Exhibit 10.3
SEQUIAM CORPORATION AND CERTAIN OF ITS SUBSIDIARIES
MASTER SECURITY AGREEMENT
To: Laurus Master Fund, Ltd.
c/o Ironshore Corporate Services, Ltd.
X.X. Xxx 0000 G.T
Queensgate House
South Church Street
Grand Cayman, Cayman Islands
Date: April 27, 2004
To Whom It May Concern:
1. To secure the payment of all Obligations (as hereafter defined),
Sequiam Corporation, a California corporation (the "Company"), each of the other
undersigned parties (other than Laurus Master Fund, Ltd, "Laurus")) and each
other entity that is required to enter into this Master Security Agreement (each
an "Assignor" and, collectively, the "Assignors") hereby assigns and grants to
Laurus a continuing security interest in all of the following property now owned
or at any time hereafter acquired by any Assignor, or in which any Assignor now
have or at any time in the future may acquire any right, title or interest (the
"Collateral"): all cash, cash equivalents, accounts, inventory, equipment,
goods, documents, instruments (including, without limitation, promissory notes),
contract rights, general intangibles (including, without limitation, payment
intangibles and an absolute right to license on terms no less favorable than
those currently in effect among our affiliates), chattel paper, supporting
obligations, investment property (including, without limitation, all equity
interests owned by any Assignor), letter-of-credit rights, trademarks and
tradestyles, patents, copyrights and other intellectual property in which any
Assignor now have or hereafter may acquire any right, title or interest, all
proceeds and products thereof (including, without limitation, proceeds of
insurance) and all additions, accessions and substitutions thereto or therefore.
In the event any Assignor wishes to finance the acquisition in the ordinary
course of business of any hereafter acquired equipment and have obtained a
commitment from a financing source to finance such equipment from an unrelated
third party, Laurus agrees to release its security interest on such hereafter
acquired equipment so financed by such third party financing source. Except as
otherwise defined herein, all capitalized terms used herein shall have the
meaning provided such terms in the Securities Purchase Agreement referred to
below.
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2. The term "Obligations" as used herein shall mean and include all
debts, liabilities and obligations owing by each Assignor to Laurus arising
under, out of, or in connection with: (i) that certain Securities Purchase
Agreement dated as of the date hereof by and between the Company and Laurus (the
"Securities Purchase Agreement"), (ii) that certain Secured Convertible Note
dated as of the date hereof made by the Company in favor of Laurus (the "Term
Note"), (iii) that certain Warrant dated as of the date hereof made by the
Company in favor of Laurus (the " Warrant"), (iv) that certain Subsidiary
Guaranty dated as of the date hereof made by certain Subsidiaries of the
Company, (the "Subsidiary Guaranty"), (v) that certain Registration Rights
Agreement dated as of the date hereof by and between the Company and Laurus (the
"Registration Rights Agreement"), (vi) this Master Security Agreement, (vii)
that certain Stock Pledge Agreement dated as of the date hereof among the
Company, certain subsidiaries of the Company and Laurus (the "Stock Pledge
Agreement"), (viii) that certain Escrow Agreement dated as of the date hereof
among the Company, Laurus and the escrow agent referred to therein (the "Escrow
Agreement"), (ix) any incremental funding referred to in that certain
Incremental Funding Side Letter, dated the date hereof, between the Company and
Laurus (the "Incremental Funding Side Letter"), (x) any other additional funding
provided by Laurus to, or investments made by Laurus in, the Company after the
date hereof (the agreements and documents evidencing such funding and/or
investments, collectively, the "Additional Funding Agreements") and (ix) the
Subordination Agreement dated as of the date hereof among Xxxx Xxxxxxxxxxx, Xxxx
XxxxxxXxxxxx and the Purchaser (the "Subordination Agreement") (the Securities
Purchase Agreement, the Term Note, the Warrant, the Registration Rights
Agreement, the Subsidiary Guaranty, this Master Security Agreement, the Stock
Pledge Agreement, the Escrow Agreement, the Incremental Funding Side Letter, the
Additional Funding Agreements and the Subordination Agreement, as each may be
amended, modified, restated or supplemented from time to time, are collectively
referred to as the "Documents"), and in connection with any documents,
instruments or agreements relating to or executed in connection with the
Documents or any documents, instruments or agreements referred to therein or
otherwise, and in connection with any other indebtedness, obligations or
liabilities of any Assignor to Laurus, whether now existing or hereafter
arising, direct or indirect, liquidated or unliquidated, absolute or contingent,
due or not due and whether under, pursuant to or evidenced by a note, agreement,
guaranty, instrument or otherwise, in each case, irrespective of the
genuineness, validity, regularity or enforceability of such Obligations, or of
any instrument evidencing any of the Obligations or of any collateral therefor
or of the existence or extent of such collateral, and irrespective of the
allowability, allowance or disallowance of any or all of the Obligations in any
case commenced by or against any Assignor under Xxxxx 00, Xxxxxx Xxxxxx Code,
