EXHIBIT 3
SECURITY AGREEMENT
This Security Agreement, dated May 28, 1997 (the "Effective Date"), is
by and between Research, Incorporated, a Minnesota corporation (the
"Corporation") and Xxxx Xxxxx Xxxxxxxx ("Secured Party").
W I T N E S S E T H:
WHEREAS, the Secured Party and the Corporation have entered into a
Stock Redemption Agreement dated May 28, 1997 providing for the purchase by the
Corporation of shares of common stock of the Corporation owned by the Secured
Party (the "Redemption Agreement"); and
WHEREAS, the Corporation delivered to the Secured Party its Promissory
Note in the original principal amount of $766,000; and
WHEREAS, the Note is to be secured by certain assets of the Corporation
as provided herein.
NOW, THEREFORE, in consideration of the premises and the mutual
undertakings herein contained, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
1.01 Certain Definitions. For all purposes of this Agreement, the terms
set forth below shall be defined as follows:
(a) "Agreement" shall mean this Agreement.
(b) "Collateral" shall mean (i) all accounts receivable,
intangibles and inventories of every kind; (ii) substitutions and
replacements of the foregoing; and (iii) all proceeds from any of the
foregoing.
(c) "Event of Default" shall have the meaning given that term
in the Note.
(d) "Note" shall mean the Promissory Note dated May 28, 1997
in the original principal amount of $766,000 issued by the Corporation
to the Secured Party.
(e) "Liabilities" shall mean all amounts now or hereafter
owing under the Note.
1.02 Other. Any term used in this Agreement which is not defined herein
but which is defined in the Uniform Commercial Code, as adopted in the State of
Minnesota (the "Code"), shall have the same meaning for purposes of this
Agreement as the meaning given to such term in the Code.
ARTICLE II
SECURITY
2.01 Grant. As security for the payment, satisfaction, performance and
discharge of all Liabilities, the Corporation hereby grants to the Secured Party
a security interest in the Collateral. The Corporation will, concurrently with
the execution, delivery, and issuance to the Secured Party of this Agreement,
execute and deliver financing statements and such other instruments and
documents as the Secured Party may reasonably request in order to perfect the
Secured Party's security interest granted in this section. The Secured Party
agrees to subordinate her security interest in the Collateral to Norwest Bank
Minnesota, N.A. (the "Bank") and to execute and deliver to the Bank a
Subordination Agreement as may be reasonably required to evidence such
subordination.
2.02 Further Assurances. Until all Liabilities are fully paid and
satisfied, Buyer will at all times make, execute, deliver, record, register, or
file all such financing statements and other instruments, and take such action,
as the Secured Party may request which are reasonably necessary to assure the
Secured Party of the continued perfection of the security interest granted to it
pursuant to this Agreement. The Corporation makes no representation regarding
priority of security interests in the Collateral.
ARTICLE III
REMEDIES UPON DEFAULT
3.01 Remedies. Upon the occurrence of an Event of Default, the Secured
Party may, subject to the terms of any Subordination Agreement with the Bank:
(a) Require the Corporation to deliver to the Secured Party a
schedule of the Collateral, identifying each item of Collateral and
stating the cost and value thereof. Any such schedule shall be
certified by a duly authorized officer of the Corporation to be
accurate, true, and complete in all material respects and shall be in
such form and detail as the Secured Party may specify.
(b) Instruct the Corporation to assemble the Collateral at the
Corporation's expense and make the Collateral available to the Secured
Party at a place designated by the Secured Party which is reasonably
convenient to both the Corporation and the Secured Party. Should the
Secured Party decide to dispose of any of the Collateral, any
notification of intended disposition by the Secured Party shall be
deemed reasonably and properly given if given at least ten days before
such disposition. Any proceeds of any disposition of any of the
Collateral may be applied by the Secured Party to the payment of
expenses in connection with the repossession or disposition of the
Collateral, including reasonable attorneys' fees and legal expenses,
and any balance of such proceeds may be applied by the Secured Party
toward the payment, satisfaction, performance, or discharge of such of
the Liabilities, and in such order of application, as the Secured Party
may elect.
(c) Exercise from time to time any rights and remedies
available to it under the Code or any other applicable law.
3.02 Rights; Liabilities. All rights and remedies of the Secured Party
hereunder shall be cumulative. Nothing herein shall be construed as limiting the
liability of the Corporation to the value of the Collateral, and in the event
that, upon default, such Collateral is insufficient to satisfy all Liabilities,
the Corporation shall remain fully liable for any deficiency resulting
therefrom.
ARTICLE IV
MISCELLANEOUS
4.01 Notices. All notices, demands, and other communications to be
given or delivered under or by reason of the provisions of this Agreement shall
be in writing and shall be deemed to have been given when personally delivered,
or three business days after being mailed by first class certified mail, return
receipt requested or on the next business day after being deposited with a
nationally recognized overnight courier service addressed as hereinafter set
forth. Notices, demands, and communications to the Corporation and the Secured
Party will, unless another address is specified in writing, be sent to the
addresses indicated below:
If to the Corporation: Research, Incorporated
0000 Xxxxxx Xxxxx Xxxxx
Xxxx Xxxxxxx XX 00000
Notices to the Secured Party: Xxxx Xxxxx Xxxxxxxx
c/o Xxxxxx X. XxxXxxxxx, Esq.
000 Xxxxxxx Xxxxxxx
Xxxxx 0000
Xxxxxxxxxx XX 00000
4.02 Waiver. No waiver by the Secured Party of any breach of any
provision of this Agreement, whether by conduct or otherwise, in any one or more
instances shall be deemed to be or construed as a further or continuing waiver
of any provision of this Agreement. The failure of the Secured Party at any time
or times to require performance of any provision of this Agreement shall in no
manner affect its right to enforce the same at a later time.
4.03 Entire Agreement. This Agreement contains the entire agreement
between the parties with respect to the subject matter hereof and supersedes all
prior oral or written agreements. No representations, promises, understandings,
or agreements, oral or otherwise, not herein contained shall be of any force and
effect.
4.04 Amendment. No modification or amendment of any provision of this
Agreement shall be effective unless made in a written instrument, duly executed
by the party to be bound thereby, which refers specifically to this Agreement
and states that a modification or amendment is being made in the respects set
forth in such instrument.
4.05 Severability. Whenever possible each provision of this Agreement
shall be interpreted in such a manner as to be effective and valid under
applicable law. If any provision of this Agreement shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
4.06 Governing Law. This Agreement shall be governed by, and construe
in accordance with, the laws of the State of Minnesota, as applicable to
agreements executed and wholly performed therein.
IN WITNESS WHEREOF, the parties have entered into this Security
Agreement as of the date first above written.
/s/ Xxxx Xxxxx Xxxxxxxx
Xxxx Xxxxx Xxxxxxxx
RESEARCH, INCORPORATED
By /s/ Xxxxxx X. Xxxxxxx
Its President