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Exhibit 10.23
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (this "AGREEMENT") is made as of the 1st day of
December, 2000, by MigraTEC, Inc., a Delaware corporation ("DEBTOR"), whose
address is ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ in favor of Mercury
Fund No. I, Ltd., a Texas limited partnership, whose address is ▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ (collectively with its successors and
assigns, "SECURED PARTY"). Debtor hereby agrees with Secured Party as follows:
1. DEFINITIONS. As used in this Agreement, the following terms shall
have the meanings indicated below:
(a) The term "CODE" shall mean the Texas Business and Commerce
Code as in effect in the State of Texas on the date of this Agreement
or as it may hereafter be amended from time to time.
(b) The term "COLLATERAL" shall mean all of the property set
forth below (as indicated):
(i) any right to payment for services rendered or for goods
sold or leased which is not evidenced by an instrument or chattel
paper, whether or not it has been earned by performance
("ACCOUNTS"), and all customer lists, subscription lists,
invoices, agings, verification reports and other records relating
in any way to such Accounts, and all of Debtor's rights in, to
and under all purchase orders or contracts now owned or hereafter
received or acquired by it for goods or services, and all of
Debtor's rights to any goods represented by any of the foregoing
(including returned or repossessed goods and unpaid seller's
rights) and all moneys due or to become due to Debtor under all
contracts for the sale or lease of goods and/or the performance
of services by it (whether or not yet earned by performance) or
in connection with any other transaction, now in existence or
hereafter arising; all promissory notes, drafts, bills of
exchange, instruments, documents and trade acceptances
(collectively, "INSTRUMENTS"); all deposit accounts, general
intangibles, tax refunds and other obligations of any kind owing
to Debtor (including under any trade names), now or hereafter
existing, arising out of or in connection with the sale or lease
of goods or the rendering of services or otherwise (including,
without limitation, any such obligations that would be
characterized as an account, general intangible or chattel paper
under the Code); and all rights now or hereafter existing in and
to all security agreements, leases, guarantees and other
contracts securing or otherwise relating to any such Accounts,
Instruments, deposit accounts, general intangibles or
obligations;
(ii) all machinery, equipment, tools, apparatus, furniture
and leasehold improvements, now owned or hereafter acquired by
Debtor or in which Debtor now has or hereafter may acquire any
right, title or interest, and any and all additions,
substitutions and replacements thereof, wherever located,
together with all attachments, components, parts, equipment and
accessories installed therein or
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affixed thereto, including but not limited to all "equipment" as
defined in Section 9.109(2) of the Code;
(iii) all writings which evidence both a monetary obligation
and a security interest in or a lease of specific goods;
(iv) all contracts and agreements to which Debtor is a party
or to which Debtor has any rights, together with all
modifications, amendments or replacements of any of the
foregoing, including, without limitation, (A) all rights of
Debtor to receive moneys due and to become due to Debtor
thereunder or in connection therewith, (B) all rights of Debtor
to damages arising out of, or for, breach or default in respect
thereof and (C) all rights of Debtor to perform and to exercise
all remedies thereunder;
(v) all general intangibles (as defined in the Code); all
inventions, processes, production methods, proprietary
information, trade secrets and know-how; all patents and
applications for patents, copyrights, trademarks, trade names,
corporate names, company names, business names, fictitious
business names, trade styles, service marks, logos and other
source or business identifiers, and the goodwill associated
therewith, now existing or hereafter adopted or acquired, all
registrations and recordings thereof, and all applications in
connection therewith, whether in the United States Patent and
Trademark office or in any similar office or agency of the United
States, any State thereof or any other country or any political
subdivision thereof, or otherwise and all renewals thereof, and
all licenses or other agreements granted to Debtor with respect
to any of the foregoing; all information, customer lists,
advertising lists, advertising contracts, identification of
suppliers, data, plans, blueprints, specifications, designs,
drawings, recorded knowledge, surveys, engineering reports, test
reports, manuals, materials standards, processing standards,
performance standards, telephone numbers and telephone listings,
catalogs, books, records, computer and automatic machinery
software and programs, and the like pertaining to operations by
or the business of Debtor and all licenses with respect thereto;
all field accounting information and all media in which or on
which any of the information or knowledge or data or records, may
be recorded or stored and all computer programs used for the
compilation or printout of such information, knowledge, records
or data; all licenses, consents, permits, variances,
certifications and approvals of all Governmental Authorities now
or hereafter held by Debtor pertaining to operations or business
now or hereafter conducted; all rights to receive return of
deposits and trust payments; all rights to payment under letters
of credit and similar agreements; all tax refunds (including,
without limitation, all federal and state income tax refunds and
benefits of net operating loss carry forwards); and all causes of
action, rights, claims and warranties now or hereafter owned or
acquired by Debtor;
