Exhibit 4.3
SECURITY AGREEMENT
THIS SECURITY AGREEMENT is dated as
of October 29, 2008 between ATLAS MERCHANT SERVICES, LLC , a
Nevada limited liability company (the “ Debtor
”), and SHERINGTON HOLDINGS, LLC , a Georgia limited
liability company (“ Secured Party
”).
W I T N E S
S E T H :
WHEREAS, pursuant to a certain Note
Purchase Agreement dated as of the date hereof, among the Debtor,
FNDS3000 Corp., a Delaware corporation (the “ Parent
”), and the Secured Party, (as the same may be amended,
restated, modified or supplemented and in effect from time to time,
the “ Note Agreement ”), the Secured Party has
agreed, subject to the satisfaction of certain conditions
precedent, to purchase that certain Secured Convertible Promissory
Note, issued by the Debtor and the Parent, jointly and severally,
in the original principal amount of $320,000 (the “
Convertible Note ”); and
WHEREAS, it is a condition precedent
to the purchase of such Convertible Note and other financial
accommodations under the Note Agreement that the Debtor shall have
granted the security interests contemplated by this Agreement in
order to secure the payment and performance of the
Obligations;
NOW, THEREFORE, in consideration of
the foregoing, and in order to induce the Secured Party to purchase
the Convertible Note from the Debtor and the Parent in accordance
with the terms of the Note Agreement, the Debtor hereby agrees with
Secured Party as follows:
SECTION 1 Definitions.
“ Agreement ”
means this Security Agreement, as the same may be amended,
restated, modified or supplemented and in effect from time to time
in accordance with the terms hereof.
“ Blocked Accounts
” has the meaning assigned to that term in
Section 4.12 .
“ Collateral ”
has the meaning assigned to that term in Section 2
.
“ Collecting Banks
” has the meaning assigned to that term in
Section 4.12 .
“ Deposit Account Control
Agreement ” has the meaning assigned to that term in
Section 4.12 .
“ Depository Account
” has the meaning assigned to that term in
Section 4.12 .
“ Excluded Account
” means any deposit account for which Debtor is not required
to obtain a Deposit Account Control Agreement pursuant to
Section 4.12 hereof.
“ Federal Registration
Collateral ” means Collateral with respect to which Liens
may be registered, recorded or filed under, or notice thereof given
under, any federal statute or regulation.
“ Lien ” means
any mortgage, deed of trust, grant, pledge, security interest,
assignment, encumbrance, judgment, lien, claim or charge of any
kind, whether perfected or unperfected, avoidable or unavoidable,
including, without limitation, any conditional sale or other title
retention agreement, any lease in the nature thereof, the agreement
to any provision for a confession of judgment, cognovit, consent to
decree or similar remedy.
“ Security Interests
” means the security interests granted or provided for
pursuant to Section 2 hereof, as well as all other
security interests created, assigned or provided as additional
security for the Obligations pursuant to the provisions of this
Agreement or any of the other Transaction Documents.
1.1 Other Definition
Provisions . References to “Sections” or
“Schedules” shall be to Sections or Schedules of this
Agreement unless otherwise specifically provided. For purposes
hereof, “including” is not limiting and
“or” is not exclusive. Except as provided by the
immediately following sentence, capitalized terms used herein and
not otherwise defined herein shall have the respective meanings
provided for in the Note Agreement. All capitalized terms defined
in the UCC and not otherwise defined herein shall have the
respective meanings provided for by the UCC. Any of the terms
defined in Section 1.1 may, unless the context
otherwise requires, be used in the singular or the plural depending
on the reference. All references to statutes and related
regulations shall include any amendments of same and any successor
statutes and regulations.
SECTION 2 Grant of Security
Interests .
