FIRST AMENDED AND RESTATED
SECURITY AGREEMENT
THIS FIRST AMENDED AND RESTATED SECURITY AGREEMENT (the "Agreement")
entered into this 24th day of May, 2005, by and between Techsphere Systems
International, LLC, a Georgia limited liability company (the "Debtor") and Cyber
Defense Systems, Inc., a Florida corporation (the "Secured Party"), amends and
restates the Security Agreement between the parties dated May 20, 2005.
In consideration of the mutual covenants contained herein, the parties
agree as follows:
1. Grant of Security Interest. The Debtor hereby grants the Secured Party
a security interest in the following-described property (collectively the
"Collateral"):
(a) Accounts Receivable and Other Intangibles. All of the Debtor's
accounts, contract rights, instruments, documents, chattel paper, general
intangibles (including, but not limited to, software, payment intangibles,
chooses in action, tax refunds, and insurance proceeds); any other obligations
or indebtedness owed to the Debtor from whatever source arising; all rights of
the Debtor to receive any payments in money or in kind; all guaranties of the
foregoing and security therefor; all the right, title, and interest of the
Debtor in and with respect to the goods, services, or other property that gave
rise to or that secure any of the foregoing and insurance policies and proceeds
relating thereto; all rights of the Debtor as an unpaid seller of goods and
services, including, but not limited to, the rights of stoppage in transit,
replevin, reclamation, and resale; and all of the foregoing, whether or not now
owned or hereafter created or acquired.
(b) Inventory. All goods, merchandise, and other personal property
now owned or hereafter acquired by the Debtor that are held for sale or lease,
or are furnished to or to be furnished under any contract of services or are raw
materials, work-in- process, supplies, or materials used or consumed in the
Debtor's business, and all products thereof, and all substitutions,
replacements, additions, or accessions therefor or thereto.
(c) Machinery, Equipment, Furniture, and Fixtures. All machinery and
equipment and furniture and fixtures now owned, or hereafter acquired, by the
Debtor and used or acquired for use in the business of the Debtor, together with
all accessions thereto and all substitutions and replacements thereof and parts
therefor.
(d) Proceeds. All cash and noncash proceeds of the foregoing,
including, but not limited to, insurance proceeds, cash, checks, monies on
deposit in any bank or banks, and accounts receivable; provided that this
provision shall not be construed as a waiver of any restriction contained in
this Security Agreement against alienating or encumbering the Collateral.
(e) Documents and Similar Items. All ledger sheets, files, records,
documents, and instruments (including, but not limited to computer programs,
tapes, disks, diskettes, and related electronic processing software) evidencing
an interest in or relating to the above.
2. Obligations Secured. The obligations secured by this Security Agreement
are:
(a) Promissory Notes. Payment of the principal and interest due upon
the Promissory Note dated May 20, 2005 in the principal amount of $1,000,000.00
(plus such additional amount as may be provided pursuant to Section 1 of that
certain Agreement between Debtor and Secured Party of even date), and the
Promissory Note dated May 24, 2005 in the principal amount of $250,000, in which
the Debtor is the maker and the Secured Party is the payee (collectively, the
"Promissory Note").
(b) Other Covenants and Conditions. Performance or observance by the
Debtor of the other covenants and conditions of the Promissory Note and of the
covenants and conditions of this Security Agreement.
(c) Other Obligations. Any other indebtedness, liability, or
obligation of the Debtor to the Secured Party, however arising, whether now
existing or herafter arising, due or not due, absolute or contingent, liquidated
or unliquidated, including indebtedness, liabilities, and obligations on which
the Debtor is jointly liable with other parties, provided the indebtedness,
liability or obligation arises out of or relates to the Secured Party's
negotiations with 21st Century Airships, Inc., or the XxXxxxx/Xxxxxx/Xxxxxxxx
creditors, as described in the Agreement between Debtor and Secured Party of
even date.
(d) Expenses of Secured Party. All expenses incurred or paid by the
Secured Party for purposes of conserving and protecting the Collateral,
including, but not limited to, reasonable attorney's fees and other legal
expenses incurred in connection with retaking, holding, preparing for sale, and
selling the Collateral.
(e) Legal Expenses. Reasonable attorney's fees and other expenses
incurred by the Secured Party in any legal proceeding, in the trial court or on
appeal, brought to enforce or to collect any obligation secured by this Security
Agreement, or to enforce any term or provision of this Security Agreement,
including any legal proceeding brought to foreclose or otherwise realize upon
the Collateral.
3. Debtor's Representations And Warranties. The Debtor represents and
warrants to the Secured Party that:
(a) Organization. The Debtor is a limited liability company duly
organized, validly existing, and in good standing under the laws of the state of
Georgia, with all corporate powers necessary to own its assets and property and
to carry on its business as now owned and conducted. Debtor's organizational
identification number is ____________.
