EXHIBIT 4(d)
SECURITY AGREEMENT
The undersigned, National Transaction Network, Inc., a Delaware
corporation with a place of business and executive office located at 000
Xxxxxxxx Xxxx, Xxxxxxxxxxx, Xxxxxxxxxxxxx 00000 (hereinafter referred to as a
"Debtor") hereby grants to International Verifact Inc., a Canadian corporation
with a place of business and executive office located at 00 Xxxxxxxxx Xxxx,
Xxxxxxx, Xxxxxxx, XXXXXX X0X 0X0 (hereinafter called the "Secured Party"), a
security interest in and agrees and acknowledges that Secured Party has and will
continue to have a security interest in the following:
(A) All of Debtor's inventory of whatever name, nature, kind or
description, all Debtor's goods held for sale or lease or to be furnished under
contracts of service, finished goods, work in process, raw materials, materials
used or consumed by the Debtor, parts, supplies, all wrapping, packaging,
advertising, labeling, and shipping materials, devices, names and marks, all
contract rights and documents relating to any of the foregoing, whether any of
the foregoing be now existing or hereafter arising, wherever located, now owned
or hereafter acquired by the Debtor (all of which is sometimes hereinafter
referred to as "Inventory");
(B) All of the Debtor's presently owned and hereafter acquired equipment,
machinery, furniture, fixtures and all other tangible personal property of
whatsoever kind or nature, together with all proceeds thereof, additions and
accessions thereto or replacements thereof or substitutions therefor (all of
which is sometimes hereinafter referred to as "Equipment");
(C) All of the Debtor's accounts, accounts receivable, notes, bills,
drafts, acceptances, instruments, documents, chattel paper and all other debts,
obligations and liabilities in whatever form owing to the Debtor for goods sold
by it or for services rendered by it, or however otherwise established or
created, all guaranties and security therefor, all right, title and interest of
the Debtor in the goods or services which gave rise thereto, including rights of
an unpaid seller of goods or services; whether any of the foregoing be now
existing or hereafter arising, now or hereafter received by or owing or
belonging to the Debtor (all of which are sometimes hereinafter referred to as
"Accounts");
(D) All of the Debtor's general intangibles, including without limitation,
names, goodwill, trade secrets, copyrights, trademarks, trademark applications,
tradenames, patents, patent applications, licenses, other intellectual property,
permits, governmental approvals, deposit accounts, tax refunds, claims under
insurance policies (whether or not proceeds from Collateral), other rights to
payment, rights of setoff, choses in action, rights under judgments, computer
programs and software, contract rights, and all contracts and agreements to, or
of which it is a party or beneficiary, and all intangible personal property of
whatsoever kind or nature now owned by the Debtor as well as any and all thereof
that may be hereafter acquired and in and to all proceeds thereof;
(E) All of the Debtor's books and records, as they exist from time to
time, relating to (A) through (D) above, inclusive;
(F) All other assets of every nature and description, whether it be now
existing or hereafter arising and whether now or hereafter belonging to the
Debtor;
(all hereinafter sometimes collectively referred to as "Collateral"); to secure
the payment of all sums due or which may become due under certain Notes of the
Debtor which may be issued from time to time in up to an aggregate principal
amount of One Million Dollars ($1,000,000), such notes to be issued from time to
time pursuant to a certain Convertible Subordinated Note Purchase Agreement (the
"Purchase Agreement") by and between the Debtor and Secured Party as of August
18, 1997 (hereinafter sometimes collectively referred to as "Obligation" or
"Obligations").
I. WARRANTIES AND COVENANTS.
The Debtor hereby warrants and covenants that:
(A) The Equipment and Inventory are used primarily for business purposes.
(B) The Equipment and Inventory of the Debtor will be kept at the Debtor's
place of business. The Debtor will promptly notify the Secured Party of any
change in the location of the Collateral, and the Debtor will not remove the
Equipment from its place of business without the prior written consent of the
Secured Party. The Debtor will notify the Secured Party, at least twenty (20)
days prior to any such event, of any change in the Debtor's exact legal name,
any change in its place of business or location of Equipment or Inventory or its
establishment of any new place of business or location of Equipment or Inventory
or office where its records concerning Accounts and other assets are kept.
(C) The Debtor will have and maintain insurance at all times with respect
to all its Collateral against risks of fire (including so-called extended
coverage), theft, embezzlement and such other risks as Secured Party may
reasonably require containing such terms. If and when requested by the Secured
Party, the Debtor shall furnish Secured Party with certificates or other
evidence of compliance with the foregoing insurance provision and the Secured
Party may act either in its name or as attorney for the Debtor (for that purpose
by these presents duly authorized and appointed with full power of substitution
and revocation) in obtaining, adjusting, settling and canceling such insurance
and endorsing any drafts in payment of any loss.
