SECURITY AGREEMENT
Exhibit
10.3
This Security Agreement (this “Agreement”) is made
as of this 22nd day of August, 2008, by United eSystems, Inc., a Nevada
corporation, (the “Debtor”), for the
benefit of Xxxxxx X. Xxxxxxxxxx, an individual residing in the State of Florida
(the “Secured
Party”).
WHEREAS,
this Agreement is entered into in connection with the issuance of a certain
Non-Interest Bearing Promissory Note made by the Debtor in favor of the Secured
Party dated August 22, 2008 (the “Note”) in which the
Debtor promises to pay to the Secured Party such sums as may be advanced from
time to time to the Debtor by the Secured Party and pursuant to the Note,
provided that the principal amount under the Note shall not exceed Five Hundred
Thousand Dollars and No Cents.
NOW, THEREFORE, in consideration of the
premises, covenants and agreements set forth below, and the mutual benefits to
be derived from this Agreement, and other good and valuable consideration, the
parties hereto agree as follows:
1. Definitions. As
used in this Agreement, the following terms shall have the following
meanings:
“Collateral” has the
meaning set forth in Section 2.
“Event of Default” has
the meaning set forth in Section 7.
“Financing Statement”
has the meaning set forth in Section 3.
“Obligations” means
all indebtedness, liabilities and other obligations of the Debtor to the Secured
Party, whether under or in connection with this Agreement, the Note, the
Intercreditor Agreement, or any other documents or instruments related to this
Agreement, the Note and the Intercreditor Agreement, including, without
limitation, all unpaid principal of the Note, all interest (if any) that may
accrue thereon, all fees and all other amounts payable by the Debtor to the
Secured Party thereunder or in connection therewith.
“Subsequent Financing”
has the meaning set forth in Section 4.
“Subsequent
Indebtedness” has the meaning set forth in Section 4.
“Subsequent Lender”
has the meaning set forth in Section 4.
“UCC” means the
Uniform Commercial Code as the same may, from time to time, be in effect in the
State of Mississippi; provided, however, in the event that, by reason of
mandatory provisions of law, any or all of the attachment, perfection or
priority of the security interest in any Collateral is governed by the Uniform
Commercial Code as
in
effect in a jurisdiction other than the State of Mississippi, the term “UCC”
shall mean the Uniform Commercial Code as in effect from time to time in such
other jurisdiction for purposes of the provisions hereof relating to such
attachment, perfection or priority and for purposes of definitions related to
such provisions.
2. Security
Interest. As security for the payment and performance of the
Obligations, the Debtor hereby pledges, assigns, transfers, hypothecates and
sets over to the Secured Party, and hereby grants to the Secured Party a
security interest in, all of the Debtor’s right, title and interest in, to and
under the following property, wherever located and whether now existing or owned
or hereafter acquired or arising (collectively, the “Collateral”): all
accounts, accounts receivable, contract rights, rights to payment, chattel
paper, electronic chattel paper, commercial tort claims, letter of credit rights
and proceeds of letters of credit, documents, securities, money and instruments,
and investment property, whether held directly or through a securities
intermediary, and other obligations of any kind owed to the Debtor; all deposit
accounts, and all funds and amounts therein; all inventory; all equipment; all
general intangibles and other personal property of the Debtor; and all proceeds,
including insurance proceeds, and supporting obligations of any and all of the
foregoing. This Agreement shall create a continuing security interest
in the Collateral that shall remain in effect until terminated in accordance
with this Agreement.
3. Financing
Statement. The Debtor will execute one or more financing
statements pursuant to the UCC (and any extensions or modifications thereof)
(each a “Financing
Statement”) and any assignments in form satisfactory to the Secured
Party, and the Debtor hereby appoints the Secured Party its attorney-in-fact to
execute any financing statements and continuation statements, and to do, at the
Secured Party’s option and at the Debtor’s expense, all acts and things that the
Secured Party may deem necessary to perfect and continue perfected the security
interest created by this Agreement.