(vi) all rights, claims and benefits of Debtor against any
person arising out of, relating to or in connection with the
Collateral;
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(vii) the balance of every bank account and deposit account
of Debtor and any other claim of Debtor against Secured Party,
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 Secured Party or
any agent, affiliate or correspondent of Secured Party, for any
purpose, and the proceeds thereof (Secured Party shall be deemed
to have possession of any of the Collateral in transit to or set
apart for Secured Party or any of its respective agents,
affiliates or correspondents);
(viii) all equity interest in any entity, any debt
instrument issued by any person or entity and any instrument
convertible into any equity or debt interest (whether owned
beneficially or of record), including but not limited to all
shares of capital stock of whatever class, all partnership and
joint venture interests, and all debentures and debt instruments
(collectively "SECURITIES"); all shares, securities, monies or
properties representing a distribution on any Securities or
representing a Distribution (defined below) or return of capital
upon or in respect of any Securities or any part thereof, or
resulting from a split-up, revision, reclassification or other
like change of the Securities, or otherwise received in exchange
therefor; all subscription rights, warrants or options issued to
the holders of, or in respect of, the Securities; each
certificate or other instrument evidencing any of the foregoing;
(ix) any declaration or payment of any distribution or
dividend (including a stock dividend) on, or the making of any
pro rata distribution, loan, advance, or investment to or in any
holder (in its capacity as a partner, shareholder or other equity
holder) of, any partnership interest or shares of capital stock
or other equity interest of such entity; any purchase,
redemption, or other acquisition or retirement for value of any
shares of partnership interest or capital stock or other equity
interest of such entity; and any payments of principal of, and
interest on, and all other payments in respect of any debt issued
by any person or entity (all of the foregoing being herein
referred to as collectively "DISTRIBUTIONS");
(x) all accounts of Debtor maintained with or through any
other person or entity or persons or entities related to the
acquisition, ownership, sale or other disposition of any interest
in any security or interest in any security (including but not
limited to all interest in any equity or debt security, option,
warrant, put, call, futures agreements, commodity agreements,
margin accounts, short positions and partnership interests), each
deposit account (time, demand or other) in which any proceeds of
or income from the foregoing may be on deposit, all general
intangibles consisting of the foregoing and each agreement,
document or instrument governing or evidencing any of the
foregoing and all amendments and restatements thereof, and all
claims of Debtor against any person or entity with respect to any
of the foregoing;
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(xi) all insurance policies and bonds and claims relating to
any of the Collateral and payments thereunder;
(xii) all other personal property now owned of hereafter
acquired by Debtor, including, without limitation, any and all
inventory, documents, goods and other property in which a
security interest would be created under Chapter 9 of the Code;
and
(xiii) all accessions to, all substitutions for and
replacements of, and all proceeds and products of any and all of
the foregoing Collateral and, to the extent not otherwise
included, all (A) payments under insurance (whether or not
Secured Party is the loss payee thereof), or any indemnity,
warranty or guaranty, payable by reason of loss or damage to or
otherwise with respect to any of the foregoing Collateral and (B)
all cash.
(c) The term "INDEBTEDNESS" shall mean (i) all indebtedness,
obligations and liabilities of Debtor to Secured Party now existing or
hereafter arising pursuant to that certain promissory note dated
December 1, 2000, in the principal amount of $565,000.00 executed by
Debtor and payable to the order of Secured Party (the "NOTE"), (ii)
all obligations of Debtor to Secured Party under any documents
evidencing, securing, governing and/or pertaining to all or any part
of the indebtedness described in (i) above, (iii) all costs and
expenses incurred by Secured Party in connection with the collection
and administration of all or any part of the indebtedness and
obligations described in (i) and (ii) above or the protection or
preservation of, or realization upon, the collateral securing all or
any part of such indebtedness and obligations, including without
limitation all reasonable attorneys' fees, and (iv) all renewals,
extensions, modifications and rearrangements of the indebtedness and
obligations described in (i), (ii) and (iii) above.
(d) The term "LOAN DOCUMENTS" shall mean the Note dated of even
date herewith by and between Debtor and Secured Party and this
Agreement.
(e) The term "SENIOR DEBT" shall mean all indebtedness of Debtor
to MJ Capital Partners, L.P. or MT Partners, L.P. and Secured Party
under that certain Note and Warrant Purchase Agreement dated as of
January 25, 2000.
(f) The term "SENIOR LENDERS" means MJ Capital Partners, L.P., MT
Partners, L.P., Mercury Ventures, Ltd., and their respective
affiliates.
All words and phrases used herein which are expressly defined in Section 1.201
or Chapter 9 of the Code shall have the meaning provided for therein. Other
words and phrases defined elsewhere in the Code shall have the meaning specified
therein except to the extent such meaning is inconsistent with a definition in
Section 1.201 or Chapter 9 of the Code.
2. SECURITY INTEREST. As security for the Indebtedness, Debtor, for
value received, hereby pledges and grants to Secured Party a continuing security
interest in the Collateral.
