SECURITY AGREEMENT - INVENTORY
1. PARTIES. The parties to this agreement are NATIONSCREDIT COMMERCIAL
CORPORATION OF AMERICA ("NCC") and the undersigned (jointly and severally
if more than one) (collectively, "CUSTOMER").
2. ADVANCES. At Customer's request, NCC, AT ITS OPTION, will advance funds
for Customer's purchase of inventory (Customer's inventory hereinafter
"INVENTORY") or other purposes satisfactory to NCC. NCC will send Customer
a schedule or schedules showing the inventory on which advances have been
made and the amounts of the advances. If Customer does not agree with any
schedule, it must immediately notify NCC in writing of the objections.
Customer's failures to notify NCC of objections within seven days following
receipt of a schedule shall constitute acceptance thereof.
3. PAYMENT. Customer shall repay NCC in accordance with a Scheduled Payment
Plan, and as otherwise provided herein or agreed in writing by the parties.
Advances for each item of inventory will be payable 40 days (rounded to the
nearest common due date) after NCC's processing of the applicable invoice.
The schedules delivered to Customer will list the repayment terms for the
items of Inventory on which funds have been advanced. Customer agrees
that:
(a) Any past due amounts owing hereunder will bear interest at a rate
equal to the Prime Rate plus 2.0%. Interest will be calculated on a
simple interest basis for a year of 365 or 366 days, based on actual
days elapsed. "PRIME RATE" means the prime rate announced by
NationsBank, N.A. at its office in Charlotte, North Carolina and in
effect on the last business day of a calendar month, calendar month,
effective for the next month.
(b) Customer will pay NCC's finance, service and late charges according to
and upon receipt of the billing statements sent by NCC to Customer, if
any payment is due on a date that is not a business day, the due date
will be extended to the next business day. NCC, at its discretion,
may at any time and without notice to Customer apply or reapply monies
received in payment of obligations hereunder, in such order of
application as NCC may determine. Proceeds of advances will be used
solely for business or commercial purposes.
(c) In lieu of a promissory note or other instrument, NCC will maintain
records reflecting Customer's Indebtedness hereunder. Failure to make
notation of any advance, however, will not affect the obligations of
Customer. Entries in such records will be conclusive, absent manifest
error.
4. COLLATERAL. As security for all present and future obligations of Customer
to NCC, whether or not arising under this agreement, and of whatever kind,
now due or to become due, absolute or contingent, and whether joint,
several, or joint and several, Customer hereby grants to NCC to continuing
security interest in the following, whether now owned or hereafter
acquired, and wherever located (collectively, "COLLATERAL"): all
inventory, whether or not financed by NCC, all replacements and
substitutions therefor, all parts, additions and accessions thereto and all
returned and repossessed goods; all of Customer's accounts and the proceeds
and products of the foregoing. Customer expressly assigns to NCC all
present and future credits, incentives and other amounts payable by any
vendors of inventory, and the proceeds thereof. Customer authorizes each
vendor to pay these directly to NCC, Customer will sign all papers
necessary to effect and perfect the assignments and security interests
hereby granted, and will bear all costs of recordation and perfection.
