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EXHIBIT 10.18
NationsBank of Texas, N.A.
Date: March 12, 1997
SECURITY AGREEMENT
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BANK/SECURED PARTY: DEBTOR(S)/PLEDGOR(S):
NationsBank of Texas, N.A. Strategic Data Systems, Inc.
Fort Worth Banking Center ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇. ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
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Debtor/Pledgor is: [ ] Individual [X] Corporation [ ] Partnership [ ] Other _______________
Address is Debtor's/Pledgor's: [ ] Residence [X] Place of Business [ ] Chief Executive Office if more
than one place of business
Collateral (hereinafter defined) is located at: [X] Debtor's/Pledgor's address shown above [ ] the
following address:
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[THIS SECURITY AGREEMENT ("AGREEMENT") CONTAINS SOME PROVISIONS PRECEDED BY
BOXES. IF A BOX IS MARKED, THE PROVISION APPLIES TO THIS TRANSACTION. IF IT IS
NOT MARKED, THE PROVISION DOES NOT APPLY TO THIS TRANSACTION.]
1. SECURITY INTEREST. For good and valuable consideration,
the receipt and adequacy of which are hereby acknowledged, Debtor/Pledgor
(hereinafter referred to as "Debtor") assigns and grants to Bank/Secured Party
(also known as "Bank" or "Secured Party"), a security interest and lien in the
Collateral (hereinafter defined) to secure the payment and the performance of
the Obligation (hereinafter defined).
2. COLLATERAL. A security interest is granted in the following
collateral described in this Item 2 (the "Collateral"):
A. TYPES OF COLLATERAL (check as applicable)
(1) ACCOUNTS: Any and all accounts and other
rights of Debtor to the payment for goods sold or leased or for services
rendered whether or not earned by performance, including, without limitation,
contract rights, book debts, checks, notes, drafts, instruments, chattel paper,
acceptances, and any and all amounts due to Debtor from a factor or other forms
of obligations and receivables, now existing or hereafter arising.
(2) EQUIPMENT: Any and all of Debtor's goods held
as equipment, as defined in the Uniform Commercial Code, including, but not
limited to, machinery, furniture, fixtures, manufacturing equipment, shop
equipment, office equipment, parts and tools, wherever located, whether now
owned or
SECURITY AGREEMENT - Page 1
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hereafter acquired, together with all increases, parts, accessories, equipment,
and special tools now or hereafter affixed to any part thereof or used in
connection therewith.
(3) INSTRUMENTS AND/OR INVESTMENT DOCUMENTS: Any
and all of Debtor's instruments, documents, and other writings of any type,
which evidence a right to the payment of money and which are of a type that is
transferred in the ordinary course of business by delivery with any necessary
endorsement or assignment, whether now owned or hereafter acquired, including,
without limitation, all contract rights specified in Section 2 B. below,
negotiable instruments, promissory notes, and documents of title owned or to be
owned by Debtor, certificates of deposit, and all liens, security agreements,
leases and other contracts securing or otherwise relating to any of said
instruments or documents.
(4) GENERAL INTANGIBLES: Any and all of Debtor's
general intangible property, whether now owned or hereafter acquired by Debtor
or used in Debtor's business currently or hereafter, including, without
limitation, all patents, trademarks, service marks, trade secrets, copyrights
and exclusive licenses (whether issued or pending) literary rights, contract
rights and all documents, applications, materials and other matters related
thereto, all inventions, all manufacturing, engineering and production plans,
drawings, specifications, processes and systems, all trade names, goodwill and
all chattel paper, documents and instruments relating to such general
intangibles.
(5) INVENTORY. Any and all of Debtor's goods held
as inventory, whether now owned or hereafter acquired, including, without
limitation, any and all such goods held for sale or lease or being processed
for sale or lease in Debtor's business, as now or hereafter conducted,
including all materials, goods, and work in process, finished goods and other
tangible property held for sale or lease or furnished or to be furnished under
contracts of service or used or consumed in Debtor's business, along with all
documents (including documents of title) covering such inventory.
B. CLAIMS AND ADMINISTRATIVE SERVICE AGREEMENTS. All
contracts providing claims functions and administrative functions to third
parties, and all the rights, but none of the obligations of Debtor under, all
such contracts; all securities and other property, rights or interests of any
description at any time issued or issuable with respect to Debtor's interests
in such contracts; and any and all proceeds, revenues, monies, income and
benefits arising from or by virtue of, and all distributions (cash or
otherwise) payable and/or distributable with respect to, all or any interest of
Debtor in such contracts.
