EXHIBIT 10(R)(7)
SUBSIDIARY SECURITY AGREEMENT
(with Schedule I)
This SECURITY AGREEMENT is made and entered into as of this 28th day of
June, 2001, among COVER-ALL SYSTEMS, INC., a Delaware corporation (the
"Guarantor"), and ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ AND ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
(collectively referred to as "Lender"), and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, as agent for the
Secured Party (the "Agent").
WHEREAS, Lender, Agent and Cover-All Technologies Inc. (the "Borrower"),
have entered into a Convertible Loan Agreement of even date herewith (the "Loan
Agreement"), pursuant to which Lender will lend to the Borrower the aggregate
principal amount of $400,000 evidenced by the Borrower's 8.00% Convertible
Debentures of even date herewith (the "Debentures");
WHEREAS, as a condition for entering into the Loan Agreement and providing
the Loan, Lender required that Guarantor, a subsidiary of the Borrower,
guarantee the Obligations of the Borrower and grant a security interest in the
assets of Guarantors as collateral for such Guarantee;
WHEREAS, Guarantors executed a Guarantee of even date herewith in favor of
Lender (the "Guarantee"), whereby Guarantors guaranteed the due performance and
full and prompt payment of all obligations and indebtedness of the Borrower
arising under the Loan Agreement;
WHEREAS, Renaissance US Growth & Income Trust PLC, a public limited company
registered in England and Wales ("RUSGIT"), and BFSUS Special Opportunities
Trust PLC, a public limited company registered in England and Wales ("BFSUS")
(RUSGIT and BFSUS collectively referred to as "Renaissance"), has loaned to
Borrower on even date herewith, the aggregate principal amount of $1,400,000
evidenced by Borrower's 8.00% Convertible Debentures;
WHEREAS, Renaissance, Renaissance Capital Group, Inc., a Texas corporation
("RCG"), and the Borrower have entered into a Pledge Agreement, certain Borrower
Security Agreements and Subsidiary Security Agreements of even date herewith
providing for the pledge and grants of security interests in the pledged Shares
and the Collateral to secure the payment when due of the Obligations of the
Borrower under the Loan Documents (as such terms are defined in the Convertible
Loan Agreement among Renaissance, RCG and Borrower); and
WHEREAS, Renaissance and Holder have entered into an Intercreditor
Agreement of even date herewith setting forth the relative rights and
responsibilities as creditors of Borrower;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements set forth herein, the parties hereby agree as follows:
1. GRANT OF SECURITY INTEREST. In order to secure payment when due of all
Obligations now existing or hereafter incurred, Guarantors hereby irrevocably
grant to Lender a first and prior security interest in the following property of
Guarantors (the "Collateral"),
whether now owned or existing, or hereafter acquired, owned, existing or arising
(whether by contract or operation of law), and wherever located, which shall be
retained by Lender, until the Obligations have been paid in full and the Loan
Agreement has been terminated.
(i) All accounts (including inter-company receivables),
contract rights, chattel paper and rights of payment of every kind
(collectively, "Accounts") and instruments and general intangibles of
Guarantor.
(ii) All bank accounts of Guarantor.
(iii) All monies and property of any kind of Guarantor, now or
hereafter, in the possession or under the control of Lender, Agent or a
bailee of Lender.
(iv) All licenses, patents, patent applications, copyrights,
trademarks, trademark applications, trade names, assumed names, service
marks and service ▇▇▇▇ applications and other intellectual property of
Guarantor, as more particularly described on SCHEDULE 1 attached hereto
and incorporated herein for all purposes.
(v) All inventory, equipment (including any and all computer
hardware and components), machinery and fixtures of Guarantor in all
forms and wherever located, and all parts and products thereof, all
accessories thereto, and all documents therefor.
(vi) All books and records (including, without limitation,
customer lists, credit files, tapes, ledger cards, computer software
and hardware, electronic data processing software, computer programs,
printouts and other computer materials and records) of Guarantor
evidencing or containing information regarding or otherwise pertaining
to any of the foregoing.