3. MAINTENANCE OF COLLATERAL. Other than the exercise of reasonable
care to assure the safe custody of any Collateral in Secured Party's possession
from time to time, Secured Party
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does not have any obligation, duty or responsibility with respect to the
Collateral. Without limiting the generality of the foregoing, Secured Party
shall not have any obligation, duty or responsibility to do any of the
following: (a) ascertain any maturities, calls, conversions, exchanges, offers,
tenders or similar matters relating to the Collateral or informing Debtor with
respect to any such matters; (b) fix, preserve or exercise any right, privilege
or option (whether conversion, redemption or otherwise) with respect to the
Collateral unless (i) Debtor makes written demand to Secured Party to do so,
(ii) such written demand is received by Secured Party in sufficient time to
permit Secured Party to take the action demanded in the ordinary course of its
business, and (iii) Debtor provides additional collateral, acceptable to Secured
Party in its sole discretion; (c) collect any amounts payable in respect of the
Collateral (Secured Party being liable to account to Debtor only for what
Secured Party may actually receive or collect thereon); (d) sell all or any
portion of the Collateral to avoid market loss; (e) sell all or any portion of
the Collateral unless and until (i) Debtor makes written demand upon Secured
Party to sell the Collateral, and (ii) Debtor provides additional collateral,
acceptable to Secured Party in its sole discretion; or (f) hold the Collateral
for or on behalf of any party other than Debtor.
4. REPRESENTATIONS AND WARRANTIES. Debtor hereby represents and
warrants the following to Secured Party:
(a) Authority. The execution, delivery and performance of the
Loan Documents by Debtor have been duly authorized by all necessary
corporate action of Debtor.
(b) Accuracy of Information. All information heretofore, herein
or hereafter supplied to Secured Party by or on behalf of Debtor with
respect to the Collateral is true and correct.
(c) Enforceability. The Loan Documents constitute legal, valid
and binding obligations of Debtor, enforceable in accordance with
their respective terms, except as limited by bankruptcy, insolvency or
similar laws of general application relating to the enforcement of
creditors' rights and except to the extent specific remedies may
generally be limited by equitable principles and except as right to
indemnification may be limited by consideration of public policy.
(d) Ownership and Liens. Debtor has good and marketable title to
the Collateral free and clear of all liens, security interests,
encumbrances or adverse claims, except for the security interest
created by this Agreement and those securing the Senior Debt. No
dispute, right of setoff, counterclaim or defense exists with respect
to all or any part of the Collateral. Debtor has not executed any
other security agreement currently affecting the Collateral and no
effective financing statement or other instrument similar in effect
covering all or any part of the Collateral is on file in any recording
office except as may have been executed or filed in favor of Secured
Party and those executed and filed in favor of Senior Lenders.
(e) No Conflicts or Consents. Neither the ownership, the intended
use of the Collateral by Debtor, the grant of the security interest by
Debtor to Secured Party herein nor the exercise by Secured Party of
its rights or remedies hereunder, will (i) conflict with
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any provision of (A) any domestic or, to Debtor's knowledge, foreign
law, statute, rule or regulation, (B) the articles of incorporation or
bylaws of Debtor, or (C) any agreement, judgment, license, order or
permit applicable to or binding upon Debtor, or (ii) result in or
require the creation of any lien, charge or encumbrance upon any
assets or properties of Debtor or of any person except as may be
expressly contemplated in the Loan Documents. Except as expressly
contemplated in the Loan Documents, no consent, approval,
authorization or order of, and no notice to or filing with, any court,
governmental authority or third party is required in connection with
the grant by Debtor of the security interest herein or the exercise by
Secured Party of its rights and remedies hereunder.
(f) Security Interest. Debtor has and will have at all times full
right, power and authority to grant a security interest in the
Collateral to Secured Party in the manner provided herein, free and
clear of any lien, security interest or other charge or encumbrance
other than those liens and security interests securing the Senior
Debt. This Agreement creates a legal, valid and binding security
interest in favor of Secured Party in the Collateral securing the
Indebtedness. Possession by Secured Party of all certificates,
instruments and cash constituting Collateral from time to time and/or
the filing of the financing statements delivered prior hereto and/or
concurrently herewith by Debtor to Secured Party will perfect and
establish Secured Party's security interest hereunder in the
Collateral.
(g) Location. Debtor's residence or chief executive office, as
the case may be, and the office where the records concerning the
Collateral are kept is located at its address set forth on the first
page hereof. Except as specified elsewhere herein, all Collateral
shall be kept at such address.
(h) Exclusion of Certain Collateral. Unless otherwise agreed by
Secured Party, the Collateral does not include any aircraft,
watercraft or vessels, railroad cars, railroad equipment, locomotives
or other rolling stock intended for a use related to interstate
commerce.
(i) Inventory. The security interest in the inventory shall
continue through all stages of manufacture and shall, without further
action, attach to the accounts or other proceeds resulting from the
sale or other disposition thereof and to all such inventory as may be
returned to Debtor by its account debtors.
(j) Accounts. Each account represents the valid and legally
binding indebtedness of a bona fide account debtor arising from the
sale or lease by Debtor of goods or license by Debtor of software or
the rendition by Debtor of services. The amount shown as to each
account on Debtor's books is the true and undisputed amount owing and
unpaid thereon, subject only to discounts, allowances, rebates,
credits and adjustments to which the account debtor has a right.
(k) Chattel Paper, Documents and Instruments. The chattel paper,
documents and instruments of Debtor pledged hereunder have only one
original counterpart and no
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party other than Debtor or Senior Lenders is in actual or constructive
possession of any such chattel paper, documents or instruments.
