VESTEXCAPITAL CORPORATION SECURITY AGREEMENT
1 . GRANT OF SECURITY INTEREST. For valuable consideration, the
undersigned Chancellor Corporation ("Debtor"), hereby grants and transfers to
Vestex Capital Corporation ("VCC") a security interest in all goods, tools,
machinery, furnishings, furniture and other equipment, now or at any time
hereafter, and prior to the termination hereof, owned or acquired by Debtor,
wherever located, whether in the possession of Debtor or any other person and
whether located on Debtor's property or elsewhere, and all improvements,
replacements, accessions and additions thereto (collectively called
"Collateral"), together with whatever is receivable or received when any of the
Collateral or proceeds thereof are sold, leased, collected, exchanged or
otherwise disposed of, whether such disposition is voluntary or involuntary,
including without limitation, (a) all accounts, contract rights, chattel paper,
instruments, documents, general intangibles and rights to payment of every kind
now or at any time hereafter arising from any such sale, lease, collection,
exchange or other disposition of any of the foregoing, (b) all rights to
payment, including returned premiums, with respect to any insurance relating to
any of the foregoing, and (c) all rights to payment with respect to any cause of
action affecting or relating to any of the foregoing (hereinafter called
"Proceeds").
2. OBLIGATIONS SECURED. The obligations secured hereby are the payment
and performance of: (a)' all present and future Indebtedness of Debtor to VCC;
(b) all obligations of Debtor and rights of VCC under this Agreement; and (c)
all present and future obligations of Debtor to VCC of other kinds. The word
"Indebtedness" is used herein in its most comprehensive sense and includes any
and all advances, debts, obligations and liabilities of Debtor, or any of them,
heretofore, now - or Hereafter made, incurred or created, whether voluntary or
involuntary and however arising, whether due or not due, absolute or contingent,
liquidated or unliquidated, determined or undetermined, and whether Debtor may
be liable individually or jointly, or whether recovery upon such indebtedness
may be or hereafter becomes unenforceable.
3. TERMINATION. This Agreement will terminate upon the performance of
all obligations of Debtor to VCC, including without limitation, the payment of
all Indebtedness of Debtor to VCC, and the termination of all commitments of VCC
to extend credit to Debtor, existing at the time VCC receives written notice
front Debtor of the termination of this Agreement.
4. OBLIGATIONS OF VCC. VCC has no obligation to make any loans hereunder.
Any money received by VCC in respect of the Collateral may be deposited, at
VCC's option, into a non-interest bearing account over which Debtor
shall leave no control and the same shall, for all purposes, be deemed
Collateral hereunder.
5. REPRESENTATIONS AND WAFIRANTIES. Debtor represents and warrants to
VCC that: (a) Debtor is the owner and has possession or control of the
Collateral and Proceeds; b) Debtor has the right to grant a security interest
in the Collateral and Proceeds; (c) all Collateral and Proceeds are genuine,
free from liens, adverse claims, setoffs, default, prepayment, defenses and
conditions precedent of any kind or character, except the lien created hereby or
as otherwise agreed to by VCC, or Heretofore disclosed by Debtor to VCC, in
writing; (d) all statements contained herein are true and complete in all
material respects; (e) no financing statement covering any of the Collateral or
Proceeds, and naming any secured party other than VCC, is on file in any public
office; and (f) Debtor is not in the business of selling goods of the kind
included within the Collateral subject to this Agreement, and Debtor
acknowledges that no sale of any Collateral, including without limitation, any
Collateral which Debtor may deem to be surplus, has been or shall be consented
to or acquiesced in by VCC, except as specifically set forth in writing by VCC.
6. COVENANTS OF DEBTOR.
(a) Debtor Agrees in general: (I) to pay Indebtedness secured hereby
when due; (ii) to indemnify VCC against all losses, claims, demands, liabilities
and expenses of every kind caused by property subject Hereto; (iii) to pay all
costs and expenses, including reasonable attorneys' fees, incurred by VCC in the
perfection and preservation of the Collateral or VCC's interest therein and/or
the. realization, enforcement and exercise of VCC's rights, powers and remedies
hereunder; (iv) to permit VCC to exercise its powers; (v) to execute and deliver
such documents as VCC deems necessary to, create, perfect and continue the
security interests contemplated hereby; and (vi) not to change its chief place
of business (or personal residence, if applicable) or the places where Debtor
keeps any of the Collateral or Debtor's records concerning the Collateral and
Proceeds without first giving VCC written notice of the address to which Debtor
is moving same.