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(b) Authority. The Debtor has full corporate power and authority to
execute and deliver this Security Agreement, to perform the Debtor's obligations
under this Security Agreement, and the execution and delivery of this agreement
has been duly authorized and approved by the Debtors board of managers. This
Security Agreement will not result in or constitute a default or an event that,
with notice or lapse of time or both, would be a default, breach, or violation
of the articles of organization or operating agreement or any other charter
document of the Debtor, or any lease, license, promissory note, conditional
sales contract, commitment, indenture, mortgage, deed of trust, or other
agreement, instrument, or arrangement to which the Debtor is a party or by which
the Debtor, or any of the Collateral, is bound.
(c) Ownership of Collateral. Debtor is the sole owner of the
Collateral, free and clear of any and all liens or encumbrances, and will defend
the same against all claims and demands of all persons.
(d) Accounts Receivable. Each of the accounts receivable included in
the Collateral is genuine, valid, and represents an existing claim arising out
of products sold or services rendered by the Debtor to the account debtor.
4. Debtor's Rights and Covenants.
(a) Possession of Collateral. Until there is a default under the
terms of this Security Agreement, the Debtor may retain possession of the
Collateral and may use the Collateral in a manner not inconsistent with this
Security Agreement.
(b) No Disposition of Collateral. Except for its inventory, which
the Debtor may sell, lease, or otherwise transfer in the ordinary course of the
Debtor's business, the Debtor shall not sell, transfer, lease, license, or
otherwise dispose of the Collateral.
(c) Use of Collateral. The Debtor shall keep the Collateral in good
order and repair and shall protect the Collateral from waste, loss, or damage.
The Debtor shall not cause or permit the Collateral to be attached or affixed to
real estate in such manner that it will become a fixture. Debtor shall not use
or permit the use of the Collateral in violation of any applicable law, statute,
ordinance, or regulation. Except for the sale of inventory and the use of
equipment in the ordinary course of the Debtor's business, the Debtor shall not
remove any collateral from the address set forth below for the giving of notices
to the Debtor.
(d) Liens, Encumbrances, and Taxes. The Debtor shall keep the
Collateral free and clear of any and all liens and encumbrances, excepting only
the lien created by this Security Agreement and the liens created upon the
purchase of machinery and equipment. The Debtor shall pay when due all taxes,
fees, or assessments imposed upon or with respect to the Collateral.
(e) Records and Inspection. The Debtor shall at all times maintain
complete and accurate records of the Debtor's business, specifically including
Debtor's accounts receivable and contract rights, in accordance with generally
accepted accounting procedures and practices. The Secured Party, and the Secured
Party's agents or representatives, shall have the right to inspect and audit the
Debtor's books and records at all reasonable times. The Secured Party, and the
Secured Party's agents or representatives, shall also have the right to come
upon Debtor's place of business for the purpose of inspecting or examining the
Collateral or to take a physical inventory of the Debtor's inventory and stock
of merchandise.
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(f) Insurance. The Debtor shall keep the Collateral insured against
fire or other casualty in an amount equal to its full insurable value with loss
payable to the Secured Party and the Debtor as their interests may appear at the
time of loss, with priority in payment to the Secured Party. Such insurance
shall be obtained under policies that are not subject to cancellation or
modification by the insurer without at least 10 days' prior written notice to
the Secured Party. The Debtor shall furnish the Secured Party with such evidence
of the Debtor's compliance with this Section 4.6 as the Secured Party may, from
time to time, reasonably require.
(g) Name; Organization. Debtor will not change its name without the
prior written consent of Secured Party.
5. Default. Time is of the essence of this Security Agreement. Any of the
following shall constitute a default under this Security Agreement:
(a) Payment Defaults. The Debtor shall fail to pay when due any
installment of principal or interest on any obligation secured by this Security
Agreement.
(b) Other Defaults. The Debtor shall fail to observe or perform any
covenant, agreement, or provision contained in this Security Agreement to be
performed by the Debtor (other than payment of the obligations secured) and such
default shall continue for a period of 10 days after notice by the Secured Party
to the Debtor of such default.
(c) Representations and Warranties. Any representation or warranty
made by the Debtor in this Security Agreement proves to have been untrue in any
material respect as of the date when made or furnished.
(d) Loss of or Damage to Collateral. Collateral with a book value of
$5,000 or more, as determined from the Debtor's books, is lost, destroyed,
stolen, or substantially damaged, and such loss, destruction, theft, or damage
is not covered by insurance.
