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EXHIBIT 10(k)
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (this "Agreement") is made as of September 1,
1998 by SOFTWARE ACQUISITION CORP., a Delaware corporation with principal
offices at 000 Xxxx Xxxx Xxxxxx, Xxxxxxxx, Xxxxxxxxxxxx 00000 (the "Grantor"),
in favor of ALLIED CAPITAL CORPORATION, a Maryland corporation, (collectively
with successors and assigns, the "Lender").
A. RECITALS
1. Lender previously advanced a loan to the Grantor's majority
shareholder and parent, Enterprise Software, Inc., a Delaware corporation
formerly named IndeNet, Inc. (the "Debtor") of Nine Million Dollars ($9,000,000)
(the "Initial Loan") and is advancing to the Debtor herewith a subsequent loan
of Six Million Dollars ($6,000,000) (the "Subsequent Loan") in consideration for
the issuance by (a) the Debtor of certain Subordinated Debentures to the Lender
and (b) the Debtor to the Lender of certain Warrants to acquire shares of the
Company's common stock in connection with the making of the Initial Loan and
Subsequent Loan, all to be made in accordance with the terms and conditions set
forth in the Investment and Loan Agreement entered into by such parties under
the date of March 26, 1998 in connection herewith (the "Investment and Loan
Agreement").
2. The obligations of the Debtor under the Subordinated Debentures and
the Holder's rights therein shall be secured by certain property of the Grantor
and certain other documents related thereto (all of which documents, including
the Investment and Loan Agreement, each Debenture, this Agreement and any other
Collateral Document (as defined in the Investment and Loan Agreement), with all
modifications, extensions, renewals, and replacements thereof and therefor, are
hereinafter collectively referred to as the "Loan Documents").
B. PROVISIONS
In consideration of the premises and other good and valuable
consideration, the receipt of which is hereby acknowledged, Grantor hereby
agrees and grants as set forth below.
1. Grant. As security for the payment of the indebtedness created
under the Loan Documents, Grantor hereby grants to Lender a continuing security
interest in all of Grantor's now owned and hereafter acquired tangible and
intangible personal property, wherever located, and the proceeds and products
thereof. Without limiting the generality
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of the foregoing, such security interest shall include all of Grantor's now
owned and hereafter acquired property and assets, and types of property,
wherever located, as follows:
(a) machinery, equipment, tools, furniture and fixtures, and all
replacements and substitutions therefor and thereof, and all attachments,
accessories and accessions thereto or for use therewith (the "Equipment");
(b) inventory, raw materials, work-in-process, finished goods,
supplies and returned and/or repossessed inventory; and all replacements, and
substitutions therefor and thereof, and all accessions thereto, (the
"Inventory");
(c) general intangibles, licenses, permits, deposits, things in
action, contracts, contractual rights, leases of real property, uncertificated
securities and goodwill (the "General Intangibles");
(d) intellectual property, literary rights, rights to performance,
inventions, processes, systems, computer programs, databases and software
(including source and object codes); copyrights, patents, patent applications,
service marks, trademarks, trade names, trade secrets, and all goodwill
associated with the foregoing, including, in respect to all the foregoing, the
right to xxx for past, present or future violations or infringements thereof,
all reissues, divisions, renewals, extensions, continuations and continuations
-in-part thereof, and all improvements thereon, (the "Intellectual Property");
(e) accounts and rights to payment for goods sold or leased or for
services rendered (the "Accounts");
(f) chattel paper and leases of personal property (the "Chattel
Paper");
(g) instruments (negotiable or otherwise), notes, bonds, certificated
securities, letters of credit, items of payment, negotiable documents, and
documents of title (the "Instruments");
(h) all books, ledgers, records, customer lists, correspondence,
computer hardware and software, and magnetic or other data storage media
relating to any of the Equipment, Inventory, General Intangibles, Intellectual
Property, Accounts, Chattel Paper, Instruments or Proceeds (as hereinafter
defined), whether in the possession of Grantor or otherwise (the "Records"); and
(i) all cash and noncash proceeds and products, including insurance
proceeds of, and any indemnity or warranty payable by reason of damage to or
loss of, the
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Equipment, Inventory, General Intangibles, Intellectual Property, Accounts,
Chattel Paper, Instruments or Records (the "Proceeds").
