance and endorsing
settlement drafts, and hereby assigns to Secured Party all sums which may
become payable under such insurance, including returned premiums and
dividends, as additional security for the Obligations.
The Collateral shall be kept at Debtor's place of business set forth
above, except for temporary removal in connection with its ordinary use or
unless Debtor shall have obtained the prior written consent of Secured Party
for its removal to another location. Secured Party shall have the right to
enter upon Debtor's premises at any reasonable time, and from time to time, to
inspect the Collateral.
5. Filing And Recording. Debtor, at its own cost and expense, shall
execute and deliver to Secured Party any financing statements, and shall
procure for Secured Party any other documents, necessary or appropriate to
protect the security interest granted to Secured Party hereunder against the
rights and interests of third parties, and shall cause the same to be duly
recorded and filed in all places necessary to perfect the security interest of
Secured Party in the Collateral. In the event that any recording or refiling
thereof (or filing of any statements of continuation of assignment of any
financing statement) is required to protect and preserve such security
interest, Debtor, at its own cost and expense, shall cause the same to be re-
recorded and/or refiled at the time and in the manner requested by Secured
Party. Debtor hereby authorizes Secured Party to file or refile any financing
statements or continuation statements with respect to the security interest
granted pursuant to this Agreement which at any time may be required or
appropriate, although the same way have been executed only by Secured Party,
and to execute such financing statement on behalf of Debtor. Debtor hereby
irrevocably designates Secured Party, its agents, representatives and
designees, as agent ant attorney-in-fact for Debtor for the aforesaid
purposes.
6. Default. The occurrence of any one or more of the following events
(hereinafter referred to as "Events of Default") shall constitute a default
hereunder, whether such occurrence is voluntary or involuntary or comes about
or is effected by operation of law or pursuant to or in compliance with any
judgment, decree or order of ~any court or any order, rule or regulation of
any administrative or governmental authority:
(a) If Debtor shall fail to pay, perform or observe any covenant,
agreement, term or provision of this Agreement, the Loan Document, the Note or
any other agreement or arrangement now or hereafter entered into between the
parties hereto or with respect to any Obligation of Debtor to Secured Party;
or
(b) If any representation, warranty or other statement of fact herein or
in any writing, certificate, report or statement at any time furnished to
Secured Party pursuant to or in connection with this Agreement or the Note
shall be false or misleading in any material respect; or
(c) If Debtor shall: admit in writing its inability to pay its debts
generally as they become due; file a petition for relief under the bankruptcy
laws or a petition to take advantage of any insolvency act; make an assignment
for the benefit of creditors; commence a proceeding for the appointment of a
receiver, trustee, liquidator or conservator of itself or the whole or any
substantial part of its property; file a petition or answer seeking
reorganization or arrangement or similar relief under the Federal Bankruptcy
Laws or any other applicable law or statute of the United States or any State;
or if Debtor shall be adjudged a bankrupt or insolvent, or a court of
competent jurisdiction shall enter any order, judgment or decree appointing a
receiver, trustee, liquidator or conservator of Debtor or of the whole or any
substantial part of the property of Debtor or approves a petition filed
against Debtor seeking reorganization or similar relief under the Federal
Bankruptcy Laws or any other applicable law or statute of the United States or
any State; or if, under the provisions of any other law for the relief or aid
of debtors, a court of competent jurisdiction shall assume custody or ~
control of Debtor or the whole or any substantial part of its property; or if
there is commenced against Debtor any proceeding for any of the foregoing
relief; or if Debtor any act indicates its consent to, approval of, or
acquiescence in any such proceeding; or
(d) If all or any creditor of Debtor for any reason whatsoever hereafter
shall accelerate payment in whole or in part of any outstanding obligation
owed to it by Debtor under any agreement or arrangement, or if any judgment
against the Debtor or any execution against any of its property for an amount
remains unpaid, unstayed or undismissed for a period in excess of ten days; or
(e) If all or any pan of the Collateral shall be sold, transferred or
assigned, or shall be funkier encumbered, hypothecated, mortgaged, or made
subject to any other lien or security interest, without the prior written
consent of Secured Party.
7. Rights And Remedies. Upon the occurrence of an Event of Default, the
obligations shall immediately become due and payable in full without notice or
demand. Secured Party shall have all rights and remedies provided by the
Uniform Commercial Code in effect in the State of Nevada on the date hereof.
