VENDINGDATA CORPORATION
SECURITY AGREEMENT
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THIS SECURITY AGREEMENT, dated as of February 6, 2001 (the
"Agreement"), is between VENDINGDATA CORPORATION, a Nevada corporation having
its principal place of business at 0000 Xxxxxxx Xxxxxx, Xxx Xxxxx, Xxxxxx 00000
("Debtor"), and JOSEPHTHAL & CO., INC, a New York corporation having its
principal place of business at 000 Xxxx Xxxxxx, 00xx Xxxxx, Xxx Xxxx, Xxx Xxxx
00000 ("Secured Party").
WITNESSETH:
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WHEREAS, the Debtor has borrowed money from the Secured Party pursuant
to a standby credit facility and has executed one or a series of 10% secured
convertible promissory notes up to the aggregate principal amount of $500,000
payable to the order of the Secured Party (all obligations arising under the
promissory notes referred to above, including any changes thereto, present or
future, without limitation, are hereinafter referred to collectively as the
"Obligations," and all notes referred to above issued by Debtor to the Secured
Party in respect of the Obligations are hereinafter collectively referred to as
the "Notes"); and
WHEREAS, it is a condition precedent to the Secured Party making loans
to the Debtor under the Notes that the Debtor execute and deliver this Agreement
to the Secured Party;
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. SECURITY INTEREST. The Debtor hereby grants to the Secured Party a
security interest in all of Debtor's right, title and interest in all property
and interests of Debtor, tangible or intangible, whether now or hereafter
existing, wherever located, including all:
(a) Accounts, including but not limited to, all accounts, all
rights of the Debtor to payment for goods sold or leased or
for services rendered, all accounts receivable of the Debtor;
all obligations owing to the Debtor evidenced by an instrument
or chattel paper; all obligations owing to the Debtor of any
kind or nature, including all writings, if any, evidencing the
same, including all instruments, drafts, acceptances and
chattel paper; any and all proceeds of any of the foregoing.
Further included within the term "Accounts" are all right,
title and interest of Debtor in and any security and liens
with respect to any Account, and all Accounts, Documents and
Contract Rights of Debtor as defined in the Uniform Commercial
Code as enacted in the State of New York (the "Uniform
Commercial Code"); and
(b) Investment Property, including all of the Debtor's investment
property (as defined in the Uniform Commercial Code) and all
of the Debtor's other securities (whether certificated or
uncertificated), security entitlements, financial assets,
securities accounts, commodity contracts, and commodity
accounts (as each such
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term is defined in the Uniform Commercial Code), including all
substitutions and additions thereto, all dividends,
distributions and sums distributable or payable from, upon or
in respect of such property, and all rights and privileges
incident to such property.
(c) Instruments and Chattel Paper, including all instruments and
chattel paper as defined in the Uniform Commercial Code and
all proceeds thereof; and
(d) General Intangibles, including but not limited to, all general
intangibles as defined in the Uniform Commercial Code and all
proceeds thereof, including without limitation, any and all
rights of Debtor to any refund of any tax assessed against
Debtor or paid by Debtor, loss carry-back tax refunds,
insurance premium rebates, unearned premiums, insurance
proceeds, chooses in action, names, trade names, goodwill,
trade secrets, computer programs, computer records, data,
computer software, customer lists, patents, patent rights,
patent applications, patents pending, patent licenses or
assignments, development ideas and concepts, licenses,
permits, franchises, literary rights, rights to performance,
trademarks, trademark applications, trademark rights, logos,
intellectual property, copyrights, proprietary or other
processes, drawings, designs, diagrams, plans, reports,
charts. catalogs, manuals, research, literature, proposals and
other reproductions on paper or otherwise, of any and all
concepts or ideas, whether or not related to the business or
operations of Debtor; and
(e) Equipment as defined in the Uniform Commercial Code, including
but not limited to, all equipment, vehicles, machinery, tools,
furniture, fixtures, trade fixtures and parts. Further
included within the term "Equipment" is all tangible personal
property utilized in the conduct of the Debtor's business and
all additions, accessions, substitutions, components, and
replacements thereto, therefor and thereof and all proceeds
thereof; and
(f) Inventory as defined in the Uniform Commercial Code, including
without limitation, all raw materials and other materials and
supplies, work-in-progress and finished goods and any products
made or processed therefrom and all substances, if any,
commingled therewith or added thereto; mid
(g) all products and proceeds of the above, including insurance
proceeds (collectively, the "Collateral").
