EXHIBIT 10. 3
RESTATED SECURITY AGREEMENT
This RESTATED SECURITY AGREEMENT (this "AGREEMENT") is made as of the 15th
day of June, 1998, by USCOMMUNICATION SERVICES, INC., a Delaware corporation
("BORROWER") in favor of CANMAX TELECOM, INC., a Texas corporation ("LENDER").
Borrower hereby agrees with Lender 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 Uniform Commercial 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:
(i) All present and future accounts, chattel paper, documents,
instruments, deposit accounts and general intangibles (including any
right to payment for goods sold or services rendered arising out of
the sale or delivery of personal property or work done or labor
performed by Borrower), now or hereafter owned, held, or acquired by
Borrower, together with any and all books of account, customer lists
and other records relating in any way to the foregoing (including,
without limitation, computer software, whether on tape, disk, card,
strip, cartridge or any other form), and in any case where an account
arises from the sale of goods, the interest of Borrower in such goods.
(ii) All present and hereafter acquired inventory (including
without limitation, all raw materials, work in process and finished
goods) held, possessed, owned, held on consignment, or held for
sale, lease, return or to be furnished under contracts of services,
in whole or in part, by Borrower wherever located, all records
relating in any way to the foregoing (including, without limitation,
any computer software, whether on tape, disk, card, strip, cartridge
or any other form).
(iii) All equipment and fixtures of whatsoever kind and
character now or hereafter possessed, held, acquired, leased or
owned by Borrower and used or usable in Borrower's business,
together with all replacements, accessories, additions,
substitutions and accessions to all of the foregoing, all records
relating in any way to the foregoing (including, without limitation,
any computer software, whether on tape, disk, card, strip, cartridge
or any other form). To the extent that the foregoing property is
located on, attached to, annexed to, related to, or used in
connection with, or otherwise made a part of, and is or shall become
fixtures upon, real property, such real property and the record
owner thereof is described on EXHIBIT "A" attached hereto and made a
part hereof.
The term Collateral, as used herein, shall also include all PRODUCTS and
PROCEEDS of all of the foregoing (including without limitation, insurance
payable by reason of loss or damage to the foregoing property) and any property,
securities, guaranties or monies of Borrower which may at any time come into the
possession of Secured Party (as hereinafter defined). The designation of
proceeds does not authorize Borrower to sell, transfer or otherwise convey any
of the foregoing property except finished goods intended for sale in the
ordinary course of Borrower's business or as otherwise provided herein.
(c) The term "INDEBTEDNESS" shall mean (i) all indebtedness,
obligations and liabilities of Borrower to Secured Party or Canmax Inc.
of any kind or character, now existing or hereafter arising, whether
direct, indirect, related, unrelated, fixed, contingent, liquidated,
unliquidated, joint, several or joint and several, (ii) all accrued but
unpaid interest on any of the indebtedness described in (i) above, (iii)
all obligations of Borrower to Secured Party under any documents
evidencing, securing, governing and/or pertaining to all or any part of
the indebtedness described in (i) and (ii) above, (iv) 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), (ii) and (iii) above or the protection or preservation
of, or realization upon, the collateral securing all or any part of such
indebtedness and obligations, including
RESTATED SECURITY AGREEMENT - PAGE 1
without limitation all reasonable attorneys' fees, and (v) all renewals,
extensions, modifications and rearrangements of the indebtedness and
obligations described in (i), (ii), (iii) and (iv) above.
(d) The term "LOAN DOCUMENTS" shall mean all instruments and
documents evidencing, securing, governing, guaranteeing and/or pertaining
to the Indebtedness, including without limitation the Rescission
Agreement dated the date hereof between, among others, Borrower and
Secured Party (the "RESCISSION AGREEMENT").
(e) The term "OBLIGATED PARTY" shall mean any party other than
Borrower who secures, guarantees and/or is otherwise obligated to pay all
or any portion of the Indebtedness.
(f) The term "SECURED PARTY" shall mean Lender, its successors and
assigns, including without limitation, any party to whom Lender, or its
successors or assigns, may assign its rights and interests under this
Agreement.