C. SUBSTITUTIONS, PROCEEDS AND RELATED ITEMS. Any and
all substitutes and replacements for, accessions, attachments and other
additions to, tools, parts and equipment now or hereafter added to or used in
connection with, and all cash or non-cash proceeds and products of, the
Collateral (including, without limitation, all income, benefits and property
receivable, received or distributed which results from any of the Collateral,
such as dividends payable or distributable in cash, property or stock;
insurance distributions of any kind related to the Collateral, including,
without limitation, returned premiums, interest, premium and principal
payments; redemption proceeds and subscription rights; and shares or other
proceeds of conversions or splits of any securities in the Collateral); any and
all choses in action and causes of action of Debtor, whether now existing or
hereafter arising, relating directly or indirectly to the Collateral (whether
arising in contract, tort or otherwise and whether or not currently in
litigation); all certificates of title, manufacturer's statements of origin,
other documents, accounts and chattel paper, whether now existing or hereafter
arising directly or indirectly from or related to the Collateral; all
warranties, wrapping, packaging, advertising and shipping materials used or to
be used in
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connection with or related to the Collateral; all of Debtor's books, records,
data, plans, manuals, computer software, computer tapes, computer systems,
computer disks, computer programs, source codes and object codes containing any
information, pertaining directly or indirectly to the Collateral and all rights
of Debtor to retrieve data and other information pertaining directly or
indirectly to the Collateral from third parties, whether now existing or
hereafter arising; and all returned, refused, stopped in transit, or
repossessed Collateral, any of which, if received by Debtor, upon request shall
be delivered immediately to Bank.
D. BALANCES AND OTHER PROPERTY. The balance of every
deposit account of Debtor maintained with Bank and any other claim of Debtor
against Bank, now or hereafter existing, liquidated or unliquidated, and all
money, instruments, securities, documents, chattel paper, credits, claims,
demands, income, and any other property, rights and interests of Debtor which
at any time shall come into the possession or custody or under the control of
Bank or any of its agents or affiliates for any purpose, and the proceeds of
any thereof. Bank shall be deemed to have possession of any of the Collateral
in transit to or set apart for it or any of its agents or affiliates.
E. EXCLUSIONS. Notwithstanding the foregoing, the assets
described on Schedule II attached hereto shall not constitute Collateral
hereunder.
3. DESCRIPTION OF OBLIGATION(S). The following obligations
("Obligation" or "Obligations") are secured by this Agreement: (a) All debts,
obligations, liabilities and agreements of Debtor to Bank, now or hereafter
existing, arising under the Loan Documents, including, without limitation, all
of the "Obligations" as defined in the Loan Agreement referred to in Section 8
C. hereof; (b) All reasonable out-of-pocket costs incurred by Bank to obtain,
preserve, perfect and enforce this Agreement and maintain, preserve, collect
and realize upon the Collateral; (c) All debt, obligations and liabilities of
MiliRisk, Inc. ("Borrower") to Bank of the kinds described in this Item 3., now
existing or hereafter arising; and (d) All other costs and attorney's fees
incurred by Bank, for which Debtor is obligated to reimburse Bank in accordance
with the terms of the Loan Documents (hereinafter defined), together with
interest at Bank's Prime Rate. If Debtor is not the obligor of the Obligation,
and in the event any amount paid to Bank on any Obligation is subsequently
recovered from Bank in or as a result of any bankruptcy, insolvency or
fraudulent conveyance proceeding, Debtor shall be liable to Bank for the
amounts so recovered up to the fair market value of the Collateral whether or
not the Collateral has been released or the security interest terminated. In
the event the Collateral has been released or the security interest terminated,
the fair market value of the Collateral shall be determined, at Bank's option,
as of the date the Collateral was released, the security interest terminated,
or said amounts were recovered.
4. DEBTOR'S WARRANTIES. Debtor hereby represents and warrants to
Bank as follows:
A. FINANCING STATEMENTS. Except as noted on Schedule I
attached hereto and incorporated herein by reference, no financing statement
covering the Collateral is or will be on file in any public office, except the
financing statements relating to this security interest, and no security
interest, other than the one herein created, has attached or been perfected in
the Collateral or any part thereof.
B. OWNERSHIP. Debtor owns, or will use the proceeds of
any loans by Bank to become the owner of, the Collateral free from any setoff,
claim, restriction, lien, security interest or encumbrance except the security
interest hereunder, and except as set forth on Schedule I hereto.
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C. FIXTURES AND ACCESSIONS. None of the Collateral is
affixed to real estate or is an accession to any goods, or will become a
fixture or accession, except as expressly set out herein.
D. COMPLIANCE. Debtor is in compliance in all material
respects with all laws and regulatory requirements to which it is subject.
E. POWER AND AUTHORITY. Debtor has full power and
authority to make this Agreement, and all necessary consents and approvals of
any persons, entities, governmental or regulatory authorities and securities
exchanges have been obtained to effectuate the validity of this Agreement.
5. DEBTOR'S COVENANTS. Until full payment and performance of all
of the Obligation and termination or expiration of any obligation or commitment
of Bank to make advances or loans to Debtor, unless Bank otherwise consents in
writing:
A. OBLIGATION AND THIS AGREEMENT. Debtor shall perform
all of its agreements herein and in any other agreements between it and Bank.
