SECURITY AGREEMENT
▇▇▇▇▇▇▇▇▇▇▇.▇▇▇, Incorporated, a Nevada corporation with its
principal offices at ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇-▇, ▇▇▇▇, ▇▇▇▇▇▇,
▇▇▇▇▇ ("Debtor"), and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, Trustee of the ▇▇▇▇▇▇▇ ▇ ▇▇▇▇▇▇ Self
Employed Pension Plan and Trust, with its offices at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇,
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ("Secured Party") agree, effective as of the
25th day of January, 2001, as follows:
1. BACKGROUND AND PURPOSE.
1.1 Debtor has executed a promissory note payable to Secured Party in
the original principal amount of Five Hundred Thousand Dollars ($500,000) (the
"Note").
1.2 To secure Debtor's obligations under the Note, and Debtor's
obligations under this Agreement, Debtor has agreed to grant to Secured Party
security interest as provided below.
1.3 The parties desire to set forth more fully the terms of this
Agreement.
2. GRANT OF SECURITY INTEREST. To secure Debtor's Obligations (as defined in
▇▇▇▇▇▇▇▇▇ ▇ ▇▇▇▇▇), ▇▇▇▇▇▇ grants to Secured Party a security interest in the
Collateral (as defined in Paragraph 4 below).
3. OBLIGATIONS. For purposes of this Agreement, "Obligations" means any and all
debts, obligations and liabilities of Debtor to Secured Party arising out of, or
relating in any way to the Note, and any obligations of Debtor to Secured Party
pursuant to this Agreement, whether or not existing or arising after the date of
this Agreement, voluntary or involuntary, jointly owned with others, direct or
indirect, or absolute or contingent, and whether or not from time to time
increased, decreased, extinguished, created, or incurred.
4. COLLATERAL. For purposes of this Agreement, "Collateral" means:
a. All stock certificates and other ownership interests in
▇▇▇▇▇▇▇▇ Publications, Inc., an Indiana corporation and ▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇,
Incorporated, a Nevada corporation.
b. All accounts, accounts receivable, contract rights and
general intangibles of or concerning ▇▇▇▇▇▇▇▇ Publications, Inc. and
▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇, Incorporated, a Nevada corporation, including, without
limitation, all forms of payment, all present and future incomes, rents,
revenues, issues and profits, goodwill, license and license rights, bailment or
leasehold interests, whether as lessor or lessee, all causes of action and
recoveries for any loss in value of the real estate of Debtor or items of
property described in this Agreement, rights of and to security agreements and
other contracts or assignments providing security to Debtor, book debts,
credits, indemnities, warranties or guarantees payable to Debtor upon loss or
damage of property, invention, designs, design registrations, trademarks, trade
styles, trade name, know-how, powers, privileges, logos, franchise rights,
payments in kind, advertising and promotional materials, trade secrets, patents,
patent rights, copyrights, patent applications, tax refunds, customer lists,
business and accounting records, including all ledger account cards, computer
tapes and disks and other computer information, in all cases whether now owned
or hereafter created or acquired by Debtor or in which Debtor may now have or
may after the date of this Agreement acquire an interest;
c. All proceeds and products of any of the personal property
described above, in any form, including, without limitation, proceeds of any
insurance relating to such collateral or fire and builder's risk insurance and
unrenewed insurance premiums, proceeds constituting of any of the above types of
collateral, all awards made in eminent domain proceedings or purchased in lieu
of such eminent domain proceedings, and proceeds of any tort cause of action in
existence, now or after the date of this Agreement and all replacements,
substitutions, renewals, returns, additions, accessions, rents, royalties,
issues, documents of ownership, and receipts for any of the foregoing.
The term "Collateral" is subject to all licenses previously granted by Debtor
and to all pre-existing contractual obligations of Debtor.
5. REPRESENTATIONS AND WARRANTIES. As a material inducement to Secured Party
under this Agreement, Debtor represents and warrants that the following are and
shall remain true and correct, except as specifically set forth in a schedule of
exceptions attached to this Agreement:
5.1 TITLE. Debtor is the owner of all right, title, and interest in the
Collateral free and clear of all liens, encumbrances, and security interests,
except the security interest created by this Agreement.
5.2 TRUTH. All information that Debtor has provided to Secured Party
concerning the Collateral is true and correct.
5.3 NO DEFENSES. No defenses, offsets, claims, or counterclaims exist
against Debtor that may be asserted against Secured Party in any proceeding to
enforce Secured Party's rights in the Collateral.