To secure the payment and
performance of the Obligations, the Debtor hereby grants to Secured
Party a lien on, security interest in and right of set-off against
any and all right, title and interest in and to any and all
property and interests in property of the Debtor, whether now owned
or existing or hereafter created, acquired or arising, including
all of the following properties and interests in properties,
whether now owned or hereafter created, acquired or arising (all
being collectively referred to herein as the “
Collateral ”):
(a) Accounts;
(b) Chattel Paper;
(c) Commercial Tort
Claims;
(d) Deposit Accounts, all cash, and
other property deposited therein or otherwise credited thereto from
time to time and other monies and property in the possession or
under the control of Secured Party or any affiliate,
representative, agent or correspondent of Secured Party;
(e) Documents;
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(f) General Intangibles;
(g) Goods, including without
limitation any and all Inventory, any and all Equipment and any and
all Fixtures;
(h) Instruments;
(i) Investment Property;
(j) Letter-of-Credit
Rights;
(k) Supporting
Obligations;
(l) Any and all other personal
property and interests in property whether or not subject to the
UCC;
(m) Any and all books and records,
in whatever form or medium, that at any time evidence or contain
information relating to any of the foregoing properties or
interests in properties or are otherwise necessary or helpful in
the collection thereof or realization thereon;
(n) All Accessions and additions to,
and substitutions and replacements of, any and all of the
foregoing; and
(o) All Proceeds and products of the
foregoing, and all insurance pertaining to the foregoing and
proceeds thereof.
SECTION 3 Representations and
Warranties .
The Debtor represents and warrants
to Secured Party as follows:
3.1 Binding Obligation;
Perfection . This Agreement constitutes a valid and binding
obligation of the Debtor, enforceable against it in accordance with
its terms, except as enforcement may be limited by bankruptcy,
insolvency, or similar laws relating to the enforcement of
creditors’ rights generally and by general equitable
principles. Secured Party has a valid and perfected first priority
security interest in the Collateral, securing the payment of the
Obligations, and such Security Interests are entitled to all of the
rights, priorities and benefits afforded by the UCC or other
applicable law as enacted in any relevant jurisdiction which
relates to perfected security interests.
3.2 Organizational
Information . Schedule 3.2 sets forth (i) the full,
correct and current name of the Debtor, as its appears in the
Debtor’s Organizational Documents, (ii) any names of the
Debtor other than the Debtor’s current name, as set forth on
the Debtor’s Organizational Documents during the five
(5) year period preceding the Closing Date, (iii) the
Debtor’s type of organization, (iv) the Debtor’s
jurisdiction of organization and (v) the Debtor’s
organizational identification number (except where the
Debtor’s jurisdiction of organization does not assign
organizational numbers).
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3.3 Collateral Locations .
Schedule 3.3 sets forth all addresses at which any
Collateral is located, indicating for each whether such location is
owned or leased by the Debtor, or owned or operated by a
third-party such as a warehouseman, consignee or processor.
Schedule 3.3 indicates which of the foregoing addresses
serves as the Debtor’s chief executive office.
3.4 No Existing Liens . The
Debtor owns the Collateral, and will own all after-acquired
Collateral, free and clear of any Lien. No effective financing
statement or other form of lien notice covering all or any part of
the Collateral is on file in any recording office.
3.5 Governmental Authorizations;
Consents; Federal Registration Collateral . No authorization,
approval or other action by, and no notice to or filing with, any
governmental authority or consent of any other Person is required
for (i) the grant by the Debtor of the Security Interests
granted hereby or for the execution, delivery or performance of
this Agreement by the Debtor; or (ii) the exercise by Secured
Party of its rights and remedies hereunder (except as may have been
accomplished by or at the direction of the Debtor or Secured
Party). Except for (a) the filing of UCC financing statements
with the Secretary of State of the Debtor’s jurisdiction of
organization, and (b) execution and delivery of Deposit
Account Control Agreements in respect of Deposit Accounts, no
authorization, approval or other action by, and no notice to or
filing with, any governmental authority or consent of any other
Person is required for the perfection of the security interests
granted hereby and pursuant to any other Transaction
Documents.