(l) Securities. Any certificates evidencing Securities are valid
and genuine and have not been altered. All Securities have been duly
authorized and validly issued, are fully paid and non-assessable, and
were not issued in violation of the preemptive rights of any party or
of any agreement by which Debtor or the issuer thereof is bound. No
restrictions or conditions exist with respect to the transfer or
voting of any Securities, except as has been disclosed to Secured
Party in writing. To the best of Debtor's knowledge, no issuer of any
of the Securities (other than those that are publicly traded) has any
outstanding stock rights, rights to subscribe, options, warrants or
convertible securities outstanding or any other rights outstanding
entitling any party to have issued to such party capital stock of such
issuer, except as has been disclosed to Secured Party in writing.
5. AFFIRMATIVE COVENANTS. Debtor will comply with the covenants
contained in this Section 5 at all times during the period of time this
Agreement is effective unless Secured Party shall otherwise consent in writing.
(a) Ownership and Liens. Debtor will maintain good and marketable
title to all Collateral free and clear of all liens, security
interests, encumbrances or adverse claims, except for the security
interest created by this Agreement and the security interests and
other encumbrances securing the Senior Debt. Debtor will not permit
any dispute, right of setoff, counterclaim or defense to exist with
respect to all or any part of the Collateral. Debtor will cause any
financing statement or other security instrument with respect to the
Collateral to be terminated, except as may exist or as may have been
filed in favor of Secured Party or the Senior Lenders.
(b) Further Assurances. Debtor will from time to time at its
expense promptly execute and deliver all further instruments and
documents and take all further action necessary or appropriate or that
Secured Party may request in order (i) to perfect and protect the
security interest created or purported to be created hereby, (ii) to
enable Secured Party to exercise and enforce its rights and remedies
hereunder in respect of the Collateral, and (iii) to otherwise effect
the purposes of this Agreement, including without limitation: (A)
executing and filing such financing or continuation statements, or
amendments thereto; and (B) furnishing to Secured Party from time to
time statements and schedules further identifying and describing the
Collateral and such other reports in connection with the Collateral,
all in reasonable detail satisfactory to Secured Party.
(c) Inspection of Collateral. Debtor will keep adequate records
concerning the Collateral and will permit Secured Party and all
representatives and agents appointed by Secured Party to inspect any
of the Collateral and the books and records of or relating to the
Collateral at any time during normal business hours, to make and take
away photocopies, photographs and printouts thereof and to write down
and record any such information.
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(d) Payment of Taxes. Debtor (i) will timely pay all property and
other taxes, assessments and governmental charges or levies imposed
upon the Collateral or any part thereof, (ii) will timely pay all
lawful claims which, if unpaid, might become a lien or charge upon the
Collateral or any part thereof, and (iii) will maintain appropriate
accruals and reserves for all such liabilities in a timely fashion in
accordance with generally accepted accounting principles. Debtor may,
however, delay paying or discharging any such taxes, assessments,
charges, claims or liabilities so long as the validity thereof is
contested in good faith by proper proceedings and provided Debtor has
set aside on Debtor's books adequate reserves therefor.
(e) Condition of Goods. Debtor will maintain, preserve, protect
and keep all Collateral which constitutes goods in good condition,
repair and working order and will cause such Collateral to be used and
operated in good and workmanlike manner, in accordance with applicable
laws and in a manner which will not make void or cancelable any
insurance with respect to such Collateral.
(f) Insurance. Debtor will, at its own expense, maintain
insurance with respect to all Collateral which constitutes goods in
such amounts, against such risks, in such form and with such insurers,
as shall be satisfactory to Senior Lenders from time to time.
(g) Accounts and General Intangibles. Debtor will, except as
otherwise provided in Subsection 6(e), collect, at Debtor's own
expense, all amounts due or to become due under each of the accounts
and general intangibles. Debtor will also duly perform and cause to be
performed all of its obligations with respect to the goods or
services, the sale or lease or rendition of which gave rise or will
give rise to each account and all of its obligations to be performed
under or with respect to the general intangibles.
6. NEGATIVE COVENANTS. Debtor will comply with the covenants contained
in this Section 6 at all times during the period of time this Agreement is
effective, unless Secured Party shall otherwise consent in writing.
(a) Transfer or Encumbrance. Other than in the ordinary course of
business, Debtor will not (i) sell, assign (by operation of law or
otherwise), transfer, exchange, lease or otherwise dispose of any of
the Collateral, (ii) ▇▇▇▇▇ ▇ ▇▇▇▇ or security interest in or execute,
file or record any financing statement or other security instrument
with respect to the Collateral to any party other than Secured Party
or Senior Lenders, or (iii) deliver actual or constructive possession
of any of the Collateral to any party other than Secured Party or
Senior Lenders, except for (A) sales and leases of inventory and
licensing of software and intellectual property rights in the ordinary
course of business, and (B) the sale or other disposal of any item of
equipment which is worn out or obsolete; provided, however, the
exceptions permitted in clauses (A) and (B) above shall automatically
terminate upon the occurrence of an Event of Default.
(b) Impairment of Security Interest. Debtor will not take or fail
to take any action which would in any manner impair the value or
enforceability of Secured Party's security interest in any Collateral.