5.4 NO CONFLICT. The execution, delivery, and performance of this
Agreement by Debtor is not in violation of any applicable law or regulation or
contractual obligation of Debtor.
5.5 FIRST PRIORITY LIEN. The liens granted to Secured Party under this
Agreement will constitute a first priority lien on the Collateral upon the
timely filing of a UCC-1 Financing Statement, subject to the release of such
collateral by ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇.
5.6 DUE AUTHORIZATION. Debtor has been duly authorized to execute and
deliver this Agreement, which is a valid and binding obligation by Debtor.
6. COVENANTS OF DEBTOR.
6.1 PROTECTION OF SECURITY INTEREST. Contemporaneously with the
execution of this Agreement, Debtor shall properly execute and deliver to
Secured Party UCC-1 Financing Statements to enable Secured Party to perfect
Secured Party's security interest in the Collateral. Debtor agrees also to
execute, file, and record such other statements, notices, and agreements, take
such action and obtain such certificates and documents, in accordance with all
applicable laws, statutes, and regulations as may be necessary or advisable to
perfect, evidence, and continue Secured Party's security interest in the
Collateral.
6.2 TRANSACTIONS INVOLVING COLLATERAL. Debtor shall not, without the
prior written consent of Secured Party, (a) sell, offer to sell, or otherwise
transfer the Collateral except in the ordinary course of business, or to pledge,
mortgage, encumber, or otherwise permit the Collateral to be subject to any
lien, security interest, or charge, other than the security interest created by
this Agreement.
6.3 COMPLIANCE WITH LAWS. Debtor shall comply with all laws, statutes,
and regulations pertaining to the Collateral.
6.4 TAXES, ASSESSMENTS, AND LIENS. Debtor shall pay when due all taxes,
assessments, and liens with regard to the Collateral.
7. AUTHORIZED ACTION BY SECURED PARTY. Debtor irrevocably appoints Secured Party
as Debtor's attorney in fact to do any act that Debtor is obligated to do
pursuant to this Agreement to preserve or protect the Collateral and to
preserve, protect, or establish Secured Party's lien on the Collateral. Debtor
further irrevocably appoints Secured Party to exercise such rights and powers as
Debtor might exercise with respect to the Collateral following an Event of
Default, as defined below. These powers shall include without limitation the
right to (a) collect by legal proceedings or otherwise, and endorse, receive,
and receipt all dividends, interest, payments, proceeds, and other sums and
property now or after the date of this Agreement payable on account of the
Collateral, (b) transfer the Collateral to Secured Party's own or Secured
Party's nominee's name, and (c) make any compromise or settlement and take any
action Secured Party deems advisable with respect to the Collateral. Debtor
agrees to reimburse Secured Party on demand for any costs and expenses,
including without limitation attorney fees, which Secured Party may incur while
acting as Debtor's attorney in fact under this Agreement, all of which costs and
expenses are included in the Obligations secured by this Agreement. Secured
Party shall have no obligation to act pursuant to this paragraph and shall not
be required to make any
presentment, demand, or protest, or give any notice or take any action to
preserve any rights against any other person in connection with the
Collateral.
8. DEFAULTS AND REMEDIES.
8.1 EVENT OF DEFAULT. Any of the following events or conditions shall
constitute an Event of Default by Debtor under this Agreement:
a. Default in payment of the obligations in accordance with
the terms of the Note;
b. Default in the performance of any Obligations or breach of
any agreement, representation, or warranty contained in this Agreement;
c. Any levy or proceeding against the Collateral or Debtor's
interest in the Collateral, except if Debtor is conducting appropriate
proceedings in good faith to contest the levy or proceeding; or
d. The filing of a petition by or against Debtor under the
provisions of the Bankruptcy Code.
8.2 REMEDIES. Upon the occurrence of an Event of Default, Secured
Party:
a. Shall have and may exercise the right to sell or
otherwise dispose of all or a portion of the Collateral, and to apply the
proceeds of such sale or disposition in the order following to (i) the expenses
of selling or otherwise disposing of the Collateral and the reasonable
attorneys' fees and legal expenses incurred by the Secured Party; and (ii) the
satisfaction of the Obligations.
b. Shall have and may exercise all other rights and
remedies accorded to Secured Party by the Nevada Revised Statutes;
c. May declare all unperformed Obligations, in whole
or in party, of Debtor immediately due and payable without demand or notice; and
d. May require Debtor to take any and all action
necessary to make the Collateral available to Secured Party.
