SECURITY AGREEMENT EX-10.31
SECURITY AGREEMENT dated April 30, 1996, made by Work RECOVERY, INC., a
Colorado corporation (the "Grantor"), and XXXXXXX X. XXXXXXX ("Secured Party").
RECITALS:
Secured Party and Grantor have entered into a loan agreement of even date
pursuant to which Secured Party has agreed to loan Grantor up to $125,000.00,
and the indebtedness to be incurred by Grantor is evidenced by a Promissory
Note (the "Note") of even date herewith.
NOW THEREFORE, in consideration of the premises and in order to induce
Secured Party to enter into and perform under the loan agreement and the Note,
the Grantor hereby agrees with Secured Party as follows:
SECTION 1. Grant of Security. The Grantor hereby assigns and pledges to
Secured Party, and hereby grants to Secured Party a security interest in and to
(a) all claims, liabilities, accounts receivables and notes owed to
Grantor by Toyota ____________ (the Receivable );
(b) those certain ERGOS WorkStations identified as follows: (i) the
R&D WorkStation; Serial Number EWS-9206123-E11-11111; and (ii) the Suite 8
WorkStation, Serial Number EWS-9412262-EA1-AAAAA (the Equipment ).
(c) All accounts receivable, contract rights, chattel paper, instruments,
general intangibles, instruments, notes, drafts, acceptances, cash, bank
balances and other obligations of any kind now or hereafter existing, and all
rights now or hereafter existing in and to all security agreements, leases, and
other contracts securing or otherwise relating to the Receivable or the
Equipment (any and all such accounts, contract rights, chattel paper,
instruments, general intangibles and obligations being also included within the
term the "Receivables" and any and all such leases, security agreements and
other contracts relating thereto being the "Related Contracts");
(d) All proceeds of any and all of the foregoing Collateral and, to the
extent not otherwise included, all payments under insurance (whether or not
Secured Party is the loan payee thereof), or any indemnity, warranty or
guaranty, payable by reason of loss or damage to or otherwise with respect to
any of the foregoing; and
(e) The products and proceeds of all of the foregoing. It is the intent
and understanding of the parties hereto that the coverage of the security
interest granted hereby be broadly and liberally construed to include all
personal property of any nature arising out of or relating to the specifically
described collateral.
SECTION 2. Security for Obligations. This Agreement secures the payments
of all obligations of the Grantor now or hereafter existing under the loan
agreement and the Note, whether for principal, interest, fees, expenses or
otherwise, and all obligations of the Grantor now or hereafter existing under
this Agreement (all such obligations being the "Obligations").
SECTION 3. Grantor Remains Liable. Anything herein to the contrary
notwithstanding,
(a) the Grantor shall remain liable under the contracts and agreements
included in the Collateral to the extent set forth therein to perform all of
its duties and obligations thereunder to the same extent as if this Agreement
had not been executed;
(b) the exercise by Secured Party of any of the rights hereunder shall
not release the Grantor from any of its duties or obligations under the
contracts and agreements included in the Collateral; and
(c) Secured Party shall have no obligations or liability under the
contracts and agreements included in the Collateral by reason of this
Agreement, nor shall Secured Party be obligated to perform any of the
obligations or duties of the Grantor thereunder or to take any action to
collect or enforce any claim for payment assigned hereunder.
SECTION 4. Representations and Warranties. The Grantor represents and
warrants as follows:
(a) The chief place of business and chief executive office of the Grantor
and the office where the Grantor keeps its records concerning the Collateral
are located in Tucson, Arizona. All of the tangible personal property covered
hereby is located in Tucson, Arizona. The Grantor shall cause any tangible
personal property covered hereby and not located in Tucson, Arizona on the
date hereof to be moved thereto within 30 days after the date hereof.
(b) This Agreement creates a valid first priority security interest in
the Collateral, securing the payment of the Obligations, and all filing and
other actions necessary or desirable to perfect and protect such security
interest have been duly taken.