2. OBLIGATIONS SECURED. The security interest granted hereby secures
payment and performance of all debts, loans and liabilities hereunder, and all
interest, fees, charges and expenses, including without limitation, such debts,
loans and liabilities of Debtor to Secured Party arising under the Note.
3. DEBTOR'S REPRESENTATIONS AND WARRANTIES. Debtor represents and
warrants that:
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3.1. AUTHORIZATION. The execution, delivery and performance of
this Agreement and the Note are within Debtor's corporate powers, and are not in
contravention of law nor of the terms of Debtor's Articles of Incorporation or
By-laws, nor of any indenture, agreement or undertaking to which the Debtor is a
party or by which it is bound.
3.2. PLACE OF BUSINESS. Debtor's principal place of business
and chief executive office is located at the address provided in the first
paragraph of this Agreement, and Debtor keeps its inventory and records
concerning accounts, contract rights and other property at that location.
3.4. TITLE TO COLLATERAL. Debtor owns all of its personal
property and has good, clear and marketable title thereto, free and clear of all
liens and encumbrances, except liens created hereunder or set forth in Schedule
3.4, attached hereto and made a part hereof, and except in connection with lines
of credit obtained by Debtor from institutional lenders acceptable to Josephthal
& Co., Inc. pursuant to intercreditor agreements in form and substance
acceptable to Josephthal & Co., Inc. Secured Party acknowledges the existence
and acceptability of those encumbrances set forth in Schedule 3.4 attached
hereto.
3.5 COLLATERAL AND PERFECTION. Neither the Debtor nor, to the
best of the Debtor's knowledge, any affiliate (as such term is used in Rule 405
under the Securities Act of 1933, as amended ("Affiliates")) have performed any
acts which might prevent the Secured Party from enforcing any of the terms of
this Agreement or which would limit the Seemed Party in any such enforcement. No
collateral is in the possession of any person (other than Debtor) asserting any
claim thereto or security interest therein. The security interests created
hereunder constitute valid security interests under the Uniform Commercial Code
securing the Obligations to the extent that a security interest may be created
in the Collateral.
4. GENERAL OBLIGATIONS OF DEBTOR.
4.1. FINANCING STATEMENTS. Debtor agrees to execute one or
more financing statements, to pay the cost of filing the same in all public
offices wherever filing is required by applicable law to perfect a security
interest or is deemed by the Secured Party to be necessary or desirable and to
execute such other documents as the Secured Party shall reasonably request.
4.2. INSURANCE. Debtor agrees to keep or cause to be kept all
the Collateral insured with coverages in amounts not less than usually carried
by one engaged in a like business.
4.3. INSPECTION. Debtor will keep accurate and complete
records of the Collateral, neither Debtor nor any Affiliates shall move the
Collateral without notice to the Secured Party and the Secured Party or any of
their agents shall have the right to inspect the Collateral wherever located and
to visit Debtor's place or places of business, at reasonable intervals without
Debtor's or any Affiliate's hindrance or delay, to inspect audit, check and make
extracts from any copies of books, records, journals, orders, receipts and
correspondence that relate to the Collateral or to the general financial
condition of Debtor or any Affiliate.
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4.4. NEGATIVE PLEDGE. The Debtor will not assign any accounts
or other Collateral to any person other than the Secured Party, nor create or
permit to be created any lien, encumbrance or security interest of any kind on
any of its accounts, contract rights or inventory other than for the benefit of
the Secured Party, nor grant or permit to be granted any corporate guaranty
other than for the benefit of the Secured Party, except in connection with (i)
lines of credit obtained by Debtor from institutional lenders acceptable to
Josephthal & Co. Inc. pursuant to intercreditor agreements in form and substance
acceptable to Josephthal & Co. Inc., (ii) debt expressly subordinate to the
Notes, or (iii) purchase price liens.