(b) Debtor agrees with regard to the Collateral and Proceeds, unless VCC
agrees otherwise in writing:
to insure the Collateral with VCC as loss payee, it form, substance and
amounts, under agreements, against risks and liabilities, and with insurance
companies satisfactory to VCC; (ii) to operate the Collateral in accordance with
all applicable statutes, rules and regulations relating to the use and control
thereof, and not to use the Collateral for any unlawful purpose or in any way
that would void any insurance required to be carried in connection therewith;
(iii) not to permit any security interest in or lien on the Collateral or
Proceeds, including without limitation, liens arising from repairs to or storage
of the Collateral, except in favor of VCC; (iv) to pay when due all license
fees, registration fees and other charges in connection with any Collateral; (v)
not to remove the Collateral from Debtor's premises unless the Collateral
consists of mobile goods as defined in the-Massachusetts Uniform Commercial
Code, in which case Debtor agrees not to remove or permit the removal of the
Collateral from its state of domicile for a period in excess of 30 calendar
days; (vi) not to sell, or otherwise dispose of, nor permit the transfer by
operation of law of, any of the Collateral or Proceeds or any interest herein;
(vii) not to rent, lease or charter the Collateral; (viii) to permit VCC to
inspect the Collateral at any time; (ix) to keep, in accordance with generally
accepted accounting principles, complete and accurate records regarding all
Collateral and Proceeds, and to permit VCC to inspect the same and make copies
thereof at any reasonable time; (x) if requested by VCC, to receive and use
reasonable diligence to collect Proceeds, in trust and as the property of VCC,
and to immediately endorse as appropriate and deliver such Proceeds to VCC daily
in the exact form in which they are received together with a collection report
in form satisfactory to VCC; (xi) not to commingle Proceeds or collections
thereunder with other property; (xii) to give only normal allowances and credits
and to advise VCC thereof immediately in writing if they affect any Collateral
or Proceeds in any material respect; (xiii) in the event VCC elects to receive
payments of Proceeds Hereunder, to pay all expenses incurred by VCC in
connection therewith, including expenses of accounting, correspondence,
collection efforts, reporting to account or contract debtors, filing, recording,
record keeping and expenses incidental thereto; and (xiv) to provide any service
and do any other acts which may be necessary to maintain, preserve and protect
all Collateral and, as appropriate and applicable, to keep the Collateral in
good and saleable condition and repair, to deal with the Collateral in
accordance with the standards and practices adhered to generally by owners of
like property, and to keep all Collateral and Proceeds free and clear of all
defenses, rights of offset and counterclaims.
7. POWERS OF VCC. Debtor appoints VCC its true attorney-in-fact to
perform any of the following powers, which are coupled with an interest, are
irrevocable until termination of this Agreement and may be exercised from time
to time by VCC's officers and employees, or any of them, whether or riot Debtor
is in default: (a) to perform any obligation of Debtor Hereunder in Debtor's
name or otherwise; (b) to give notice to account debtors or others of VCC's
rights in the Collateral and Proceeds, to enforce the sale and make extension
agreements with respect thereto; (c) to release persons liable on Proceeds and
to give receipts and acquittances and compromise disputes in connection
therewith; (d) to release security; (e) to resort to security in any order; (f)
to prepare, execute, file, record or deliver notes, assignments, schedules,
designation statements, financing statements, continuation statements,
termination statements, statements of assignment, applications for registration
or like papers to perfect, preserve or release VCC's interest in the Collateral
and Proceeds; (g) to receive, open and read mail addressed to Debtor; (h) to
take cash, instruments for the payment of money and other property to which VCC
is entitled; (i) to verify facts concerning the Collateral and Proceeds by
inquiry of obligors thereon, or otherwise, in its own name or a fictitious name;
(i) to endorse, collect, deliver and receive payment under instruments for the
payment of money constituting or relating to Proceeds; (k) to prepare, adjust,
execute, deliver and receive payment under insurance claims, and to collect and
receive payment of and endorse any instrument in payment of loss or returned
premiums or any otter insurance refund or return, and to apply such amounts
received by Batik, at VCC's sole option, toward repayment of the Indebtedness or
replacement of the Collateral; (1) to exercise all rights, powers and remedies
which Debtor would have, but for this Agreement, with respect to all Collateral
and Proceeds subject hereto; (m) to enter onto Debtor's premises in inspecting
the Collateral; and (n) to do all acts and things and execute all documents in
the name of Debtor or otherwise, deemed by VCC as necessary, proper and
convenient in connection with the preservation, perfection or enforcement of its
rights hereunder.