5. CUSTOMER'S DUTIES. So long as any advances are outstanding or this
agreement is in effect. Customer agrees that it shall:
(a) Not sell, transfer, encumber, lease or use any item of Collateral
without NCC's prior written consent, except for the sale of Inventory
in the ordinary course of business;
(b) Keep accurate and complete records of the Collateral, and during
reasonable hours, permit NCC to inspect the Collateral and to inspect
and make copies of Customer's books and records, at Customer's
expense;
(c) Promptly report and pay all taxes and other charges against the
Collateral; maintain a perfected interest in favor of NCC in the
Collateral, subject only to liens of Bankers Trust Company, as agent,
and other liens or exceptions acceptable to NCC in its discretion; and
discharge all other liens, encumbrances, assessments, charges and
adverse claims that attach to or are asserted against any Collateral;
(d) Pay all transportation and storage charges on the Collateral, and pay
all rents and other amounts, if any, for the use of premises on which
Customer keeps any Collateral;
(e) Keep the Collateral insured for full value against all insurable risks
with NCC as the loss payee, as its interest may appear, with
endorsements satisfactory to NCC, and notify NCC in writing 10 days
before changing or canceling any such policy;
(f) If any default hereunder exists, not pay or declare any dividends or
distributions, not redeem any capital stock, not make any payment with
respect to subordinate debt, and not pay any cash dividends or make
distributions of any kind to any shareholder (but direct and indirect
wholly-owned subsidiaries of Federal Data Corporation may pay
dividends to their parent corporations);
(g) Cause any newly formed or acquired direct or indirect subsidiary of
Federal Data Corporation to guaranty Customer's obligations hereunder
in a manner satisfactory to NCC;
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(h) Deliver to NCC (i) within 30 days after the end of each month, a
balance sheet and statement of income for such month, prepared in
accordance with GAAP on a consolidated basis, (ii) within 45 days
after the end of each of the three fiscal quarters, a balance sheet
and statement of income for such quarter and for the portion of the
fiscal year then ending, prepared in accordance with GAAP on a
consolidated basis, (iii) within 80 days after the end of each fiscal
year, a balance sheet and statements of income and cash flows for such
fiscal year, prepared in accordance with GAAP on a consolidated basis,
audited by independent certified public accountants, and accompanied
by such accountants unqualified opinion, (iv) within 90 days after the
beginning of each fiscal year, financial projections and budgets for
such year, and concurrently with preparation, any updates of such
projections made during the year, and (v) such financial statements,
compliance certificates and other information relating to the
Collateral and Customer's and any guarantor's financial condition,
assets and prospects as NCC shall reasonably request from time to
time; and
(i) Comply with the financial covenants set forth in Sections 8.09, 8.10
and 8.11 of the credit agreement between Customer and Agent, as such
covenants are in effect on this date or hereafter modified with NCC's
approval; and
(j) Deliver to NCC on the last business day of each month, a calculation
of the borrowing base under Customer's credit facility with Bankers
Trust Company, as agent ("BANKERS TRUST FACILITY"), as of the last
business day of the preceding month, in form and substance
satisfactory to NCC. If at any time outstanding advances and funding
commitments to vendors under this Agreement, plus outstanding advances
and letter of credit obligations under the Bankers Trust Facility,
exceed the current borrowing base (calculated in accordance with the
formula under the Bankers Trust Facility, as in effect on the date
hereof or changed hereafter with NCC's consent). Customer will
immediately repay such excess to NCC, to the extent of the
Indebtedness owing to and commitments by NCC. Payment of such amount
will be in addition to any regularly scheduled payments hereunder.
6. DEFAULTS. Any of the following shall constitute a default hereunder:
failure by Customer to make any payment to NCC when due or to fulfill any
promise or agreement with NCC or any affiliate of NCC, whether or not
contained herein: death or dissolution of Customer, material change in
management, ownership or control of Customer; Customer causing to do
business as a good concern; assignment by Customer or any guarantor for the
benefit of creditor's; commencement of a proceeding by or against Customer
or any guarantor under any bankruptcy, insolvency, liquidation or similar
law, or for the appointment of a receiver, Customer or any guarantor
becoming insolvent or unable to pay debts as they come due; default in the
payment or performance of obligations owing to any other creditors; entry
of a judgment against Customer; issuance of an order of attachment against
Customer or any property of Customer; damage to or destruction of a
substantial part of the Collateral; any change in Customer's or any
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guarantors financial condition, assets or prospects that NCC deems adverse,
or the occurrence of any other circumstance or event as a result of which
NCC deems itself insecure; assertion by a guarantor of any obligations
hereunder that its guaranty is unenforceable, or revocation or repudiation
of any such guaranty; the occurrence of a default under any such guaranty;
or any representation or information furnished to NCC on behalf of Customer
or any guarantor proves to have been false when given.