including, without limitation, obligations or indebtedness of each Assignor for
post-petition interest, fees, costs and charges that would have accrued or been
added to the Obligations but for the commencement of such case
3. Each Assignor hereby jointly and severally represents, warrants and
covenants to Laurus that:
3.1 it is a corporation, partnership or limited liability
company, as the case may be, validly existing, in good standing and organized
under the respective laws of its jurisdiction of organization set forth on
Schedule A, and each Assignor will provide Laurus thirty (30) days' prior
written notice of any change in any of its respective jurisdiction of
organization;
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3.2 its legal name is as set forth in its respective Certificate
of Incorporation or other organizational document (as applicable) as amended
through the date hereof and as set forth on Schedule A, and it will provide
Laurus thirty (30) days' prior written notice of any change in its legal name;
3.3 its organizational identification number (if applicable) is as
set forth on Schedule A hereto, and it will provide Laurus thirty (30) days'
prior written notice of any change in any of its organizational identification
number;
3.4 it is the lawful owner of the respective Collateral and it has
the sole right to grant a security interest therein and will defend the
Collateral against all claims and demands of all persons and entities;
3.5 it will keep its respective Collateral free and clear of all
attachments, levies, taxes, liens, security interests and encumbrances of every
kind and nature ("Encumbrances"), except (i) Encumbrances securing the
Obligations, (ii) to the extent said Encumbrance does not secure indebtedness in
excess of $100,000 and such Encumbrance is removed or otherwise released within
ten (10) days of the creation thereof, (iii) liens of warehousemen, mechanics,
materialmen, workers, repairmen, common carriers, or landlords, liens for taxes,
assessments or other governmental charges, and other similar liens arising by
operation of law, in each case arising in the ordinary course of business and
for amounts that are not yet due and payable or which are being contested in
good faith by appropriate proceedings promptly instituted and diligently
conducted and for which an adequate reserve or other appropriate provision shall
have been made to the extent required by generally accepted accounting
principals, and (iv) pledges or deposits in connection with workers'
compensation, unemployment insurance and other social security legislation
(collectively, the "Permitted Encumbrances");
3.6 it will, at its and the other Assignors joint and several
cost and expense use commercially reasonable efforts to keep the Collateral in
good state of repair (ordinary wear and tear excepted) and will not waste or
destroy the same or any part thereof other than ordinary course discarding of
items no longer used or useful in its or such other Assignors' business;
3.7 it will not without Laurus' prior written consent, sell,
exchange, lease or otherwise dispose of the Collateral, whether by sale, lease
or otherwise, except for the sale of inventory in the ordinary course of
business and for the disposition or transfer in the ordinary course of business
during any fiscal year of obsolete and worn-out equipment or equipment no longer
necessary for its ongoing needs, having an aggregate fair market value of not
more than $25,000 and only to the extent that:
(a) the proceeds of any such disposition are used to acquire
replacement Collateral which is subject to Laurus' first priority perfected
security interest, or are used to repay Obligations or to pay general
corporate expenses; and
(b) following the occurrence of an Event of Default which
continues to exist the proceeds of which are remitted to Laurus to be held
as cash collateral for the Obligations;
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3.8 it will insure or cause the Collateral to be insured in
Laurus' name against loss or damage by fire, theft, burglary, pilferage, loss in
transit and such other hazards as Laurus shall specify, in amounts and under
policies which are customary for similarly situated businesses, and by insurers
acceptable to Laurus, and all premiums thereon shall be paid by such Assignor
and the policies delivered to Laurus. If any such Assignor fails to do so,
Laurus may procure such insurance and the cost thereof shall be promptly
reimbursed by the Assignors, jointly and severally, and shall constitute
Obligations;
3.9 it will at all reasonable times and upon reasonable advance
notice to such Assignor allow Laurus or Laurus' representatives free access to
and the right of inspection of the Collateral;
3.10 such Assignor (jointly and severally with each other
Assignor) hereby indemnifies and saves Laurus harmless from all loss, costs,
damage, liability and/or expense, including reasonable attorneys' fees, that
Laurus may sustain or incur to enforce payment, performance or fulfillment of
any of the Obligations and/or in the enforcement of this Master Security
Agreement or in the prosecution or defense of any action or proceeding either
against Laurus or any Assignor concerning any matter growing out of or in
connection with this Master Security Agreement, and/or any of the Obligations
and/or any of the Collateral except to the extent caused by Laurus' own gross
negligence or willful misconduct (as determined by a court of competent
jurisdiction in a final and nonappealable decision).