8. PAYMENT OF PREMIUMS, TAXES, CHARGES, LIENS AUID ASSESSMENTS. Debtor
agrees to pay, prior to delinquency, all insurance premiums, taxes, charges,
liens and assessments against the Collateral and Proceeds, and Lien on the
failure of Debtor to do so, VCC at its option may pay any of the lien and shall
be the sole judge of the legality or validity thereof and the amount necessary
to discharge the said. Any such payments made by Chancellor shall be
obligations of Debtor to VCC, due and payable immediately upon demand, together
with interest at a rate determined in accordance with the provisions of Section
15 Herein, and shall be secured by tile Collateral and Proceeds, subject to all
terms and conditions of this Agreement.
9. EVENTS OF DEFAULT. The occurrence of any of the following shall
constitute an "Event of Default" under this Agreement: (a) any default in the
payment or performance of any obligation, or any defined event of default, under
(i) any contract or instrument evidencing any Indebtedness, or (ii) any other
agreement between any Debtor and VCC, including without limitation any loan
agreement, relating to or executed in connection with any Indebtedness; (b) any
representation or warranty made by any Debtor Herein shall prove to be incorrect
in any material respect when made; (c) any Debtor shall fail to observe or
perform any obligation or agreement contained herein; (d) any attachment or like
levy on any property of any Debtor; and (e) VCC, in good faith, believes any or
all of the Collateral and/or Proceeds to be in danger of (misuse, dissipation,
loss, theft, damage or destruction, or otherwise iii jeopardy or unsatisfactory
in character or value.
10. REMEDIES. Upon the occurrence of any Event of Default, VCC shall
have the right to declare immediately due and payable all or any Indebtedness
secured Hereby and to terminate any commitments to make loans or otherwise
extend credit to Debtor. VCC shall have all other rights, powers, privileges
and remedies granted to a secured party upon default under the Massachusetts
Uniform Commercial Code or otherwise provided by law, including without
limitation, the right to contact all persons obligated to Debtor on any
Collateral or Proceeds and to instruct such persons to deliver all Collateral
and/or Proceeds directly to VCC. All rights, powers, privileges and remedies of
VCC shall be cumulative. No delay, failure or discontinuance of VCC in
exercising any right, power, privilege or remedy hereunder shall affect or
operate as a waiver of such right, power, privilege or remedy; nor shall any
single or partial exercise of any such right, power, privilege or remedy
preclude, waive or otherwise affect any other or further exercise thereof or the
exercise of any other right, power, privilege or remedy. Any waiver, permit,
consent or approval of any kind by VCC of any default hereunder, or any such
waiver of any provisions or conditions Hereof, must be in writing and shall be
effective only to the extent set forth in writing. It is agreed that public or
private sales, for cash or on credit, to a wholesaler or retailer or investor,
or user of property of the types subject to this Agreement, or public auction,
are all commercially reasonable since differences in the sales prices generally
realized in the different kinds of sales are ordinarily offset by the
differences in the costs and credit risks of such sales.
While an Event of Default exists: (a) Debtor will deliver to VCC from time to
time, as requested by VCC, current lists of all Collateral and Proceeds; (b)
Debtor will not dispose of any of the Collateral or Proceeds except on terms
approved by VCC; (c) at VCC's request, Debtor will assemble and deliver all
Collateral and Proceeds, and books and records pertaining thereto, to VCC at a
reasonably convenient place designated by VCC; and (d) VCC may, without notice
to Debtor, enter onto Debtor's premises and take possession of the Collateral.
ii. DISPOSITION OF COLLATERAL AND PROCEEDS. Upon the transfer of all
or any part of the Indebtedness, VCC may transfer all or any part of the
Collateral or Proceeds and shall be fully discharged thereafter from all
liability and responsibility with respect to any of the foregoing so
transferred, and the transferee shall be vested with all rights and powers of
VCC Hereunder with respect to any of the foregoing so transferred; but with
respect to any Collateral or Proceeds not so transferred VCC shall retain all
rights, powers, privileges and remedies herein given. Any proceeds of any
disposition of any of the Collateral or Proceeds, or any part thereof, may be
applied by VCC to tile payment of expenses incurred by VCC iii connection with
the foregoing, including reasonable attorneys' fees, and the balance of such
proceeds may be applied by VCC toward the payment of the Indebtedness in such
order of application as VCC may from time to time elect. In the event that
additional capital is infused into the Debtor by a third party, VCC in it's sole
discretion may elect to place and all of those funds towards repayment of
principal and /or interest of it's outstanding obligation from the debtor.