Grantor's Equipment, Inventory, Intellectual Property, Accounts, General
Intangibles, Chattel Paper, Instruments, Records and Proceeds are hereinafter
referred to collectively as the "Collateral". Lender shall have all of the
rights and remedies of a secured party under the applicable Uniform Commercial
Code with respect to the Collateral. Notwithstanding any of the foregoing, the
security interests granted herein shall be subordinate to Senior Debt (as such
term is defined in the Investment and Loan Agreement) according to the terms of
the Investment and Loan Agreement.
2. Grantor's Representations and Warranties. Grantor represents and
warrants to Lender as follows:
(a) No Uniform Commercial Code Financing Statement that names Grantor
as a debtor or which lists any of the Collateral as collateral has been filed in
any jurisdiction except in connection with Senior Debt; Grantor has not signed
any financing statement or any security agreement authorizing any other secured
party thereunder to file any such financing statement except in connection with
Senior Debt; and the security interests granted to Lender under this Agreement
are second priority security interests subordinate only to the Senior Debt (as
defined in the Investment and Loan Agreement).
(b) The address for Grantor set forth in the initial paragraph of this
Agreement is Grantor's correct mailing address and the address of Grantor's
principal place of business; Grantor has never had a principal place of business
at any other address, changed its name or used any other name or any trade name,
within the twelve (12) years immediately preceding the date of this Agreement;
Grantor's Equipment and Inventory are located at Grantor's principal place of
business set forth above or at 0000 Xxxx Xxxxxxxx Xxxxxxxxx, Xxxx Xxxxx, Xxxxxxx
00000; and none of Grantor's Inventory is stored with or in the possession of
any bailee, warehouseman, subcontractor, or other similar person.
3. Covenants of Grantor. Grantor covenants and agrees as follows:
(a) Grantor shall promptly execute and deliver any Uniform Commercial
Code Financing Statement or other document reasonably required, or procure any
document reasonably required (including Uniform Commercial Code Financing
Statement termination statements, as necessary), pay all costs to record such
documents and otherwise, and pay any documentary or stamp tax or recording fee,
to perfect and maintain perfected the security interest, and the priority of the
security interest, granted under this Agreement. To the extent any of the
Collateral is of a type as to which it is necessary or desirable for Lender to
take possession in order to perfect, or maintain the priority of, Lender's
security interest, then upon Lender's request, Grantor shall deliver such
Collateral
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to Lender. A carbon, photographic, photocopy or other reproduction of a security
agreement or financing statement shall be sufficient as a financing statement.
(b) In the event of Default, Grantor shall provide Lender from time to
time within five working days of the written request of Lender with: (i) written
statements or schedules identifying and describing the Collateral, and all
additions, substitutions, and replacements thereof and thereto; (ii) copies of
customers' invoices or billing statements; (iii) evidence of shipment or
delivery of goods or merchandise to or performance of services for customers;
(iv) a listing and aging report for the Accounts; (v) proof of the sale or lease
of goods or satisfactory performance of services which gave rise to the
Accounts; and (vi) such other schedules and information as Lender reasonably
may require. The items to be provided under this Section shall be in form
satisfactory to Lender, in such detail as Lender may require and are to be
executed and delivered to the Lender from time to time solely for Lender's
convenience in maintaining Records of the Grantor's Collateral. The Grantor's
failure to give any of such items to Lender shall not affect, terminate, modify
or otherwise limit Lender's security interest in the Collateral.