(c) The Grantor owns the Collateral free and clear of any lien, security
interest, charge or encumbrance except for the security interest created by
this Agreement and Equipment Financings. No effective financing statement or
other similar instrument is on file in any recording office covering the
Collateral, except such as may have been filed in favor of Secured Party
relating to this Agreement or with respect to Equipment Financings.
(d) No authorization, approval or other action by, and no notice to or
filing with, any governmental authority or regulatory body not already
undertaken is required either (i) for the grant by the Grantor of the security
interest granted hereby or for the execution, delivery or performance of this
Agreement by the Grantor or (ii) for the perfection of or the exercise by
Secured Party of his rights and remedies hereunder.
SECTION 5. Further Assurances.
(a) The Grantor agrees that from time to time, at the expense of the
Grantor, the Grantor will promptly execute and deliver all further instruments
and documents, and take all further action, that may be necessary or that
Secured Party may reasonably request, in order to perfect and protect any
security interest granted or purported to be granted hereby or to enable
Secured Party to exercise and enforce his rights and remedies hereunder with
respect to any Collateral. Without limiting the generality of the foregoing,
the Grantor will executeand file such financing or continuation statements, or
amendments thereto and such other instruments or notices,or take such further
action, as may be necessary or as Secured Party may reasonably request, in
order to perfectand preserve the security interests granted or purported to
be granted hereby.
(b) The Grantor hereby authorizes Secured Party to file one or more
financing or continuation statements, and amendments thereto, relative to all
or part of the Collateral without the signature of the Grantor where permitted
by law.
(c) The Grantor will furnish 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 as Secured Party may
reasonably request, all in reasonable detail.
SECTION 6. As to Equipment. The Grantor shall:
(a) Other than in the ordinary course of business, keep the Equipment at
the place therefor specified in Section 4(a) or, upon 30 days' prior written
notice to Secured Party, at such other places in jurisdictions where all action
required by Section 5 shall have been taken with respect to the Equipment.
(b) Pay promptly when due all property and other taxes, assessments and
governmental charges or levies imposed upon, and all claims (including claims
for labor, materials and supplies) against, the Equipment, except to the extent
the validity thereof is being contested in good faith.
SECTION 7. Insurance.
(a) The Grantor shall, at its own expense, maintain a complete insurance
package in such amounts, against such risks, in such form and with such
insurers, as shall reasonably be required from time to time by the Secured
Party. Each policy for liability insurance shall provide for all losses to be
paid on behalf of Secured Party and the Grantor as their respective interests
may appear, and shall provide that at least 10 days' prior written noticeof
cancellation, amendment, change of beneficiary or lapse shall be given to
Secured Party by the insurer. TheGrantor shall, if so requested by Secured
Party, deliver to Secured Party original or duplicate policies of such
insurance.
(b) Reimbursement under any liability insurance maintained by the Grantor
pursuant to this Section 7 may be paid directly to the person who shall have
incurred liability covered by such insurance.
SECTION 8. As to Receivables.
(a) The Grantor shall keep its chief place of business and chief
executive office at the office where the Grantor keeps its records concerning
the Receivable at the location therefor specified in Section 4(a) or, upon 30
days' prior written notice to Secured Party, at such other locations in a
jurisdiction where all action required by Section 5 shall have been taken with
respect to the Receivables. The Grantor will hold and preserve such recordson
chattel paper and will permit representatives of Secured Party at any time
during normal business hours to inspect and make abstracts from such records
and chattel paper.