B. OWNERSHIP AND MAINTENANCE OF THE COLLATERAL. Debtor
shall keep all tangible Collateral in good condition. Debtor shall defend the
Collateral against all claims and demands of all persons at any time claiming
any interest therein adverse to Bank, except as noted on Schedule I hereto.
Debtor shall keep the Collateral free from all liens and security interests
except the security interest hereby created, and except as noted on Schedule I
hereto.
C. INSURANCE. Debtor shall maintain insurance with
responsible insurance companies on the Collateral in such amounts and against
such risks as is customarily maintained by similar businesses similarly
situated.
D. BANK'S COSTS. Debtor shall pay all out-of-pocket
costs necessary to obtain, preserve, perfect, defend and enforce the security
interest created by this Agreement, collect the Obligation, and preserve,
defend, enforce and collect the Collateral, including but not limited to taxes,
assessments, insurance premiums, repairs, rent, storage costs and expenses of
sales, legal expenses, reasonable attorney's fees and other fees or expenses
for which Debtor is obligated to reimburse Bank in accordance with the terms of
the Loan Documents. Whether the Collateral is or is not in Bank's possession,
and without any obligation to do so and without waiving Debtor's default for
failure to make any such payment, Bank may at its option, at any time after an
Event of Default has occurred and is continuing, pay any such costs and
expenses, discharge encumbrances on the Collateral, and pay for insurance of
the Collateral, and such payments shall be a part of the Obligation and bear
interest at the rate set out in the Obligation. Debtor agrees to reimburse Bank
on demand for any costs so incurred.
E. INFORMATION AND INSPECTION. Debtor shall (i) promptly
furnish Bank any information with respect to the Collateral reasonably
requested by Bank; (ii) allow Bank or its representatives to inspect the
Collateral, at any reasonable time and wherever located, and to inspect and
copy, or furnish Bank or its representatives with copies of, all records
relating to the Collateral and the Obligation; and (iii) promptly furnish Bank
or its representatives such information as Bank may reasonably request to
identify the Collateral, at the time and in the form requested by Bank.
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F. ADDITIONAL DOCUMENTS. Debtor shall sign and deliver
any papers deemed necessary or desirable in the judgment of Bank to obtain,
maintain, and perfect the security interest hereunder and to enable Bank to
comply with any federal or state law in order to obtain or perfect Bank's
interest in the Collateral or to obtain proceeds of the Collateral.
G. PARTIES LIABLE ON THE COLLATERAL. Debtor shall
preserve the liability of all obligor on any Collateral and shall preserve the
priority of all security therefor. In the absence of gross negligence or
willful misconduct, Bank shall have no duty to preserve such liability or
security, but may do so at the expense of Debtor, without waiving Debtor's
default.
H. RECORDS OF THE COLLATERAL. Debtor at all times shall
maintain accurate books and records covering the Collateral. Bank is hereby
given the right to audit the books and records of Debtor relating to the
Collateral at any reasonable time and from time to time. The amounts shown as
owed to Debtor on Debtor's books and on any assignment schedule will be the
undisputed amounts owing and unpaid.
I. DISPOSITION OF THE COLLATERAL. No Collateral may be
sold, leased, manufactured, processed or otherwise disposed of by Debtor in any
manner without the prior written consent of Bank, except the Collateral sold,
leased, manufactured, processed or consumed in the ordinary course of business.
J. ACCOUNTS. Each account held as Collateral will
represent the valid and legally enforceable obligation of third parties and
shall not be evidenced by any instrument or chattel paper.
K. NOTICE/LOCATION OF THE COLLATERAL. Debtor shall give
Bank written notice of each office of Debtor in which records of Debtor
pertaining to accounts held as Collateral are kept, and each location at which
the Collateral is or will be kept, and of any change of any such location. If
no such notice is given, all records of Debtor pertaining to the Collateral and
all Collateral of Debtor are and shall be kept at the address marked by Debtor
above.
L. CHANGE OF NAME/STATUS AND NOTICE OF CHANGES. Without
the written consent of Bank, Debtor shall not change its name, change its
corporate status, or engage in any business not reasonably related to its
business as presently conducted. Debtor shall notify Bank immediately of (i)
any material change in the Collateral, (ii) a change in Debtor's residence or
location, (iii) a material change in any matter warranted or represented by
Debtor in this Agreement, or in any of the Loan Documents or furnished to Bank
pursuant to this Agreement, and (iv) the occurrence of an Event of Default
(hereinafter defined).
M. USE AND REMOVAL OF THE COLLATERAL. Debtor shall not
use the Collateral illegally. Debtor shall not, unless previously indicated as
a fixture, permit the Collateral to be affixed to real or personal property
without the prior written consent of Bank. Debtor shall not permit any of the
Collateral to be removed from the locations specified herein without the prior
written consent of Bank, except for the sale of inventory in the ordinary
course of business.