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, Borrower, for
value received, hereby grants to Secured Party a continuing security interest
in the Collateral. This Agreement is executed in partial substitution and
replacement of the security arrangements existing between Debtor and Secured
Party as of the date hereof.
3. REPRESENTATIONS AND WARRANTIES. Borrower hereby represents and
warrants the following to Secured Party:
(a) DUE AUTHORIZATION. The execution, delivery and performance of
this Agreement and all of the other Loan Documents by Borrower have been
duly authorized by all necessary corporate action of Borrower.
(b) ENFORCEABILITY. This Agreement and the other Loan Documents
constitute legal, valid and binding obligations of Borrower, 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.
(c) OWNERSHIP AND LIENS. Except for encumbrances existing on the
date hereof and disclosed to Secured Party, (i) Borrower 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; (ii) no dispute, right of setoff,
counterclaim or defense exists with respect to all or any part of the
Collateral; and (iii) Borrower 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.
(d) NO CONFLICTS OR CONSENTS. Neither the ownership, the intended
use of the Collateral by Borrower, the grant of the security interest by
Borrower to Secured Party herein nor the exercise by Secured Party of its
rights or remedies hereunder, will (i) conflict with any provision of (A)
any domestic or foreign law, statute, rule or regulation, (B) the
articles or certificate of incorporation, charter, bylaws or partnership
agreement, as the case may be, of Borrower, or (C) any agreement,
judgment, license, order or permit applicable to or binding upon
Borrower, or (ii) result in or require the creation of any lien, charge
or encumbrance upon any assets or properties of Borrower 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 Borrower of the security interest herein or the exercise by
Secured Party of its rights and remedies hereunder.
RESTATED SECURITY AGREEMENT - PAGE 2
(e) SECURITY INTEREST. Borrower 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, except for any liens in
existence on the date hereof and disclosed to Secured Party. 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 Borrower to Secured
Party will perfect and establish the first priority of Secured Party's
security interest hereunder in the Collateral, except for any liens in
existence on the date hereof and disclosed to Secured Party.
(f) LOCATION. Borrower'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 signature
page hereof. Except as specified elsewhere herein, all Collateral shall
be kept at such address and such other addresses as may be listed in
SCHEDULE "A" attached hereto and made a part hereof.
(g) SOLVENCY OF BORROWER. As of the date hereof, and after giving
effect to this Agreement and the completion of all other transactions
contemplated by Borrower at the time of the execution of this Agreement,
and Secured Party acknowledges that as of the date hereof, (i) Borrower
is and will be solvent, (ii) the fair saleable value of Borrower's assets
exceeds and will continue to exceed Borrower's liabilities (both fixed
and contingent), (iii) Borrower is paying and will continue to be able to
pay its debts as they mature, and (iv) if Borrower is not an individual,
Borrower has and will have sufficient capital to carry on Borrower's
businesses and all businesses in which Borrower is about to engage.
(h) 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
Borrower by its account Borrowers.
(i) ACCOUNTS. Each account represents the valid and legally binding
indebtedness of a bona fide account Borrower arising from the sale or lease
by Borrower of goods or the rendition by Borrower of services and is not
subject to contra accounts, setoffs, defenses or counterclaims by or
available to account Borrowers obligated on the accounts except as
disclosed by Borrower to Secured Party from time to time in writing. The
amount shown as to each account on Borrower'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 Borrower
has a right and which have been disclosed to Secured Party in writing.
(j) CHATTEL PAPER, DOCUMENTS AND INSTRUMENTS. The chattel paper,
documents and instruments of Borrower pledged hereunder have only one
original counterpart and no party other than Borrower or Secured Party is
in actual or constructive possession of any such chattel paper, documents
or instruments.
4. AFFIRMATIVE COVENANTS. Borrower will comply with the covenants
contained in this Section 4 at all times during the period of time this
Agreement is effective unless Secured Party shall otherwise consent in writing.