4. The occurrence of any of the following events or conditions shall
constitute an "Event of Default" under this Master Security Agreement:
4.1 Breach of any covenant, warranty, representation or statement
made or furnished to Laurus by any Assignor or on any Assignor's benefit was
false or misleading in any material respect when made or furnished, and if
subject to cure, shall not be cured for a period of thirty (30) days;
(b) the loss, theft, substantial damage, destruction, sale or
encumbrance to or of any of the Collateral or the making of any levy,
seizure or attachment thereof or thereon except to the extent:
(a) such loss is covered by insurance proceeds which are used to
replace the item or repayLaurus; or
(b) said levy, seizure or attachment does not secure indebtedness
in excess of $100,000 and such levy, seizure or attachment has not been
removed or otherwise released within ten (10) days of the creation or the
assertion thereof;
4.2 any Assignor shall become insolvent, cease operations,
dissolve, terminate our business existence, make an assignment for the benefit
of creditors, suffer the appointment of a receiver, trustee, liquidator or
custodian of all or any part of Assignors' property;
4.3 any proceedings under any bankruptcy or insolvency law shall
be commenced by or against any Assignor and if commenced against any Assignor
shall not be dismissed within forty-five (45) days;
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4.4 the Company shall repudiate, purport to revoke or fail to
perform any or all of its obligations under the Note (after passage of
applicable cure period, if any); or
4.5 an Event of Default shall have occurred under and as defined
in any Document, after giving effect to any applicable cure or grace period.
5. Upon the occurrence of any Event of Default and at any time
thereafter, Laurus may declare all Obligations immediately due and payable and
Laurus shall have the remedies of a secured party provided in the Uniform
Commercial Code as in effect in the State of New York, this Agreement and other
applicable law. Upon the occurrence of any Event of Default and at any time
thereafter, Laurus will have the right to take possession of the Collateral and
to maintain such possession on our premises or to remove the Collateral or any
part thereof to such other premises as Laurus may desire. Upon Laurus' request,
each of the Assignors shall assemble or cause the Collateral to be assembled and
make it available to Laurus at a place designated by Laurus. If any
notification of intended disposition of any Collateral is required by law, such
notification, if mailed, shall be deemed properly and reasonably given if mailed
at least ten (10) days before such disposition, postage prepaid, addressed to
any Assignor either at such Assignor's address shown herein or at any address
appearing on Laurus' records for such Assignor. Any proceeds of any disposition
of any of the Collateral shall be applied by Laurus to the payment of all
expenses in connection with the sale of the Collateral, including reasonable
attorneys' fees and other legal expenses and disbursements and the reasonable
expense of retaking, holding, preparing for sale, selling, and the like, and any
balance of such proceeds may be applied by Laurus toward the payment of the
Obligations in such order of application as Laurus may elect, and each Assignor
shall be liable for any deficiency.
6. If any Assignor defaults in the performance or fulfillment of any of
the terms, conditions, promises, covenants, provisions or warranties on such
Assignor's part to be performed or fulfilled under or pursuant to this Master
Security Agreement, Laurus may, at its option without waiving its right to
enforce this Master Security Agreement according to its terms, immediately or at
any time thereafter and without notice to any Assignor, perform or fulfill the
same or cause the performance or fulfillment of the same for each Assignor's
joint and several account and at each Assignor's joint and several cost and
expense, and the cost and expense thereof (including reasonable attorneys' fees)
shall be added to the Obligations and shall be payable on demand with interest
thereon at the highest rate permitted by law.
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7. Each Assignor appoints Laurus, any of Laurus' officers, employees or
any other person or entity whom Laurus may designate as our attorney, with power
to execute such documents in each of our behalf and to supply any omitted
information and correct patent errors in any documents executed by any Assignor
or on any Assignor's behalf; to file financing statements against us covering
the Collateral; to sign our name on public records; and to do all other things
Laurus deem necessary to carry out this Master Security Agreement. Each
Assignor hereby ratifies and approves all acts of the attorney and neither
Laurus nor the attorney will be liable for any acts of commission or omission,
nor for any error of judgment or mistake of fact or law other than gross
negligence or willful misconduct (as determined by a court of competent
jurisdiction in a final and non-appealable decision). This power being coupled
with an interest, is irrevocable so long as any Obligations remains unpaid.
Furthermore, in connection with the filing of any financing statements, the
Collateral may be described in any such financing statements as "all assets"
and/or "all personal property", whether now owned and/or hereafter acquired.