3.6 Accounts . Each existing
Account constitutes, and each hereafter arising Account will
constitute, the legally valid and binding obligation of the
applicable Account Debtor. The amount represented by the Debtor to
Secured Party as owing by each Account Debtor, and the amount set
forth on any invoice pertaining to any Account, is, or will be, the
correct amount actually and unconditionally owing, except for
normal cash discounts and allowances where applicable. No Account
Debtor has, or will have, any defense, set-off, claim or
counterclaim against the Debtor that can be asserted against
Secured Party, whether in any proceeding to enforce Secured
Party’s rights in the Collateral or otherwise except
defenses, setoffs, claims or counterclaims that are not, in the
aggregate, material to the value of the Accounts. None of the
Accounts is, nor will any hereafter-arising Account be, evidenced
by a promissory note or other Instrument other than a
check.
3.7 Inventory . All Inventory
is, and will be, of good and merchantable quality, free from any
material defects. Such Inventory is not, and will not be, subject
to any licensing, patent, trademark, trade name or copyright
agreement with any Person that restricts the Debtor’s or
Secured Party’s ability to manufacture and/or sell the
Inventory. The completion and manufacturing process of such
Inventory by a Person other than the Debtor would be permitted
under any contract to which the Debtor is a party or to which the
Inventory is subject. The Debtor does not sell any Inventory to any
customer on approval or on any other basis that entitles the
customer to return, or which may obligate the Debtor to repurchase,
such Inventory. None of the Debtor’s Inventory has been, or
will be, produced in violation of any provision of the Fair Labor
Standards Act of 1938, or in violation of any other law.
3.8 Control Arrangements .
Except for control arising by operation of law in favor of banks
and securities intermediaries having custody over Deposit Accounts
and Securities Accounts set forth on Schedule 3.10 , no
Person has control of any Deposit Accounts, Electronic Chattel
Paper, Investment Property or Letter-of-Credit Rights in which the
Debtor has any interest.
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3.9 Accurate Information .
All information heretofore, herein or hereafter supplied to Secured
Party by or on behalf of the Debtor with respect to the Collateral
is and will be accurate and complete in all material
respects.
3.10 Survival of Representations
and Warranties . All representations and warranties of the
Debtor contained in this Agreement shall survive the execution and
delivery of this Agreement.
SECTION 4 Covenants and Further
Assurances .
4.1 Name or Entity Changes .
The Debtor shall not change the Debtor’s name, type of
organization or jurisdiction of organization, unless Debtor has
given Secured Party not less than thirty (30) days prior
written notice thereof.
4.2 Accounts . Except as
otherwise provided in this Section 4.2 , the Debtor
shall continue to collect, at its own expense, all amounts due or
to become due to the Debtor with respect to Accounts and apply such
amounts as are so collected to the outstanding balances thereof. In
connection with such collections, the Debtor may take (and, at
Secured Party’s direction during the continuance or any
Default or Event of Default, shall take) such action as the Debtor
or Secured Party may deem necessary or advisable to enforce
collection of the Accounts. Secured Party shall have the right at
any time after the occurrence and during the continuance of a
Default or an Event of Default to: (i) notify the Account
Debtor under any Accounts (or any other Person obligated thereon)
of the Lien granted upon such Accounts in favor of Secured Party
and to direct such Account Debtors and other Persons to make
payment of all amounts due or to become due or otherwise render
performance directly to Secured Party; (ii) exercise the
rights of the Debtor with respect to the obligation of the Account
Debtor to make payment or otherwise render performance to the
Debtor and with respect to any property that secures the
obligations of the Account Debtor or any other Person obligated on
the Collateral; and (iii) adjust, settle or compromise the
amount or payment of such Accounts. After the occurrence and during
the continuance of an Event of Default all amounts and Proceeds
received by the Debtor with respect to the Accounts shall be
received in trust for the benefit of Secured Party, shall be
segregated from other funds of the Debtor and shall be forthwith
paid over to Secured Party in the same form as so received (with
any necessary endorsement) to be held in any Deposit Account
pursuant to Section 4.12 and applied pursuant to the
Obligations in such manner as the Secured Party may determine in
its sole discretion. The Debtor shall not adjust, settle or
compromise the amount or payment of any Account, or release wholly
or partly any Account Debtor, or allow any credit or discount
thereon (other than adjustments, settlements, compromises, releases
credits and discounts in the ordinary course of its business and in
amounts which are not material to the Debtor) without the prior
consent of Secured Party.
