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Exhibit: 10.6
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (the
“
Agreement ”),
is
entered into and made effective as of October 31, 2007, by and
between
ATSI COMMUNICATIONS, a
Nevada corporation with its principal place of business located at
3201 Cherry Ridge Drive, Suite C300, San Antonio, TX 78230 (the
“
Company ”),
and the
BUYER(S) listed
on the signature page hereof (the “
Secured Party ”,
whether one or more).
WHEREAS, the
Company executed that certain Secured Promissory Note of even date
herewith (the “
Note ”),
pursuant to which the Company has promised to pay the principal sum
of Two Hundred Thousand and No/100 Dollars ($200,000) to the
Secured Party, all as more particularly described therein;
and
WHEREAS, to
induce the Secured Party to enter into the transaction contemplated
by the Note of even date herewith between the Company and the
Secured Party (collectively referred to as the “
Transaction Documents ”),
the Company hereby grants to the Secured Party a security interest
in and to the property identified on
Exhibit A hereto
(collectively referred to as the “
Property ”)
until the satisfaction of the Obligations, as defined herein
below.
NOW, THEREFORE, in
consideration of the promises and the mutual covenants herein
contained, and for other good and valuable consideration, the
adequacy and receipt of which are hereby acknowledged, the parties
hereto hereby agree as follows:
ARTICLE
1.
DEFINITIONS AND INTERPRETATIONS
Section
1.1.
Recitals .
The
above recitals are true and correct and are incorporated
herein, in their entirety, by this reference.
Section
1.2.
Interpretations .
Nothing
herein expressed or implied is intended or shall be construed
to confer upon any person other than the Secured Party any
right, remedy or claim under or by reason hereof.
Section
1.3.
Obligations Secured .
The
obligations secured hereby are any and all obligations of the
Company now existing or hereinafter incurred to the Secured
Party, whether oral or written and whether arising before, on
or after the date hereof including, without limitation, those
obligations of the Company to the Secured Party under this
Agreement, the Note, and any other amounts now or hereafter
owed to the Secured Party by the Company thereunder or
hereunder (collectively, the “
Obligations ”).
ARTICLE
2.
PROPERTY, ADMINISTRATION OF COLLATERAL
AND TERMINATION OF SECURITY INTEREST
Section
2.1.
Property .
(a)
Company
assigns to the Secured Party, and creates in the Secured Party
for its benefit, a security interest for such time until the
Obligations are paid in full, in and to all of the property of
the Company as set forth in
Exhibit “A” attached
hereto and the products thereof and the proceeds of all such items
(collectively, the “
Property ”):
(b)
Simultaneously
with the execution and delivery of this Agreement, the Company
shall make, execute, acknowledge, file, record and deliver to
the Secured Party any documents reasonably requested by the
Secured Party to perfect its security interest in the
Property. Simultaneously with the execution and delivery of
this Agreement, the Company shall make, execute, acknowledge
and deliver to the Secured Party such documents and
instruments, including, without limitation, financing
statements, certificates, affidavits and forms as may, in the
Secured Party’s reasonable judgment, be necessary to
effectuate, complete or perfect, or to continue and preserve,
the security interest of the Secured Party in the Property,
and the Secured Party shall hold such documents and
instruments as secured party, subject to the terms and
conditions contained herein.
Section
2.2.
Rights; Interests; Etc.
(a)
So
long as no Event of Default (as hereinafter
defined) shall have occurred and be
continuing:
(i)
the
Company shall be entitled to exercise any and all rights
pertaining to the Property or any part thereof for any purpose
not inconsistent with the terms hereof; and
(ii)
the
Company shall be entitled to receive and retain any and all
payments paid or made in respect of the Property.