4. Subject to Additional
Financing Agreement. The Secured Party agrees and understands
that the Debtor anticipates obtaining, from Thermo Credit, LLC (collectively,
the “Subsequent
Lender”), additional financing in an amount not to exceed $3,000,000 (the
“Subsequent
Financing”), the proceeds from which will primarily be utilized to
purchase certain assets from NetCom Data Corp of N.Y. and American Timeshare
Associates, Inc. In connection with the Subsequent Financing, the
Debtor anticipates issuing a promissory note that is secured by a security
interest in the Collateral. The Secured Party further agrees and
understands that, in the event of such Subsequent Financing, the security
interest in the Collateral granted herein shall, , be subordinated to or placed
in equal priority with the security interest in the Collateral that will be
granted to the Subsequent Lender in connection with the Subsequent
Financing.
5. Representations and
Warranties. The Debtor represents and warrants to the Secured
Party that:
(a) The
Debtor has rights in or the power to transfer the Collateral and its title to
the Collateral is free of all adverse claims, liens, security interests and
restrictions on transfer or pledge except as created by this
Agreement.
(b) The
Debtor’s principal place of business is located at 00000 X’Xxxx Xx., Xxxxxxxx,
XX 00000.
6. Covenants. So
long as any of the Obligations remain unsatisfied, the Debtor agrees
that:
(a) The
Debtor shall do and perform all reasonable acts that may be necessary and
appropriate to maintain, preserve and protect the Collateral.
(b) The
Debtor shall comply in all material respects with all laws, regulations and
ordinances, and all policies of insurance, relating in a material way to the
possession, operation, maintenance and control of the Collateral.
(c) The
Debtor shall give prompt written notice to the Secured Party of: (i) any
change in the location of the Debtor’s principal place of business;
(ii) any change in its name; (iii) any changes in its identity or
structure in any manner which might make any financing statement filed hereunder
incorrect or misleading; and (iv) any change in its jurisdiction of
organization; provided that the
Debtor shall not locate any of the Collateral outside of the United States nor
shall Debtor change its jurisdiction of organization to a jurisdiction outside
the United States.
(d) The
Debtor shall not surrender or lose possession of (other than to Secured Party or
to the Subsequent Lender), sell, lease, rent, or otherwise dispose of or
transfer any of the Collateral or any right or interest therein, except in the
ordinary course of business.
(e) The
Debtor shall carry and maintain in full force and effect, at its own expense and
with financially sound and reputable insurance companies, insurance with respect
to the Collateral in such amounts, with such deductibles and covering such risks
as is customarily carried by companies engaged in the same or similar businesses
and owning similar properties in the localities where the Debtor
operates.
7. Events of
Default. Any of the following events which shall occur and be
continuing shall constitute an “Event of
Default”:
(a) The
failure of the Debtor to pay any payment hereunder on the due date for such
payment, which failure shall continue for five days after written notice from
the Secured Party of such failure to pay, provided, however, that the Debtor
shall not be entitled to receive more than two such notices and cure periods
during any twelve month period;
(b) The
failure of the Debtor to timely perform or observe any non-monetary term,
covenant, condition or obligation contained in the Note, if such failure remains
uncured upon expiration of ten days after written notice thereof is given by the
Secured Party to the Debtor;
(c) The
appointment of a receiver for the property of the Debtor, the assignment for the
benefit of creditors by the Debtor, or the commencement of any proceedings under
any bankruptcy or insolvency laws by or against the Debtor;
(d) Any
representation or warranty by the Debtor under or in connection with this
Agreement, the Note or any other document shall prove to have been incorrect in
any material respect when made or deemed made; or
(e) The
failure of the Debtor to perform or observe any other term, covenant or
agreement contained in this Agreement on its part to be performed or observed
and any such failure shall remain unremedied for a period of 30 days from the
occurrence thereof (unless the Secured Party reasonably determines that such
failure is not capable of remedy).
8. Remedies; Power of
Attorney. Upon any Event of Default, the Secured Party shall have the
right to pursue any of the following remedies separately, successively or
simultaneously.
(a) In
such event, the Secured Party may pursue any remedy available at law (including
those available under the provisions of the UCC), or in equity to collect,
enforce or satisfy any Obligations then owing, whether by acceleration or
otherwise.