(a) OWNERSHIP AND LIENS. Borrower 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 expressly permitted by the other Loan Documents. Borrower
will not permit any dispute, right of setoff, counterclaim or defense to
exist with respect to all or any part of the Collateral. Borrower 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. Borrower will defend at its
expense Secured Party's right, title and security interest in and to the
Collateral against the claims of any third party.
(b) FURTHER ASSURANCES. Borrower 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
RESTATED SECURITY AGREEMENT - PAGE 3
that Secured Party may request in order (i) to perfect and protect the
security interest created or purported to be created hereby and the first
priority of such security interest, (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. Borrower 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.
(d) PAYMENT OF TAXES. Borrower (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.
Notwithstanding any other provision contained in this Subsection, Secured
Party may at its discretion exercise its rights under Subsection 6(c) at
any time to pay such taxes, assessments, governmental charges, interest,
costs and penalties.
(e) MORTGAGEE'S AND LANDLORD'S WAIVERS. Borrower shall cause each
landlord of real property leased by Borrower to execute and deliver
agreements satisfactory in form and substance to Secured Party by which
such mortgagee or landlord waives or subordinates any rights it may have in
the Collateral.
(f) CONDITION OF GOODS. Borrower 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. Borrower will promptly make or cause to be
made all repairs, replacements and other improvements to or in connection
with the Collateral which Secured Party may request from time to time.
(g) INSURANCE. Borrower 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 Secured Party from time to time. If requested
by Secured Party, each policy for property damage insurance shall provide
for all losses to be paid directly to Secured Party. If requested by
Secured Party, each policy of insurance maintained by Borrower shall (i)
name Borrower and Secured Party as insured parties thereunder (without
any representation or warranty by or obligation upon Secured Party) as
their interests may appear, (ii) contain the agreement by the insurer
that any loss thereunder shall be payable to Secured Party
notwithstanding any action, inaction or breach of representation or
warranty by Borrower, (iii) provide that there shall be no recourse
against Secured Party for payment of premiums or other amounts with
respect thereto, and (iv) provide that at least thirty (30) days prior
written notice of cancellation or of lapse shall be given to Secured
Party by the insurer. Borrower will, if requested by Secured Party,
deliver to Secured Party original or duplicate policies of such insurance
and, as often as Secured Party may reasonably request, a report of a
reputable insurance broker with respect to such insurance. Borrower will
also, at the request of Secured Party, duly execute and deliver
instruments of assignment of such insurance policies and cause the
respective insurers to acknowledge notice of such assignment. All
insurance payments in respect of loss of or damage to any Collateral
shall be paid to Secured Party and applied as Secured Party in its sole
discretion deems appropriate.
(h) ACCOUNTS AND GENERAL INTANGIBLES. Borrower will, except as
otherwise provided in Subsection 6(f), collect, at Borrower's own
expense, all amounts due or to become due under each of the accounts and
general intangibles. In connection with such collections, Borrower may
and, at Secured
RESTATED SECURITY AGREEMENT - PAGE 4
Party's direction, will take such action not otherwise forbidden by
Subsection 5(e) as Borrower or Secured Party may deem necessary or
advisable to enforce collection or performance of each of the accounts and
general intangibles. Borrower 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. Borrower also covenants and agrees to take any
action and/or execute any documents that Secured Party may request in order
to comply with the Federal Assignment of Claims Act, as amended.
(i) CHATTEL PAPER, DOCUMENTS AND INSTRUMENTS. Borrower will take
such action as may be requested by Secured Party in order to cause any
chattel paper, documents or instruments to be valid and enforceable and
will cause all chattel paper to have only one original counterpart. Upon
request by Secured Party, Borrower will deliver to Secured Party all
originals of chattel paper, documents or instruments and will ▇▇▇▇ all
chattel paper with a legend indicating that such chattel paper is subject
to the security interest granted hereunder.