(b)
Upon
the occurrence and during the continuance of an Event of
Default:
(i)
All
rights of the Company to exercise the rights which it would
otherwise be entitled to exercise pursuant to
Section 2.2(a)(i) hereof and to receive payments
which it would otherwise be authorized to receive and retain
pursuant to Section 2.2(a)(ii) hereof shall be
suspended, and all such rights shall thereupon become vested
in the Secured Party who shall thereupon have the sole right
to exercise such rights and to receive and hold as Property
such payments;
provided, however ,
that if the Secured Party shall become entitled and shall elect to
exercise its right to realize on the Property pursuant to
Article 5 hereof, then all cash sums received by the Secured
Party, or held by Company for the benefit of the Secured Party and
paid over pursuant to Section 2.2(b)(ii) hereof, shall be
applied against any outstanding Obligations; and
(ii)
All
interest, dividends, income and other payments and
distributions which are received by the Company contrary to
the provisions of Section 2.2(b)(i) hereof shall be
received in trust for the benefit of the Secured Party, shall
be segregated from other property of the Company and shall be
forthwith paid over to the Secured Party; or
(iii)
The
Secured Party in its sole discretion shall be authorized
to sell
any or all of the Property at public or private sale in order
to recoup all of the outstanding principal plus accrued
interest owed pursuant to the Note as described
herein
(c)
An
“
Event of Default ”
shall be deemed to have occurred under this Agreement upon an Event
of Default under the Note.
ARTICLE
3.
ATTORNEY-IN-FACT; PERFORMANCE
Section
3.1.
Secured Party Appointed Attorney-In-Fact .
Upon
the occurrence of an Event of Default, the Company hereby
appoints the Secured Party as its attorney-in-fact, with full
authority in the place and stead of the Company and in the
name of the Company or otherwise, from time to time in the
Secured Party’s discretion to take any action and to
execute any instrument which the Secured Party may reasonably
deem necessary to accomplish the purposes of this Agreement,
including, without limitation, to receive and collect all
instruments made payable to the Company representing any
payments in respect of the Property or any part thereof and to
give full discharge for the same. The Secured Party may
demand, collect, receipt for, settle, compromise, adjust, sue
for, foreclose, or realize on the Property as and when the
Secured Party may determine. To facilitate collection, the
Secured Party may notify account debtors and obligors on any
Property to make payments directly to the Secured
Party.
Section
3.2.
Secured Party May Perform .
If
the Company fails to perform any agreement contained herein,
the Secured Party, at its option, may itself perform, or cause
performance of, such agreement, and the expenses of the
Secured Party incurred in connection therewith shall be
included in the Obligations secured hereby and payable by the
Company under Section 8.3.
ARTICLE
4.
REPRESENTATIONS AND WARRANTIES
Section
4.1.
Authorization; Enforceability .
Each
of the parties hereto represents and warrants that it has
taken all action necessary to authorize the execution,
delivery and performance of this Agreement and the
transactions contemplated hereby; and upon execution and
delivery, this Agreement shall constitute a valid and binding
obligation of the respective party, subject to applicable
bankruptcy, insolvency, reorganization, moratorium and similar
laws affecting creditors’ rights or by the principles
governing the availability of equitable remedies.
Section
4.2.
Ownership of Property .
The
Company warrants and represents that it is the legal and
beneficial owner of the Property free and clear of any lien,
security interest, option or other charge or encumbrance
except for the security interest created by this
Agreement.
ARTICLE
5.
DEFAULT; REMEDIES; SUBSTITUTE
COLLATERAL
Section
5.1.
Default and Remedies .
(a)
If
an Event of Default occurs, then in each such case the Secured
Party may declare the Obligations to be due and payable
immediately, by a notice in writing to the Company, and upon
any such declaration, the Obligations shall become immediately
due and payable.
(b)
Upon
the occurrence of an Event of Default, the Secured Party shall
be entitled to (i) receive all distributions with respect
to the Property, (ii) cause the Property to be
transferred into the name of the Secured Party or its nominee,
(iii) dispose of the Property, and (iv) realize upon
any and all rights in the Property then held by the Secured
Party.
Section
5.2.
Method of Realizing Upon the Property: Other Remedies
.
Upon
the occurrence of an Event of Default, in addition to any
rights and remedies available at law or in equity, the
following provisions shall govern the Secured Party’s
right to realize upon the Property:
(a)
Any
item of the Property may be sold for cash or other value in
any number of lots at brokers board, public auction or private
sale and may be sold without demand, advertisement or notice
(except that the Secured Party shall give the Company
ten (10) days’ prior written notice of the
time and place or of the time after which a private sale may
be made (the “
Sale Notice ”)),
which notice period is hereby agreed to be commercially reasonable.