4.3 Bailees . No Collateral
shall at any time be in the possession or control of any warehouse,
consignee, bailee or any of the Debtor’s agents or processors
without prior written notice to Secured Party and the receipt by
Secured Party, if Secured Party has so requested, of warehouse
receipts or bailee lien waivers (as applicable) satisfactory to
Secured Party prior to the
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commencement of such possession or control. The
Debtor shall, upon the reasonable request of Secured Party, notify
any such warehouse, consignee, bailee, agent or processor of the
Security Interests, shall instruct such Person to hold all such
Collateral for Secured Party’s account subject to Secured
Party’s instructions and shall obtain an acknowledgement from
such Person that such Person holds the Collateral for Secured
Party’s benefit. Secured Party agrees with the Debtor that it
shall not give any such instructions unless an Event of Default has
occurred and is continuing.
4.4 Chattel Paper and
Instruments . The Debtor shall deliver to Secured Party all
Tangible Chattel Paper and all Instruments duly endorsed and
accompanied by duly executed instruments of transfer or assignment,
all in form and substance satisfactory to Secured Party. The Debtor
shall provide Secured Party with control of all Electronic Chattel
Paper by having Secured Party identified as the assignee of the
Records pertaining to the single authoritative copy thereof and
otherwise complying with the applicable elements of control set
forth in the UCC. The Debtor also shall deliver to Secured Party
all security agreements securing any Chattel Paper and securing any
Instruments. The Debtor will mark conspicuously all Chattel Paper
and all Instruments with a legend, in form and substance
satisfactory to Secured Party, indicating that such Chattel Paper
and such Instruments are subject to the Security
Interests.
4.5 Letters of Credit . The
Debtor shall deliver to Secured Party all Letters of Credit duly
endorsed and accompanied by duly executed instruments of transfer
or assignment, all in form and substance satisfactory to Secured
Party. The Debtor also shall deliver to Secured Party all security
agreements securing any Letters of Credit. The Debtor shall take
any and all actions as may be necessary or desirable, or that
Secured Party may reasonably request, from time to time, to cause
Secured Party to obtain exclusive control of any Letter-of-Credit
Rights owned by the Debtor in a manner acceptable to Secured
Party.
4.6 Equipment . The Debtor
shall cause all Equipment to be maintained and preserved in the
same condition, repair and in working order as when new, ordinary
wear and tear and damage from casualty excepted, and shall promptly
make or cause to be made all repairs, replacements and other
improvements in connection therewith that are necessary or
desirable to such end. Upon request of Secured Party, the Debtor
shall promptly deliver to Secured Party any and all certificates of
title, applications for title or similar evidence of ownership of
all Equipment and shall cause Secured Party to be named as
lienholder on any such certificate of title or other evidence of
ownership (except to the extent already encumbered by a Permitted
Lien). The Debtor shall promptly inform Secured Party of any
deletions from the Equipment and shall not permit any such items to
become Fixtures to real estate other than real estate subject to
mortgages or deeds of trust in favor of Secured Party.
4.7 Investment Property . The
Debtor shall take any and all actions as may be necessary or
desirable, or that Secured Party may reasonably request from time
to time, to (i) cause Secured Party to obtain exclusive
control of any Investment Property owned by t