In addition to, or in conjunction with, or substitution for such rights and
remedies, Secured Party may at any time and from and after the occurrence of
an Event of Default hereunder:
(a) with or without notice to Debtor, foreclose the security interest
created herein by any available judicial procedure, or take possession of the
Collateral, or any portion thereof, with or without judicial process, and
enter any premises where the Collateral may be located for the purpose of
taking possession of or removing the same, or rendering the same unusable, or
disposing of the Collateral on such premises, and Debtor agrees not to resist
or interfere therewith;
(b) require Debtor to prepare, assemble or collect the Collateral, at
Debtor's own expense, and make the same available to Secured Party at such
place as Secured Party may designate, whether at Debtor's premises or
elsewhere;
(c) sell, lease or otherwise dispose of all or any pan of the
Collateral, whether in its then condition or after funkier preparation, in
Debtor's name or in its own name, or in the name of such party as Secured
Party may designate, either at public or private sale (at which Secured Party
shall have the right to purchase), in lots or in bulk, for cash or for credit,
with or without representations or warranties, and upon such other terms as
Secured Party, in its sole discretion, may deem advisable; and ten days'
written notice of such public sale date or dates after which private sale may
occur, or such lesser period of time in the case of an emergency, shall
constitute reasonable notice hereunder;
(d) execute and deliver documents of title, certificates of origin, or
other evidence of payment, shipment or storage of any Collateral or proceeds
on behalf of and in the name of Debtor;
(e) remedy any default by Debtor hereunder, without waiving such
default, and any monies expended in so doing shall be chargeable with interest
to Debtor and added to the Obligations secured hereby; and
(f) apply for an injunction to restrain a breach or threatened breach of
this Agreement by Debtor.
8. Cumulative Rights. All rights, remedies and powers granted to Secured
Party herein, or in any instrument or document related hereto, or provided or
implied by law or in equity shall be cumulative and may be exercised singly or
concurrently on any one or more occasions.
9. Debtor's Representations And Warranties. Debtor hereby represents and
warrants to Secured Party that:
(a) Neither the execution nor the delivery of this Agreement, nor the
consummation of the transactions herein contemplated, nor compliance with the
provisions hereof, will violate any law or regulation, or any order or decree
of any court of governmental authority, or will conflict with, or result in
the breach of, or constitute a default under, any indenture, mortgage, deed or
trust, agreement or other instrument to which Debtor is a party or by which
Debtor my be bound, or result in the creation or imposition of any lien, claim
or encumbrance upon any property of Debtor.
(b) Debtor has the power to execute, deliver and perform the provisions
of this Agreement and all instruments and documents delivered or to be
delivered pursuant hereto; and has taken or caused to be taken all necessary
or appropriate actions to authorize the execution, delivery and performance of
this Agreement and all such instruments and documents.
(c) Debtor is the legal and equitable owner of the Collateral, free and
clear of all security interests, liens, claims and encumbrances of every kind
and nature.
(d) No default exists, and no event which with notice or the passage of
time, or both, would constitute a default under the Collateral by any party
thereto, and there are no offsets, claims or defenses against the obligations
evidenced by the Collateral, except as may be expressly set forth in Exhibit A
annexed hereto.
10. Notices. All notices, requests, demands or other communications
provided for herein shall be in writing and shall be deemed to have been
property given if sent by registered or certified mail, return receipt
requested, addressed to the parties at their respective addresses hereinabove
set forth, or at such other addresses as the parties may designate in writing.
11. Modification And Waiver. No modification or waiver of any provision
of this Agreement, and no consent by Secured Party to any breach thereof by
Debtor, shall be effective unless such modification or waiver shall then be in
writing and signed by Secured Party, and the same shall then be effective only
for the period and on the conditions and for the specific instances and
purposes specified in writing. No course of dealing between Debtor and Secured
Party in exercising any rights or remedies hereunder shall operate as a waiver
or preclude the exercise of any other rights or remedies hereunder.
12. Applicable Law. This Agreement shall be construed in accordance with
an shall be governed by the laws of the State of Nevada.
13. Benefit. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective heirs, executors,
administrators, successors and assigns.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
on the date first above written.
NET TELECOMMUNICATIONS INC.
By:/s/Xxxxxxx Xxxxx
--------------------------
Xxxxxxx Xxxxx
President
BENTLEY KING ASSOCIATES, INC.
By:/s/Xxx X. Xxxxxx
--------------------------
Xxx X. Xxxxxx
Executive Vice President
Exhibit A
1. All shares of common stock issued and outstanding of NTI Telecom,
Inc.
2. All equipment, including but not limited to, computers and related
equipment, printers, fixtures, furniture, supplies, account receivables and
all other assets of the Debtor whether existing now or acquired hereinafter.
3. Secured party acknowledges that the ownership of the switch and all
related equipment is vested in Telecommunication Finance Group (TFG) pursuant
to TFG's prior recorded documents.
