SECURITY AGREEMENT
This Security Agreement is made and entered into as of December 18, 1998 by
and between Avalon Financial Services, LLC, with an office at ▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇, Attn: ▇▇▇▇▇▇ ▇▇▇▇▇, President (the
"Subscriber"), and AccuFacts Pre-Employment Screening, Inc., with an office at ▇
▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇ (the "Secured Party"); the Subscriber and the
Secured Party collectively referred to hereinafter as the "Parties".
W I T N E S E T H:
WHEREAS, contemporaneously herewith Subscriber is purchasing from Secured
Party 187,500 shares of Common Stock par value $.01 per share of Secured Party
represented by Certificate No. 1146 (the "Shares") and in consideration therefor
has issued to the Secured Party a Secured Guaranteed Promissory Note of even
date herewith (the "Note"), for the principal amount of THREE HUNDRED
SEVENTY-FIVE THOUSAND ($375,000.00) DOLLARS plus interest; and
WHEREAS, it is a condition of the Secured Party's acceptance of the Note
that Subscriber grant a security interest to the Secured Party in the Shares.
NOW THEREFORE, the Parties agree as follows:
1. Security Interests in Collateral.
To secure the prompt payment and performance to Secured Party of the
Subscriber under the Note, (the "Obligations"), Subscriber hereby grants to
Secured Party a continuing security
interest and a lien upon the Shares (the "Collateral") together with all
dividends currently or hereafter accrued thereupon.
2. Location of Collateral.
Subscriber has simultaneously with the execution of this Agreement
delivered to Secured Party the certificate representing the Shares.
3. Title.
Except for the security interest hereby granted or any other claim herein
set forth, Subscriber has full title to the Collateral, free and clear of any
lien, security interest, encumbrance, or claim, and Subscriber will, at
Subscriber's cost and expense, defend any action which may affect Secured
Party's security interest in, or Subscriber's title to, the Collateral.
4. Financing Statement.
No financing statement covering the Collateral or any part thereof or any
proceeds thereof is on file in any public office and, at Secured Party's
request, Subscriber will join in executing all necessary financing statements in
favor of Secured Party in forms satisfactory to Secured Party, will pay the cost
of filing fees for filing the same and will further execute all other
instruments deemed necessary by Secured Party and pay the cost of filing fees
for filing the same.
5. Sale or Disposition of Collateral.
Subscriber warrants and covenants that it will not, without the prior
written consent of Secured Party, sell, contract to sell, encumber, or dispose
of the Collateral or any interest therein or parties thereof until all
Obligations have been fully satisfied.
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6. Term.
This Agreement shall terminate upon payment of all principal and interest
due under the Note.
7. Reimbursement of Expenses By Subscriber.
At the option of Secured Party, Secured Party may discharge taxes, liens,
interest, or perform or cause to be performed for and on behalf of Subscriber
any actions and conditions, obligations, or covenants which Subscriber has
failed or refused to perform, and may pay for the maintenance, and preservation
of the Collateral, and any sums so advanced shall be immediately payable at the
place designated in the Note and shall be secured by this Security Agreement.
8. Payment.
Subscriber will pay the Note secured by this Security Agreement and any
renewal or extension thereof and any other indebtedness hereby secured in
accordance with the terms and provisions thereof and will repay immediately all
sums expended by Secured Party in accordance with the terms and provisions of
this Security Agreement.
9. Change of Address.
Subscriber will promptly notify Secured Party of any change of Subscriber's
address.
10. Attorney in Fact.
Subscriber hereby irrevocably appoints Secured Party as Subscriber's
attorney in fact, effective upon any default under the Note, to do any and every
act which Subscriber is obligated by this Security Agreement to do, and to
exercise all rights of Subscriber in the Collateral and to make collections and
to prepare, execute and file, for and in Subscriber's name, any and all papers
and instruments including, without limitation, financing statements, and to do
all other things necessary
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or desirable to preserve, protect, perfect, enforce and continue the Collateral
and to make collections and to protect Secured Party's security interest in said
Collateral.
11. Additional Rights of Secured Party.
In its sole discretion, the Secured Party may, at any time and from time to
time, assign, transfer or deliver to any transferee of the Notes any rights in
the Collateral, whereupon Secured Party shall be fully discharged from all
responsibility and the transferee shall be vested with all powers and rights of
the Secured Party hereunder with respect thereto, but the Secured Party shall
retain all rights and powers with respect to any Collateral not assigned,
transferred or delivered.
