SECURITY AGREEMENT
This Security Agreement ("Security Agreement") by and between TECHALT,
INC., a Nevada corporation, having its principal place of business at 0000 X.
Xxxxxxxxx Xxx., Xxxxx X, Xxxxxxxxx Xxxxxxx, XX 00000 (hereinafter referred to as
"DEBTOR"), and XXXX XXXXXXX and SERVICES BY DESIGNWISE, LTD, 0000 Xxxxxxxxx
Xxxxxx, Xxxxxx, XX 00000, (collectively hereinafter referred to as the "SECURED
PARTY") made this ___ day of November 2004, and immediately effective upon the
Closing as defined in the Settlement Agreement of even date by and among,
DEBTOR, Technology Alternatives, Inc., an Illinois corporation, Xxxxx Xxxxxxx
and SECURED PARTY.
For value received the DEBTOR hereby grants the SECURED PARTY a security
interest in the following described property, hereinafter referred to as
COLLATERAL, to wit:
All of DEBTOR's accounts, accounts receivable, goods, equipment,
inventory, machinery, fixtures, cash, securities, all intellectual
property including trademarks, service marks, trade names, copyrights,
patents, licenses, including patent licenses, including the intellectual
property set forth on Exhibit A, contracts, and other tangible and
intangible property of DEBTOR together with all the additions,
substitutions, increments, proceeds and products, whether now owned or
later acquired. For purposes of this Agreement, "inventory" means goods
held for sale in DEBTOR'S business as now or hereafter conducted,
including all raw materials, supplies, goods in process, finished goods
and all other items customarily classified as inventory;
To secure hereinafter:
Payment in full of the obligations of the DEBTOR under the Settlement
Agreement of even date herewith among inter alia DEBTOR and SECURED PARTY
("Settlement Agreement"), and the Secured Convertible Promissory Note
("Note") and other Related Agreements as defined in the Settlement
Agreement including all costs of collection incurred by SECURED PARTY in
enforcing his rights hereunder.
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DEBTOR'S COVENANTS, REPRESENTATIONS AND WARRANTIES.
DEBTOR warrants, covenants, agrees, and represents the following:
1. TITLE. Except for the security interest granted hereunder and as permitted by
Xxxxxxxxx 0, XXXXXX has, or will have upon the occurrence of the Merger as
defined in the Note, full title to the COLLATERAL free from any liens, security
interest, encumbrances, or claims, and DEBTOR will, at the DEBTOR'S cost and
expense, defend any action which may affect SECURED PARTY's security interest,
or DEBTOR'S title to the COLLATERAL; provided, however, that SECURED PARTY
acknowledges that Hinsdale Bank & Trust has a first security interest on that
certain 2003 Ford Crown Victoria, and all accessories thereto, and that Hinsdale
Bank & Trust has not agreed to subordinate said security interest to that of
SECURED PARTY'S.
2. SUBORDINATION FOR CREDIT LINE. Prior to execution of this Agreement or at any
time hereafter provided no Event of Default (as defined herein) then exists, in
the event DEBTOR enters into a line of credit to finance operations ("Credit
Line") from a bank or other financial institution ("Lender"), the Credit Line
shall be secured by a lien against the COLLATERAL which lien shall be superior
in priority to the lien created hereunder. DEBTOR agrees (a) the Credit Line
shall not exceed the sum of $2,000,000.00 as set forth herein, whether by
principal payment or conversion; (b) unless otherwise agreed to in writing by
DEBTOR and SECURED PARTY, up to $1,125,000.00 of the Credit Line shall be used
solely (i) to purchase inventory and equipment for signed contracts or purchase
orders with DEBTOR'S customers; and (ii) to pay sums owed to SECURED PARTY under
this or any of the Related Agreements; and (c) unless otherwise agreed to in
writing by DEBTOR and SECURED PARTY, up to $875,000.00 of the Credit Line shall
be used solely to pay any of the expenses described in Exhibit B in the ordinary
course of business. SECURED PARTY agrees to execute such documents as are
reasonably necessary and required by Lender to consent to subordination of
SECURED PARTY'S lien to the lien to secure the Credit Line.