N. POSSESSION OF THE COLLATERAL. Debtor shall deliver
all investment securities and other instruments, documents and chattel paper
which are part of the Collateral and in Debtor's possession to Bank
immediately, or if hereafter acquired, immediately following acquisition,
appropriately indorsed to
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Bank's order, or with appropriate, duly executed powers. Debtor waives
presentment, notice of acceleration, demand, notice of dishonor, protest, and
all other notices with respect thereto.
0. CONSUMER CREDIT. If any Collateral or proceeds
includes obligations of third parties to Debtor, the transactions giving rise
to the Collateral shall conform in all respects to the applicable state or
federal law including but not limited to consumer credit law. Debtor shall hold
harmless and indemnify Bank against any cost, loss or expense arising from
Debtor's breach of this covenant.
P. POWER OF ATTORNEY. Debtor appoints Bank and any
officer thereof as Debtor's attorney-in-fact with full power in Debtor's name
and behalf to do every act which Debtor is obligated to do or may be required
to do hereunder; however, nothing in this paragraph shall be construed to
obligate Bank to take any action hereunder nor shall Bank be liable to Debtor
for failure to take any action hereunder (except for Bank's gross negligence or
willful misconduct). This appointment shall be deemed a power coupled with an
interest and shall not be terminable as long as the Obligation is outstanding
and shall not terminate on the disability or incompetence of Debtor. Bank
agrees that the power of attorney herein granted shall be exercised by it only
after an Event of Default has occurred and is continuing.
Q. WAIVERS BY DEBTOR. Debtor waives notice of the
creation, advance, increase, existence, extension or renewal of, and of any
indulgence with respect to, the Obligation; waives presentment, demand, notice
of dishonor, and protest; waives notice of the amount of the Obligation
outstanding at any time, notice of any change in financial condition of any
person liable for the Obligation or any part thereof, notice of any Event of
Default, and all other notices respecting the Obligation; and agrees that
maturity of the Obligation and any part thereof may be accelerated, extended or
renewed one or more times by Bank in its discretion, without notice to Debtor.
Debtor waives any right to require that any action be brought against any other
person or to require that resort be had to any other security or to any balance
of any deposit account. Debtor further waives any right of subrogation or to
enforce any right of action against any other Debtor until the Obligation is
paid in full.
R. OTHER PARTIES AND OTHER COLLATERAL. No renewal or
extension of or any other indulgence with respect to the Obligation or any part
thereof, no release of any security, no release of any person (including any
maker, indorser, guarantor or surety) liable on the Obligation, no delay in
enforcement of payment, and no delay or omission or lack of diligence or care
in exercising any right or power with respect to the Obligation or any security
therefor or guaranty thereof or under this Agreement shall in any manner impair
or affect the rights of Bank under the law, hereunder, or under any other
agreement pertaining to the Collateral. Bank need not file suit or assert a
claim for personal judgment against any person for any part of the Obligation
or seek to realize upon any other security for the Obligation, before
foreclosing or otherwise realizing upon the Collateral. Debtor waives any right
to the benefit of or to require or control application of any other security or
proceeds thereof, and agrees that ]Bank shall have no duty or obligation to
Debtor to apply to the Obligation any such other security or Proceeds thereof.
S. COLLECTION AND SEGREGATION OF ACCOUNTS AND RIGHT TO
NOTIFY. Bank hereby authorizes Debtor to collect the Collateral, subject to the
direction and control of Bank, but Bank may, without cause or notice, curtail
or terminate said authority at any time after an Event of Default has occurred
and is continuing. Upon notice by Bank, whether oral or in writing, to Debtor
given during the continuation of an Event of Default, Debtor shall forthwith
upon receipt of all checks, drafts, cash, and
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other remittances in payment of or on account of the Collateral, deposit the
same in one or more special accounts maintained with Bank over which Bank alone
shall have the power of withdrawal. The remittance of the proceeds of such
Collateral shall not, however, constitute payment or liquidation of such
Collateral until Bank shall receive good funds for such proceeds. Funds placed
in such special accounts shall be held by Bank as security for all Obligations
secured hereunder. These proceeds shall be deposited in precisely the form
received, except for the endorsement of Debtor where necessary to permit
collection of items, which endorsement Debtor agrees to make, and which
endorsement Bank is also hereby authorized, as attorney-in-fact, to make on
behalf of Debtor. In the event Bank has notified Debtor to make deposits to a
special account, pending such deposit, Debtor agrees that it will not commingle
any such checks, drafts, cash or other remittances with any funds or other
property of Debtor, but will hold them separate and apart therefrom, and upon
an express trust for Bank until deposit thereof is made in the special account.
