Exhibit 10.02

 

SECURITY AGREEMENT

THIS SECURITY AGREEMENT (the “Agreement”) dated as of the ___ day of December,
2013, is entered into by and between Stratus Media Group, Inc., a Nevada
corporation (the “Debtor”), and Carolina Preferred High Yield Fund, LLC, a
Florida limited liability company (the “Holder”).

Recitals

WHEREAS, the Holder has agreed to purchase a $500,000 principal amount 10%
secured convertible promissory note (the “Note”) from the Debtor pursuant to the
terms and conditions of the Note Purchase Agreement of even date herewith (the
“Note Purchase Agreement”).

WHEREAS, as a condition of the Note Purchase Agreement, and in order to induce
the Holder to purchase the Notes, the Debtor has agreed to grant to the Holder a
security interest in the Collateral (as hereinafter defined) to be used as
security for the Secured Obligations (as defined herein) on terms set forth
herein.

NOW, THEREFORE, in consideration of the premises set forth herein, and for other
good and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the Debtor hereby agrees with the Holder as follows:

1.           Recitals. The above recitals are true and correct and same are
incorporated into this Agreement by this reference.

2.           Definition. As used herein, the term “Collateral” shall mean the
Debtor’s assets set forth on Schedule A attached hereto and incorporated herein
by such reference.

3.           Security for Obligations. This Agreement secures, and the
Collateral is collateral security for, the prompt payment of all amounts due
under the Note, whether at stated maturity, by prepayment, declaration,
acceleration, conversion, demand or otherwise (including the payment of amounts
that would become due but for the operation of the automatic stay under Section
363(a) of the Bankruptcy Code, 11 U.S.C. §362(a)) (the “Secured Obligations”).

4.           Security Interests. As security for the payment and performance of
the Secured Obligations, the Debtor hereby creates and grants to the Holder, its
successors and assigns, a security interest in the Collateral (the “Security
Interest”). Without limiting the foregoing, the Holder is hereby authorized to
file one or more financing statements for the purpose of perfecting, confirming,
continuing, enforcing or protecting the Security Interest, naming the Debtor as
debtor and the Holder as creditor.

5.           Further Assurances. Debtor agrees, at its expense, to execute,
acknowledge, deliver and cause to be duly filed all such further instruments and
documents and take all such actions as the Holder may from time to time
reasonably request for the assuring and preserving of the Security Interest and
the rights and remedies created hereby, including, without limitation, the
payment of any fees and taxes required in connection with the execution and
delivery of this Agreement, the granting of the Security Interest and the filing
of any financing statements or other documents in connection herewith.

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6.           Taxes; Encumbrances. At its option, the Holder may discharge past
due taxes, liens, security interests or other encumbrances at any time levied or
placed on the Collateral, and may pay for the maintenance and preservation of
the Collateral to the extent Debtor fails to do so, and Debtor agrees to
reimburse the Holder within five (5) business days following receipt of written
notice from the Holder, accompanied by proof of payment, for any payment made or
any expense incurred by it pursuant to the foregoing authorization; provided,
however, that nothing in this Section shall be interpreted as excusing Debtor
from the performance of any covenants or other promises with respect to taxes,
liens, security interests or other encumbrances and maintenances as set forth
herein.

7.           Representations, Warranties and Covenants. Debtor hereby
represents, warrants, covenants and agrees as follows:

(a)                Title and Authority. Subject to security agreements, leases
or similar arrangements entered into by Debtor prior to the execution of this
Agreement, it has (i) rights in, and good and marketable title to, the
Collateral and (ii) the requisite corporate power and authority to grant to the
Holder the Security Interest in such Collateral pursuant hereto and to execute,
deliver and perform its obligations in accordance with the terms of this
Agreement, without the consent or approval of any other person or entity other
than any consent or approval which has been obtained.

(b)               Filing. Fully executed Uniform Commercial Code financing
statements containing a description of the Collateral shall have been or shall
be delivered to the Holder in such form as requested by the Holder.