(c) Upon reasonable advance notice, Grantor shall allow Lender access
to the Grantor's places of business during normal business hours at intervals to
be determined by Lender, before or after a Default, and without hindrance or
delay, to audit, inspect, verify, check and make extracts or photocopies from
the Records of the Grantor and other data relating to the Collateral.
(d) The Grantor shall pay or reimburse Lender for all expenses of any
nature which may be reasonably necessary, before or after Default hereunder, for
the enforcement or preservation of Lender's rights under this Agreement or under
the Loan Documents, including but not limited to reasonable attorneys' fees,
appellate costs and fees, and costs incurred by Lender as a participant in any
bankruptcy proceeding, workout, debt restructuring, extension of maturity or
document amendment, involving the Grantor under the Loan Documents.
4. Additional Terms Relating to Contracts. In respect to any
contracts, agreements and other documents included in the Collateral, and both
before and after a Default, (a) Grantor shall remain liable under such
contracts, agreements and documents to the extent set forth therein, to perform
all of its duties and obligations thereunder to the same extent as if this
Agreement had not been executed; (b) the exercise by Lender of any of the rights
hereunder shall not release Grantor from any of its duties or obligations
thereunder; and (c) Lender shall have no obligation or liability under any such
contracts, agreements and other documents by reason of this Agreement, nor shall
Lender be obligated to perform any of the obligations or duties of Grantor
thereunder or to take any action to collect or enforce any such contract,
agreement or other document.
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5. Further Assurances. Grantor will promptly and duly execute and
deliver to Lender Such Further Documents and Assurances, and take such further
action as Lender may from time to time reasonably request, in order to carry out
the intent and purpose of this Agreement, and to establish and protect the
rights and remedies created, or intended to be created, in favor of Lender
hereunder.
6. Default. Grantor shall be deemed to be in default hereunder
"Default" if (a) Grantor shall be in breach of any warranty or covenant herein,
after provision of any notice and lapse of any cure period provided in the Loan
Documents expressly in respect to breaches of this Agreement, or (b) a default
shall occur or exist under any of the Loan Documents, which is not cured after
any notice and within any period of time expressly allowed therein.
7. Remedies. In the event of Default, Lender may exercise any one or
more of its remedies under common or statutory law, and at any time do any one
or more of the following, all of which are hereby authorized by Grantor:
(a) Require Grantor (at Grantor's sole expense), to forward promptly
any or all of the Equipment and Inventory to Lender at such location as shall be
reasonably required by Lender; or enter upon the premises where any such
Equipment or Inventory is located and take immediate possession of and remove
the Equipment or Inventory by summary proceedings or otherwise, all without
liability from Lender to Grantor for or by reason of such entry or taking of
possession, whether for the restoration of damage to property caused by such
taking, or otherwise;
(b) Sell or otherwise dispose of the Collateral at a commercially
reasonable public or private sale or otherwise, at such price as it may deem
best, for cash, credit, or otherwise, and, in case of any deficiency, collect
such deficiency from Grantor;
(c) Exercise any other right or remedy which may be available to it
under this Agreement, the Loan Documents or applicable law; or proceed by
appropriate court action to enforce the terms hereof or to recover damages for
the breach hereof;
(d) Take or release other security for the obligations of Grantor
under the Loan Documents; release any party primarily or secondarily liable for
any such obligations; grant extensions, renewals or indulgences with respect to
such obligations; and apply any other security therefor held by Lender to the
satisfaction of such obligations, all without prejudice to any rights hereunder.
