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EXHIBIT 10(i)
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (this "Agreement") is made as of the 26th
day of March, 1998 by IndeNet, Inc., a Delaware corporation (the "Company"),
Cable Computerized Management Systems, Inc., a Michigan corporation, and
Enterprise Systems Group, Inc., a New York corporation (each company with its
successors and assigns is a "Debtor" and collectively are the "Debtors"), in
favor of Allied Capital Corporation, a Maryland corporation, (collectively with
successors and assigns, the "Lender").
I. RECITALS
A. The Debtors have requested a loan from Lender, and Lender is
willing to make an initial loan to the Debtors in the aggregate amount of Nine
Million Dollars ($9,000,000) (the "Initial Loan") and subsequent loans in the
aggregate amount of Six Million Dollars ($6,000,000) (the "Subsequent Loans") in
consideration for the issuance by (a) the Debtors of certain Subordinated
Debentures to the Lender in connection with the making of the Initial Loan and
Subsequent Loan and (b) the Company 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, each to be made in accordance with the terms
and conditions set forth in the Investment and Loan Agreement to be entered into
by such parties in connection herewith (the "Investment and Loan Agreement").
B. The obligations of the Debtors under the Subordinated
Debentures and the Holder's rights therein shall be secured by certain
collateral of the Debtors 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").
II. PROVISIONS
In consideration of the premises and other good and valuable
consideration, the receipt of which is hereby acknowledged, each Debtor hereby
agrees and grants as set forth below.
1. Grant. As security for the payment of the indebtedness created
under the Loan Documents, each Debtor hereby grants to Lender a continuing
security interest in all of such Debtor's now owned and hereafter acquired
tangible and intangible personal property, wherever located, and the proceeds
and products thereof. Without limiting the generality of the foregoing, such
security interest shall include all of each Debtor's now
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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 such Debtor 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").
Each Debtor'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. Each Debtor's Representations and Warranties. Each Debtor
represents and warrants to Lender with respect to itself as follows:
(a) No Uniform Commercial Code Financing Statement
that names Debtor as a debtor or which lists any of the Collateral as collateral
has been filed in any jurisdiction except in connection with Senior Debt; Debtor
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 Debtor set forth on Exhibit A to
this Agreement is Debtor's correct mailing address and the address of Debtor's
principal place of business; Debtor 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;
Debtor's Equipment and Inventory are located at Debtor's principal place of
business set forth above; and none of Debtor's Inventory is stored with or in
the possession of any bailee, warehouseman, subcontractor, or other similar
person.
3. Covenants of Each Debtor. Each Debtor covenants and
agrees with respect to itself as follows:
(a) Debtor 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, Debtor shall deliver such
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Collateral 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, Debtor 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 Debtor's Collateral. The
Debtor'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, Debtor shall allow
Lender access to the Debtor'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 Debtor and other data relating to the
Collateral.
(d) The Debtor 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 Debtor
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) each Debtor 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 any Debtor 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 a Debtor
thereunder or to take any action to collect or enforce any such contract,
agreement or other document.
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5. Further Assurances. Each Debtor 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. A Debtor shall be deemed to be in default
hereunder ("Default") if (a) any Debtor 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 arc hereby authorized by each
Debtor:
(a) Require each Debtor (at such Debtor'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 Debtor 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 any Debtor;
(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 a Debtor 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. Each Debtor hereby
irrevocably appoints such Lender as Debtor'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 such Debtor
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or in the name of Lender or otherwise, for the use and benefit of Lender, but
at the cost and expense of such Debtor, and without notice to such Debtor 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 Debtor's place of business any or all Records;
(d) make such use of any Debtor'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;
(i) endorse the name of any Debtor 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 any Debtor, and notify the
postal authorities to change the address for the delivery of mail to any Debtor
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, each Debtor 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. Each Debtor 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 a Debtor where necessary to permit the collection of such items of payment,
which endorsement each Debtor hereby agrees to make. Pending such deposit, each
Debtor 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. Each
Debtor, any party who becomes liable for any Debtor'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. Each Debtor 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. Each Debtor 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. Each Debtor intends that the courts of the jurisdictions in which
such Debtor 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 such Debtor hereunder, and
hold that such District courts have in person jurisdiction to enter a valid
judgment against such Debtor. Service of any summons and/or complaint hereunder,
and any other process which may be served on a Debtor 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 such Debtor to Lender. Each Debtor
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. EACH DEBTOR 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.
EACH DEBTOR 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. EACH DEBTOR
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. EACH DEBTOR 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 each Debtor, 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 which 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,
each Debtor executes this Agreement as of the date first set forth above.
[Seal]
INDENET, INC.
By: Xxxxxx X. Xxxx
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Name: Xxxxxx Xxxx
Title: Vice-President
[Seal] CABLE COMPUTERIZED
MANAGEMENT SYSTEMS, INC.
By: Xxxxxx X. Xxxx
-----------------------
Name: Xxxxxx Xxxx
Title: Secretary
[Seal] ENTERPRISE SYSTEMS
GROUP, INC.
By: Xxxxxx X. Xxxx
-----------------------
Name: Xxxxxx Xxxx
Title: Secretary
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CORPORATE ACKNOWLEDGMENT
_____________)
) SS:
_____________)
On this the __ day of March, 1998, before me, a notary public in and
for the jurisdiction set out above, personally appeared Xxxxxx Xxxx, who
acknowledged himself to be the Vice President of IndeNet, Inc., a corporation,
and that he, as such Vice 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 Vice-President.
WITNESS my hand and official seal this __ day of March, 1998.
Xxxxx Xxxx Xxxxxxxxxx
---------------------------
Notary Public
[Notarial Seal]
My Commission Expires: ___________
XXXXX XXXX XXXXXXXXXX
Notary Public Oakland County, Michigan
My Commission Expires April 19, 2000.
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CORPORATE ACKNOWLEDGMENT
_____________)
) SS:
_____________)
On this the __ day of March, 1998, before me, a notary public in and
for the jurisdiction set out above, personally appeared Xxxxxx Xxxx, who
acknowledged himself to be the Secretary of Cable Computerized Management
Systems, Inc., a corporation, and that he, as such Secretary, being authorized
so to do, executed the foregoing document for the purposes therein contained, by
signing the name of the corporation by himself as Secretary.
WITNESS my hand and official seal this 26th day of March, 1998.
Xxxxx Xxxx Xxxxxxxxxx
---------------------------
Notary Public
[Notarial Seal]
My Commission Expires: ___________
XXXXX XXXX XXXXXXXXXX
Notary Public Oakland County, Michigan
My Commission Expires April 19, 2000.
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CORPORATE ACKNOWLEDGMENT
_____________)
) SS:
_____________)
On this the __ day of March, 1998, before me, a notary public in and
for the jurisdiction set out above, personally appeared Xxxxxx Xxxx, who
acknowledged himself to be the Secretary of Enterprise Systems Group, Inc., a
corporation, and that he, as such Secretary, being authorized so to do, executed
the foregoing document for the purposes therein contained, by signing the name
of the corporation by himself as Secretary.
WITNESS my hand and official seal this 26th day of March, 1998.
Xxxxx Xxxx Xxxxxxxxxx
---------------------------
Notary Public
[Notarial Seal]
My Commission Expires: ___________
XXXXX XXXX XXXXXXXXXX
Notary Public Oakland County, Michigan
My Commission Expires April 19, 2000.
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