(D) The Debtor will pay promptly when due all taxes and assessments upon
its Collateral or for its use or operation or upon this Agreement or upon any
note or notes secured hereby. In its sole discretion, the Secured Party may: (i)
discharge taxes and liens levied or placed on Collateral; (ii) pay for insurance
thereon or the maintenance and preservation thereof; or (iii) if the Debtor
shall fail to make required deposits in respect of F.I.C.A. or any withholding
taxes, make such deposits or pay such taxes, in whole or in part, or set up such
reserves as the Secured Party in its sole discretion deem necessary in respect
of the Debtor's liability therefor. Any amount so paid,
deposited or reserved for shall constitute a loan for all purposes hereunder,
and the Debtor promises to repay the Secured Party such amounts upon the Secured
Party's demand. Nothing herein shall be deemed to obligate the Secured Party to
do any of the foregoing and the making of any one or more such payments;
deposits or reserves shall not constitute an agreement by the Secured Party to
take any further or similar action or a waiver of any right of the Secured Party
hereunder.
(E) The Debtor will keep its Collateral at all times in good order and
repair, reasonable wear and tear excepted, and will make necessary renewals of
and replacements to the same with goods of equal value and serviceability, free
of all liens, security interests and encumbrances, which goods shall
automatically become subject to this Agreement.
II. ADDITIONAL RIGHTS AND ASSURANCES.
(A) Subject to Article VI of this Agreement, the Secured Party will at any
time following an occurrence of an Event of Default hereunder have the right to
take physical possession of the Collateral and to maintain such possession on
the Debtor's premises or to remove the Collateral or any part thereof to such
other places as the Secured Party may desire. If the Secured Party exercises
such right, the Debtor shall at its sole expense upon the Secured Party's
request assemble the same and make it available to the Secured Party at a place
reasonably convenient to the Secured Party. If any Inventory is in the
possession or control of any of the Debtor's agents or processors, the Debtor
shall, at the Secured Party's request, notify them of the Secured Party's
security interest therein and, at the Secured Party's request, instruct them to
hold the same for the Secured Party's account and subject to the Secured Party's
instructions.
(B) The Secured Party may at any time after an occurrence of an Event of
Default (i) in its own name or in the name of others communicate with account
debtors in order to verify with them to the Secured Party's satisfaction the
existence, amount and terms of any Accounts and the absence of any reductions,
discounts, defenses or offsets with respect thereto, or (ii) notify account
debtors that Collateral has been assigned to the Security Party and that
payments by such debtors shall be made directly to the Secured Party. At the
Secured Party's request, the Debtor will notify any or all such debtors of such
assignment, give instruction and/or indicate on xxxxxxxx to such debtors that
their Accounts shall be paid to the Secured Party and/or supply such debtors
with a copy of this Agreement.
(C) Subsequent to the occurrence of any Event of Default, the Secured
Party shall have full power, in its own name or that of the Debtor, to collect,
endorse, compromise, settle, sell or otherwise deal with any or all of the
Collateral or proceeds thereof. Subsequent to the occurrence of any Event of
Default, the Debtor agrees upon request of the Secured Party to appoint any
officer or agent of the Secured Party as true and lawful attorney-in-fact, with
power of substitution, to endorse the name of the Debtor or any of its officers,
trustees or agents upon any Accounts, notes, checks, drafts, money orders, or
other instruments of payment (including under any policy of insurance on
Collateral) or Collateral that may come into possession of the Secured Party in
full or part payment of any amounts owing to Secured Party; to sign and endorse
the name of the Debtor or any of its officers, trustees or agents upon any
invoice, freight or express
xxxx, xxxx of lading, storage or warehouse receipts, drafts against debtors,
assignments, verifications and notices in connection with Accounts, and any
instruments or documents relating thereto or to the Debtor's rights therein; to
give written notice to such offices and officials of the United States Postal
Service to effect such change or changes of address so that all mail addressed
to the Debtor may be delivered directly to the Secured Party; to take any and
all other actions necessary or appropriate to collect, compromise, settle, sell
or otherwise deal with any or all of the Collateral or proceeds thereof; and to
obtain, adjust, settle and cancel any insurance; hereby granting to each said
attorney-in-fact or his substitute full power to do any and all things necessary
or appropriate to be done in and about the premises as fully and effectually as
the Debtor might or could do, and hereby ratifying all that any said
attorney-in-fact or his substitute shall lawfully do or cause to be done by
virtue hereof.
(D) The Debtor hereby assigns to the Secured Party all sums, including
without limitation return of premiums, which may become payable under any and
all of such Debtor's policies of insurance and directs each insurance company
issuing any such policy to make payment which would otherwise be due thereunder
to the Debtor directly to the Secured Party.
(E) In the event of the sale, exchange or disposition of any of the
Collateral (other than finished goods in the ordinary course of business) or any
interest therein (and no such sale, exchange or other disposition is hereby
authorized or consented to), the Secured Party's security interest shall
nevertheless continue in such Collateral (including without limitation all
proceeds, cash and non-cash) notwithstanding such sale, exchange or other
disposition; and the Secured Party's receipt of any such proceeds shall not be
deemed or construed to be an authorization of or consent to any such sale,
exchange or other disposition.