At any sale or sales of the Property, the Company may bid for and
purchase the whole or any part of the Property and, upon compliance
with the terms of such sale, may hold, exploit and dispose of the
same without further accountability to the Secured Party. The
Company will execute and deliver, or cause to be executed and
delivered, such instruments, documents, assignments, waivers,
certificates, and affidavits and supply or cause to be supplied
such further information and take such further action as the
Secured Party reasonably shall require in connection with any such
sale.
(b)
Any
cash being held by the Secured Party as Property and all cash
proceeds received by the Secured Party in respect of, sale of,
collection from, or other realization upon all or any part of
the Property shall be applied as follows:
(i)
to
the payment of all amounts due the Secured Party for the
expenses reimbursable to it hereunder or owed to it pursuant
to Section 8.3 hereof;
(ii)
to
the payment of the Obligations then due and
unpaid.
(iii)
the
balance, if any, to the person or persons entitled thereto,
including, without limitation, the Company.
(c)
In
addition to all of the rights and remedies which the Secured
Party may have pursuant to this Agreement, the Secured Party
shall have all of the rights and remedies provided by law,
including, without limitation, those under the Uniform
Commercial Code as adopted and in effect in the State of
Texas.
(i)
If
the Company fails to pay such amounts due upon the occurrence
of an Event of Default which is continuing, then the Secured
Party may institute a judicial proceeding for the collection
of the sums so due and unpaid, may prosecute such proceeding
to judgment or final decree and may enforce the same against
the Company and collect the monies adjudged or decreed to be
payable in the manner provided by law out of the property of
Company, wherever situated.
(ii)
The
Company agrees that it shall be liable for any reasonable
fees, expenses and costs incurred by the Secured Party in
connection with enforcement, collection and preservation of
the Transaction Documents, including, without limitation,
reasonable legal fees and expenses, and such amounts shall be
deemed included as Obligations secured hereby and payable as
set forth in Section 8.3 hereof.
Section
5.3.
Proofs of Claim .
In
case of the pendency of any receivership, insolvency,
liquidation, bankruptcy, reorganization, arrangement,
adjustment, composition or other judicial proceeding relating
to the Company or the Property or of such other obligor or its
creditors, the Secured Party (irrespective of whether the
Obligations shall then be due and payable as therein expressed
or by declaration or otherwise and irrespective of whether the
Secured Party shall have made any demand on the Company for
the payment of the Obligations), shall be entitled and
empowered, by intervention in such proceeding or
otherwise:
(i)
to
file and prove a claim for the whole amount of the Obligations
and to file such other papers or documents as may be necessary
or advisable in order to have the claims of the Secured Party
(including any claim for the reasonable legal fees and
expenses and other expenses paid or incurred by the Secured
Party permitted hereunder) allowed in such judicial
proceeding, and
(ii)
to
collect and receive any monies or other property payable or
deliverable on any such claims and to distribute the same; and
any custodian, receiver, assignee, trustee, liquidator,
sequestrator or other similar official in any such judicial
proceeding is hereby authorized by the Company to make such
payments to the Secured Party and, in the event that the
Secured Party shall consent to the making of such payments, to
pay to the Secured Party any amounts for expenses due it
hereunder.
Section
5.4.
Duties Regarding Property .
The
Secured Party shall have no duty as to the collection or
protection of the Property or any income thereon or as to the
preservation of any rights pertaining thereto, beyond the safe
custody and reasonable care of any of the Property actually in
the Secured Party’s possession.
ARTICLE
6.
AFFIRMATIVE COVENANTS
The
Company covenants and agrees that, from the date hereof and
until the Obligations have been fully paid and satisfied,
unless the Secured Party shall consent otherwise in writing
(as provided in Section 8.4 hereof):
Section
6.1.
Existence, Properties, Etc.
(a)
The
Company shall do, or cause to be done, all things, or proceed
with due diligence with any actions or courses of action, that
may be reasonably necessary (i) to maintain
Company’s due organization, valid existence and good
standing under the laws of its state of incorporation, and
(ii) to preserve and keep in full force and effect all
qualifications, licenses and registrations in those
jurisdictions in which the failure to do so could have a
Material Adverse Effect (as defined below). For purpose of
this Agreement, the term “
Material Adverse Effect ”
shall mean any material and adverse affect as determined by Secured
Party in its sole discretion, whether individually or in the
aggregate, upon (a) the Company’s assets,
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