(vii) All accessories to, substitutions for and all replacements,
products and proceeds of the foregoing including, without limitation,
proceeds of insurance policies insuring the Collateral (including, but
not limited to, claims paid and premium refunds).
2. INSURANCE ON COLLATERAL. Guarantors further warrant and agree that in
each case where the terms of any such Accounts require the Guarantor or the
account debtor named in such Account to place or carry insurance in respect of
the property to which such Account relates, the Guarantor or the account debtor
will pay for and maintain such insurance.
3. DELIVERY OF RECEIVABLES. Upon Lender's or Agent's request, upon the
occurrence of an Event of Default, the Guarantors will, at any reasonable time
and at Guarantor's own expense, physically deliver to Lender or Agent all
Accounts assigned to Lender at any reasonable place or places designated by
Lender or Agent. Failure to deliver any Account, or failure to deliver physical
possession of any instruments, documents or writings in respect of any Account
shall not invalidate Lender's Lien and security interest therein, except to the
extent that
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possession may be required by applicable law for the perfection of said Lien or
security interest, in which latter case, the Account shall be deemed to be held
by Guarantors as the custodian agent of Lender, for the benefit of Lender.
Failure of Lender or Agent to demand or require Guarantors to include any
Account in any schedule, to execute any schedule, to assign and deliver any
schedule or to deliver physical possession of any instruments, documents or
writings related to any Account shall not relieve Guarantors of their duty so to
do.
4. COLLECTION OF RECEIVABLES. Guarantors hereby agree that they shall use
commercially reasonable efforts, at their sole cost and expense and in their own
names, to promptly and diligently collect and enforce payment of all Accounts
and Guarantors will defend and hold Lender harmless from any and all loss,
damage, penalty, fine or expense arising from such collection or enforcement.
5. FINANCING STATEMENTS. Guarantors agree to execute all financing
statements and amendments thereto as Lender or Agent may request from time to
time to evidence the security interest granted to Lender hereunder and will pay
all filing fees and taxes, if any, necessary to effect the filing thereof.
Wherever permitted by law, Guarantors authorize Lender or Agent to file
financing statements with respect to the Collateral without the signature of
Guarantors, and shall give notice thereof to the Guarantors. Without the written
consent of Lender or Agent, Guarantors will not allow any financing statement or
notice of assignment to be on file in any public office covering any Collateral,
proceeds thereof or other matters subject to the security interest granted to
Lender herein, unless such financing statement relates to a Permitted Lien.
6. LENDER'S PAYMENT OF CLAIMS. Lender may, in its sole discretion,
discharge or obtain the release of any security interest, lien, claim or
encumbrance asserted by any Person against the Collateral, other than a
Permitted Lien. All sums paid by Lender in respect thereof shall be payable, on
demand, by Guarantors to such Lender and shall be a part of the Obligations.
7. DEFAULT AND REMEDIES.
(a) Guarantors shall be in default hereunder upon the occurrence of an
Event of Default, as set forth in the Loan Agreement.
(b) Upon the occurrence of any Event of Default which shall be
continuing, (i) unless Lender or Agent shall elect otherwise, the entire
unpaid amount due under the Guarantee as are not then otherwise due and
payable shall become immediately due and payable without notice to
Guarantors or demand by Lender or Agent and (ii) either Lender or Agent may
at its or their option exercise from time to time any and all rights and
remedies available to them under the Uniform Commercial Code or otherwise,
including the right to foreclose or otherwise realize upon the Collateral
and to dispose of any of the Collateral at one or more public or private
sales or other proceedings, and Guarantors agree that any of Lender, Agent
or their nominee may become the purchaser at any such sale or sales.
Guarantors agree that twenty (20) days shall be reasonable prior notice of
the date of any public sale or other disposition, if the same may be made.
All rights and remedies granted Lender hereunder or under any other
agreement between Lender and Guarantors shall be deemed concurrent and
cumulative and not alternative, and Lender, or Agent on its behalf, may
proceed with any number of remedies at the
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same time or at different times until all the Obligations are fully
satisfied. The exercise of any one right or remedy shall not be deemed a
waiver or release of or an election against any other right or remedy.