Bank will, from time to time, apply the whole or any part of the Collateral
funds on deposit in this special account against such Obligations as are
secured hereby as Bank may in its sole discretion elect. At the sole election
of Bank, any portion of- said funds on deposit in the special account which
Bank shall elect not to apply to the Obligations, may be paid over by Bank to
Debtor. At any time after an Event of Default has occurred and is continuing,
Bank may notify persons obligated on any Collateral to make payments directly
to Bank and Bank may take control of all proceeds of any Collateral. Until Bank
elects to exercise such rights, Debtor, as agent of Bank, shall collect and
enforce all payments owed on the Collateral.
T. COMPLIANCE WITH STATE AND FEDERAL LAWS. Debtor shall
maintain its existence, good standing and qualification to do business where
required and comply with all laws, regulations and governmental requirements,
including, without limitation, environmental laws applicable to it or to any of
its property, business operations and transactions, except where failure to do
so would not be reasonably expected to have a material adverse effect on
Debtor.
6. RIGHTS AND POWERS OF BANK.
A. GENERAL. Bank, without liability to Debtor (except
for acts or omissions constituting gross negligence or willful misconduct) may,
at any time after an Event of Default has occurred and is continuing: obtain
from any person information regarding Debtor or Debtor's business, which
information any such person also may furnish without liability to Debtor;
require Debtor to give possession or control of any Collateral to Bank; indorse
as Debtor's agent any instruments, documents or chattel paper in the Collateral
or representing proceeds of the Collateral; contact account debtors directly to
verify information furnished by Debtor; take control of proceeds, including
stock received as dividends or by reason of stock splits; release the
Collateral in its possession to any Debtor, temporarily or otherwise; require
additional Collateral; reject as unsatisfactory any property hereafter offered
by Debtor as Collateral; set standards from time to time to govern what may be
used as after acquired Collateral; designate, from time to time, a certain
percent of the Collateral as the loan value and require Debtor to maintain the
Obligation at or below such figure; take control of funds generated by the
Collateral, such as cash dividends, interest and proceeds or refunds from
insurance, and use same to reduce any part of the Obligation and exercise all
other rights which an owner of such Collateral may exercise; at any time
transfer any of the Collateral or evidence thereof into its own name or that of
its nominee; and demand, collect, convert, redeem, receipt for, settle,
compromise, adjust, ▇▇▇ for, foreclose or realize upon the Collateral, in its
own name or in the name of Debtor, as Bank may determine. Bank shall not be
liable for failure to collect any account or instruments, or for any act or
omission on the part of Bank, its officers, agents or employees, except for its
or their own willful misconduct or gross negligence. The foregoing rights and
powers of Bank will be in addition to,
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and not a limitation upon, any rights and powers of Bank given by law,
elsewhere in this Agreement, or otherwise. If Debtor fails to maintain any
required insurance after notice thereof from Bank, to the extent permitted by
applicable law Bank may (but is not obligated to) purchase single interest
insurance coverage for the Collateral which insurance may at Bank's option (i)
protect only Bank and not provide any remuneration or protection for Debtor
directly and (ii) provide coverage only after the Obligation has been declared
due as herein provided. The premiums for any such insurance purchased by Bank
shall be a part of the Obligation and shall bear interest as provided in 3(d)
hereof.
B. CONVERTIBLE COLLATERAL. Bank may present for
conversion any Collateral which is convertible into any other instrument or
investment security or a combination thereof with cash, but Bank shall not in
the absence of gross negligence or willful misconduct have any duty to present
for conversion any Collateral unless it shall have received from Debtor
detailed written instructions to that effect at a time reasonably far in
advance of the final conversion date to make such conversion possible.
7. DEFAULT.
A. EVENT OF DEFAULT. "Event of Default" as used herein
means an "Event of Default" as defined in the Loan Agreement described in
Section 8 C. hereof.
B. RIGHTS AND REMEDIES. If any Event of Default shall
occur and be continuing, then, in each and every such case, Bank may, without
presentment, demand, or protest; notice of default, dishonor, demand,
non-payment, or protest; notice of intent to accelerate all or any part of the
Obligation; notice of acceleration of all or any part of the Obligation; or
notice of any other kind, all of which Debtor hereby expressly waives, (except
for any notice required under this Agreement, any other Loan Document or
applicable law); at any time thereafter exercise and/or enforce any of the
following rights and remedies at Bank's option:
(1) ACCELERATION. The Obligation shall, at Bank's
option, become immediately due and payable, and the obligation, if any, of Bank
to permit further borrowings under the Obligation shall at Bank's option
immediately cease and terminate.
(2) POSSESSION AND COLLECTION OF THE COLLATERAL.