(c)                Absence of Other Liens. Except as set forth on Schedule B,
the Collateral is owned by the Debtor free and clear of any lien or encumbrance
of any nature whatsoever, except otherwise disclosed to the Holder in writing on
the date hereof, and except as previously furnished to the Debtor, no financing
statement has been filed, under the Uniform Commercial Code as in effect in any
state or otherwise, covering any Collateral.

(d)               No Conflict. None of the execution and delivery by Debtor of
this Agreement and the other loan documents or the grant and perfection of the
Security Interest will (i) conflict with, violate, breach, cause a default under
(with or without the giving of notice or the passage of time), or permit an
acceleration or termination of, any document, instrument, mortgage, indenture or
other agreement applicable to Debtor or to which its assets are subject, (ii)
conflict with, violate or breach any applicable law, rule, regulation or order,
or (iii) conflict with, violate or breach any of the organizational documents of
Debtor, the result of which (in the case of clauses (i) and (ii) only) could be
a material adverse affect upon the business, assets, condition (financial or
other) or prospects of Debtor.

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(e)                Survival of Representations and Warranties. All
representations and warranties of the Debtor contained in this Agreement shall
survive the execution, delivery and performance of this Agreement until the
termination of this Agreement.

(f)                Exclusive Security Interest. Debtor shall not grant to any
person a security interest in the Collateral, except for the security interest
created hereby.

8.           Protection of Security. Debtor shall, at its own cost and expense,
take any and all actions reasonably necessary to defend title to the Collateral,
to defend the Security Interest of the Holder in such Collateral, and the
priority thereof, against any adverse lien or encumbrance of any nature
whatsoever.

9.           Continuing Obligations of Debtor. Debtor shall remain liable to
observe and perform all the material conditions and obligations to be observed
and performed by it under each contract, agreement, interest or obligation
relating to the Collateral, all in accordance with the terms and conditions
thereof.

10.          Use and Disposition of Collateral. Debtor shall not (a) make or
permit to be made any assignment, pledge or hypothecation of the Collateral, or
grant any security interest in the Collateral except for the Security Interest
except to the extent that any new security interest is subordinated to the
Security Interest or (b) except in the ordinary course of business, make or
permit to be made any transfer of any Collateral.

11.          Remedies upon Default. In the event the Debtor fails to pay any of
the Secured Obligations as and when due (following the expiration of all
applicable grace periods), the Holder shall have right to exercise its remedies
pursuant to the Uniform Commercial Code. The Debtor hereby waives all defenses
it may have against the enforcement of this provision (whether known or unknown)
and irrevocably agrees that any claims or counterclaims it may have against the
Holder shall not be deemed to be a defense against the enforcement of this
provision.

12.          Replenishment of Collateral. To the extent that the Collateral is
withdrawn by the Holder in accordance with the provisions of Section 11, above,
the Debtor shall have a period of 45 days from the date of such withdrawal to
replenish the Collateral so that the Collateral is equal to the then outstanding
principal amount of the Note. The Debtor’s failure to so replenish the
Collateral within such 45-day period shall constitute a default under this
Agreement.

13.          Security Interest Absolute. All rights of the Holder hereunder, the
Security Interest, and all obligations of the Debtor hereunder, shall be
absolute and unconditional irrespective of (a) any partial invalidity or
unenforceability of the Note, any other agreement with respect to any of the
Secured Obligations or any other agreement or instrument relating to any of the
foregoing, (b) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Secured Obligations, or any other amendment or
waiver of or consent to any departure from the Note or any other agreement or
instrument, (c) any exchange, release or non-perfection of any other Collateral,
or any release or amendment or waiver of or consent to or departure from any
guarantee, for all or any of the Secured Obligations, or (d) any other
circumstance which might otherwise constitute a defense available to, or
discharge of the Debtor in respect of the Secured Obligations or in respect of
this Agreement.