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(c) Possession of Collateral. Debtor will not cause or permit the
removal of any Collateral from its possession, control and risk of
loss, nor will Debtor cause or permit the removal of any Collateral
from the address on the first page hereof other than (i) as permitted
by Subsection 6(a), or (ii) in connection with the possession of any
Collateral by Secured Party, Senior Lenders or by their bailee.
(d) Goods. Debtor will not permit any Collateral which
constitutes goods to at any time (i) be covered by any document except
documents in the possession of the Senior Lenders, (ii) become so
related to, attached to or used in connection with any particular real
property so as to become a fixture upon such real property, or (iii)
be installed in or affixed to other goods so as to become an accession
to such other goods unless such other goods are subject to a security
interest under this Agreement.
(e) Compromise of Collateral. Debtor will not adjust, settle,
compromise, amend or modify any Collateral, except an adjustment,
settlement, compromise, amendment or modification in good faith and in
the ordinary course of business.
(f) Financing Statement Filings. Debtor recognizes that financing
statements pertaining to the Collateral have been or may be filed
where Debtor maintains any Collateral, has its records concerning any
Collateral or has its residence or chief executive office, as the case
may be. Without limitation of any other covenant herein, Debtor will
not cause or permit any change in the location of (i) any Collateral,
(ii) any records concerning any Collateral, or (iii) Debtor's chief
executive office to a jurisdiction other than as represented in
Subsection 4(g) unless Debtor shall have notified Secured Party in
writing of such change at least thirty (30) days prior to the
effective date of such change, and shall have first taken all action
required by Secured Party for the purpose of further perfecting or
protecting the security interest in favor of Secured Party in the
Collateral. In any written notice furnished pursuant to this
Subsection, Debtor will expressly state that the notice is required by
this Agreement and contains facts that may require additional filings
of financing statements or other notices for the purpose of continuing
perfection of Secured Party's security interest in the Collateral.
7. RIGHTS OF SECURED PARTY. Secured Party shall have the rights
contained in this Section 7 at all times during the period of time this
Agreement is effective.
(a) Additional Financing Statements Filings. Debtor hereby
authorizes Secured Party to file, without the signature of Debtor, one
or more financing or continuation statements, and amendments thereto,
relating to the Collateral. Debtor further agrees that a carbon,
photographic or other reproduction of this Security Agreement or any
financing statement describing any Collateral is sufficient as a
financing statement and may be filed in any jurisdiction Secured Party
may deem appropriate.
(b) Power of Attorney. Debtor hereby irrevocably appoints Secured
Party as Debtor's attorney-in-fact, such power of attorney being
coupled with an interest, with full authority in the place and stead
of Debtor and in the name of Debtor or otherwise, after the occurrence
of an Event of Default and subject to the provisions of the Debtor's
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obligations to Senior Lenders, to take any action and to execute any
instrument which Secured Party may deem necessary or appropriate to
accomplish the purposes of this Agreement, including without
limitation: (i) to obtain and adjust insurance required by Secured
Party hereunder; (ii) to demand, collect, ▇▇▇ for, recover, compound,
receive and give acquittance and receipts for moneys due and to become
due under or in respect of the Collateral; (iii) to receive, endorse
and collect any drafts or other instruments, documents and chattel
paper in connection with clause (i) or (ii) above; and (iv) to file
any claims or take any action or institute any proceedings which
Secured Party may deem necessary or appropriate for the collection
and/or preservation of the Collateral or otherwise to enforce the
rights of Secured Party with respect to the Collateral.
8. EVENTS OF DEFAULT. Each of the following constitutes an "EVENT OF
DEFAULT" under this Agreement:
(a) Default in Payment. The failure, refusal or neglect of Debtor
to repay the Indebtedness, as the same shall become due and payable,
and such failure, refusal or neglect to repay the Indebtedness when
due and payable remains unremedied for a period of thirty (30) days
after notice of such failure, refusal or neglect is given by Secured
Party; or
(b) Non-Performance of Covenants. The failure (other than as
referred to in Subsection (a) above) of Debtor to timely and properly
observe, keep or perform any covenant, agreement, warranty or
condition required herein and such failure remains unremedied for a
period of thirty (30) days after notice of such failure is given by
Secured Party to Debtor; or
(c) Debtor's Bankruptcy or Insolvency. If Debtor (i) becomes
insolvent, or makes a transfer in fraud of creditors, or makes an
assignment for the benefit of creditors, or admits in writing its
inability to pay its debts as they become due; (ii) generally is not
paying its debts as such debts become due; (iii) has a receiver,
trustee or custodian appointed for, or take possession of, all or
substantially all of the assets of such party or any of the
Collateral, either in a proceeding brought by such party or in a
proceeding brought against such party and such appointment is not
discharged or such possession is not terminated within ninety (90)
days after the effective date thereof or such party consents to or
acquiesces in such appointment or possession; (iv) files a petition
for relief under the United States Bankruptcy Code or any other
present or future federal or state insolvency, bankruptcy or similar
laws (all of the foregoing hereinafter collectively called "APPLICABLE
BANKRUPTCY LAW") or an involuntary petition for relief is filed
against such party under any Applicable Bankruptcy Law and such
involuntary petition is not dismissed within ninety (90) days after
the filing thereof, or an order for relief naming such party is
entered under any Applicable Bankruptcy Law, or any composition,
rearrangement, extension, reorganization or other relief of debtors
now or hereafter existing is requested or consented to by such party;
or (v) fails to have discharged within a period of ninety (90) days
any attachment, sequestration or similar writ levied upon any property
of such party.