12. Time of Performance and Waiver.
In performing any act by Subscriber under this Security Agreement and the
Note secured hereby, time shall be of the essence. Secured Party's acceptance of
partial or delinquent payments, or the failure of Secured Party to exercise any
right or remedy shall not be a waiver of any obligation of Subscriber or right
of Secured Party or constitute a waiver of any other similar default
subsequently occurring.
13. Default.
Subscriber shall be in default under this Security Agreement on the
happening of any of the following events or conditions (each an "Event of
Default"):
(a) the Note is not paid in accordance with its terms or an acceleration
event occurs under the Note; or
(b) any warranty, representation, or statement made or furnished to Secured
Party by or on behalf of Subscriber proves to have been false in any material
respect when made or furnished; or
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(c) default in payment or performance of covenants or sums due hereunder
three (3) days after notice thereof.
14. Remedies.
(a) Upon the occurrence of an Event of Default and at any time thereafter,
Secured Party may, without notice to or demand upon Subscriber, declare any and
all of the Obligations secured hereunder immediately due and payable and Secured
Party shall have all rights and remedies of a secured party under the Uniform
Commercial Code or of the Secured Party under the Obligations, all such rights
and remedies being cumulative, not exclusive and enforceable alternatively,
successively or concurrently; provided however, that the sole remedy of Secured
Party for nonpayment of the Note shall be recovery and cancellation of the
Shares.
(b) The Secured Party may appropriate, set off and apply to the payment of
the Obligations, any Collateral in or coming into the possession of the Secured
Party or its agents, without notice to Subscriber and in such manner as the
Secured Party may in its discretion determine.
15. Miscellaneous Provisions.
(a) New York Law to Apply: This Security Agreement shall be construed under
and in accordance with the Uniform Commercial Code and other applicable laws of
the State of New York and all obligations of the parties created hereunder are
performable in New York County, New York.
(b) Parties Bound: This Security Agreement shall be binding on and inure to
the benefit of the Parties and their respective heirs, executors,
administrators, legal representatives, successors, and assigns where permitted
by this Security Agreement.
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(c) Legal Construction: In case any one or more of the provisions contained
in this Security Agreement shall for any reason be held to be invalid, illegal,
or unenforceable in any respect, such invalidity, illegality, or
unenforceability shall not affect any other provision hereof and this Security
Agreement shall be construed as if such invalid, illegal, or unenforceable
provision had never been contained herein.
(d) Prior Agreements Superseded: This Agreement constitutes the sole and
only agreement of the Parties hereto and supersedes any prior understandings or
written or oral agreements between the parties respecting the within subject
matter.
(e) Definitions: All terms used herein which are defined in the Uniform
Commercial Code of New York shall have the same meaning herein as in said Code.
IN WITNESS WHEREOF, the undersigned have executed this Security Agreement
as of the date first above written.
ACCUFACTS PRE-EMPLOYMENT
SCREENING, INC.
By /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
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▇▇▇▇▇▇ ▇▇▇▇▇▇, President
AVALON FINANCIAL SERVICES, LLC
By /s/ ▇▇▇▇▇▇ ▇▇▇▇▇
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▇▇▇▇▇▇ ▇▇▇▇▇, President
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GUARANTEED SECURED PROMISSORY NOTE
$375,000.00 New York, New York
December 18, 1998
FOR VALUE RECEIVED, the undersigned, AVALON FINANCIAL SERVICES, LLC (the
"Payor"), hereby promises to pay to the order of AccuFacts Pre-Employment
Screening, Inc. (the "Payee"), at the option of Payee, on June 30, 1999, at such
place in the State of New York as the holder of this Note shall specify, in such
coin or currency of the United States of America as at the time shall be legal
tender for the payment of public and private debts, the principal sum of Three
Hundred Seventy-Five Thousand ($375,000.00) Dollars, together with accrued
interest as hereinafter provided.
1. Interest.
1.1 The unpaid principal amount hereof shall bear simple interest from the
date hereof at the prime rate set forth by Citibank, N.A. from time to time.
1.2 If payment of the principal amount hereof and interest accrued thereon
is not made upon maturity, then interest shall accrue on such unpaid amount from
the date of non-payment to the date of payment at the maximum rate permitted by
applicable law.
2. Security Interest; Guarantee of Performance. Payor's obligations
pursuant to this note are secured by a first priority security interest in
Payor's 187,500 shares of Common Stock par value $.01 of the Payee (the
"Shares")under the terms of a Security Agreement between Payor and Payee of even
date herewith.