8. No delay or failure on Laurus' part in exercising any right,
privilege or option hereunder shall operate as a waiver of such or of any other
right, privilege, remedy or option, and no waiver whatever shall be valid unless
in writing, signed by Laurus and then only to the extent therein set forth, and
no waiver by Laurus of any default shall operate as a waiver of any other
default or of the same default on a future occasion. Laurus' books and records
containing entries with respect to the Obligations shall be admissible in
evidence in any action or proceeding, shall be binding upon each Assignor for
the purpose of establishing the items therein set forth and shall constitute
prima facie proof thereof. Laurus shall have the right to enforce any one or
more of the remedies available to Laurus, successively, alternately or
concurrently. Each Assignor agrees to join with Laurus in executing financing
statements or other instruments to the extent required by the Uniform Commercial
Code in form satisfactory to Laurus and in executing such other documents or
instruments as may be required or deemed necessary by Laurus for purposes of
affecting or continuing Laurus' security interest in the Collateral.
9. This Master Security Agreement shall be governed by and construed in
accordance with the laws of the State of New York and cannot be terminated
orally. All of the rights, remedies, options, privileges and elections given to
Laurus hereunder shall inure to the benefit of Laurus' successors and assigns.
The term "Laurus" as herein used shall include Laurus, any parent of Laurus',
any of Laurus' subsidiaries and any co-subsidiaries of Laurus' parent, whether
now existing or hereafter created or acquired, and all of the terms, conditions,
promises, covenants, provisions and warranties of this Agreement shall inure to
the benefit of and shall bind the representatives, successors and assigns of
each Assignor and each of the foregoing. Laurus and each Assignor hereby (a)
waive any and all right to trial by jury in litigation relating to this
Agreement and the transactions contemplated hereby and each Assignor agrees not
to assert any counterclaim in such litigation, (b) submit to the nonexclusive
jurisdiction of any New York State court sitting in the borough of Manhattan,
the city of New York and (c) waive any objection Laurus or each Assignor may
have as to the bringing or maintaining of such action with any such court.
10. All notices from Laurus to any Assignor shall be sufficiently given
if mailed or delivered to such Assignor's address set forth below.
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11. This Master Security Agreement and the security interests granted
by the Assignors hereunder shall terminate upon the provision by Laurus of
written confirmation to the Company that (x) all indebtedness obligations owed
by any Assignor to Laurus have been repaid in full (including, without
limitation, all principal, interest and fees related to the Term Note, any
indebtedness referred to in the Incremental Funding Side Letter, any Additional
Funding Agreements and any other indebtedness outstanding at such time and owed
to Laurus) and (y) all commitments by Laurus to fund any indebtedness have been
terminated in their entirety.
Very truly yours,
SEQUIAM CORPORATION
By: ____________________
Name:
Title:
Address: 000 Xxxxxxx Xxxx
Xxxxxxx, XX 00000
SEQUIAM SOFTWARE, INC.
By: ____________________
Name:
Title:
Address: 000 Xxxxxxx Xxxx
Xxxxxxx, XX 00000
SEQUIAM BIOMETRICS, INC.
By: ____________________
Title:
Address: 000 Xxxxxxx Xxxx
Xxxxxxx, XX 00000
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SEQUIAM EDUCATION, INC.
By: ____________________
Name:
Title:
Address: 000 Xxxxxxx Xxxx
Xxxxxxx, XX 00000
SEQUIAM SPORTS, INC.
By: ____________________
Name:
Title:
Address: 000 Xxxxxxx Xxxx
Xxxxxxx, XX 00000
FINGERPRINT DECTECTION
TECHNOLOGIES, INC.
By: ____________________
Name:
Title:
Address: 000 Xxxxxxx Xxxx
Xxxxxxx, XX 00000
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ACKNOWLEDGED:
LAURUS MASTER FUND, LTD.
By:______________________
Name:
Title:
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SCHEDULE A
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Jurisdiction of Organization Identification
Entity Organization Number
------------------ --------------- ---------------------------
Sequiam
Corporation CA CA:2047001
------------------ --------------- ---------------------------
Sequiam
Software, Inc. CA CA:2377290
------------------ --------------- ---------------------------
Sequiam
Biometrics, Inc. FL FL: P03000045341
------------------ --------------- ---------------------------
Sequiam
Education, Inc. FL FL: P03000060330
------------------ --------------- ---------------------------
Sequiam Sports,
Inc. DE DE: 3172165
------------------ --------------- ---------------------------
Fingerprint
Detection
Technologies, Inc. FL FL: P03000079719
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