5. NEGATIVE COVENANTS. Borrower 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) TRANSFER OR ENCUMBRANCE. Borrower 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 (iii) deliver actual or constructive possession of any of the
Collateral to any party other than Secured Party, except for (A) sales and
leases of inventory in the ordinary course of business, and (B) the sale or
other disposal of any item of equipment which is worn out or obsolete and
which has been replaced by an item of equal suitability and value, owned by
Borrower and made subject to the security interest under this Agreement,
but which is otherwise free and clear of any lien, security interest,
encumbrance or adverse claim; 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. Borrower 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.
(b) POSSESSION OF COLLATERAL. Borrower will not cause or permit the
removal of any Collateral from its possession, control and risk of loss,
nor will Borrower cause or permit the removal of any Collateral from the
address on the signature page hereof and the addresses specified on
SCHEDULE "B" to this Agreement other than (i) as permitted by Subsection
5(a), or (ii) in connection with the possession of any Collateral by
Secured Party or by its bailee.
(d) GOODS. Borrower 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 Secured Party, (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 perfected first priority security interest
under this Agreement.
(e) COMPROMISE OF COLLATERAL. Borrower 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; provided, however, this exception shall
automatically terminate upon the occurrence of an Event of Default or upon
Secured Party's written request. Borrower shall provide to Secured Party
such information concerning (i) any adjustment, settlement, compromise,
amendment or modification of any Collateral, and (ii) any claim asserted by
any account Borrower for credit, allowance, adjustment, dispute, setoff or
counterclaim, as Secured Party may request from time to time.
RESTATED SECURITY AGREEMENT - PAGE 5
(f) FINANCING STATEMENT FILINGS. Borrower recognizes that financing
statements pertaining to the Collateral have been or may be filed where
Borrower 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, Borrower will not
cause or permit any change in the location of (i) any Collateral, (ii) any
records concerning any Collateral, or (iii) Borrower's residence or chief
executive office, as the case may be, to a jurisdiction other than as
represented in Subsection 3(f) unless Borrower 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,
Borrower 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.
6. RIGHTS OF SECURED PARTY. Secured Party shall have the rights
contained in this Section 6 at all times during the period of time this
Agreement is effective.
(a) ADDITIONAL FINANCING STATEMENTS FILINGS. Borrower hereby
authorizes Secured Party to file, without the signature of Borrower, one
or more financing or continuation statements, and amendments thereto,
relating to the Collateral. Borrower 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. Borrower hereby irrevocably appoints
Secured Party as Borrower's attorney-in-fact, such power of attorney
being coupled with an interest, with full authority in the place and
stead of Borrower and in the name of Borrower or otherwise, from time to
time in Secured Party's discretion, 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.
(c) PERFORMANCE BY SECURED PARTY. If Borrower fails to perform any
agreement or obligation provided herein, Secured Party may itself perform,
or cause performance of, such agreement or obligation, and the expenses of
Secured Party incurred in connection therewith shall be a part of the
Indebtedness, secured by the Collateral and payable by Borrower on demand.
(d) BORROWER'S RECEIPT OF PROCEEDS. All amounts and proceeds
(including instruments and writings) received by Borrower in respect of
such accounts or general intangibles shall be received in trust for the
benefit of Secured Party hereunder and, upon an Event of Default and
request of Secured Party, shall be segregated from other property of
Borrower and shall be forthwith delivered to Secured Party in the same
form as so received (with any necessary endorsement) and applied to the
Indebtedness in such manner as Secured Party deems appropriate in its
sole discretion.
(e) NOTIFICATION OF ACCOUNT BORROWERS. Secured Party may, upon an
Event of Default, notify any or all obligors under any accounts or
general intangibles (i) of Secured Party's security interest in such
accounts or general intangibles and direct such obligors to make payment
of all amounts due or to become due to Borrower thereunder directly to
Secured Party, and (ii) to verify the accounts or general intangibles
with such obligors. Secured Party shall have the right, at the expense of
Borrower, to enforce collection of any such accounts or general
intangibles and to adjust, settle or compromise the amount or payment
thereof, in the same manner and to the same extent as Borrower.