At its option: (a) take possession or control of, store, lease, operate,
manage, sell, or instruct any Agent or Broker to sell or otherwise dispose of,
all or any part of the Collateral; (b) notify all parties under any account or
contract right forming all or any part of the Collateral to make any payments
otherwise due to Debtor directly to Bank; (c) in Bank's own name, or in the
name of Debtor, demand, collect, receive, ▇▇▇ for, and give receipts and
releases for, any and all amounts due under such accounts and contract rights;
(d) indorse as the agent of Debtor any check, note, chattel paper, documents,
or instruments forming all or any part of the Collateral; (e) make formal
application for transfer to Bank (or to any assignee of Bank or to any
purchaser of any of the Collateral) of all of Debtor's permits, licenses,
approvals, agreements, and the like relating to the Collateral or to Debtor's
business; (f) take any other action which Bank deems necessary or desirable to
protect and realize upon its security interest in the Collateral; and (g) in
addition to the foregoing, and not in substitution therefor, exercise any one
or more of the rights and remedies exercisable by Bank under any other
provision of this Agreement, under any of the other Loan Documents, or as
provided by applicable law (including, without limitation, the Uniform
Commercial Code as in effect in Texas (hereinafter referred to as the "UCC")).
In taking possession of the Collateral Bank may enter
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Debtor's premises and otherwise proceed without legal process, if this can be
done without breach of the peace. Debtor shall, upon Bank's demand, promptly
make the Collateral or other security available to Bank at a place designated
by Bank, which place shall be reasonably convenient to both parties.
Bank shall not be liable for, nor be prejudiced by, any loss, depreciation or
other damages to the Collateral, unless caused by Bank's willful or grossly
negligent omission or act. In the absence of gross negligence or willful
misconduct, Bank shall have no duty to take any action to preserve or collect
the Collateral.
(3) RECEIVER. Obtain the appointment of a
receiver for all or any of the Collateral, Debtor hereby consenting to the
appointment of such a receiver and agreeing not to oppose any such appointment.
(4) RIGHT OF SET OFF. Without notice or demand to
Debtor, set off and apply against any and all of the Obligation any and all
deposits (general or special, time or demand, provisional or final) and any
other indebtedness, at any time held or owing by Bank or any of Bank's agents
or affiliates to or for the credit of the account of Debtor or any guarantor or
indorser of Debtor's Obligation.
During the existence of any Event of Default, Bank shall be entitled to
immediate possession of all books and records evidencing any Collateral or
pertaining to chattel paper covered by this Agreement and it or its
representatives shall have the authority to enter upon any premises upon which
any of the same, or any Collateral, may be situated and remove the same
therefrom without liability if such can be accomplished without breach of the
peace. During the existence of any Event of Default, Bank may surrender any
insurance policies in the Collateral and receive the unearned premium thereon.
Debtor shall be entitled to any surplus and shall be liable to Bank for any
deficiency. During the existence of any Event of Default, the proceeds of any
disposition available to satisfy the Obligation shall be applied to the
Obligation in such order and in such manner as Bank in its discretion shall
decide.
Debtor specifically understands and agrees that any sale by Bank of all or part
of the Collateral pursuant to the terms of this Agreement may be effected by
Bank at times and in manners which could result in the proceeds of such sale as
being significantly and materially less than might have been received if such
sale had occurred at different times or in different manners, and Debtor hereby
releases Bank and its officers and representatives from and against any and all
obligations and liabilities arising out of or related to the timing or manner
of any such sale other than acts or omissions constituting gross negligence or
willful misconduct.
If, in the opinion of Bank, there is any question that a public sale or
distribution of any Collateral will violate any state or federal securities
law, Bank may offer and sell such Collateral in a transaction exempt from
registration under federal securities law, and any such sale made in good faith
by Bank shall be deemed "commercially reasonable".
8. GENERAL.
A. PARTIES BOUND. Bank's rights hereunder shall inure to
the benefit of its successors and assigns. In the event of any assignment or
transfer by Bank of any of the Obligation or the Collateral, Bank thereafter
shall be fully discharged from any responsibility with respect to the
Collateral so assigned
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or transferred, but Bank shall retain all rights and powers hereby given with
respect to any of the Obligation or the Collateral not so assigned or
transferred. All representations, warranties and agreements of Debtor if more
than one are joint and several and all shall be binding upon the personal
representatives, heirs, successors and assigns of Debtor.
B. WAIVER. No delay of Bank in exercising any power or
right shall operate as a waiver thereof; nor shall any single or partial
exercise of any power or right preclude other or further exercise thereof or
the exercise of any other power or right. No waiver by Bank of any right
hereunder or of any default by Debtor shall be binding upon Bank unless in
writing, and no failure by Bank to exercise any power or right hereunder or
waiver of any default by Debtor shall operate as a waiver of any other or
further exercise of such right or power or of any further default. Each right,
power and remedy of Bank as provided for herein or in any of the Loan
Documents, or which shall now or hereafter exist at law or in equity or by
statute or otherwise, shall be cumulative and concurrent and shall be in
addition to every other such right, power or remedy. The exercise or beginning
of the exercise by Bank of any one or more of such rights, powers or remedies
shall not preclude the simultaneous or later exercise by Bank of any or all
other such rights, powers or remedies.
