SECURITY AGREEMENT
THIS SECURITY AGREEMENT (this "Agreement"), made and entered into effective
as of this 28th day of April, 2004 by DynaSig Corporation, an Arizona
corporation ("Borrower"), in favor of Milestone Equity Partners Phoenix, LLC, a
Delaware limited liability company ("Secured Party").
RECITALS
A. Borrower has agreed to pay Secured Party the sum of $55,000.00 evidenced
by that certain Promissory Note (Convertible) of even date (the "Note") executed
by Borrower in favor of Secured Party.
B. This Agreement is a security agreement and Secured Party would not make
accept the Note unless Borrower executes and delivers this Agreement in favor of
Secured Party.
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements, covenants, representations, warranties and promises set forth
herein, the parties agree as follows:
ARTICLE 1
GRANT OF SECURITY INTEREST
1.1 For the purposes of securing the Obligations, as defined below,
Borrower hereby grants to Secured Party, pursuant to the Uniform Commercial Code
in effect in the State of Arizona at that time (the "UCC"), a security interest
in all of Borrower's right, title and interest in and to the collateral
described in Exhibit A attached hereto (collectively, the "Collateral").
1.2 This Agreement and the rights hereby granted shall secure the payment
and performance of all of Borrower's obligations, liabilities, covenants and
duties owing to Secured Party under the Note and this Agreement (collectively,
the "Obligations").
1.3 Notwithstanding anything contained in this Agreement, (a) Borrower
shall remain liable under any contracts and agreements included in the
Collateral to perform all of its duties and obligations under the contract or
agreement to the same extent as if this Agreement had not been executed, (b) the
exercise by Secured Party of any of the rights under this Agreement shall not
release Borrower from any of its duties or obligations under the contracts and
agreements included in the Collateral, and (c) Secured Party shall have no
obligation or liability under the contracts and agreements included in the
Collateral by reason of this Agreement, nor shall Secured Party be obligated to
perform any of the obligations or duties of Borrower under the contracts or
agreements or to take any action to collect or enforce any claim for payment in
which a security interest is granted under this Agreement.
ARTICLE 2
WARRANTIES, COVENANTS AND AGREEMENTS
Borrower hereby warrants, covenants and agrees that:
2.1 Borrower has authority to enter into this Agreement, and any person
signing this Agreement on Borrower's behalf has been duly authorized to sign on
Borrower's behalf.
2.2 The Collateral covered by this Agreement is used or purchased for use
for business purposes.
2.3 Borrower shall not, without obtaining the prior written consent of
Secured Party, sell, contract to sell, lease, encumber or dispose of the
Collateral or any part thereof other than in the ordinary course of Borrower's
business.
2.4 Borrower shall maintain with financially sound and reputable companies,
insurance policies (a) insuring the Collateral consisting of insurable personal
property of Borrower against loss by fire, explosion, theft and such other
casualties as may be reasonably satisfactory to Secured Party, and (b) insuring
Borrower against liability for personal injury and property damage relating to
such insurable property, such policies to be in such form and amounts and having
such coverage as may be reasonably satisfactory to Secured Party, with losses
payable to Secured Party. All such insurance shall name Secured Party as an
insured party and shall be reasonably satisfactory in all other respects to
Secured Party. Borrower shall deliver to Secured Party a report of a reputable
insurance broker with respect to such insurance as Secured Party may from time
to time reasonably request.
2.5 Upon reasonable prior telephonic or written notice to Borrower and at
reasonable times, Secured Party or its representatives may inspect the
Collateral and may enter upon any and all premises where the same is kept or
located.
2.6 Secured Party at all times shall have a perfected security interest in
the Collateral that shall be superior to any other interest therein and Borrower
will do all acts and things, and will execute and file all instruments
(including, without limitation, any and all security agreements, financing
statements, and continuation statements) required by Secured Party to establish,
maintain and continue the perfected security interest of Secured Party in the
Collateral, and will promptly on demand, pay all costs and expenses of filing
and recording, including the cost of any searches reasonably deemed necessary by
Secured Party from time to time to establish and determine the validity and the
continuing priority of the security interest of Secured Party granted by this
Agreement. Borrower hereby irrevocably authorizes Secured Party at any time and
from time to time to file in any UCC jurisdiction any initial financing
statements and amendments that (a) indicate that Secured Party has a perfected
security interest in the Collateral and (b) contain any other information
required by of Article 9 of the UCC for the sufficiency or filing office
acceptance of any financing statement or amendment.