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Notwithstanding the foregoing, in the event DEBTOR intends to enter into a
Credit Line agreement with a Lender ("Credit Line Agreement"), prior to entering
into such Credit Line Agreement, DEBTOR shall first give the SECURED PARTY
written notice of DEBTOR'S intent to enter into the Credit Line Agreement,
including in said notice all of the relevant terms of such financing. SECURED
PARTY shall have fourteen (14) days ("Notice Period") from the receipt of
DEBTOR'S notice in which to secure financing for the benefit of DEBTOR on the
same or better terms as those set forth in the Credit Line Agreement ("Loan
Right of First Refusal"). If SECURED PARTY secures financing (the "Alternate
Credit Line") for the benefit of DEBTOR from a third-party lender ("Alternate
Lender") during the Notice Period on the same or better terms as those set forth
in the Credit Line Agreement and desires to execute its Loan Right of First
Refusal, it shall do so by delivering written notice of exercise to DEBTOR at
any time prior to expiration of the Notice Period. In event of SECURED PARTY'S
exercise of the Loan Right of First Refusal, (i) DEBTOR shall take any and all
reasonable steps to enter into Alternate Credit Line obtained by SECURED PARTY
in lieu of the line of credit set forth in the Credit Line Agreement, provided
the Alternate Lender is able to provide the Alternate Credit Line within
fourteen (14) days of the exercise of the Loan Right of First Refusal.
3. FINANCING STATEMENT. Except as disclosed in Section 1, no financing statement
covering the COLLATERAL or any part thereof or any proceeds thereof is on file
in any public office and, at the SECURED PARTY'S request, DEBTOR will join in
executing all necessary financing statements in forms satisfactory to the
SECURED PARTY and will pay the cost of filing the same and will further execute
all other necessary instruments and pay the costs of filing the same.
4. NO PRIOR LIENS. Except as disclosed in Section 1, no prior liens, security
interest, encumbrances, or claims have been made against the COLLATERAL.
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5. INSURANCE. DEBTOR will insure the COLLATERAL with companies reasonably
acceptable to the SECURED PARTY against such casualty and in such amounts as the
SECURED PARTY shall reasonably require (not to exceed the aggregate sum due and
owing the SECURED PARTY by DEBTOR pursuant to the Note), with a loss payable
clause in favor of DEBTOR and SECURED PARTY as their interests may appear.
Provided no Event of Default (as defined herein) has occurred, the DEBTOR is
authorized to collect such sums which may become due and paid under any of said
policies as a result of a casualty or loss affecting the COLLATERAL, and the
DEBTOR, in its sole discretion, shall use such sums to repair or replace the
COLLATERAL affected by such casualty or apply such sums to the obligations
hereby secured. Upon the occurrence of an Event of Default, any sums which may
be paid under any of said policies as a result of a casualty or loss affecting
the COLLATERAL shall be used to repair or replace the COLLATERAL affected by
such casualty or applied to the obligations hereby secured in the sole
discretion of SECURED PARTY.
6. PROTECTION OF COLLATERAL. DEBTOR will keep the COLLATERAL in good order and
repair and will not waste or destroy the COLLATERAL or any part thereof. DEBTOR
will not use the COLLATERAL in violation of any statute or ordinance and the
SECURED PARTY will have the right to examine and inspect the COLLATERAL upon one
(1) day prior notice to DEBTOR.
7. SALE OF ASSETS. Except in the ordinary course of business, DEBTOR shall not
sell the COLLATERAL without the written consent of SECURED PARTY.
8. TAXES. DEBTOR will pay promptly when due all taxes and assessments on the
COLLATERAL or for its use and operation, except to the extent that DEBTOR
determines to dispute any and all taxes and assessments for which it maintains a
good faith defense.
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9. LOCATION AND IDENTIFICATION. After delivery, DEBTOR will not remove the
COLLATERAL from its location without the SECURED PARTY's consent except in the
ordinary course of business.
10. SECURITY INTEREST AND PROCEEDS, ACCESSIONS, ETC. DEBTOR hereby grants the
SECURED PARTY a security interest in and to all proceeds, increases,
substitutions, replacements, additions, and accessions to the COLLATERAL. The
provisions shall not be construed to mean that DEBTOR is authorized to sell,
lease, or dispose of the COLLATERAL without the consent of the SECURED PARTY.