C. DEFINITIONS. Terms defined in that certain Loan
Agreement between Bank and Borrower dated as of March 12, 1997 (such Agreement,
as amended from time to time the "Loan Agreement"), are used herein as so
defined unless otherwise defined herein. Unless the context indicates
otherwise, definitions in the UCC apply to words and phrases in this Agreement;
if UCC definitions conflict, Article 9 definitions apply.
D. NOTICES. Notice shall be deemed reasonable if mailed
postage prepaid at least five (5) days before the related action (or if the UCC
elsewhere specifies a longer period, such longer period) to the address of
Debtor given above, or to such other address as any party may designate by
written notice to the other party. Each notice, request and demand shall be
deemed given or made, if sent by mail, upon the earlier of the date of receipt
or five (5) days after deposit in the U.S. Mail, first class postage prepaid,
or if sent by any other means, upon delivery.
E. MODIFICATIONS. No provision hereof shall be modified
or limited except by a written agreement expressly referring hereto and to the
provisions so modified or limited and signed by Debtor and Bank. The provisions
of the Agreement shall not be modified or limited by course of conduct or usage
of trade.
F. APPLICABLE LAW AND PARTIAL INVALIDITY. This Agreement
has been delivered in the State of Texas and shall be construed in accordance
with the laws of that State. Wherever possible each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by
or invalid under applicable law, such provision shall be ineffective to the
extent of such prohibition or invalidity, without invalidating the remainder of
such provisions or the remaining provisions of this Agreement. The invalidity
or unenforceability of any provision of any Loan Document to any person or
circumstance shall not affect the enforceability or validity of such provision
as it may apply to other persons or circumstances.
SECURITY AGREEMENT - Page 10
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G. FINANCING STATEMENT. To the extent permitted by
applicable law, a carbon, photographic or other reproduction of this Agreement
or any financing statement covering the Collateral shall be sufficient as a
financing statement.
H. ARBITRATION. ANY CONTROVERSY OR CLAIM BETWEEN OR
AMONG THE PARTIES HERETO INCLUDING BUT NOT LIMITED TO THOSE ARISING OUT OF OR
RELATING TO THIS INSTRUMENT, AGREEMENT OR DOCUMENT OR ANY RELATED INSTRUMENTS,
AGREEMENTS OR DOCUMENTS, INCLUDING ANY CLAIM BASED ON OR ARISING FROM AN
ALLEGED TORT, SHALL BE DETERMINED BY BINDING ARBITRATION IN ACCORDANCE WITH THE
FEDERAL ARBITRATION ACT (OR IF NOT APPLICABLE, THE APPLICABLE STATE LAW), THE
RULES OF PRACTICE AND PROCEDURE FOR THE ARBITRATION OF COMMERCIAL DISPUTES OF
J.A.M.S./ENDISPUTE OR ANY SUCCESSOR THEREOF ("J.A.M.S."), AND THE "SPECIAL
RULES" SET FORTH BELOW. IN THE EVENT OF ANY INCONSISTENCY, THE SPECIAL RULES
SHALL CONTROL. JUDGMENT UPON ANY ARBITRATION AWARD MAY BE ENTERED IN ANY COURT
HAVING JURISDICTION. ANY PARTY TO THIS INSTRUMENT, AGREEMENT OR DOCUMENT MAY
BRING AN ACTION, INCLUDING A SUMMARY OR EXPEDITED PROCEEDING, TO COMPEL
ARBITRATION OF ANY CONTROVERSY OR CLAIM TO WHICH THIS AGREEMENT APPLIES IN ANY
COURT HAVING JURISDICTION OVER SUCH ACTION.