2.7 Borrower shall pay when due all taxes, assessments, charges, liens or
encumbrances now or hereafter a lien on or otherwise affecting the Collateral.
2.8 Borrower shall promptly notify Secured Party of any seizure by legal
process or otherwise of any part of the Collateral, and of any threatened or
filed claim or proceedings that might in any way affect or impair any of Secured
Party's rights under this Agreement.
2.9 Borrower shall promptly notify Secured Party in writing of any change
in its place of business or the change of any trade name or fictitious business
name and, upon request of Secured Party, shall execute any additional financing
statements or other certificates necessary to reflect the adoption or change in
trade names or fictitious business names. In connection therewith, Borrower
represents and warrants to Secured Party that Borrower owns and holds, or upon
acquisition will own and hold, all Collateral in the name set forth in the first
paragraph of this Agreement and does not do business under any trade name or
fictitious business names other than the name set forth in this Agreement.
2.10 If Borrower fails to perform any agreement or obligation in this
Agreement, Secured Party may, at its option, and without any obligation to do
so, perform, or cause the performance of, such agreement or obligation, and the
expenses of Secured Party incurred in connection therewith shall be payable by
Borrower to Secured Party upon demand by Secured Party, and such expenses shall
bear interest at the rate of 18% per annum, compounded annually, from the date
of such expenditure until paid.
2.11 Secured Party shall be under no duty to exercise or to withhold the
exercise, and shall not be responsible for any failure to exercise or for any
delay in exercising, any of the rights, powers, and privileges expressly or
implicitly granted to Secured Party under this Agreement. Furthermore, Secured
Party shall not be required to take any steps necessary to preserve any rights
of the Collateral against prior parties nor to protect, preserve or maintain any
security interest given to secure the Collateral.
2.12 Borrower irrevocably appoints Secured Party as Borrower's
attorney-in-fact, with full authority in the place and stead of Borrower and in
the name of Borrower or otherwise, from time to time in Secured Party's
reasonable discretion, to take any action and to execute any instrument that
Secured Party may deem necessary or advisable to accomplish the purposes of this
Agreement, or otherwise to enforce the rights of Secured Party with respect to
any of the Collateral, and Borrower ratifies all that such attorney-in-fact
shall lawfully do or cause to be done by virtue hereof. This power of attorney
is coupled with an interest and shall be irrevocable.
ARTICLE 3
EVENTS OF DEFAULT
The occurrence of any of the following events shall constitute an "Event of
Default":
3.1 Any failure or neglect to observe or perform any of the terms,
provisions, promises, agreements or covenants of this Agreement; or any failure
of Borrower to pay any sum due under the Obligations secured by this Agreement,
at the time such sum shall become due and payable; or
3.2 If any warranty, representation or statement by Borrower contained in
this Agreement shall be or shall prove to have been false when made or
furnished.
ARTICLE 4
SECURED PARTY'S REMEDIES
Upon the occurrence of any Event of Default, Secured Party shall have the
following rights and remedies:
4.1 Secured Party may, at its option, declare all or any part of the
Obligations immediately due and payable, and Secured Party may, without further
notice or demand and without legal process, take possession of the Collateral
wherever found and, for this purpose, may enter upon the real property where the
Collateral may be located. Secured Party may require Borrower to assemble the
Collateral and make it available to Secured Party at a place designated by
Secured Party.
4.2 Secured Party may pursue any legal remedy available to collect all sums
secured by this Agreement and to enforce its title in and right to possession of
the Collateral, and to enforce any and all other rights or remedies available to
it, and no such action shall operate as a waiver of any other right or remedy of
Secured Party under the terms of this Agreement, or under the laws of Arizona.
4.3 Borrower waives all rights or privileges it might otherwise have to
require Secured Party to proceed against or exhaust the Collateral or to pursue
any other remedy available to Secured Party in any particular manner or order
under the legal or equitable doctrine or principle of marshalling and/or
suretyship and further agrees that Secured Party may proceed against any or all
of the Collateral encumbered by this Agreement in the event of default in such
order and manner as Secured Party in its sole discretion may determine.
4.4 Secured Party, upon obtaining possession of all or any part of the
Collateral, may sell the same at public or private sale either with or without
having such Collateral at the place of sale. The proceeds of any such sale of
all or any part of the Collateral, after deducting all expenses of Secured Party
in taking, storing, repairing and selling the Collateral (including reasonable
attorney's fees) shall be applied to the payment, first to interest and then to
principal, of the Obligations and any other indebtedness or liability of
Borrower to Secured Party which is secured by this Agreement, and any surplus
remaining shall be paid to Borrower, or any other person that may be legally
entitled to receive the surplus.