(e) Financial Distress. The Debtor shall (a) discontinue business;
(b) make a general assignment for the benefit or creditors; (c) apply for or
consent to the appointment of a receiver, a trustee, or liquidator of the Debtor
or of all or a substantial part of the Debtor's assets; (d) be adjudicated a
bankrupt or insolvent; (e) file a voluntary petition in bankruptcy or file a
petition or answer seeking reorganization or an arrangement with creditors or
seeking to take advantage of any other law (whether federal or state) relating
to relief of debtors, or admit (by answer by default or otherwise) the material
allegations of a petition filed against it in any bankruptcy, reorganization,
arrangement, insolvency, or other proceeding (whether federal or state) relating
to relief or debtors; (f) there shall have been entered any judgment, decree, or
order entered by a court of competent jurisdiction that approves a petition
seeking reorganization of the Debtor, appoints a receiver, trustee, or
liquidator of the Debtor or of all or a substantial part of the Debtor's assets,
or takes any other action that in the reasonable opinion of the Secured Party
would jeopardize the security interest created by this Security Agreement; or
(g) the Debtor takes or omits to take any action for the purpose or with the
result of effecting or permitting any of the foregoing.
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(f) Foreclosure Suit. Commencement of a foreclosure action or
proceeding by any third party against the Collateral if the Secured Party
reasonably determines that such action or proceeding would jeopardize the
security interest created by this Security Agreement.
6. Rights of Secured Party
(a) Assignment. The Secured Party shall have the right to assign
this Security Agreement and the interest of the Secured Party under this
Security Agreement, or to grant a security interest in the same, upon terms that
do not impair the rights of the Debtor under this Security Agreement, only if
the Option to Merge described in the Agreement of even date between the Debtor
and Secured Party is not exercised.
(b) Acceleration and Remedies. Upon default by the Debtor, the
Secured Party may, at the option of Secured Party, declare the unpaid balances
of all indebtedness owed by the Debtor to the Secured Party immediately due and
payable, and the Secured Party shall have and may exercise each and all of the
remedies granted to the Secured Party by the Uniform Commercial Code, together
with any other remedies which may be available to Secured Party under this
Security Agreement or by applicable law.
(c) Accounts Receivable. Following default by the Debtor, the
Secured Party may notify any account debtor or obligor of Debtor to make payment
to the Secured Party. The Debtor hereby authorizes the Secured Party to endorse
any checks, drafts, or other instruments received by the Secured Party as the
act and deed of the Debtor. At the request of the Secured Party at any time
after the Secured Party is entitled to notify account debtors, the Debtor shall
deliver to the Secured Party all original documents evidencing the sale and
delivery of merchandise or services performed which created any of the accounts
receivable that are part of the Collateral, including original contracts,
orders, invoices, bills of lading, warehouse receipts, and shipping receipts.
The Debtor shall also deliver to the Secured Party all security or guarantees
held by the Debtor with respect to such accounts receivable.
(d) Documents. Following default by the Debtor, or any time before
default when the Secured Party reasonably deems the Secured Party to be
insecure, the Secured Party may require the Debtor to deliver to the Secured
Party all original documents, drafts, acceptances, notes, securities,
instruments, and chattel paper that constitutes part of the Collateral.
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(e) Payment of Debtor's Obligations. If the Debtor fails to insure
the collateral as required under the terms of this Security Agreement, or if the
Debtor fails to pay any premium for such insurance, or fails to pay any tax,
fee, or assessment imposed upon or with respect to the Collateral, or fails to
pay any debt or obligation giving rise to any lien or encumbrance on the
Collateral, Secured Party may pay the same, whether before or after default by
the Debtor. All such amounts paid by the Secured Party shall constitute an
obligation of the Debtor to the Secured Party, shall be payable upon demand,
shall bear interest at three percentage points above the announced prime rate of
[Name of Bank], and shall be secured by this Security Agreement.
(f) Assembling the Collateral. In exercising its rights following
default by the Debtor, the Secured Party may require the Debtor to assemble the
Collateral and make the Collateral available to the Secured Party at a place to
be designated by the Secured Party that is reasonably convenient to both
parties.
(g) Notice. Unless the Collateral is perishable or threatens to
decline speedily in value or is of the type customarily sold on a recognized
market, the Secured Party shall give the Debtor reasonable notice of the time
and place of any public sale or of the time after which any private sale or
other disposition of the Collateral is to be made. For this purpose, notice
given at least 10 days before the time of the sale or other disposition shall be
conclusively presumed to be reasonable (provided that setting forth of this one
commercially reasonable method of disposing of the collateral is not intended to
limit its disposition to that method only).