3. Suits for Enforcement and Remedies. The sole remedy of Payee for non
payment of this Note is recovery of the Shares. If payment of the principal
amount hereof and interest accrued thereon is not made upon maturity, or is
accelerated under the terms of paragraph 5 hereof, the holder of this Note may
proceed to protect and enforce such holder's rights either by suit in equity or
by action at law, or both, whether for the specific performance of any covenant,
condition or agreement contained in this Note or in aid of the exercise of any
power granted in this Note, or proceed to enforce the payment of this Note or to
enforce any other legal or equitable right of the holder of this Note. By his
execution hereof, Payor agrees to submit to the jurisdiction of the Courts of
the State of New York and that any suit to enforce this Note may be brought in
the Courts of the State of New York.
4. Unconditional Obligation; Fees; Waivers, etc.
4.1 The obligations to make the payments provided for in this Note are
absolute and unconditional and not subject to any defense, set-off,
counterclaim, rescission, recoupment or adjustment whatsoever.
4.2 If the holder of this Note shall institute any action to enforce the
collection of this Note so as to recover the Shares, there shall be immediately
due and payable from the Payor, in addition to the Shares, all reasonable costs
and expenses incurred by the Payee in connection therewith, including, without
limitation, reasonable attorneys' fees and disbursements.
4.3 No forbearance, indulgence, delay or failure to exercise any right or
remedy with respect to this Note shall operate as a waiver, nor as an
acquiescence in any default, nor shall any single or partial exercise of any
right or remedy preclude any other or further exercise thereof or the exercise
of any other right or remedy.
4.4 This Note may not be modified or discharged orally, but only in writing
duly executed by the holder hereof.
4.5 The Payor hereby waives presentment, demand, notice of dishonor,
protest and notice of protest.
5. Events of Default. In the event of and immediately upon the occurrence
of any of the following events (an "Event of Default") this Note shall become
immediately due and payable without any action by the Payee:
5.1 If Payee shall be in default of the payment provisions of this Note;
5.2 If an Event of Default shall occur under the Security Agreement
herewith between Payor and Payee of even date herewith or such Security
Agreement shall cease to be in full force and effect in accordance with its
terms;
5.3 (a) the Payor makes a general assignment for the benefit of creditors
or commences (as the debtor) a case in bankruptcy, or commences (as the debtor)
any proceeding under any other insolvency law; or
(b) a case in bankruptcy or any proceeding under any other insolvency law
is commenced by or against the Payor (as the debtor) and a court having
jurisdiction enters a decree or order for relief against the Payor as the debtor
in such case or proceeding, or such case or proceeding is consented to by the
Payor or remains undismissed for 60 days, or the Payor consents or admits the
material allegations against it in any such case or proceeding; or
(c) a trustee, receiver or agent (however named) is appointed or authorized
to take charge of substantially all of the property of the Payor for the purpose
of general administration of such property for the benefit of creditors and the
order making such appointment or granting such authorization is not vacated
within 60 days, during which period such trustee, receiver or agent shall not
have taken any action with respect to the property of the Payor which might
prejudice the interest of the Payee hereunder.
If an Event of Default occurs and is continuing, Payee may pursue any
available remedy to collect the payment of all amounts due under this Note or to
enforce the performance of any provision of this Note. No waiver of any default
hereunder shall be
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construed as a waiver of any subsequent default, and the failure to exercise any
right or remedy hereunder shall not waive the right to exercise such right or
remedy thereafter.
6. Miscellaneous.
6.1 Headings of the various paragraphs of this Note are for convenience of
reference only and shall in no way modify any of the terms or provisions of this
Note.
6.2 Any notice required or permitted to be given hereunder shall be deemed
to have been duly given when personally delivered or two days after being mailed
certified or registered, first class, portage prepaid, as follows:
If to the Payor: Avalon Financial Services, LLC
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
ATTN: ▇▇▇▇▇▇ ▇▇▇▇▇, President
If to the Payee: AccuFacts Pre-Employment Screening, Inc.
▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
6.3 This Note and the obligations of the Payor and the rights of any holder
hereof shall be governed by and construed in accordance with the laws of the
State of New York applicable to contracts made and to be performed entirely
within such state.
PAYOR:
Avalon Financial Services, LLC
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇
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▇▇▇▇▇▇ ▇▇▇▇▇, President
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ACCUFACTS PRE-EMPLOYMENT SCREENING, INC.
▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
June 10, 1999
Avalon Financial Services LLC
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Re: 12/18/98 Note Payable in the Total principal Amount of $375,000
Dear Sirs:
As discussed, this will modify the referenced Note in that the due date for
payment of its balance is extended from June 30, 1999 to September 15, 1999. No
other provisions are modified by this letter, and shall remian in full force and
effect.
Very truly yours,
Accufacts Pre-Employment Scrrening, Inc.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
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▇▇▇▇▇▇ ▇▇▇▇▇▇, President