(F) Any and all instruments, documents, policies and certificates of
insurance, securities, goods, accounts, choses in action, general intangibles,
chattel paper, cash, property and the proceeds thereof (whether or not the same
are Collateral or proceeds thereof) owned by the Debtor or in which the Debtor
has an interest, which now or hereafter are at any time in possession or control
of the Secured Party or any affiliate of the Secured Party or in transit by mail
or carrier to or from the Secured Party or such affiliate or in the possession
of any third party acting in its behalf, without regard to whether the Secured
Party or such affiliate received the same in pledge, for safekeeping, as agent
for collection or transmission or otherwise or had conditionally released the
same, shall constitute security for Obligations and may be applied at any time
to Obligations which are then owing, whether due or not due.
(G) A carbon, photographic, or other reproduction of a security agreement
or a financing statement is sufficient as a financing statement to the extent
permitted under applicable law.
III. EVENTS OF DEFAULT.
The Debtor shall be in default under this Agreement upon the happening of
any of the following events or conditions (individually and collectively an
"Event of Default"):
(A) Failure by the Debtor to observe or perform any covenant or agreement
referred to herein and, if no other grace or cure period is applicable thereto,
the continuance of such failure for thirty (30) business days; or
(B) An Event of Default (as defined in the Purchase Agreement) shall have
occurred and is continuing and such Event of Default has not been annulled.
IV. REMEDIES.
(A) If an Event of Default occurs:
(1) The Secured Party may declare all obligations secured hereby
to be immediately due and payable without presentment, demand, protest or other
notice of any kind, all of which are hereby expressly waived.
(2) The Secured Party may exercise and shall have any and all
rights and remedies accorded it by the Massachusetts Uniform Commercial Code or
the Uniform Commercial Code as adopted in such state whose laws govern the
disposition of certain Collateral. The requirement of reasonable notice shall be
met, if notice containing such information as may be required under applicable
law is mailed, postage prepaid, to the Debtor or other person entitled thereto
at least ten (10) days (including non-business days) before the time of sale or
disposition of the Collateral.
(3) The Debtor designates and appoints the Secured Party its true
and lawful attorney with full power of substitution in its own name or in the
name of such Debtor to demand, collect, receive, receipt for, xxx for, compound
and give acquittance for, any and all amounts due and to become due on the
Accounts and to endorse the name of such Debtor on all commercial paper given in
payment or part-payment thereof and in its reasonable discretion to file any
claim or take any other action which the Secured Party may reasonably deem
necessary or appropriate to protect and preserve and realize upon the security
interest of the Secured Party in the Accounts or the proceeds thereof. The
Secured Party shall also have the right to (i) open all mail addressed to the
Debtor; (ii) change the Post Office box or mailing address of the Debtor; and
(iii) use the Debtor's stationery and billing forms or facsimiles thereof, for
the purpose of collecting Accounts and realizing upon the Collateral.
(B) No delay in accelerating the maturity of any obligation as aforesaid
or in taking any other action with respect to any Event of Default or in
exercising any rights with respect to the Collateral such affect the rights of
the Secured Party later to take such action with respect thereto, and no waiver
as to one Event of Default shall affect rights as to any other default.
V. MISCELLANEOUS.
(A) In case any one or more of the provisions contained herein should be
invalid, illegal or unenforceable in any respect, the validity, legality or
enforceability of the remaining provisions contained herein shall not in any way
be affected or impaired thereby.
(B) All rights of the Secured Party hereunder shall inure to the benefit
of its successors and assigns; and all obligations of the Debtor shall bind the
successors or assigns of the Debtor. All the provisions of this Agreement shall
be construed by and administered in accordance with the local laws of the
Commonwealth of Massachusetts. This Agreement shall become effective when it is
signed by the Debtor. The Debtor acknowledges receipt of a copy of this
Agreement.
(C) In the absence of gross negligence or willful misconduct, neither the
Secured Party nor any attorney-in-fact appointed hereunder shall be liable to
the Debtor or any other person for any act or omission, any mistake of fact or
any error of judgment in exercising any right or remedy granted herein.
VI. FIRST RIGHTS OF BANK.
The Secured Party and the Debtor acknowledge that the Debtor has granted a
security interest to the Silicon Valley Bank ("Bank") to secure certain
obligations of the Debtor to the Bank. Both the Secured Party and the Debtor
hereby expressly acknowledge that the security interest in the Collateral
created hereby is subordinate and junior to the security interest of the Bank in
the Collateral.
Signed and delivered this 19th day of September 1997.
NATIONAL TRANSACTION NETWORK, INC.
By: /s/ Xxxxxx X. Xxxxxx
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Xxxxxx X. Xxxxxx
Vice President, Finance & Administration
INTERNATIONAL VERIFACT INC.
By: /s/ Xxxxx X. Xxxxx
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Xxxxx X. Xxxxx
Vice President, Finance & Administration