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9. REMEDIES AND RELATED RIGHTS. If an Event of Default shall have
occurred, and without limiting any other rights and remedies provided herein, or
otherwise available to Secured Party, but subject to the provisions of the
rights of Senior Lenders under the Senior Debt, Secured Party may exercise one
or more of the rights and remedies provided in this Section.
(a) Remedies. Secured Party may from time to time at its
discretion, without limitation and without notice except as expressly
provided herein:
(i) exercise in respect of the Collateral all the rights and
remedies of a secured party under the Code (whether or not the
Code applies to the affected Collateral);
(ii) require Debtor to, and Debtor hereby agrees that it
will at its expense and upon request of Secured Party, assemble
the Collateral as directed by Secured Party and make it available
to Secured Party at a place to be designated by Secured Party
which is reasonably convenient to both parties;
(iii) reduce its claim to judgment or foreclose or otherwise
enforce, in whole or in part, the security interest granted
hereunder by any available judicial procedure;
(iv) sell or otherwise dispose of, at its office, on the
premises of Debtor or elsewhere, the Collateral, as a unit or in
parcels, by public or private proceedings, and by way of one or
more contracts (it being agreed that the sale or other
disposition of any part of the Collateral shall not exhaust
Secured Party's power of sale, but sales or other dispositions
may be made from time to time until all of the Collateral has
been sold or disposed of or until the Indebtedness has been paid
and performed in full), and at any such sale or other disposition
it shall not be necessary to exhibit any of the Collateral;
(v) buy the Collateral, or any portion thereof, at any
public sale;
(vi) buy the Collateral, or any portion thereof, at any
private sale if the Collateral is of a type customarily sold in a
recognized market or is of a type which is the subject of widely
distributed standard price quotations;
(vii) apply for the appointment of a receiver for the
Collateral, and Debtor hereby consents to any such appointment;
and
(viii) at its option, retain the Collateral in satisfaction
of the Indebtedness whenever the circumstances are such that
Secured Party is entitled to do so under the Code or otherwise.
Debtor agrees that in the event Debtor is entitled to receive any notice under
the Uniform Commercial Code, as it exists in the state governing any such
notice, of the sale or other disposition of any Collateral, reasonable notice
shall be deemed given when such notice is deposited in a depository receptacle
under the care and custody of the United States Postal Service, postage prepaid,
at Debtor's address set forth on the first page hereof, ten (10) days prior
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to the date of any public sale, or after which a private sale, of any of such
Collateral is to be held. Secured Party shall not be obligated to make any sale
of Collateral regardless of notice of sale having been given. Secured Party may
adjourn any public or private sale from time to time by announcement at the time
and place fixed therefor, and such sale may, without further notice, be made at
the time and place to which it was so adjourned.
(b) Private Sale of Securities. Debtor recognizes that Secured
Party may be unable to effect a public sale of all or any part of the
Securities because of restrictions in applicable federal and state
securities laws and that Secured Party may, therefore, determine to
make one or more private sales of any of the Securities to a
restricted group of purchasers who will be obligated to agree, among
other things, to acquire any of the Securities for their own account,
for investment and not with a view to the distribution or resale
thereof. Debtor acknowledges that any such private sale may be at
prices and other terms less favorable than what might have been
obtained at a public sale and, notwithstanding the foregoing, agrees
that each such private sale shall be deemed to have been made in a
commercially reasonable manner and that Secured Party shall have no
obligation to delay the sale of any of the Securities for the period
of time necessary to permit the issuer to register such Securities for
public sale under any federal or state securities laws. Debtor further
acknowledges and agrees that any offer to sell such Securities which
has been made privately in the manner described above to not less than
five (5) bona fide offerees shall be deemed to involve a "public sale"
for the purposes of Section 9.504(c) of the Code, notwithstanding that
such sale may not constitute a "public offering" under any federal or
state securities laws and that Secured Party may, in such event, bid
for the purchase of such Securities.
(c) Application of Proceeds. If any Event of Default shall have
occurred, Secured Party may at its discretion apply or use any cash
held by Secured Party as Collateral, and any cash proceeds received by
Secured Party in respect of any sale or other disposition of,
collection from, or other realization upon, all or any part of the
Collateral as follows in such order and manner as Secured Party may
elect:
(i) to the repayment or reimbursement of the reasonable
costs and expenses (including, without limitation, reasonable
attorneys' fees and expenses) incurred by Secured Party in
connection with (A) the administration of the Loan Documents, (B)
the custody, preservation, use or operation of, or the sale of,
collection from, or other realization upon, the Collateral, and
(C) the exercise or enforcement of any of the rights and remedies
of Secured Party hereunder;
(ii) to the payment or other satisfaction of any liens and
other encumbrances upon the Collateral;
(iii) to the satisfaction of the Indebtedness;
(iv) to the payment of any other amounts required by
applicable law (including without limitation, Section 9.504(a)(3)
of the Code or any other applicable statutory provision); and
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(v) by delivery to Debtor or any other party lawfully
entitled to receive such cash or proceeds whether by direction of
a court of competent jurisdiction or otherwise.
