SECURITY AGREEMENT
THIS SECURITY AGREEMENT ("Agreement") is made and entered into as of
November 9, 1999, by and among Xx0.Xxx, Inc., a Wyoming corporation (hereinafter
referred to as the "Debtor"), and Data Transmission Network Corporation, a
Delaware corporation (hereinafter referred to as the "Secured Party").
WITNESSETH:
WHEREAS, Debtor has executed and delivered to Secured Party a
Promissory Note in the principal amount not to exceed $2,125,000 dated the same
date as this Agreement (hereinafter the "Note"); and
WHEREAS, in order to induce Secured Party to accept the Note, Debtor
has agreed to grant Secured Party a security interest in the property described
below to secure the Note.
NOW, THEREFORE, in consideration of the above recitals and the promises
and covenants contained herein, the parties agree as follows:
1. Security Interest and Collateral. As collateral security for the
full and timely payment and performance of the Note, including all replacements,
renewals, extensions, substitutions and modifications thereof, and to secure the
prompt payment in full of any and all other indebtedness and obligations,
liabilities, covenants and duties of Debtor to Secured Party, of every kind and
description (whether or not evidenced by the Note or any invoice, billing,
guaranty or other instrument, and whether or not for the payment of money),
direct or indirect, absolute or contingent, liquidated or unliquidated, due or
to become due, now existing or hereafter arising, including, without limitation,
any debt, liability or obligation owing from Debtor to Secured Party; damages
for breach of this Agreement and expenses and attorneys' fees chargeable to
Debtor, whether or not provided in this Agreement (collectively, "Obligations"),
Debtor hereby grants to Secured Party a continuing security interest in the
following property of Debtor (collectively, the "Collateral"), including all
proceeds and products thereof:
INVENTORY: All inventory of every type and description, now owned or
hereafter acquired by Debtor, including inventory consisting of whole
goods, spare parts or components, supplies or materials and inventory
acquired, held or furnished for sale, for lease or under service
contracts or for manufacture or processing, or any other purpose, and
wherever located.
DOCUMENTS OF TITLE: All warehouse receipts, bills of lading and other
documents of title of every type and description now owned or hereafter
acquired by Debtor.
RECEIVABLES: Each and every right of Debtor to the payment of money,
whether such right to payment now exists or hereafter arises, whether
such right to payment arises out of a sale, lease or other disposition
of goods or other property, out of a rendering of services, out of a
loan, out of the overpayment of taxes or other liabilities, or any
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other transaction or event, whether such right to payment is created,
generated or earned by Debtor or by some other person whose interest is
subsequently transferred to Debtor, whether such right to payment is or
is not already earned by performance, and howsoever such right to
payment is or is not already earned by performance, and rights and
interests (including all liens, security interests and guaranties)
which Debtor may at any time have by law or agreement against any
account debtor or other person obligated to make any such payment or
against any property of such account debtor or other person; all
contract rights, chattel papers, bonds, notes and other debt
instruments, and all loans and obligations receivable, tax refunds and
other rights to payment in the nature of general intangibles.
EQUIPMENT AND FIXTURES: All equipment of every type and description now
owned or hereafter acquired by Debtor including (without limitation)
all present and future machinery, vehicles, furniture, fixtures,
manufacturing equipment, shop equipment, office and record keeping
equipment, parts, tools, supplies and all other goods (except
inventory) used or bought for use by Debtor for any business or
enterprise and including all goods that are or may be attached or
affixed to or otherwise become fixtures upon any real property.
GENERAL INTANGIBLES: All general intangibles of every type and
description now owned or hereafter acquired by Debtor, including
(without limitation) all present and future domestic and foreign
patents, patent applications, software (source code and object code),
software applications, trademarks, trademark applications, copyrights,
trade names, trade secrets, shop drawings, engineering drawings,
blueprints, specifications, parts lists, manuals, operating
instructions, customer or supplier lists and contracts, contract
rights, licenses, permits, franchises, the right to use Debtor's
corporate name and the goodwill of Debtor's business.
2. Representations, Warranties and Agreements of Debtor. Debtor hereby
represents, warrants and agrees that:
(a) Debtor has (or will have at the time Debtor acquires
rights in Collateral hereafter arising) absolute title to each item of
Collateral free and clear of all security interests, liens and
encumbrances, and will defend the Collateral against all claims or
demands of all persons other than Secured Party. Debtor will not sell
or otherwise dispose of any material Collateral or any interest therein
(other than the sale of inventory in the ordinary course of business of
Debtor and other than the disposition of obsolete or damaged equipment)
without the prior written consent of Secured Party.
(b) Debtor will not permit any tangible Collateral to be
located in any state (and, if county filing is required, in any county)
in which a financing statement covering such Collateral is required to
be, but has not in fact been, filed in order to perfect the security
interest herein granted to Secured Party.