8. Additional Remedies of Lender . Grantor hereby irrevocably appoints
such Lender as Grantor's attorney-in-fact, with power of substitution, to do,
after a Default hereunder and during the continuance of such Default, in the
name of Grantor or in the
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name of Lender or otherwise, for the use and benefit of Lender, but at the cost
and expense of Grantor, and without notice to Grantor each of the following:
(a) notify the account debtors obligated on any Accounts to make
payments thereon directly to Lender, and to take control of the cash and
non-cash proceeds of any Collateral;
(b) compromise, release, exchange, surrender, make substitutions for,
extend, or renew any or all of the Collateral, or otherwise deal with the same
as Lender may deem advisable;
(c) remove from any of Grantor's places of business any or all
Records;
(d) make such use of Grantor's place or places of business as may be
reasonably necessary to administer, control, collect or otherwise dispose of the
Collateral;
(e) repair, alter or supply goods, if any, necessary to fulfill in
whole or in part the purchase order of any account debtor;
(f) demand, collect, receipt for and give renewals, extensions,
discharges and releases of any of the Collateral;
(g) institute and prosecute legal and equitable proceedings to enforce
collection of, or realize upon, any of the Collateral;
(h) settle, renew, extend, compromise, compound, exchange or adjust
claims with respect to any of the Collateral or any legal proceedings brought
with respect thereto;
(1) endorse the name of Grantor upon any instruments or items of
payment relating to the Collateral, or upon any proof of claim in bankruptcy
against an account debtor;
(j) institute and prosecute legal and equitable proceedings to reclaim
any of the goods sold to any account debtor obligated on an Account at a time
when such account debtor was insolvent; and
(k) receive and open all mail addressed to Grantor, and notify the
postal authorities to change the address for the delivery of mail to Grantor to
such address as Lender may designate.
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9. Collection of Accounts After Default. Upon the request of Lender
at any time after a Default, Grantor shall deposit, or cause to be deposited,
all checks, drafts, cash and other remittances in payment of, or on account of
payment of, any and all Accounts (all of the foregoing herein collectively
referred to as "items of payment") to an account (the "Collateral Account")
designated by Lender at a bank or other financial institution designated by
Lender. Lender shall not be responsible for the solvency of any such bank or
other financial institution, or the management and administration of the
Collateral Account. Lender alone shall have the power to access and make
withdrawals from the Collateral Account. Grantor shall deposit such items of
payment for credit to the Collateral Account within one (1) banking day of the
receipt thereof and in precisely the form received, except for the endorsement
of Grantor where necessary to permit the collection of such items of payment,
which endorsement Grantor hereby agrees to make. Pending such deposit, Grantor
will not commingle any such items of payment with any of its other funds or
property, but will hold them separate and apart. Lender shall be entitled to
apply the funds in the Collateral Account against the obligations secured hereby
from time to time in Lender's discretion.
10. No Marshalling. Notwithstanding the existence of any other
collateral security for the obligations secured hereby, Lender shall have the
right to determine the order in which any or all of the Collateral shall be
subjected to the remedies provided herein. Lender shall have the right to
determine the order in which any or all portions of the obligations secured
hereby are satisfied from the proceeds realized upon exercise of the remedies
provided herein. Grantor, any party who becomes liable for Grantor's obligations
and covenants under the Loan Documents, and any party who now or hereafter
acquires a security interest in the Collateral, or any portion thereof, hereby
waives any and all right to require any marshalling of assets in connection with
the exercise of any remedy provided herein, in any of the Loan Documents or by
applicable law.
11. Notices. All notices hereunder shall be given in accordance with
the notice provisions in the Loan Documents. Grantor agrees that five (5) days
prior notice of the time and place of any public sale of the Collateral, or of
the time after which a private sale of the Collateral will be made, is
commercially reasonable notice.
12. Costs and Fees. Grantor shall be liable for all legal fees and
other costs and expenses incurred by reason of any Default, or in the exercise
of Lender's remedies with respect thereto.
13. No Exclusive Remedies. No remedy referred to in this Agreement is
intended to be exclusive, but each shall be cumulative, and shall be in addition
to any other remedy referred to herein or otherwise available under the Loan
Documents, at law or in equity.
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14. Non-Waiver. The failure of Lender to exercise, or delay in the
exercise of, the rights granted hereunder, either before or after Default shall
not constitute a waiver of any such right.