(d) Deficiency. In the event that the proceeds of any sale of,
collection from, or other realization upon, all or any part of the
Collateral by Secured Party are insufficient to pay all amounts to
which Secured Party is legally entitled, Debtor and any party who
guaranteed or is otherwise obligated to pay all or any portion of the
Indebtedness shall be liable for the deficiency, together with
interest thereon as provided in the Loan Documents.
(e) Non-Judicial Remedies. In granting to Secured Party the power
to enforce its rights hereunder without prior judicial process or
judicial hearing, Debtor expressly waives, renounces and knowingly
relinquishes any legal right which might otherwise require Secured
Party to enforce its rights by judicial process. Debtor recognizes and
concedes that non-judicial remedies are consistent with the usage of
trade, are responsive to commercial necessity and are the result of a
bargain at arm's length. Nothing herein is intended to prevent Secured
Party or Debtor from resorting to judicial process at either party's
option.
(f) Other Recourse. Debtor waives any right to require Secured
Party to proceed against any third party, exhaust any Collateral or
other security for the Indebtedness, or to have any third party joined
with Debtor in any suit arising out of the Indebtedness or any of the
Loan Documents, or pursue any other remedy available to Secured Party.
Debtor further waives any and all notice of acceptance of this
Agreement and of the creation, modification, rearrangement, renewal or
extension of the Indebtedness. Debtor further waives any defense
arising by reason of any disability or other defense of any third
party or by reason of the cessation from any cause whatsoever of the
liability of any third party. Until all of the Indebtedness shall have
been paid in full, Debtor shall have no right of subrogation and
Debtor waives the right to enforce any remedy which Secured Party has
or may hereafter have against any third party, and waives any benefit
of and any right to participate in any other security whatsoever now
or hereafter held by Secured Party. Debtor authorizes Secured Party,
and without notice or demand and without any reservation of rights
against Debtor and without affecting Debtor's liability hereunder or
on the Indebtedness to (i) take or hold any other property of any type
from any third party as security for the Indebtedness, and exchange,
enforce, waive and release any or all of such other property, (ii)
apply such other property and direct the order or manner of sale
thereof as Secured Party may in its discretion determine, (iii) renew,
extend, accelerate, modify, compromise, settle or release any of the
Indebtedness or other security for the Indebtedness, (iv) waive,
enforce or modify any of the provisions of any of the Loan Documents
executed by any third party, and (v) release or substitute any third
party.
10. INDEMNITY. DEBTOR HEREBY INDEMNIFIES AND AGREES TO HOLD HARMLESS
SECURED PARTY, AND ITS REPRESENTATIVES (EACH AN "INDEMNIFIED PERSON") FROM AND
AGAINST ANY AND ALL LIABILITIES, OBLIGATIONS, CLAIMS, LOSSES, DAMAGES,
PENALTIES, ACTIONS, JUDGMENTS,
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SUITS, COSTS, EXPENSES OR DISBURSEMENTS OF ANY KIND OR NATURE (COLLECTIVELY, THE
"CLAIMS") WHICH MAY BE IMPOSED ON, INCURRED BY, OR ASSERTED AGAINST, ANY
INDEMNIFIED PERSON ARISING IN CONNECTION WITH THE LOAN DOCUMENTS, THE
INDEBTEDNESS OR THE COLLATERAL (INCLUDING WITHOUT LIMITATION, THE ENFORCEMENT OF
THE LOAN DOCUMENTS AND THE DEFENSE OF ANY INDEMNIFIED PERSON'S ACTIONS AND/OR
INACTIONS IN CONNECTION WITH THE LOAN DOCUMENTS) PROVIDED THAT NO INDEMNIFIED
PERSON SHALL BE INDEMNIFIED HEREUNDER FOR ITS OWN GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT. THE PARTIES ACKNOWLEDGE THAT THE INDEMNIFICATION PROVIDED FOR IN
THIS SECTION SHALL BE PERMITTED IN THE EVENT OF THE NEGLIGENCE (BUT NOT GROSS
NEGLIGENCE) OF AN INDEMNIFIED PERSON. THE INDEMNIFICATION PROVIDED FOR IN THIS
SECTION SHALL SURVIVE THE TERMINATION OF THIS AGREEMENT AND SHALL EXTEND AND
CONTINUE TO BENEFIT EACH INDIVIDUAL OR ENTITY WHO IS OR HAS AT ANY TIME BEEN AN
INDEMNIFIED PERSON HEREUNDER.
11. MISCELLANEOUS.
(a) Entire Agreement. This Agreement and the other Loan Documents
contain the entire agreement of Secured Party and Debtor with respect
to the Collateral. If the parties hereto are parties to any prior
agreement, either written or oral, relating to the Collateral, the
terms of this Agreement shall amend and supersede the terms of such
prior agreements as to transactions on or after the effective date of
this Agreement, but all security agreements, financing statements,
guaranties, other contracts and notices for the benefit of Secured
Party shall continue in full force and effect to secure the
Indebtedness unless Secured Party specifically releases its rights
thereunder by separate release.