(c) Each right to payment and each instrument, document,
chattel paper and other agreement constituting or evidencing Collateral
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is (or will be when arising or issued) the valid, genuine and legally
enforceable obligation, subject to no defense, set-off or counterclaim
(other than those arising in the ordinary course of business) of the
account debtor or other obligor named therein or in Debtor's records
pertaining thereto as being obligated to pay such obligation. Debtor
will neither agree to any material modification or amendment nor agree
to any cancellation of any such obligation without Secured Party's
prior written consent, and will not subordinate any such right to
payment to claims of other creditors of such account debtor or other
obligor.
(d) Debtor will (i) promptly pay all taxes and other
governmental charges levied or assessed upon or against any Collateral
or upon or against the creation, perfection or continuance of the
security interest herein granted to Secured Party; (ii) keep all
Collateral free and clear of all security interests, liens and
encumbrances, except the security interest herein granted to Secured
Party; (iii) at all reasonable times, permit Secured Party or its
representatives to examine or inspect any Collateral, wherever located,
and to examine, inspect and copy Debtor's books and records pertaining
to the Collateral and its business and financial condition and, after
the occurrence of an Event of Default, to discuss with account debtors
and other obligors requests for verifications of amounts owed to
Debtor; (iv) keep accurate and complete records pertaining to the
Collateral and pertaining to each Debtor's business and financial
condition and submit to Secured Party such periodic reports concerning
the Collateral and each Debtor's business and financial condition as
Secured Party may from time to time reasonably request; (v) promptly
notify Secured Party of any loss of or material damage to any
Collateral or of any adverse change, known to Debtor, in the prospect
of payment of any sums due on or under any instrument, chattel paper,
or account constituting Collateral; (vi) if Secured Party at any time
so requests after the occurrence of an Event of Default, promptly
deliver to Secured Party any instrument, document or chattel paper
constituting Collateral, duly endorsed or assigned by Debtor; (vii) at
all times keep all tangible Collateral insured against risk of loss and
such other risks and in such amounts as Secured Party may reasonably
request, with any loss being payable to Secured Party to the extent of
its interest; (viii) from time to time execute such financing
statements as Secured Party may reasonably require in order to perfect
the security interest herein granted to Secured Party; (ix) pay when
due or reimburse Secured Party on demand for all costs of collection of
any of the Obligations and all other out-of-pocket expenses (including
in each case all reasonable attorneys' fees) incurred by Secured Party
in connection with the creation, perfection, satisfaction, protection,
defense or enforcement of the security interest herein granted to
Secured Party or the creation, continuance, protection, defense or
enforcement of this Agreement or any or all of the Obligations,
including expenses incurred in any litigation, bankruptcy or insolvency
proceedings; (x) execute, deliver or endorse any and all instruments,
documents, assignments, security agreements and other agreements and
writings which Secured Party may at any time reasonably request in
order to secure, protect, perfect or enforce the security interest
herein granted to Secured Party and Secured Party's rights under this
Agreement; and (xi) permit Secured Party at any time and from time to
time to send requests to account debtors or other obligors for
verification of amounts owed to Debtor. If Debtor at any time fails to
perform or observe any agreement contained in this Section 2(d),
immediately upon the occurrence of such failure, without notice or
lapse of time, Secured Party may (but need not) perform or observe such
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agreement on behalf and in the name, place and stead of Debtor (or, at
Secured Party's option, in Secured Party's own name) and may (but need
not) take any and all other actions which Secured Party may reasonably
deem necessary to cure or correct such failure (including, without
limitation, the payment of taxes, the satisfaction of security
interests, liens, or encumbrances, the performance of obligations under
contracts or agreements with account debtors or other obligors, the
procurement and maintenance of insurance, the execution of financing
statements, the endorsement of instruments, and the procurement of
repairs, transportation or insurance); and, except to the extent that
the effect of such payment would be to render any loan or forbearance
of money usurious or otherwise illegal under any applicable law, Debtor
shall thereupon pay Secured Party on demand the amount of all moneys
expended and all costs and expenses (including reasonable attorneys'
fees) incurred by Secured Party in connection with or as a result of
Secured Party's performing or observing such agreements or taking such
actions, together with interest thereon from the date expended or
incurred by Secured Party at the highest rate then applicable under the
Note. To facilitate the performance or observance by Secured Party of
such agreements of Debtor, Debtor hereby irrevocably appoints (which
appointment is coupled with an interest) Secured Party, or its
delegate, as the attorney-in-fact of Debtor with the right (but not the
duty) from time to time to create, prepare, complete, execute, deliver,
endorse or file, in the name and on behalf of Debtor, any and all
instruments, documents, financing statements, applications for
insurance and other agreements, and writings required to be obtained,
executed, delivered or endorsed by Debtor under this Section 2.