RESTATED SECURITY AGREEMENT - PAGE 6
7. EVENTS OF DEFAULT. Each of the following constitutes an "EVENT OF
DEFAULT" under this Agreement:
(a) FAILURE TO PAY INDEBTEDNESS. The failure, refusal or neglect of
Borrower to make any payment of principal or interest on the Indebtedness,
or any portion thereof, as the same shall become due and payable; or
(b) NON-PERFORMANCE OF COVENANTS. The failure of Borrower or any
Obligated Party to timely and properly observe, keep or perform any
covenant, agreement, warranty or condition required herein or in any of the
other Loan Documents; or
(c) DEFAULT UNDER OTHER LOAN DOCUMENTS. The occurrence of an event
of default under any of the other Loan Documents (other than attributable
to the insolvency or bankruptcy of ▇▇▇▇▇ ▇. ▇▇▇▇▇▇); or
(d) FALSE REPRESENTATION. Any representation contained herein or
in any of the other Loan Documents made by Borrower or any Obligated
Party is false or misleading in any material respect; or
(e) BANKRUPTCY OR INSOLVENCY. If Borrower or any Obligated Party
(other than ▇▇▇▇▇ ▇. ▇▇▇▇▇▇): (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 sixty (60) 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 sixty (60) 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
Borrowers now or hereafter existing is requested or consented to by such
party; (v) fails to have discharged within a period of sixty (60) days
any attachment, sequestration or similar writ levied upon any property of
such party; or (vi) fails to pay within thirty (30) days any final money
judgment against such party.
(f) ACTION BY OTHER LIENHOLDER. The holder of any lien or security
interest on any of the assets of Borrower, including without limitation,
the Collateral (without hereby implying the consent of Secured Party to the
existence or creation of any such lien or security interest on the
Collateral), declares a default thereunder or institutes foreclosure or
other proceedings for the enforcement of its remedies thereunder; or
(g) LIQUIDATION AND RELATED EVENTS. The liquidation, dissolution,
merger or consolidation of Borrower.
8. REMEDIES AND RELATED RIGHTS. If an Event of Default shall have
occurred, and without limiting any other rights and remedies provided herein,
under any of the other Loan Documents or otherwise available to Secured Party,
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 in any
of the Loan Documents:
(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 Borrower to, and Borrower 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
RESTATED SECURITY AGREEMENT - PAGE 7
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 Borrower 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 Borrower 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.
Borrower agrees that in the event Borrower 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 Borrower's address set forth on the signature
page hereof, five (5) days prior 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) 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) by holding such cash and proceeds as Collateral;
RESTATED SECURITY AGREEMENT - PAGE 8
(v) 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
(vi) by delivery to Borrower or any other party lawfully
entitled to receive such cash or proceeds whether by direction of a
court of competent jurisdiction or otherwise.
(c) 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, Borrower 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.
(d) NON-JUDICIAL REMEDIES. In granting to Secured Party the power to
enforce its rights hereunder without prior judicial process or judicial
hearing, Borrower expressly waives, renounces and knowingly relinquishes
any legal right which might otherwise require Secured Party to enforce its
rights by judicial process. Borrower 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 Borrower
from resorting to judicial process at either party's option.
(e) OTHER RECOURSE. Borrower 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
Borrower in any suit arising out of the Indebtedness or any of the Loan
Documents, or pursue any other remedy available to Secured Party.
Borrower further waives any and all notice of acceptance of this
Agreement and of the creation, modification, rearrangement, renewal or
extension of the Indebtedness. Borrower 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, Borrower shall have no right of subrogation and Borrower 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. Borrower authorizes Secured Party, and without notice or
demand and without any reservation of rights against Borrower and without
affecting Borrower'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.