7. REMEDIES: During a default hereunder, NCC may, at its option and without
notice, demand immediate payment of any or all obligations under this
agreement or otherwise owing by Customer, NCC, NCC shall have all the
rights and remedies available at law, in equity or by agreement, including
those of a secured party under the Uniform Commercial Code in effect in any
jurisdiction where Collateral is kept. Such rights shall include the right
to cancel any committed but unfunded advances, to enter any of Customer's
premises with or without legal process, but without breach of the peace,
and/or to take possession of and remove Collateral and books and records
relating to Collateral. At NCC's request, Customer will assemble, prepare
for removal and make available to NCC at a place designated by NCC such
items of Collateral as NCC may from time to time request. During the
continuance of a default, NCC may take control of any funds generated by
the Collateral, and in NCC's name or Customer's name, demand, collect,
receipt for, settle, compromise, xxx for, repossess, accept returns of,
foreclose or realize upon any Collateral. Customer waives any and all
rights that it may have to a notice prior to seizure by NCC of any
Collateral. Customer agrees that private sale of any item financed by NCC
at the amount owed to NCC on that item, less a reasonable restocking
charge, shall be a commercially reasonable method of disposition. Ten days
written notice of a public sale date or the date after which a private sale
may occur shall be reasonable notice. To the fullest extent permitted by
law, Customer waives relief from any appraisement, valuation,
anti-deficiency, homestead, exemption or usury laws now or hereafter in
effect. Customer shall pay all costs and expenses (including reasonable
attorneys fees) incurred by NCC in enforcing this agreement.
8. MODIFICATION. This agreement can be changed only by a writing signed by
the parties. However, the following may be proved by ordinary course of
business records of NCC: (a) descriptions of specific items constituting
Collateral, (b) amounts and terms of advances, (c) time extensions, and (d)
rates and amounts of curtailments and of finance, service and late charges.
Any provision of this agreement found to be void or prohibited by law shall
be severable and enforced to the fullest extent permitted by law, and shall
not invalidate other provisions hereof.
9. POWER OF ATTORNEY. Customer hereby irrevocably appoints NCC, including any
officer or employee of NCC, as Customer's lawful attorney-in-fact with
power of substitution to do the following acts on behalf of Customer: to
execute and deliver in the name of Customer financing statements and
amendments, lien filings, certificates of title, and other instruments
relating to Collateral: to endorse Customer's name on any checks, money
orders and other instruments payable to Customer and relating to any
Collateral; and generally to perform all acts and do all things appropriate
to discharge Customer's
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duties hereunder, including making affidavits and acknowledging instruments
as fully as if done by Customer. The foregoing powers are coupled with an
interest and are irrevocable as long as any advances are outstanding or
this agreement is in effect.
10. FAILURE TO PERFORM. If Customer fails to perform any act required
hereunder, including the payment and discharge of taxes, liens, adverse
claims and insurance premiums relating to the Collateral, NCC may (but
shall not be required to) perform such act. Amounts incurred by NCC in the
performance of any such act or in the enforcement of this agreement shall
be part of the obligations secured hereby, bear interest at the default
rate and be payable upon demand.
11. HAZARDOUS WASTE INDEMNIFICATION. Customer shall indemnify and hold
harmless NCC, its parent company, subsidiaries, affiliates, and all of
their directors, officers, employees, agents, successors, attorneys and
assigns from and against any loss, damage, cost, expense or liability
directly or indirectly arising out of or attributable to the use,
generation, manufacture, treatment, production, storage, release,
threatened release, discharge, disposal or presence or a hazardous
substance on, under or about Customer's property or operations or property
leased to Customer, including but not limited to attorneys' fees (including
the reasonable estimate of the allocated cost of in-house counsel and
staff). For these purposes, the term hazardous substances" means any
substances which is or becomes designated as "hazardous" or "toxic" under
any federal, state or local law. This indemnity shall survive repayment of
Customer's obligations to NCC.
12. DISCLAIMER OF WARRANTY; VENDOR RELATIONSHIP. CUSTOMER ACKNOWLEDGES THAT
NCC HAS MADE NO EXPRESS OR IMPLIED WARRANTIES WITH RESPECT TO ANY INVENTORY
OR OTHER COLLATERAL, INCLUDING ANY WARRANTY OF MERCHANTABILITY. CUSTOMER
IRREVOCABLY WAIVES ANY CLAIMS AGAINST NCC WITH RESPECT TO THE INVENTORY AND
OTHER COLLATERAL, WHETHER FOR BREACH OF WARRANTY OR OTHERWISE. NCC does
not assume any obligations of Customer relating to any inventory, accounts,
contractual obligations or other duties arising from the Collateral.
Customer will not delay payment of any obligations to NCC, or assert any
defense or set-off with respect to such obligations, due to a dispute
between Customer and a vendor or manufacturer of inventory and regardless
of any discount or allowance provided by a vendor or manufacturer to NCC.