3. Collection Rights of Secured Party. Secured Party may, at any time
after the occurrence of an Event of Default, notify any account debtor, or any
other person obligated to pay any amount due, that such chattel paper, account,
or other right to payment has been assigned or transferred to Secured Party for
security and shall be paid directly to Secured Party. If Secured Party so
requests at any time, Debtor will so notify such account debtors and other
obligors in writing and will indicate on all invoices to such account debtors or
other obligors that the amount due is payable directly to Secured Party. At any
time after Secured Party or Debtor gives such notice to an account debtor or
other obligor, Secured Party may (but need not), in its own name or in Debtor's
name, demand, xxx for, collect or receive any money or property at any time
payable or receivable on account of, or securing, any such chattel paper,
account, or other right to payment, or grant any extension to, make any
compromise or settlement with or otherwise agree to waive, modify, amend or
change the obligations (including collateral obligations) of any such account
debtor or other obligor.
4. Events of Default. Each of the following occurrences shall
constitute an event of default under this Agreement (herein called "Event of
Default"): (i) Debtor shall fail to pay any or all of the Obligations when due
or (if payable on demand) on demand, or shall fail to observe or perform any
covenant or agreement herein binding on it; (ii) any representation or warranty
by Debtor set forth in this Agreement or made to Secured Party in any financial
statements or reports submitted to Secured Party by or on behalf of Debtor shall
prove materially false or misleading; (iii) a garnishment, summons or a writ of
attachment shall be issued against or served upon the Secured Party for the
attachment of any property of Debtor or any indebtedness owing to Debtor; (iv)
the Debtor shall voluntarily file, or have filed against it involuntarily, a
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petition under the United States Bankruptcy Code; (v) there shall be an Event of
Default under the Note, as defined therein, or (vi) Secured Party shall in good
faith believe that the prospect of due and punctual payment of any or all of the
Obligations is impaired.
5. Remedies Upon Event of Default. Upon the occurrence of an Event of
Default under Section 4 above and at any time thereafter, Secured Party may
exercise any one or more of the following rights or remedies: (i) declare all
unmatured Obligations to be immediately due and payable, and the same shall
thereupon be immediately due and payable, without presentment or other notice or
demand, (ii) exercise and enforce any or all rights and remedies available upon
default to a secured party under the Uniform Commercial Code, including, but not
limited to, the right to take possession of any Collateral, proceeding without
judicial process or by judicial process, and the right to sell, lease or
otherwise dispose of any or all of the Collateral, and in connection therewith,
Secured Party may require Debtor to make the Collateral available to Secured
Party at a place to be designated by Secured Party which is reasonably
convenient to both parties, and if notice to Debtor of any intended disposition
of Collateral or any other intended action is required by applicable law in a
particular instance, such notice shall be deemed commercially reasonable if
given in the manner specified in Section 6 below at least ten (10) calendar days
prior to the date of disposition or other action, (iii) apply any and all money
owing by Secured Party to Debtor under any funding agreement or similar type
agreement now or hereafter entered into between Secured Party and Debtor to the
payment of the Obligations, or (iv) exercise or enforce any or all other rights
or remedies available to Secured Party by law or agreement against the
Collateral, against Debtor or against any other person or property. Upon the
occurrence of the Event of Default, all Obligations shall be immediately due and
payable without demand or notice therefor.
6. Notices. All notices to be given to Debtor shall be deemed
sufficiently given if delivered by overnight courier or mailed by registered or
certified mail, postage prepaid and return receipt requested, to Debtor at the
address set forth opposite its name or at the most recent address shown on
Secured Party' records.
7. Binding Effect. This Agreement shall be binding upon and shall inure
to the benefit of the parties hereto and their respective heirs, legal
representatives, successors and assigns.
8. Modification; Amendment; Waiver. This Agreement can be modified,
amended, terminated or discharged, and the security interest can be released,
only explicitly in a writing signed by Secured Party. A waiver signed by Secured
Party shall be effective only in the specific instance and for the specific
interest given.
9. Severability. If any term, provision, covenant or condition of this
Agreement is held by a Court of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the provision, covenant or condition shall
remain in full force and effect and shall in no way be affected, impaired or
invalidated, unless to do so would substantially destroy the fundamental purpose
of this Agreement.
10. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Nebraska without regard to its conflict
of laws principles.
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IN WITNESS WHEREOF, this Security Agreement has been duly executed by
Debtor and Secured Party as of the day and year first above-written.
Address: XX0.XXX, INC., a
Wyoming corporation, Debtor
Xx0.Xxx, Inc.
Attention: President By: /s/ Xxxxxxx X. Xxxx
------------------------------
Xxxxxxx X. Xxxx
Title: CEO
Address: DATA TRANSMISSION NETWORK
CORPORATION, a Delaware corporation,
Data Transmission Network Corporation Secured Party
0000 Xxxx Xxxxx Xxxx, Xxxxx 000
Xxxxx, Xxxxxxxx 00000
Attention: President By: /s/ Xxxx X. Xxxxx
-------------------------------
Xxxx X. Xxxxx, President
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