1 2. STATUTE OF LIMITATIONS. Until all indebtedness shall have been paid
in full and all commitments by VCC to extend credit to Debtor leave been
terminated, the power of sale and all other rights, powers, privileges and
remedies granted to VCC hereunder shall continue to exist and may be exercised
by VCC at any time and from time to time irrespective of the fact that the
Indebtedness or any part thereof may have become barred by any statute of
limitations, or that the personal liability of Debtor may have ceased, unless
such liability shall have ceased due to the payment in full of all Indebtedness
secured hereunder.
1 3. MISCELLANEOUS. (a) The obligations of Debtor are joint and several;
(b) Debtor hereby waives any right (i) to require VCC to make any presentment or
demand, or give any notice of nonpayment or nonperformance, protest, notice of
protest or notice of dishonor Hereunder, (ii) to direct the application of
payments or security for Indebtedness of Debtor or indebtedness of customers of
Debtor, or (iii) to require proceedings against others or to require exhaustion
of security; and (c) Debtor Hereby consents to extensions, forbearances or
alterations of the terms of Indebtedness, the release or substitution of
security, and the release of any guarantors; provided however, that in each
instance, VCC believes in good faith that the action in question is commercially
reasonable in that it does not unreasonably increase the risk of nonpayment of
the Indebtedness to which the action applies. Until all Indebtedness shall
leave been paid in full, no Debtor shall have any right or contribution, and
each Debtor Hereby waives any benefit of or right to participate in any of the
Collateral or Proceeds or any other security now or hereafter held by VCC.
14. NOTICES. All notices, requests and demands required under this
Agreement must be in writing, addressed to VCC at the address specified in any
other loan documents entered into between Debtor and VCC and to Debtor at the
address party may designate by written notice to each other party, and shall be
deemed to have been given or made as follows: (a) if personally delivered, upon
delivery; (b) if sent by mail, upon the earlier of the date of receipt or 3 days
after deposit in the U. S. mail, first class and postage prepaid; and (c) if
sent by telecopy, upon receipt.
15. COSTS, EXPENSES AND ATTORNEYS' FEES. Debtor shall pay to VCC
immediately upon demand the full amount of all payments, advances, charges,
costs and expenses, including reasonable attorneys' fees (to include outside
counsel fees and all allocated costs of VCC's in-house counsel), expended or
incurred by VCC iii exercising any right, power, privilege or remedy conferred
by this Agreement or in the enforcement thereof, whether incurred at the trial
or appellate level, it) an arbitration proceeding or otherwise, and including
any of the foregoing incurred in connection with any bankruptcy proceeding
(including without limitation, any adversary proceeding, contested matter or
motion brought by VCC or any other person) relating to Debtor or in any way
affecting any of the Collateral or VCC's ability to exercise any of its rights
or remedies with respect thereto. All of the foregoing shall be paid by Debtor
with interest from the date of demand until paid in full at a rate per annum
equal to the greater of ten percent (10%) or the Prime Rate in effect from time
to time. The "Prime Rate" is a base rate that VCC from time to time establishes
and which serves as the basis upon which effective rates of interest are
calculated for those loans making reference thereto.
16. SUCCESSORS; ASSIGNS; AMENDMENT. This Agreement shall be binding
upon and inure to the benefit of the heirs, executors, administrators, and legal
representatives, successors and assigns of the parties, and may be amended or
modified only in writing signed by VCC and Debtor.
17. SEVERABILITY OF PROVISIONS. If any provision of this Agreement shall be
held to be prohibited by-or invalid under applicable law, such provision shall
be ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or any remaining provisions of this
Agreement.
18. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Massachusetts.
IN WITNESS WHEREOF, this Agreement has been duly executed as of December
22,1998.
Chancellor Corporation
By: /s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
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▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Treasurer