(b) Except as otherwise provided in this subsection (b), the Grantor
shall continue to collect, at its own expense, all amounts due or to become due
the Grantor under the Receivables. In connection with such collections, the
Grantor may take (and, at Secured Party's direction, if an Event of Default
shall occur, shall take) such actionas the Grantor or Secured Party may deem
necessary or advisable to enforce collection of the Receivables; provided,
however, that upon the occurrence of an event of default (hereunder or under
the Note), Secured Party shall have the right to notify the account debtors or
obligors under the Receivable of the assignment of such Receivable toSecured
Party and to direct such account debtors or obligors to make payment of all
amounts due or to become dueto the Grantor thereunder directly to Secured Party
and, upon such notification and at the expense of the Grantor,to enforce
collection of any such Receivable and to adjust, settle or compromise the
amount or payment thereof,in the same manner and to the same extent as the
Grantor might have done. After receipt by the Grantor of the notice from
Secured Party referred to in the proviso to the preceding sentence,
(i) all amounts and proceeds (including instruments) received by the
Grantor in respect of the Receivable shall be received in trust for the
benefit of Secured Party hereunder, shall be segregated from other funds of
the Grantor and shall be forthwith paid over to Secured Party in the same
form as so received (with any necessary endorsement) to be applied as
provided by Section 13(b); and
(ii) the Grantor shall not adjust, settle or compromise the amount or
payment of any receivable, or release wholly or partly an account debtor
or obligor thereof, or allow any credit or discount thereon.
SECTION 9. Transfers and Other Liens. The Grantor shall not:
(a) Sell, assign (by operation of law or otherwise) or otherwise dispose
of any of the Collateral, except in the ordinary course of business in which
case such Collateral shall be free and clear of the security interest created
hereby.
(b) Create or suffer to exist any lien, security interest or other charge
or encumbrance upon or with respect to any of the Collateral to secure debt of
any person or entity, except for the security interest created by this
Agreement.
SECTION 10. Secured Party Appointed Attorney-in-Fact. The Grantor hereby
irrevocably appoints Secured Party as the Grantor's attorney-in-fact, with full
authority in the place and stead of the Grantor and in the name of the Grantor
or otherwise, from time to time in Secured Party's discretion, upon the
occurrence of an event of default under the Loan Agreement or Note, to
accomplish the purposes of this Agreement (subject to the rights of the Grantor
under Section 8), including without limitation:
(i) to obtain and adjust insurance required to be paid to Secured
Party pursuant to Section 7;
(ii) to ask, demand, collect, xxx for, recover, compound, receive and
give acquittance and receipts for monies due and to become due under or in
respect of any of the Collateral;
(iii) to receive, enforce, 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 desirable for the
collection of any of the Collateral or otherwise to enforce the rights
of Secured Party with respect to any of the Collateral.
SECTION 11. Secured Party May Perform. If the Grantor fails to perform
any agreement contained herein, upon the occurrence of an event of default
under the Loan Agreement or Note, Secured Party may cure such event of default,
and the expenses of Secured Party incurred in connection therewith shall be
payable by the Grantor under Section 14(b).
SECTION 12. Secured Party's Duties. The powers conferred on Secured
Party hereunder are solely to protect its interest in the Collateral and shall
not impose any duty upon it to exercise any such powers. Except for the safe
custody of any Collateral in its possession and the accounting for monies
actually received by it hereunder, Secured Party shall have no duty as to any
Collateral or as to the taking of any necessary steps to preserve rights against
prior parties or any other rights pertaining to any Collateral.
SECTION 13. Remedies. If any event of default under the Note or Loan
Agreement shall have occurred and be continuing:
(a) Secured Party may exercise in respect of the Collateral, in addition
to other rights and remedies provided for herein or otherwise available to it,
all the rights and remedies of a secured party on default under the Uniform
Commercial Code (the "Code") (whether or not the Code applies to the affected
Collateral) and also may
(i) require the Grantor to, and the Grantor hereby agrees that it
will at its expense and upon request of Secured Party forthwith, assemble
all or part of the Collateral as directed by Secured Party and make it
available to Secured Party at a place in Tucson, Arizona, to be designated
by Secured Party which is reasonably convenient to both parties; and
(ii) without notice except as specified below, sell the Collateral or
any part thereof in one or more parcels at public or private sale in
Tucson, Arizona, for cash, on credit or for future delivery, and at such
price or prices and upon such other terms as Secured Party may deem
commercially reasonable.