15. Choice of Law Venue and Jurisdiction Service of Process. This
Agreement shall be interpreted, and the rights and liabilities of the parties
hereto determined, in accordance with the laws and decisions of the District of
Columbia, without regard to its principles of conflicts of law. Venue for any
adjudication hereof shall be only in the courts of the District of Columbia or
the Federal courts in the District of Columbia, to the jurisdiction of which
courts all parties hereby consent, as the agreement of the parties, as not
inconvenient and as not subject to review by any court other than such courts in
the District. Grantor intends that the courts of the jurisdictions in which
Grantor is incorporated and conducts business shall afford full faith and credit
to any judgment rendered by a court of the District of Columbia or the Federal
courts in the District of Columbia, against Grantor hereunder, and hold that
such District courts have in personam jurisdiction to enter a valid judgment
against Grantor. Service of any summons and/or complaint hereunder, and any
other process which may be served on a Grantor in any action in respect hereto,
may be made by mailing via registered mail or delivering a copy of such process,
to the address last provided by Grantor to Lender. Grantor agrees that this
submission to jurisdiction and consent to service of process are reasonable and
made for the express benefit of Lender.
16. WAIVER OF JURY TRIAL. GRANTOR WAIVES ALL RIGHT TO TRIAL BY JURY OF
ALL CLAIMS, DEFENSES, COUNTERCLAIMS AND SUITS OF ANY KIND ARISING FROM OR
RELATING TO THIS AGREEMENT OR THE DEALINGS OF THE PARTIES IN RESPECT HERETO.
GRANTOR ACKNOWLEDGES AND AGREES THAT THIS PROVISION IS A MATERIAL TERM OF THIS
AGREEMENT AND THAT LENDER WOULD NOT EXTEND ANY FUNDS UNDER THE LOAN DOCUMENTS IF
THIS WAIVER OF JURY TRIAL WERE NOT A PART HEREOF. GRANTOR ACKNOWLEDGES THAT THIS
IS A WAIVER OF A LEGAL RIGHT AND THAT IT MAKES THIS WAIVER VOLUNTARILY AND
KNOWINGLY AFTER CONSULTATION WITH, OR THE OPPORTUNITY TO CONSULT WITH, COUNSEL
OF ITS CHOICE. GRANTOR AGREES THAT ALL SUCH CLAIMS, DEFENSES, COUNTERCLAIMS AND
SUITS SHALL BE TRIED BEFORE A JUDGE OF A COURT OF COMPETENT JURISDICTION,
WITHOUT A JURY.
17. Successors and Assigns. This Agreement shall inure to the benefit
of Lender, its successors and assigns, and shall be binding upon Grantor, its
successors and assigns.
18. Miscellaneous. This Agreement shall not be amended or altered
except by a document in writing signed by the party against enforcement of the
change is
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sought. Any provision of this Agreement which is prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability, without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction. The captions in this Agreement are for convenience of
reference only and shall not define or limit any of the terms or provisions
hereof.
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IN WITNESS WHEREOF, and intending to be legally bound hereby, Grantor
executes this Agreement as of the date first set forth above.
[Seal] SOFTWARE ACQUISITION CORP.
By: Xxxxxx X. Xxxx
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Name: Xxxxxx X. Xxxx
Title: President
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CORPORATE ACKNOWLEDGMENT
STATE OF MICHIGAN )
) SS:
COUNTY OF XXXXX )
On this the 28 day of August, 1998, before me, a notary public in and
for the jurisdiction set out above, personally appeared Xxxxxx X. Xxxx, who
acknowledged himself to be the President Of Software Acquisition, Corporation a
corporation, and that he, as such President, being authorized so to do, executed
the foregoing document for the purposes therein contained, by signing the name
of the corporation by himself as PRESIDENT.
WITNESS my hand and official seal this 28th, day August, 1998.
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/s/ Xxxxx X. Xxxxxxx
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Notary Public
[Notarial Seal]
My Commission Expires:
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