11. REIMBURSEMENT OF EXPENSES. At the option of the SECURED PARTY, the SECURED
PARTY may discharge taxes, liens, interest, or perform or cause to be performed
for and on behalf of DEBTOR any actions or conditions, obligations, or covenants
which DEBTOR has failed or refused to perform, and may pay for the repair,
maintenance, and preservation of the COLLATERAL, and all sums so expended,
including, but not limited to, reasonable attorney's fees, court costs, agents
fees, or commissions, or any other costs or expenses, shall bear interest from
the date of payment at the rate of twelve percent (12%) per annum and shall be
payable at the place designated in the Note and shall be secured by this
Security Agreement.
12. CHANGE OF PLACE OF BUSINESS. DEBTOR will promptly notify the SECURED PARTY
of any change in DEBTOR'S chief place of business or place where records
concerning the accounts and other contract rights are kept.
13. TIME OF PERFORMANCE AND WAIVER PERIOD. In performing any act under this
Security Agreement, time shall be of the essence. The SECURED PARTY'S acceptance
of partial or delinquent payments, or of the failure of the SECURED PARTY to
exercise any right or remedy shall not be a waiver of any obligation of DEBTOR
or right of the SECURED PARTY or constitute a waiver of any other similar
defaults subsequently occurring.
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14. DEFAULT PERIOD. DEBTOR shall be in default under this Security Agreement on
the happening of any of the following events ("Event of Default"):
(a) Default in the payment or observance of DEBTOR'S obligations as
described from time to time in this Agreement, which has not been cured within
five (5) business days after notice;
(b) Loss, theft, substantial damage, destruction, sale, or encumbrance to
or of any of the COLLATERAL, or the making of a levy, seizure, or attachment
thereof or thereon, and the COLLATERAL has not been substantially replaced
within fourteen (14) days following written notice from SECURED PARTY;
(c) The occurrence of a default under the Note and/or any of the other
Related Agreement which remains uncured after the expiration of any applicable
cure period.
15. REMEDIES. On the occurrence of any Event of Default, and at any time
thereafter, SECURED PARTY may declare all obligations secured hereby immediately
due and payable and may proceed to enforce payment of the same and exercise any
and all of the rights and remedies provided by the Uniform Commercial Code as
well as other rights and remedies, either at law or at equity, possessed by the
SECURED PARTY.
16. TERMINATION. This Agreement shall terminate only upon DEBTOR'S full
satisfaction of all of its obligations under the Settlement Agreement, the
Secured Convertible Promissory Note and all of the other Related Agreements (the
"Obligations").
17. RELEASE OF RIGHTS ON THE TERMINATION DATE. When all of the Obligations shall
have been paid in full (the "Termination Date"), this Agreement shall terminate
and the rights, remedies, powers, duties, authority and obligations conferred on
the SECURED PARTY pursuant to this Agreement shall terminate and be of no
further force and effect, and all rights, remedies, powers, duties, authority
and obligations of the SECURED PARTY with respect to the COLLATERAL shall be
automatically released. Further, the SECURED PARTY will, at the expense of the
DEBTOR, (i) execute such instruments of transfer and release, in recordable form
if necessary, in favor of the DEBTOR as the DEBTOR may reasonably request, (ii)
deliver to DEBTOR any COLLATERAL in SECURED PARTY'S possession, and (iii)
otherwise transfer and release the lien in this Agreement and transfer and
release and deliver to the DEBTOR the COLLATERAL.
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18. MISCELLANEOUS PROVISIONS.
(a) Parties bound. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective heirs, executors,
administrators, legal representatives, successors, and assigns where permitted
by this Agreement.
(b) Legal construction. In case any one or more of the provisions
contained in this Agreement shall for any reason be held to be invalid, illegal
or unenforceable in any respect, such as in validity, legality, or
unenforceability shall not affect any other provision thereof of this Agreement
and shall be construed as if such invalid, illegal, or unenforceable provision
had never been contained herein.