4.5 At any sale, public or private, of all or any part of the Collateral
made in the enforcement of the rights and remedies of Secured Party under this
Agreement, Secured Party may, so far as may be lawful, purchase part or all of
the Collateral offered at such sale.
4.6 Secured Party shall give Borrower reasonable notice of any sale or
other disposition of all or any part of the Collateral. Borrower agrees that
notice and demand shall be conclusively deemed to be reasonable and effective if
such notice is mailed by registered or certified mail, postage prepaid, to
Borrower at least 10 days prior to such sale or other disposition.
4.7 Secured Party shall have all the rights and remedies afforded a secured
party under the UCC and all other legal or equitable remedies provided by the
laws of the United States and the State of Arizona.
ARTICLE 5
MISCELLANEOUS PROVISIONS
5.1 No Event of Default under this Agreement shall be deemed to have been
waived by Secured Party except by a writing to that effect signed on behalf of
Secured Party and no waiver of any such Event of Default shall operate as a
waiver of any other Event of Default on a future occasion, or as a waiver of
that Event of Default after written notice thereof and demand by Secured Party
for strict performance of this Agreement. Acceptance of partial or delinquent
payments shall not constitute the waiver of any right of Secured Party. Time is
of the essence of this Agreement. All rights, remedies and privileges of Secured
Party under this Agreement shall be cumulative and not alternative.
5.2 All notices or other communications required or permitted hereunder
shall be in writing and may be given by overnight courier or by delivering the
same in person to such party.
If to Secured Party:
Milestone Equity Partners Phoenix, LLC
0000 X. Xxxxxxxxxx Xxxxx Xx.
Xxxxx 000
Xxxxxxxxxx, XX 00000
If to Borrower:
DynaSig Corporation
Xxxxxxx Xxx
11445 E. Via Xxxxx
Suite 2 PMB 472
Xxxxxxxxxx, XX 00000
Notice shall be deemed given and effective the day personally delivered and one
business day after being sent by overnight courier, subject to signature
verification. Any party may change the address for notice by notifying the
other parties of such change in accordance with this Section.
5.3 Subject to any express definitions set forth in this Agreement, all
terms used in this Agreement shall have the meanings in and be construed under
the UCC and all issues arising under this Agreement shall be governed by the
laws of the State of Arizona. If any provision of this Agreement shall be
prohibited by, or invalid under, applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Agreement.
5.4 No modification, rescission, waiver, release or amendment of any
provision of this Agreement shall be made except by a written agreement executed
by the parties or by their authorized officers or agents.
5.5 This Agreement shall inure to the benefit of Secured Party's successors
and assigns and shall bind Borrower's successors and assigns.
5.6 Should legal action be required to enforce any provision of this
Agreement, the prevailing party shall be entitled to payment of its court costs
and attorneys' fees.
IN WITNESS WHEREOF, Borrower has executed this Agreement on date first
written above.
DYNASIG CORPORATION
By: /s/ Xxxxxxx X. Xxx
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Name: Xxxxxxx X. Xxx
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Its: President
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EXHIBIT A
DESCRIPTION OF COLLATERAL
All of Borrower's right, title and interest in and to the following, in
each case whether now owned or existing or hereafter acquired or arising and
however and wherever arising or located: all personal and fixture property of
every kind and nature including without limitation all goods (including
inventory, equipment and any accessions thereto), instruments (including
promissory notes), documents, accounts, chattel paper (whether tangible or
electronic), deposit accounts, letter-of-credit rights (whether or not the
letter of credit is evidenced by a writing), commercial tort claims, securities
and all other investment property, supporting obligations, any other contract
rights or rights to the payment of money, insurance claims and proceeds, tort
claims, and all general intangibles including, without limitation, all payment
intangibles, patents, patent applications, trademarks, trademark applications,
trade names, copyrights, copyright applications, software, engineering drawings,
service marks, customer lists, goodwill, and all licenses, permits, agreements
of any kind or nature pursuant to which Borrower possesses, uses or has
authority to possess or use property (whether tangible or intangible) of others
or others possess, use or have authority to possess or use property (whether
tangible or intangible) of Borrower, all recorded data of any kind or nature,
regardless of the medium of recording including, without limitation, all
software, writings, plans, specifications and schematics, and all accessions,
additions, substitutions, products and proceeds of the foregoing.