(b) Amendment. No modification, consent or amendment of any
provision of this Agreement or any of the other Loan Documents shall
be valid or effective unless the same is in writing and signed by the
party against whom it is sought to be enforced.
(c) Actions by Secured Party. The lien, security interest and
other security rights of Secured Party hereunder shall not be impaired
by (i) any renewal, extension, increase or modification with respect
to the Indebtedness, (ii) any surrender, compromise, release, renewal,
extension, exchange or substitution which Secured Party may grant with
respect to the Collateral, or (iii) any release or indulgence granted
to any endorser, guarantor or surety of the Indebtedness. The taking
of additional security by Secured Party shall not release or impair
the lien, security interest or other security rights of Secured Party
hereunder or affect the obligations of Debtor hereunder.
(d) Waiver by Secured Party. Secured Party may waive any Event of
Default without waiving any other prior or subsequent Event of
Default. Secured Party may remedy any default without waiving the
Event of Default remedied. Neither the failure by Secured Party to
exercise, nor the delay by Secured Party in exercising, any right or
remedy upon any Event of Default shall be construed as a waiver of
such Event of Default or as a waiver of the right to exercise any such
right or remedy at a later date. No single or partial exercise by
Secured Party of any right or remedy hereunder shall exhaust
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the same or shall preclude any other or further exercise thereof, and
every such right or remedy hereunder may be exercised at any time. No
waiver of any provision hereof or consent to any departure by Debtor
therefrom shall be effective unless the same shall be in writing and
signed by Secured Party and then such waiver or consent shall be
effective only in the specific instances, for the purpose for which
given and to the extent therein specified. No notice to or demand on
Debtor in any case shall of itself entitle Debtor to any other or
further notice or demand in similar or other circumstances.
(e) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS AND
APPLICABLE FEDERAL LAWS, EXCEPT TO THE EXTENT PERFECTION AND THE
EFFECT OF PERFECTION OR NON-PERFECTION OF THE SECURITY INTEREST
GRANTED HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL, ARE
GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF TEXAS.
(f) Venue. This Agreement has been entered into in the county in
Texas where Secured Party's address for notice purposes is located,
and it shall be performable for all purposes in such county. Courts
within the State of Texas shall have jurisdiction over any and all
disputes arising under or pertaining to this Agreement and venue for
any such disputes shall be in the county or judicial district where
this Agreement has been executed and delivered.
(g) Severability. If any provision of this Agreement is held by a
court of competent jurisdiction to be illegal, invalid or
unenforceable under present or future laws, such provision shall be
fully severable, shall not impair or invalidate the remainder of this
Agreement and the effect thereof shall be confined to the provision
held to be illegal, invalid or unenforceable.
(h) No Obligation. Nothing contained herein shall be construed as
an obligation on the part of Secured Party to extend or continue to
extend credit to Debtor.
(i) Notices. All notices, requests, demands or other
communications required or permitted to be given pursuant to this
Agreement shall be in writing and given by (i) personal delivery, (ii)
expedited delivery service with proof of delivery, or (iii) United
States mail, postage prepaid, registered or certified mail, return
receipt requested, sent to the intended addressee at the address set
forth on the first page hereof or to such different address as the
addressee shall have designated by written notice sent pursuant to the
terms hereof and shall be deemed to have been received either, at the
time of personal delivery, or as of the date of first attempted
delivery at the address and in the manner provided herein, during
normal business hours. Either party shall have the right to change its
address for notice hereunder to any other location within the
continental United States by notice to the other party of such new
address at least thirty (30) days prior to the effective date of such
new address.
(j) Binding Effect and Assignment. This Agreement (i) creates a
continuing security interest in the Collateral, (ii) shall be binding
on Debtor and the successors and
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assigns of Debtor, and (iii) shall inure to the benefit of Secured
Party and its successors and assigns. Debtor's rights and obligations
hereunder may not be assigned or otherwise transferred without the
prior written consent of Secured Party.
(k) Cumulative Rights. All rights and remedies of Secured Party
hereunder are cumulative of each other and of every other right or
remedy which Secured Party may otherwise have at law or in equity or
under any of the other Loan Documents, and the exercise of one or more
of such rights or remedies shall not prejudice or impair the
concurrent or subsequent exercise of any other rights or remedies.
(l) Gender and Number. Within this Agreement, words of any gender
shall be held and construed to include the other gender, and words in
the singular number shall be held and construed to include the plural
and words in the plural number shall be held and construed to include
the singular, unless in each instance the context requires otherwise.
(m) Descriptive Headings. The headings in this Agreement are for
convenience only and shall in no way enlarge, limit or define the
scope or meaning of the various and several provisions hereof.
[REMAINDER OF PAGE LEFT BLANK INTENTIONALLY.]
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EXECUTED as of the date first written above.
DEBTOR:
MIGRATEC, INC.
By: /s/ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
---------------------------------------------
Name: ▇. ▇▇▇▇▇▇ Brechbuhl
Title: President and Chief Financial Officer
SECURED PARTY:
MERCURY FUND NO. 1, LTD.
By: MERCURY VENTURES, LTD.
General Partner
By: MERCURY MANAGEMENT, L.L.C.
General Partner
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇
------------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇
Title: Manager
Security Agreement Signature Page