(1) SPECIAL RULES. THE ARBITRATION SHALL BE
CONDUCTED IN THE COUNTY OF ANY BORROWER'S DOMICILE AT THE TIME OF THE EXECUTION
OF THIS INSTRUMENT, AGREEMENT OR DOCUMENT AND ADMINISTERED BY J.A.M.S. WHO WILL
APPOINT AN ARBITRATOR; IF J.A.M.S. IS UNABLE OR LEGALLY PRECLUDED FROM
ADMINISTERING THE ARBITRATION, THEN THE AMERICAN ARBITRATION ASSOCIATION WILL
SERVE. ALL ARBITRATION HEARINGS WELL BE COMMENCED WITHIN 90 DAYS OF THE DEMAND
FOR ARBITRATION; FURTHER, THE ARBITRATOR SHALL ONLY, UPON A SHOWING OF CAUSE,
BE PERMITTED TO EXTEND THE COMMENCEMENT OF SUCH HEARING FOR UP TO AN ADDITIONAL
60 DAYS.
(2) RESERVATION OF RIGHTS. NOTHING IN THIS
ARBITRATION PROVISION SHALL BE DEEMED TO (I) LIMIT THE APPLICABILITY OF ANY
OTHERWISE APPLICABLE STATUTES OF LIMITATION OR REPOSE AND ANY WAIVERS CONTAINED
IN THIS INSTRUMENT, AGREEMENT OR DOCUMENT; OR (II) BE A WAIVER BY BANK OF THE
PROTECTION AFFORDED TO IT BY 12 U.S.C. SEC. 91 OR ANY SUBSTANTIALLY EQUIVALENT
STATE LAW; OR (III) LIMIT THE RIGHT OF BANK HERETO (A) TO EXERCISE SELF HELP
REMEDIES SUCH AS (BUT NOT LIMITED TO) SETOFF, OR (B) TO FORECLOSE AGAINST ANY
REAL OR PERSONAL PROPERTY COLLATERAL, OR (C) TO OBTAIN FROM A COURT PROVISIONAL
OR ANCILLARY REMEDIES SUCH AS (BUT NOT LIMITED TO) INJUNCTIVE RELIEF, WRIT OF
POSSESSION OR THE APPOINTMENT OF A RECEIVER. BANK MAY EXERCISE SUCH SELF HELP
RIGHTS, FORECLOSE UPON SUCH PROPERTY, OR OBTAIN SUCH PROVISIONAL OR ANCILLARY
REMEDIES BEFORE, DURING OR AFTER THE PENDENCY OF ANY ARBITRATION PROCEEDING
BROUGHT PURSUANT TO THIS INSTRUMENT, AGREEMENT OR DOCUMENT. NEITHER THIS
EXERCISE OF SELF HELP REMEDIES NOR THE INSTITUTION OR MAINTENANCE OF AN ACTION
FOR FORECLOSURE OR PROVISIONAL OR ANCILLARY REMEDIES SHALL
SECURITY AGREEMENT - Page 11
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CONSTITUTE A WAIVER OF THE RIGHT OF ANY PARTY, INCLUDING THE CLAIMANT IN ANY
SUCH ACTION, TO ARBITRATE THE MERITS OF THE CONTROVERSY OR CLAIM OCCASIONING
RESORT TO SUCH REMEDIES.
I. CONTROLLING DOCUMENT. To the extent that this
Security Agreement conflicts with or is in any way incompatible with any other
Loan Document concerning the Obligation, the Loan Agreement shall control over
any other document, and if the Loan Agreement does not address an issue, then
each Loan Document shall control to the extent that it deals most specifically
with an issue.
J. NOTICE OF FINAL AGREEMENT. THIS WRITTEN SECURITY
AGREEMENT AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN
THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS
OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES.
K. LIMITATION ON LIABILITY. The liability of Debtor with
respect to the Obligations shall not exceed the Maximum Amount (as defined
below) for Debtor. "Maximum Amount" means the greater of (a) the amount of the
economic benefit received by Debtor from the Obligations whether by loan
proceeds to purchase assets or perform contracts for Debtor or by loan proceeds
being otherwise available to Debtor through intercompany loans, advances,
capital contributions or otherwise, or (b) the highest of (i) 95% of the
Adjusted Net Worth (as defined below) of Debtor as of the date hereof, (ii) 95%
of the Adjusted Net Worth of Debtor as of the date of the commencement of a
case under Title 11 of the United States Bankruptcy Code involving Borrower or
Debtor, or (iii) 95% of the Adjusted Net Worth of Debtor as of the date
enforcement hereunder is sought; provided however, notwithstanding anything
herein to the contrary, the Maximum Amount for Debtor shall be limited to the
Maximum Amount of liability of Debtor that can be incurred without rendering
this Security Agreement voidable under applicable law relating to fraudulent
conveyances or fraudulent transfers. "Adjusted Net Worth" means the following,
all determined in accordance with applicable federal and state laws governing
determinations of the insolvency of debtors generally: (x) the aggregate fair
salable value of the assets of Debtor, minus (y) the amount of all liabilities
of Debtor (including contingent liabilities, but excluding liabilities of
Debtor under this Security Agreement, and any other Loan Documents executed by
Debtor for the benefit of Bank).
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IN WITNESS WHEREOF, the parties hereto have caused this Security Agreement to
be duly executed by their duly authorized representatives as of the date first
above written.
BANK/SECURED PARTY: CORPORATE OR PARTNERSHIP DEBTOR/PLEDGOR
NATIONSBANK OF TEXAS, N.A. STRATEGIC DATA SYSTEMS, INC.
a Wisconsin corporation
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇ By: /s/ F. ▇▇▇▇▇▇ ▇▇▇▇▇▇, III
-------------------------------- --------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇ F. ▇▇▇▇▇▇ ▇▇▇▇▇▇, III, Chairman of the Board
Vice President
By: /s/ ▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------
▇▇▇ ▇. ▇▇▇▇▇▇, Secretary
SECURITY AGREEMENT - Page 13