Advances disbursed directly to vendors or manufacturers will be treated as
outstanding from the date on which NCC processes the applicable invoice,
regardless of any funding delay allowed by the vendor or manufacturer.
13. RATE LIMITATION. It is not the intention of any party to this agreement to
make an agreement violative of any applicable laws relating to maximum
permissible rates of interest. In no event shall Customer or any guarantor
be obligated to pay any amount in excess of the maximum amount of interest
permitted under applicable law. If NCC ever receives anything of value
deemed excess interest under applicable law, such excess will be applied to
principal or refunded to the payor.
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14. MISCELLANEOUS. Time is of the essence in the performance of Customer's
duties, but NCC's failure to insist upon strict compliance with this
agreement shall not be deemed a waiver of any rights. A waiver by NCC on
any one occasion shall not be construed as a bar to a waiver of any right
or remedy on any future occasion. All inspections by NCC are for the
benefit of NCC only, and may not be relied upon by Customer or any other
person. All rights and remedies of NCC hereunder are cumulative. Terms
are used herein as defined in the Uniform Commercial Code. A copy of this
agreement or any financing statement may be filed as a financing statement
in any appropriate jurisdiction. NCC may file, electronically or
otherwise, a replication of or substitute for any financing statement
signed by Customer, may insert or reformat information based upon the
filing jurisdiction's requirements, and may indicate that Customer's
signature is on file and authorized.
15. ASSIGNMENT. This agreement shall inure to the benefit of and be binding
upon the parties hereto, and their successors and assigns; provided,
however, that Customer must have NCC's written consent before Customer can
assign any of its rights or obligations under this agreement.
16. JOINT AND SEVERAL OBLIGATIONS. If more than one entity is party hereto as
"Customer," each agrees that its obligations are joint and several with
each other Customer, regardless of which entity requested an advance or
received proceeds thereof. NCC may demand and receive payment from any
Customer in any order, and may from time to time modify, waive or release
the obligations of any Customer hereunder, release or impair any security
for any Customer, or otherwise take or omit to take any action with respect
to any Customer, in every case without affecting the liability of any
Customer hereunder.
17. TERMINATION. Any party hereto may terminate this agreement by giving 30
days written notice to the other party(ies), but no such termination shall
alter Customer's obligations to NCC relating to amounts funded or committed
prior to the effective date of the termination, and all rights, remedies
and covenants shall extend until indefeasible payment of all amounts owing
by Customer to NCC.
18. LAW. This agreement shall be governed by the laws of the State of Georgia;
provided, however, that Section 18 shall be governed by the laws and rules
of any forum state. The state and federal courts located in Atlanta,
Georgia, including the U.S. District Court for the Northern District of
Georgia, shall have jurisdiction to determine any claim or dispute
pertaining to this agreement, and the parties expressly submit and consent
to such jurisdiction.
19. WAIVER OF JURY TRIAL. TO THE MAXIMUM EXTENT PERMITTED BY LAW, THE PARTIES
HERETO WAIVE TRIAL BY JURY IN ANY DISPUTE OR PROCEEDING RELATING TO ANY WAY
TO THIS AGREEMENT OR ANY RELATED MATTERS.
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20. ENTIRE AGREEMENT. This agreement constitutes the entire agreement between
the parties, and supersedes all prior agreements and understandings
relating to the subject matter hereof. THIS WRITTEN AGREEMENT REPRESENTS
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 AGREEMENTS BETWEEN THE PARTIES.
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CUSTOMER ACKNOWLEDGES RECEIPT OF A COPY OF THIS AGREEMENT
Effective as of 5th day of September, 1997
CUSTOMER: FEDERAL DATA CORPORATION CUSTOMER: FDC TECHNOLOGIES, INC.
By: /s/ Xxxxx X. Xxxx (SEAL) By: /s/ Xxxxx X. Xxxx (SEAL)
------------------------------- -------------------------------
Title: Vice President Title: Vice President
CUSTOMER: XXXXXXX MANAGEMENT SYSTEM NCC: NATIONSCREDIT COMMERCIAL
CORPORATION CORPORATION OF AMERICA
By: /s/ Xxxxx X. Xxxx (SEAL) By: /s/ Authorized Signatory (SEAL)
------------------------------- ------------------------------
Title: Vice President Title:
---------------------------
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