Guarantors shall pay to Lender or Agent, on demand, any and all expenses
(including reasonable attorneys' fees and legal expenses) which may have
been incurred by Lender or Agent (i) in the prosecution or defense of any
action growing out of or connected with the subject matter of this
Agreement, the Guarantee, the Collateral or any of Lender's rights therein
or thereto; or (ii) in connection with the custody, preservation, use,
operation, preparation for sale or sale of the Collateral, the incurring of
all of which are hereby authorized to the extent Lender or Agent deem the
same advisable. Guarantors' liability to Lender or Agent for any such
payment shall be included in the Obligations. The proceeds of any
Collateral received by Lender or Agent at any time before or after default,
whether from a sale or other disposition of Collateral or otherwise, or the
Collateral itself, may be applied to the payment in full or in part of such
of the Obligations and in such order and manner as Lender or Agent may
elect.
8. REPRESENTATIONS AND COVENANTS OF GUARANTOR. Guarantor hereby represents
to and agrees with Lender as follows:
(a) Guarantor owns the Collateral as sole owner, free and clear of any
Liens, other than Permitted Liens.
(b) So long as any amounts due pursuant to the Loan Agreement remain
unpaid, Guarantor agrees not to sell, assign or transfer the Collateral,
other than the sale of Collateral in the ordinary course of business, and
to maintain it free and clear of any Liens, other than Permitted Liens.
9. MISCELLANEOUS.
(a) This Agreement shall bind and inure to the benefit of the parties
and their respective heirs, personal representatives, successors and
assigns, except that Guarantor shall not assign any of its rights hereunder
without the prior written consent of the holders of more than 50% of the
principal amount of the then outstanding Debentures.
(b) Any provision hereof which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent
of such prohibition or unenforceability without affecting the validity or
enforceability of the remainder of this Agreement or the validity or
enforceability of such provision in any other jurisdiction.
(c) All issues arising hereunder shall be governed by the laws of the
State of New York.
(d) Guarantor hereby consents to the jurisdiction of the courts of the
State of New York in any action or proceeding which may be brought against
them under or in connection with this Agreement or any transaction
contemplated hereby or to enforce any agreement contained herein, and in
the event any such action or proceeding shall be brought against one or
both of them, Guarantors agree not to raise any objection to such
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jurisdiction or to the laying of venue in New York County, New York or, if
applicable, any other county in any state in which Collateral is located.
(e) Any notices or other communications required or permitted to be
given by this Agreement or any other documents and instruments referred to
herein must be (i) given in writing and personally delivered, mailed by
prepaid certified or registered mail or sent by overnight service, such as
FedEx, or (ii) made by telex or facsimile transmission delivered or
transmitted to the party to whom such notice or communication is directed,
with confirmation thereupon given in writing and personally delivered or
mailed by prepaid certified or registered mail.
If to Guarantor to:
Cover-All Systems, Inc.
▇▇-▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn.: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Chairman and CEO
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇▇▇▇▇, Esq.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
If to Lender to:
▇▇▇▇ ▇▇▇▇▇▇
c/o ▇▇-▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn.: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Chairman and CEO
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
c/o Spear, Leeds & ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
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and
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
c/o Spear, Leeds & ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
If to Agent to:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
c/o Spear, Leeds & ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Any notice delivered personally in the manner provided herein will be
deemed given to the party to whom it is directed upon the party's (or its
agent's) actual receipt. Any notice addressed and mailed in the manner provided
herein will be deemed given to the party to whom it is addressed at the close of
business, local time of the recipient, on the fourth business day after the day
it is placed in the mail, or, if earlier, the time of actual receipt.
(f) Capitalized terms used herein, unless otherwise defined herein,
have the definitions given them in the Loan Agreement among Borrower and
Lender, Agent.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK;
SIGNATURE PAGE FOLLOWS.]
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IN WITNESS WHEREOF, this Agreement has been duly executed as of the date
and year written above.
COVER-ALL SYSTEMS, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
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▇▇▇▇ ▇. ▇▇▇▇▇▇, Chairman and CEO
LENDER:
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇
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▇▇▇▇ ▇▇▇▇▇▇
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
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▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
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▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
AGENT:
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
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▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
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