4.5. EXISTENCE; PERFECTION. Debtor will maintain its corporate
existence in good standing comply with all laws and regulations of the United
States or any state or political subdivision thereof or of any governmental
authority which may have jurisdiction over it or its business. Debtor will not
change its name, identity or corporate structure in any manner unless it shall
have given the Secured Party prior notice thereof and delivered an opinion of
counsel satisfactory to the Secured Party with respect thereto. Debtor will not
establish or change the location of its chief executive office or its chief
place of business or except in the ordinary course of business, the locations
where it keeps or holds any Collateral or records relating thereto or in any
event change the location of any Collateral if such change would cause the
security interests hereunder to lapse or cease to be perfected.
4.6. TAXES. Debtor will pay all real and personal property
taxes, assessments and charges as well as all franchise, income, unemployment,
old age benefit, withholding, sales and other taxes assessed against it, or
payable by it at such times and in such manner as to prevent any penalty from
accruing or any lien or charge from attaching to its property, and wilt furnish
the Secured Party upon request, receipts or other evidence that deposits or
payments have been made.
4.7. SALES. Debtor will not sell or dispose of any of its
assets, including the Collateral, except in the ordinary and usual course of its
business
4,8. REPAIR. Debtor will maintain its equipment and property
in good repair and working order.
4.9. CONTINUING REPRESENTATIONS. The warranties and
representations made by Debtor in this Agreement arc continuing. In the event
that any obligation, representation or warranty is no longer true or correct,
Debtor will immediately notify the Secured Party in writing.
5. DEFAULT. Debtor shall be in default under this Agreement and under
any other agreement with the Secured Party upon the happening of' any of the
following events or conditions, without demand or notice:
5.1. Failure of Debtor to pay when due any Obligation, whether
by maturity, acceleration or otherwise;
5.2. Failure of Debtor to perform any of its agreements,
warranties or representations in this Agreement or in the Note;
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5.3. Material loss or theft, substantial damage or destruction
or unauthorized sale or encumbrance of any material portion of the Collateral in
excess of reasonably expected recoveries under insurance policies, or the making
of any levy on, or seizure or attachment of a material portion of the
Collateral; or
5.4. The occurrence of a default under the Note.
6. SECURED PARTIES' RIGHTS UPON DEFAULT. The Secured Party shall upon
the occurrence of a default hereunder and at any time thereafter, without
presentment, demand, notice, protest or advertisement of any kind have the
following rights in addition to all other rights hereunder:
6.1. ACCELERATION. The Secured Party may make all Obligations
under this or any other agreement with the Debtor immediately due and payable
without presentment, demand, protest, heating or notice of any kind and may
exercise the rights of a secured party under law or under the terms of this or
any other agreement with the Debtor.