9. INDEMNITY. Borrower hereby indemnifies and agrees to hold harmless
Secured Party, and its shareholders, officers, directors, employees, agents
and representatives (each an "INDEMNIFIED PERSON") from and against any and
all liabilities, obligations, claims, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or nature made
by or through Borrower or any Obligated Party (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). WITHOUT LIMITATION, THE FOREGOING
INDEMNITIES SHALL APPLY TO EACH INDEMNIFIED PERSON WITH RESPECT TO ANY CLAIMS
WHICH IN WHOLE OR IN PART ARE CAUSED BY OR ARISE OUT OF THE NEGLIGENCE OF SUCH
AND/OR ANY OTHER INDEMNIFIED PERSON, except to the limited extent the Claims
against an Indemnified Person are proximately caused by such Indemnified
Person's gross negligence or willful misconduct. If Borrower or any third
party ever alleges such gross negligence or willful misconduct by any
Indemnified Person, the indemnification provided for in this Section shall
nonetheless be paid upon demand, subject to later adjustment or reimbursement,
until such time as a court of competent jurisdiction enters a final judgment
as to the extent and effect of the alleged gross negligence or willful
misconduct. The indemnification provided for in this Section shall survive
the termination of this
RESTATED SECURITY AGREEMENT - PAGE 9
Agreement and shall extend and continue to benefit each individual or entity
who is or has at any time been an Indemnified Person hereunder.
10. MISCELLANEOUS.
(a) ENTIRE AGREEMENT. This Agreement contains the entire agreement
of Secured Party and Borrower 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 Borrower 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 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 Borrower 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 Borrower in any case shall of itself entitle Borrower to
any other or further notice or demand in similar or other circumstances.
(e) COSTS AND EXPENSES. Borrower will upon demand pay to Secured
Party the amount of any and all costs and expenses (including without
limitation, attorneys' fees and expenses), which Secured Party may incur
in connection with (i) the custody, preservation, use or operation of, or
the sale of, collection from, or other realization upon, the Collateral,
(ii) the exercise or enforcement of any of the rights of Secured Party
under the Loan Documents, or (iii) the failure by Borrower to perform or
observe any of the provisions hereof.
(f) 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.
(g) VENUE. This Agreement has been entered into in Dallas County,
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
RESTATED SECURITY AGREEMENT - PAGE 10
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.
(h) 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.
(i) 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 Borrower.
(j) 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 signature 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, in the case of personal delivery, at the time of
personal delivery, in the case of expedited delivery service, as of the
date of first attempted delivery at the address and in the manner provided
herein, or in the case of mail, upon deposit in a depository receptacle
under the care and custody of the United States Postal Service. 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.
(k) BINDING EFFECT AND ASSIGNMENT. This Agreement (i) creates a
continuing security interest in the Collateral, (ii) shall be binding on
Borrower and the heirs, executors, administrators, personal
representatives, successors and assigns of Borrower, and (iii) shall inure
to the benefit of Secured Party and its successors and assigns. Without
limiting the generality of the foregoing, Secured Party may pledge, assign
or otherwise transfer the Indebtedness and its rights under this Agreement
and any of the other Loan Documents to any other party. Borrower's rights
and obligations hereunder may not be assigned or otherwise transferred
without the prior written consent of Secured Party.
(l) TERMINATION. It is contemplated by the parties hereto that
from time to time there may be no outstanding Indebtedness, but
notwithstanding such occurrences, this Agreement shall remain valid and
shall be in full force and effect as to subsequent outstanding
Indebtedness. Upon (i) the satisfaction in full of the Indebtedness,
(ii) written request for the termination hereof delivered by Borrower to
Secured Party, and (iii) written release or termination delivered by
Secured Party to Borrower, this Agreement and the security interests
created hereby shall terminate. Upon termination of this Agreement and
Borrower's written request, Secured Party will, at Borrower's sole cost
and expense, return to Borrower such of the Collateral as shall not have
been sold or otherwise disposed of or applied pursuant to the terms
hereof and execute and deliver to Borrower such documents as Borrower
shall reasonably request to evidence such termination.
(m) 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.
(n) 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.
(o) 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.
RESTATED SECURITY AGREEMENT - PAGE 11
EXECUTED as of the date first written above.
Borrower's Address: BORROWER:
▇.▇. ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇ Services, Inc.
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, President
----------------------------------
Secured Party's Address: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, President
c/o Canmax Inc.
▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
RESTATED SECURITY AGREEMENT - PAGE 12