(h) Disposal of Collateral. In connection with any sale, lease,
license, or other disposal (collectively a "sale") of the Collateral, the Debtor
agrees that it is commercially reasonable to sell the Collateral at public or
private sale as one lot or in several lots and at prices that are substantially
lower than those for which the Collateral would sell in the ordinary course of
retail sales. A public sale in the following fashion shall be conclusively
presumed to be reasonable:
(i) The sale shall be held in the county of the Debtor's
principal place of business or the county in which the Collateral, or any
part of the Collateral, is located.
(ii) The sale shall be by auction, but the sale does not need
to be conducted by a professional auctioneer.
(iii) The terms of sale shall require that payment be made at
the time of the sale in cash or by cashier's check.
(iv) The Collateral shall be sold "as is" and without any
preparation for sale.
(v) The Secured Party may bid on all or any portion of the
Collateral.
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(i) Other Disposition. Secured Party shall be under no obligation to
sell the Collateral and is under no obligation to complete a sale of the
Collateral if, in the reasonable business judgment of the Secured Party,
none of the offers received reasonably approximates the fair value of the
Collateral. If the Secured Party elects not to sell the Collateral, the
Secured Party may elect to follow the procedures set forth in the Uniform
Commercial Code for retaining the Collateral in satisfaction of the
obligations secured by this Security Agreement, subject to the Debtor's
rights under such procedures.
(j) Receiver. In addition to the other rights granted under this
Security Agreement, the Secured Party shall, in the event of a default by the
Debtor, be entitled to the appointment of a receiver for the Collateral as a
matter of right whether or not the apparent value of the Collateral exceeds the
outstanding principal amount of the obligations secured by this Security
Agreement. Any receiver appointed may serve without bond. Employment by Secured
Party shall not disqualify a person from serving as receiver.
(k) Marshaling. The Secured Party shall not be required to marshal
security and may proceed to foreclose or otherwise realize upon the Collateral
and any other security for the obligations secured by this Security Agreement in
such order and in such manner as the Secured Party may determine in the Secured
Party's sole discretion.
7. Financing Statements. Secured Party may from time to time, file one or
more financing statements pursuant to the Uniform Commercial Code in order to
perfect the Secured Party's security interest under this Security Agreement.
8. Miscellaneous Provisions
(a) Binding Effect. The provisions of this agreement shall be
binding upon and inure to the benefit of the heirs, personal representatives,
successors, and assigns of the parties; provided that this provision shall not
be construed as a waiver of any restriction contained in this Security Agreement
against alienating or encumbering the Collateral. If more than one person is
named in this Security Agreement as the Debtor, each of such persons shall be
jointly and severally liable for the obligations of the Debtor under this
Security Agreement.
(b) Notice. Any notice or other communication required or permitted
to be given under this Security Agreement or the Uniform Commercial Code shall
be in writing and shall be mailed by certified mail, return receipt requested,
postage prepaid, and addressed to the parties at the following addresses:
If to Debtor: Techsphere Systems International, L.L.C.
000 Xxxxxxx Xxxxx, Xxxxxxxx 00, Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
Attn: Xxxx Xxxxxx, President
If to Secured Party: Cyber Defense Systems Inc.
00000 Xxxxxxxxx Xxxx.
Xxxxx 000X
Xx. Xxxxxxxxxx, Xxxxxxx 00000
Attn: Xxxxxxx X. Xxxxxxxx, CEO
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All notices and other communications shall be deemed to be given at the
expiration of three days after the date of mailing. The address of a party to
which notices or other communications shall be mailed may be changed from time
to time by giving written notice to the other party.
(c) Litigation Expense. If any legal proceeding is commenced for the
purpose of interpreting or enforcing any provision of this Security Agreement,
or for the purpose of collecting any obligation secured by this Security
Agreement, the Secured Party shall be entitled to recover a reasonable
attorney's fee in such proceeding, or any appeal thereof, to be set by the court
without the necessity of hearing testimony or receiving evidence, in addition to
the costs and disbursements allowed by law. In addition, the Secured Party shall
be entitled to recover reasonable attorney's fees and legal expenses incurred by
the Secured Party in connection with retaking, holding, preparing for sale, and
selling the Collateral.
(d) Waiver. No waiver of any provision of this Security Agreement or
any obligation secured by this Security Agreement shall be deemed, or shall
constitute, a waiver of any other provision, whether or not similar, nor shall
any waiver constitute a continuing waiver. No waiver shall be binding unless
executed in writing by the party making the waiver.
(e) Applicable Law. This Security Agreement shall be governed by and
shall be construed in accordance with the laws of the state of Oklahoma.
"Debtor"
Techsphere Systems International, LLC
By:
------------------------------------
Xxxx Xxxxxx, President
"Secured Party"
Cyber Defense Systems, Inc.
By:
------------------------------------
Xxxxxxx X. Xxxxxxxx, CEO
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