(c) Amendments. This Agreement (together with all documents, exhibits, and
instruments being entered into concurrently herewith, including without
limitation, the Related Agreements), contains the entire agreement and
understanding among the parties hereto relating to the subject matter hereof,
and supercedes all prior or previous written and oral negotiations, commitments,
and writings with respect to the subject matter hereof. This Agreement may be
amended only by written instrument signed by each party hereto
(d) Waiver. The failure of any party to exercise any right or remedy given
such party under this Agreement and/or the Related Agreements or otherwise
available to such person or party, no failure of any party to insist upon strict
compliance by any other party with its obligations hereunder, and no custom or
practice of the parties in variance with the terms hereof, shall constitute a
waiver of any party's right to demand exact compliance with the terms hereof,
unless such waiver is set forth in writing and executed by such party.
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(e) Validity;Severability. In the event any provision or any portion of
any provision of this Agreement and/or Related Agreements is held invalid or
unenforceable as applied to any facts or circumstances, the remaining provisions
and portions of this Agreement and/or Related Agreements, and the same provision
as applied to any other facts or circumstances shall not be affected or impaired
thereby, and shall remain valid and enforceable.
(f) Applicable Law. This Agreement shall be governed and construed in
accordance with the internal laws and judicial decisions in the State of
Illinois.
(g) Jurisdiction; Exclusive Jurisdiction. All parties agree that the
Circuit Court of Xxxx County in Chicago, Illinois and/or the Federal District
Court for the Northern District Court of Illinois shall be the venue and
exclusive proper forum in which to adjudicate any and all controversies arising
directly or indirectly in connection with this Agreement and/or Related
Agreements, and the parties further agree that in the event of any litigation
arising out of or in connection with this Agreement and/or the Related
Agreements, they will not contest or challenge the jurisdiction of either court;
provided, however, any injunction obtained pursuant to a breach of this
Agreement and/or the Related Agreements may be enforced in any court in the
United States.
(h) Counterparts/Facsimiles. This Agreement may be executed in
counterparts. For purposes of negotiating and finalizing this Agreement, any
documents transmitted by facsimile shall be treated in all manner and respect as
an original document. Faxed signatures shall be treated the same as original
signature pages.
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(i) Capacity. Each party hereto expressly acknowledges, represents, and
warrants that he, she or it has voluntarily executed this Agreement. Each person
signing this Agreement further represents and warrants that he, she or it has or
possesses the full right, power, authority and capacity to execute this
Agreement on behalf of his or her respective party and to bind said party to
this Agreement, that this Agreement does not conflict with any material
agreements of such party, and that this Agreement is enforceable against such
party in accordance with its terms.
(j) Further Assurances/Cooperation. Each of the parties agrees that at any
time after the execution of this Agreement, he, she or it will take such actions
and execute and deliver such documents and instruments as any other party may
reasonably require to confirm or give effect to the provisions and terms of this
Agreement and the Related Agreements.
(k) Full Knowledge, Consent and Voluntary Signing. The parties hereto
acknowledge that each has been given a reasonable time in which to consider this
Agreement, and that each has read this Agreement and fully understands its
meaning and intent, and that each understands its legal consequences, and each
agrees to all of the terms of this Agreement and is voluntarily signing this
Agreement.
(l) Attorneys' Fees. The non-prevailing party in any action arising out of
or relating to this Agreement and/or the Related Agreements agrees to pay all
reasonable attorneys' fees, costs, and expenses that may be incurred by the
prevailing party in enforcing the terms of this Agreement and/or the Related
Agreements together with reasonable attorneys' fees and costs reasonably
incurred in the collection of any judgments arising out of or relating to this
Agreement and/or Related Agreements.
(m) Notice. Any notice, consent, waiver, or other communication that is
required or permitted hereunder shall be sufficient if it is in writing, signed
by or on behalf of the party giving such notice, consent, waiver, or other
communication, and delivered personally, by mail or by Federal Express or
similar overnight courier, postage prepaid, facsimile, and if by mail, certified
or registered, to the addresses set forth below, or to such other addressee or
address as shall be set forth in a notice given in the same manner:
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If to: Xxxx Xxxxxxx
0000 Xxxxxxxxx Xxxxxx
Xxxxxx, XX 00000
Fax: (000) 000-0000
With a copy to: Xxxxxxxx, Xxxxxx & Associates, Ltd.
Attn: Xx. Xxxxxxx X. Xxxxxx
000X Xxxxx Xxxxxx Xxxx Xxxx
Xxxxxxx, XX 00000
Fax: (000) 000-0000
If to: TECHALT, INC.