(b) In
such event, the Secured Party may file suit and obtain judgment and, in
conjunction with any action, the Secured Party may seek any ancillary remedies
provided by law, including levy of attachment and garnishment.
(c) In
such event, the Secured Party may take possession of any the Collateral if not
already in its possession without demand and without legal
process. Upon the Secured Party’s demand, the Debtor will assemble
and make the Collateral available to the Secured Party as they direct, and the
Debtor grants to the Secured Party the right, for this purpose, to peaceably
enter into or on any premises where Collateral may be located.
(d) In
such event, without taking possession, the Secured Party may sell, lease or
otherwise dispose of the Collateral at public or private sale in accordance with
the UCC.
9. Proceeds from Sales.,
The cash proceeds actually received from the sale or other disposition or
collection of the Collateral, and any other amounts received in respect of the
Collateral the application of which is not otherwise provided for herein, shall
be applied to the payment of the Obligations. Any surplus thereof
that exists after payment and performance in full of the Obligations shall be
promptly paid over to the Debtor or otherwise disposed of in accordance with the
UCC or other applicable law. The Debtor shall remain liable to the
Secured Party for any deficiency which exists after any sale or other
disposition or collection of the Collateral.
10. No Waiver. No delay
or omission by the Secured Party to exercise any right or remedy accruing upon
any Event of Default shall: (a) impair any right or remedy; (b) waive any
default or operate as acquiescence to the Event of Default; or (c) affect any
subsequent default of the same or of a different nature.
11. Termination. Upon
payment and performance in full of all Obligations, the security interests
created by this Agreement shall terminate and the Secured Party shall promptly
execute and deliver to the Debtor such documents and instruments reasonably
requested by the Debtor as shall be necessary to evidence termination of all
such security interests given by the Debtor to the Secured Party
hereunder.
12. Notices. The
Secured Party shall give the Debtor such notice of any private or public sale as
may be required by the UCC. All notices or other communications hereunder shall
be in writing (including by facsimile or transmission) and mailed, sent or
delivered to the respective parties hereto at or to their respective addresses
or facsimile numbers set forth below, or at or to such other address or
facsimile number as shall be designated by any party in a written notice to the
other parties hereto. All such notices and other communications shall
be effective (i) if delivered by hand, when delivered; (ii) if sent by
mail, upon the earlier of the date of receipt or five business days after
deposit in the mail, first class; and (iii) if sent by facsimile
transmission, when sent.
IF TO
DEBTOR: United
eSystems, Inc.
00000
X’Xxxx Xx.,
Xxxxxxxx,
Xxxxxxxxxxx 00000
Fax: 000-000-0000
IF TO SECURED
PARTY: Xxxxxx X. Xxxxxxxxxx
0000 Xxxxxx Xxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxx 00000
Fax:
000-000-0000
13. Severability. Should
any provision of this Agreement be found to be void, invalid or unenforceable by
a court or panel of arbitrators of competent jurisdiction, that finding shall
only affect the provisions found to be void, invalid or unenforceable and shall
not affect the remaining provisions of this Agreement
14. Entire Agreement;
Amendment. This Agreement contains the entire agreement of the
parties with respect to the subject matter hereof and shall not be amended
except by the written agreement of the parties.
15. Governing Law. This
Agreement shall be governed by, and construed in accordance with, the law of the
State of Mississippi, except as required by mandatory provisions of law and to
the extent the validity or perfection of the security interests hereunder, or
the remedies hereunder, in respect of any Collateral are governed by the law of
a jurisdiction other than Mississippi.
16. Counterparts. This
Agreement may be executed in any number of counterparts and by different parties
hereto in separate counterparts, each of which when so executed shall be deemed
to be an original and all of which taken together shall constitute but one and
the same agreement.
[Signatures
on the next page.]
IN WITNESS WHEREOF, the parties hereto
have duly executed this Agreement, as of the date first above
written.
DEBTOR:
By:
/s/ Xxxxxx X. Xxxxx, Xx.
Xxxxxx X. Xxxxx, Xx.
Secretary and Treasurer
SECURED
PARTY:
/s/ Xxxxxx X. Xxxxxxxxxx
Xxxxxx
X. Xxxxxxxxxx