The Grantor agrees that, to the extent notice of sale shall be required by
law, at least 10 days' notice to the Grantor of the time and place of any public
sale or the time after which any private sale is to be made shall constitute
reasonable notification. 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) All cash proceeds received by Secured Party in respect of any sale of,
collection from, or other realization upon all or any part of the Collateral
may, in the discretion of Secured Party, be held by Secured Party as collateral
for, and/or then or at any time thereafter applied (after payment of any amounts
payable to Secured Party pursuant to Section 14) in whole or in part by Secured
Party against all or any part of the Obligations. All Collateral that is cash
or cash proceeds held by Secured Party and remaining after payment in full of
all the Obligations shall be paid over to the Grantor or to whomsoever may be
lawfully entitled to receive such surplus.
SECTION 14. Indemnity and Expenses.
(a) The Grantor agrees to indemnify Secured Party for, from and against
all claims, losses and liabilities growing out of or resulting from this
Agreement (including, without limitation, enforcement of this Agreement), except
claims, losses or liabilities resulting from Secured Party's gross negligence
or willful misconduct.
(b) The Grantor will upon demand pay to Secured Party the amount of any
and all reasonable expenses, including the reasonable fees and disbursements of
its counsel and of any experts and agents, 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, any of the Collateral;
(ii) the exercise or enforcement of any of the rights of Secured
Party hereunder; or
(iii) the failure by the Grantor to perform or observe any of the
provisions hereof.
SECTION 15. Security Interest Absolute. All rights of Secured Party and
security interests hereunder, and all Obligations of the Grantor hereunder,
shall be absolute and unconditional, irrespective of:
(i) any lack of validity or enforceability of the Loan Agreement,
the Note or any other agreement or instrument relating thereto;
(ii) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Obligations or any other amendment or
waiver of or any consent to any departure from the Loan Agreement or the
Note;
(iii) any exchange, release or non-perfection of any other
collateral, or any release or amendment or waiver of or consent to
departure from any guaranty, for all or any of the Obligations; or
(iv) any other circumstances which might otherwise constitute a
defense available to, or a discharge of, Grantor in respect of the
Obligations of the Grantor in respect of this Agreement.
SECTION 16. Amendments; Etc. No amendment or waiver of any provision of
this Agreement nor consent to any departure by the Grantor herefrom, shall in
any event 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 instance and for the specific purpose for which given.
SECTION 17. Addresses for Notices. All notices and other communications
provided for hereunder shall be in writing (including telegraphic
communications) and,
if to the Secured Party, mailed or telegraphed or delivered to it,
addressed to it at:
Xxxxxxx X. Xxxxxxx
Sage Clearing, L.P.
000 Xxxx Xxxxxx, Xxxxx 000
Xxx Xxxxxxxxx, XX 00000
if to Grantor, mailed or delivered to it, addressed to Grantor at:
Work Recovery, Inc.
0000 X. Xxxxxxx, Xxxxx 00
Xxxxxx, XX 00000
or as to either party at such other address as shall be designated by such
party in a written notice to each other party complying as to delivery with the
terms of this Section. All such notices and other communications shall, when
mailed or telegraphed, respectively, be effective on the third day after deposit
in the mails or on the day delivered to the telegraph company, respectively
addressed as aforesaid.
SECTION 18. Continuing Security Interest; Transfer of Notes. This
Agreement shall create a continuing security interest in the Collateral and
shall (i) remain in full force and effect until payment in full of the
Obligations, (ii) be binding upon the Grantor, its successors and assigns and
(iii) inure to the benefit of Secured Party and its respective successors,
transferees and assigns. Without limiting the generality of the foregoing
clause (iii), SecuredParty may assign or otherwise transfer the Note (or any
interest thereunder) to any other person or entity, and suchother persons or
entity shall thereupon become vested with all the benefits in respect thereof
granted to Secured Party herein or otherwise. Upon the payment in full of the
Obligations, the security interest granted hereby shall terminate and all rights
to the Collateral shall revert to the Grantor. Upon any such termination,
Secured Party will, at the Grantor's expense, execute and deliver to the Grantor
such documents as the Grantor shall reasonably request to evidence such
termination.
SECTION 19. Governing Law; Terms. This Agreement shall be governed by
and construed in accordance with the laws of the State of Arizona. Unless
otherwise defined herein or in the Loan Agreement, terms used in Article 9 of
the Uniform Commercial Code in the State of Arizona are used herein as therein
defined. All terms defined in the Loan Agreement and not otherwise defined
herein shall have the same meaning herein as therein.