Attn: Xxxxx X. Xxxxxxx
0000 X. Xxxxxxxxx Xxx., Xxxxx X
Xxxxxxxxx Xxxxxxx, XX 00000
Fax: (000) 000-0000
With a copy to: The Xxxx Law Group, PLLC
Attn: Xxxxx Xxxx
000 Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, XX 00000
Fax: (000) 000-0000
Xxxxx Xxxxxxx
0000 X. Xxxxxxxxx Xxx., Xxxxx X
Xxxxxxxxx Xxxxxxx, XX 00000
Fax: (000) 000-0000
Xxxxxxx Xxxxx Xxxxxxxxx, Esq.
000 Xxxxx Xxxxx
Xxxx Xxxxxx, XX 00000
Fax: (000) 000-0000
Xxxxx X. Xxxxxxx, Esq.
Xxxxx X. Xxxxxxx and Associates
000 Xxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxxxxxx, XX 00000
Fax: (000) 000-0000
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Notice shall be deemed given upon delivery if delivered personally, on the
next day if delivered by an overnight carrier, or three (3) days after the
date of postmark if deposited in the U.S. Mail for delivery by certified
or registered mail, return receipt requested, postage prepaid, addressed,
or upon transmission if it has been given by facsimile between 9:00 a.m.
and 5:00 p.m. central time, Monday through Friday.
(n) Defined Terms. Terms not otherwise defined herein shall have the
meaning set forth in the Settlement Agreement.
DEBTOR: SECURED PARTY:
TECHALT, INC. SERVICES BY DESIGNWISE, LTD.
By: ___________________________ By: ________________________
Its: ___________________________ Its: ________________________
-------------------------
Xxxx Xxxxxxx, individually
State of ___________, County of ______________ ss. I, the undersigned, a Notary
Public in and for said County, in the State aforesaid, DO HEREBY CERTIFY that
__________________ as ________________________ of __________________________
personally known to me to be the same person whose name is subscribed to the
foregoing instrument, appeared before me this day in person, and acknowledged
that he signed, sealed and delivered the said instrument as his free and
voluntary act, for the uses and purposes therein set forth, including the
release and waiver of the right of homestead.
Given under my hand and official seal, this _____ day of ___________, 2004
-----------------------------
NOTARY PUBLIC
Commission Expires: ___________
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State of ___________, County of ______________ ss. I, the undersigned, a Notary
Public in and for said County, in the State aforesaid, DO HEREBY CERTIFY that
__________________ as ________________________ of __________________________
personally known to me to be the same person whose name is subscribed to the
foregoing instrument, appeared before me this day in person, and acknowledged
that he signed, sealed and delivered the said instrument as his free and
voluntary act, for the uses and purposes therein set forth, including the
release and waiver of the right of homestead.
Given under my hand and official seal, this _____ day of ___________, 2004
---------------------
NOTARY PUBLIC Commission Expires: ________
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EXHIBIT A
INTELLECTUAL PROPERTY
1. SBD System
SBD INTELLECTUAL PROPERTY TO TRANSFER TO TECHALT
FOR IN-CAR BASED COMMUNICATIONS, DATA CAPTURE, AND VIDEO SYSTEMS
VIDEO BROWSER SOFTWARE
- Vendor information, release letter to vendor
Fixed Com Modules
- Vendor information on boards and assemblies including location of
tooling, and mfg. release letter to vendor
Portable Camera Stand
- Vendor information on boards and assemblies including location of
tooling, and mfg. release letter to vendor
Portable Com Module
- Vendor information on boards and assemblies including location of
tooling, and mfg. release letter to vendor
Enhanced VHS System with Console
- Vendor information on boards and assemblies including location of
tooling, and mfg. release letter to vendor
Enhanced VHS System without Console
- Vendor information on boards and assemblies including location of
tooling, and mfg. release letter to vendor
Rear Seat Camera with Microphone Unit
- Vendor information on boards and assemblies including location of
tooling, and mfg. release letter to vendor
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Grill Lights
- Vendor information on boards and assemblies including location of
tooling, and mfg. release letter to vendor
VHS based In-Car Recording System
- Vendor information on boards and assemblies including location of
tooling, and mfg. release letter to vendor
- Software Source Code with Comments for
- Software Design for U16 (Radar serial interface with auto detection
of manufacturer protocolCommented code on CD
- Software Design for U14 (Output control for vault circuitry with
synchronous serial communications)
- Commented code on CD