8.3 REMEDIES CUMULATIVE. All of Secured Party's rights and remedies,
whether evidenced by this Agreement or by any other writing, shall be cumulative
and may be exercised singularly or concurrently. Election by Secured Party to
pursue any remedy shall not exclude pursuit of any other remedy.
9. WAIVER OF HEARING. Debtor expressly waives any constitutional or other right
to a judicial hearing prior to the time Secured Party takes possession or
disposes of the Collateral upon an Event of Default as provided in Paragraph 8
above.
10. ESCROW. The parties may convey all or a portion of the Collateral to an
escrow officer mutually agreed-upon by the parties (the "Escrow Officer")
pursuant to mutually agreeable escrow instructions that require the Escrow
Officer to sell the portion of the Collateral conveyed into escrow and to use
the proceeds of such sale(s) to satisfy the Obligations.
11. ADDITIONAL DOCUMENTATION; COOPERATION. Each party shall, upon the request of
the other, execute, acknowledge, and deliver to the other any instrument that
may be required to accomplish the intent of this Agreement. Each party agrees to
cooperate to effectuate the intent of this Agreement and shall take all
appropriate action necessary or useful in doing so.
12. NONRESPONSIBILITY OF SECURED PARTY. Secured Party is not responsible for the
preservation or exercise of any rights to, or granted by, any Collateral and is
not responsible for insuring any such Collateral or for the wear, destruction
(partial or total), or depreciation of Collateral in its possession.
13. MISCELLANEOUS.
13.1 NOTICES. All notices, requests, consents and other communications
which are required or permitted hereunder shall be in writing and shall be
delivered personally, sent by facsimile transmission, or mailed by certified or
registered mail, postage prepaid, return-receipt requested (in which case it
shall be deemed given three (3) business days after mailing) to the addresses
listed in the preamble of this Agreement.
13.2 ENTIRE AGREEMENT. This Agreement, together with the Note contains
the entire understanding of the parties in respect of its subject matter and
supersedes all prior agreements and understandings (oral or written) between or
among the parties with respect to such subject matter.
13.3 ASSIGNMENT. The rights and obligations of this Agreement shall
bind and inure to the benefit of the parties and their respective successors and
assigns.
13.4 COUNTERPARTS; FACSIMILE. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument. Executed copies of this
Agreement of this Agreement may be delivered by facsimile, and delivery of
executed facsimile copies to the parties and their counsel shall be deemed to be
a delivery of a duplicate original and sufficient delivery to result in entry to
this Agreement by the transmitting party.
13.5 GOVERNING LAW, JURISDICTION AND WAIVER OF VENUE. This Agreement
shall be governed by and construed in accordance with the laws of the State of
Nevada regardless of the fact that any of the parties hereto may be or may
become a resident of a different country, state, or jurisdiction. Any suit,
action, or proceeding arising out of, or with respect to, this Agreement shall
be filed in a court of competent jurisdiction within the County of Washoe, State
of Nevada or in the U.S. District Court for the District of Nevada, Northern
Division. The parties hereby consent to the personal jurisdiction of such courts
within the County of Washoe, State of Nevada and the U.S. District Court for the
District of Nevada, Northern Division. The parties hereby waive any objections
to venue in such courts with Washoe County, State of Nevada and the U.S.
District Court for the District of Nevada, Northern Division.
13.6 ATTORNEYS' FEES. If any action at law or in equity is necessary to
enforce or interpret the terms of this Agreement, the prevailing party shall be
entitled to receive from the other its reasonable attorneys' fees, costs, and
necessary disbursements in addition to any other relief to which such party may
be entitled.
13.7 SEVERABILITY. In case any provision of this Agreement shall, for
any reason, be held to be invalid, unenforceable, or illegal, such provision
shall be severed from this Agreement, and such invalidity, unenforceable or
illegality shall not affect any other provisions of this Agreement.
13.8 WAIVER. Secured Party shall not be deemed to have waived any
rights under this Agreement unless such waiver is in writing and signed by
secured Party. No delay or omission on the part of Secured Party in exercising
any right shall operate as a waiver of such right or any other right.
IN WITNESS WHEREOF, the parties hereto have caused this Security
Agreement to be duly executed and delivered as of the day and year first above
written.
SECURED PARTY
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Trustee
▇▇▇▇▇▇▇▇▇▇▇.▇▇▇, INCORPORATED, a
Nevada corporation
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Chief Financial Officer