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14.          No Waiver. No failure on the part of the Holder to exercise, and no
delay in exercising, any right, power or remedy hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any such right,
power or remedy by the Holder preclude any other or further exercise thereof or
the exercise of any other right, power or remedy. All remedies hereunder are
cumulative and are not exclusive of any other remedies provided by law. The
Holder shall not be deemed to have waived any rights hereunder or under any
other agreement or instrument unless such waiver shall be in writing and signed
by such parties.

15.          Holder Appointed Attorney-in-Fact. Debtor hereby appoints Siskey
Industries, LLC, the Manager of the Holder, the attorney-in-fact of Debtor
solely for the purpose of carrying out the provisions of this Agreement and
taking any action and executing any instrument which the Holder may reasonably
deem necessary to accomplish the purposes hereof, which appointment is
irrevocable so long as this Agreement and the Security Interest have not been
terminated.

16.          Waiver of Equitable Subordination. Each of the parties hereto
waives any and all rights it may have to assert a claim for or to raise the
defense of equitable subordination in any legal action or proceeding arising
from this Agreement or the Note.

17.          Binding Agreement; Assignments. This Agreement, and the terms,
covenants and conditions hereof, shall be binding upon and inure to the benefit
of the parties hereto and their respective successors and assigns, except that
the Debtor shall not be permitted to assign this Agreement or any interest
herein or in the Collateral, or any part thereof, or any cash or property held
by the Holder as Collateral under this Agreement, except as contemplated by this
Agreement.

18.          Governing Law. This Agreement shall be construed in accordance with
and governed by the laws of the State of Nevada, except to the extent that the
validity or perfection of the security interest hereunder, or remedies
hereunder, in respect of any particular collateral are governed by the laws of a
jurisdiction other than the State of Nevada.

19.          Notices. All communications and notices hereunder shall be in
writing and given as provided in the Note.

20.          Severability. In case any one or more of the provisions contained
in this Agreement should be invalid, illegal or unenforceable the remaining
provisions contained herein shall not in any way be affected or impaired.

21.          Section Headings. Section headings used herein are for convenience
only and are not to affect the construction of, or to be taken into
consideration in interpreting, this Agreement.

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22.          Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall constitute an original, but all of which, when
taken together, shall constitute but one instrument. This Agreement shall be
effective when a counterpart that bears the signature of the Debtor shall have
been delivered to the Holder.

23.          Termination. This Agreement and the Security Interest shall
terminate when all the Secured Obligations have been fully and indefeasibly paid
in full, at which time the Holder shall execute and deliver to the Debtor all
Uniform Commercial Code termination statements and similar documents which the
Debtor shall reasonably request to evidence such termination; provided, however,
that all indemnities of the Debtor contained in this Agreement shall survive,
and remain operative and in full force and effect regardless of, the termination
of this Agreement for a period of six months following the termination of this
Agreement.

24.          Entire Agreement. This Agreement constitutes the entire agreement
between the parties and supersedes any prior or contemporaneous oral or written
agreement or representation between them with regard to the subject matter
hereof. This Agreement may not be modified except by a writing signed by each of
the parties hereto.

IN WITNESS WHEREOF, the parties hereto have duly executed this Security
Agreement as of the day and year first above written.

  DEBTOR:       Stratus Media Group, Inc.

 

  By:_______________________________   Name:_____________________________  
Title:______________________________           HOLDER:       Carolina Preferred
High Yield Fund, LLC   By: Siskey Industries, LLC, Manager      
By:_______________________________   Todd D. Beddard, President

 

 

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Schedule A

 

Collateral

 

“Collateral” means all of the Company’s right, title and interest in, to and
under all personal property and other assets, whether now owned by or owing to,
or hereafter acquired by or arising in favor of the Company (including under any
trade names, styles or derivations thereof) and whether owned or consigned by or
to, or leased from or to, the Company, and regardless of where located, and any
and all proceeds or products of (or additions or accessories to) any of the
foregoing.

Dated:

STRATUS MEDIA GROUP, INC.

 

By:______________________________

      Name:

      Title:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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