- Software Design for U8 (Tone Key decoding and car interface monitor
with synchronous serial communications)
- Commented code on CD
- Software Design for U1 (Vault master with UART and synchronous
serial communications)
- Commented code on CD
VHF and 900 mhz Belt Pack Radio
- Vendor information on boards and assemblies including location of
tooling, and mfg. release letter to vendor
Camera Design
- Vendor information on boards and assemblies including location of
tooling, and mfg. release letter to vendor
Car Cabling Design
- Vendor information including location of any tooling, mfg. release
letter to vendor
Packaging Design
- Vendor information including location of any tooling, mfg. release
letter to vendor
DVD Based In-Car Recording System Sheet Metal Design
- Vendor information including location of any tooling, mfg. release
letter to vendor
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DVD Based In-Car Recording System Piggy Back Board Design
- includes circuit design and Printed Circuit Board Layout
- Hard copy of schematic, and xxxx of material
- Schematic, BOM, Gerber files on disk or CD
- Vendor information on all components
Vendor information on boards and assemblies including location of tooling,
and mfg. release letter to vendor
DVD Based In-Car Recording System Piggy Back Board Software Design featuring
Universal Power Supply Design for DVD and Communications Module featuring
- seven switchmode supplies with adjustable output voltages
- environmental controls with temperature sensing
- microprocessor control of supplies and environmental controls
- includes circuit design and Printed Circuit Board Layout
- Hard copy of schematic, and xxxx of material
- Schematic, BOM, Gerber files on disk or CD
- Vendor information on all components
- Vendor information on boards and assemblies including location of
tooling, and mfg. release letter to vendor
PC104 interface for Universal Power Supply
The above listing includes any and all designs, modules, prototypes and versions
produced by SBD for Technology Alternatives, Inc. or TechAlt Inc. including but
not limited to accessories, brackets, manuals and installation materials.
2. SBD Patent Application No. 10/192,941 filed on July 11, 2002
3. TECHALT PATENT - US Patent Number 6,587,441 B1, issued July 1, 2003, and
associated applications for transmission (i.e. images, audio, documents, etc.),
storage, retrieval, viewing and output of customer data (the "IP").
4. TRADE SECRET TOOL SETS
All associated source code, designs, diagrams, network architectures,
layouts, concept documents, documentation, generic routines, subroutines, test
equipment, jigs, methods and/or algorithms which define functionality unique to
the TechAlt applications, for recording, viewing, storing, retrieving, and
communicating, in any form, the data associated with the IP. Examples would
include certain drivers and/or networking interfaces to WiFi, 1XRTT, iDEN,
GSM/GPRS, Satellite, microwave and other wireless technologies, code set for
interfaces to Microsoft Xxxxxxx.XXX framework compliant devices, etc.
5. COPYRIGHTS
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TechAlt's copyrighted materials include: The TechAlt logo, PowerPoint
presentations (including, but not limited to, photos, audio, embedded graphics
and associated art functionality), brochures, sales literature, Website, exhibit
display booth(s), advertisement materials (i.e. print, audio, video, etc.) fact
finding questioners, training materials, proposals, look & feel computer display
screens, select application code, and descriptive graphical representations of
functions and processes, representing the TechAlt technology and its implemented
applications.
6. TRADEMARKS
Trademarks have been filed in the name of Technology Alternatives, Inc.
("TechAlt") including:
"TechAlt" and its derivatives, (Examples of which include TechAlt "The right
information. To the right people. Right awayTM"; "Unleash the power of
Wireless"; "Working together to save lives").
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EXHIBIT B
ALLOWED EXPENSES FOR CREDIT LINE
Payroll*
Benefits*
Payroll taxes*
Employee moving and recruitment costs*
Travel and Entertainment costs*
Regulatory fees*
Consultant fees*
Auto Expenses*
Material costs
Capital Equipment
Raw materials
Software programming fees
Software licenses
Contractor charges
Customer installation materials
Freight and postage charges
*None of the amounts subject to the Credit Line shall be used to pay any
compensation, benefit or expense to or on behalf of an officer or director in
any capacity.
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