IN WITNESS WHEREOF, the Grantor has caused this Agreement to be duly
executed and delivered by its officer thereunto duly authorized as of the date
first above written.
WORK RECOVERY, INC.,
a Colorado corporation
By___________________________________________________
Its authorized officer
"Grantor"
_____________________________________________________
Xxxxxxx X. Xxxxxxx
"Secured Party"
DEMAND PROMISSORY NOTE
$125,000.00 April 30, 0000
Xxxxxx, Xxxxxxx
FOR VALUE RECEIVED, WORK RECOVERY, INC. (the Maker), a Colorado
corporation, promises to pay to the order of XXXXXXX X. XXXXXXX (the Holder,
which term shall also include subsequent holders and other assignees of this
Note) at Tucson, Arizona, or at such other place as Holder may from time to
time designate in writing, the principal sum of One Hundred Twenty-Five Thousand
and No/100 Dollars ($125,000.00) in immediately available funds, together with
interest in arrears as hereinafter provided on the unpaid principal balance,
from the date of this Note until such principal balance is paid in full.
The principal amount of this Note shall bear interest at ten percent (10%)
per annum. Interest as herein provided shall be computed on a daily basis and
calculated on the basis of a 365-day year for the actual number of days elapsed.
Interest shall be simple, and not compounded, throughout the term of this Note.
The entire indebtedness (principal and interest) evidenced by this Note,
if not sooner paid, shall be due and payable in full on demand, and, if no
demand is made, on May 31, 1996.
Maker shall have the right to prepay the principal balance of this Note in
full or in part at any time without penalty or premium.
If any of the following events takes place (each, an Event of Default ),
Holder at its option may declare all principal and interest then remaining
unpaid and all other amounts payable under this Note immediately due and
payable:
(i) Maker fails to pay principal of or interest on this Note when such
payment is due; or
(ii) A receiver, liquidator or trustee of Maker or any substantial part of
Maker s assets or properties is appointed by a court order and such
appointment remains in effect for sixty (60) days; or
(iii)A default occurs under the Security Agreement; or
(iv) Any of Maker's property is sequestered by or in consequence of a
court order and such order remains in effect for more than sixty (60)
days; or
(v) Maker files a petition in voluntary bankruptcy or requests
reorganization under any provision of any bankruptcy, reorganization
or insolvency law or consents to the filing of any petition against
him under any such law; or,
(vi) Maker makes a formal or informal general assignment for the benefit of
its creditors, or admits in writing its inability to pay debts
generally when they become due, or consents to the appointment of a
receiver or liquidator of Maker or of all or any part of his property.
Upon the occurrence of an Event of Default, interest on the outstanding
principal balance of the Note shall accrue at fifteen percent (15%) per annum.
If an Event of Default occurs and is continuing and Holder incurs costs or
expenses in connection with its collection of the principal of or interest on
this Note, such reasonable costs and expenses shall be paid by Maker and
constitute part of the indebtedness evidenced by this Note.
Payment of this Note is secured by a security agreement (the Security
Agreement ) of even date herewith, covering (i) certain account receivables
and (ii) certain equipment.
Presentment, demand, notice of dishonor, and protest are waived by Maker.
No delay by Holder in exercising any of the rights it may have hereunder shall
operate as a waiver of any of the rights Holder may have, and any waiver
granted for one occasion shall not operate as a waiver of any subsequent
default.
All rights and remedies existing under this Note are cumulative and in
addition to, and not exclusive of, any rights or remedies otherwise available.
This Note shall be governed by and construed in accordance with the laws
of the United States and the State of Arizona, without regard to such of those
laws as govern the choice of law or mandate reliance upon laws foreign to such
State.
This Note shall be binding upon and enforceable against Maker s personal
representatives and assigns, and shall inure to the benefit of and be
enforceable by Holder s heirs, personal representatives, successors and
assigns.
WORK RECOVERY, INC.
By_________________________________________________
Its President
Maker