6.2. POSSESSION. The Secured Party may enter and take
possession of all Equipment, Inventory and other Collateral and the premises on
which they are located, and in the Secured Party's sole discretion operate and
use Debtor's equipment, whether or not Collateral hereunder, complete work in
process, apply as Debtor's attorney-in-fact for domestic or foreign patents or
other intellectual property rights with respect to inventions and seek
registration or assignment, foreign and domestic, of any trademarks, trade
names, styles, logos or copyrights, and sell, lease or license the Collateral to
third persons or associations without being liable to Debtor on account of any
losses, damage or depreciation that may occur as a result thereof so long as the
Secured Party shall act reasonably and in good faith; and at the Secured Party's
option and without notice to Debtor (except as specifically herein provided) the
Secured Party may sell, lease, assign and deliver the whole or any part of the
Collateral, or any substitute therefor or any addition thereto, at public or
private sale, for cash, upon credit, or for future delivery, at such prices and
upon such terms as the Secured Party deems advisable, including without
limitation, the right to sell or lease in conjunction with other property, real
or personal, and allocate the sale or lease proceeds among the items of property
sold without the necessity of the Collateral being present at any such sale or
lease, or in view of prospective purchasers thereof. The Secured Party shall
give Debtor at ten least (10) days' notice by hand delivery at or by United
States certified mail, postage prepaid (in which event notice shall be deemed to
have been given when so delivered), to the address specified herein, of the time
and place of any public or private sale or other disposition unless the
Collateral is perishable, threatens to decline speedily in value, or is the type
customarily sold in a recognized market. Upon such sale, the Secured Party may
become the purchaser of the whole or any part of the Collateral, discharged from
all claims and free from any right of redemption. In case of any such sale by
the Secured Party of all or any of said Collateral on credit or for future
delivery, property so sold may be retained by the Secured Party until the
selling price is paid by the purchaser. The Secured Party shall incur no
liability in case of the failure of the purchaser to take up and pay for the
property so sold. In case of any such failure, the said property may again be
sold.
6.3. POWER OF ATTORNEY AND NOTIFICATION. At Debtor's expense,
the Secured Party in its own name or in the name of others may communicate with
account debtors in
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order to verify with them to the Secured Party's satisfaction the existence,
amount and terms of any accounts or contract rights and also notify account
debtors that Collateral has been assigned to the Secured Party and that payments
shall be made directly to the Secured Party. Upon request of the Secured Party,
Debtor will so notify such account debtors and will indicate on all xxxxxxxx to
such account debtors that their accounts must be paid to the Secured Party.
Debtor does hereby appoint the Secured Party and its agents as Debtor's
attorney-in-fact: to, upon an event of default hereunder, collect, compromise,
endorse, sell or otherwise deal with the Collateral or proceeds thereof in its
own name or in the name of the Debtor; to endorse the name of Debtor upon any
Note, checks, drafts, money orders, or other instruments, documents, receipts or
Collateral that may come into its possession and to apply the same in full or
part payment of any amounts owing to the Secured Party; to sign and endorse the
name of Debtor upon any documents, instruments, drafts against account debtors,
assignments, verifications and notices in connection with Accounts, and any
instrument or document relating thereto or to Debtor's rights therein; and to
give written notice to any office and officials of the United States Post Office
to effect such change or changes of address tat all mail addressed to Debtor may
be delivered directly to the Secured Party. Debtor hereby grants to its said
attorney-in-fact full power to do any and all things necessary to be done in and
about the premises as frilly and effectually as Debtor might or could do, and
hereby ratifies all that its attorney-in-fact shall lawfully do or cause to be
done by virtue hereof. This power of attorney is coupled with an interest and is
irrevocable for the term of this Agreement for all transactions hereunder and
thereafter as long as the Debtor may be indebted to the Secured Party.
6.4. APPLICATION OF PROCEEDS. Any and all proceeds of any
Collateral realized or obtained by the Secured Party upon exercise of its rights
and remedies hereunder, shall be applied, after payment of any and all costs and
expenses, fees and commission and taxes of such sale, collection or other
realization, in accordance with the following:
(a) With respect to any surplus proceeds of any Collateral then
remaining, to the payment of the Obligations, and any costs,
fees or expenses incurred in connection with the
administration, collection or enforcement thereof, including,
without limitation, reasonable attorney's fees and other
professionals' out of pocket costs and fees, until payment and
satisfaction in full thereof; and
(b) Any surplus remaining after application as provided in
paragraph (a) above, shall be paid to the Debtor, or its
successors or assigns, or to whomsoever may be lawfully
entitled to receive the same.
7. DEBTOR'S OBLIGATION TO PAY EXPENSES OF SECURED PARTIES. Debtor shall
pay to the Secured Party on demand any and all reasonable expenses (including,
but not limited to, a collection charge on all accounts collected, all
reasonable attorney's fees and expenses, and all other expenses of like or
unlike nature) that may be incurred or paid by the Secured Party to obtain or
enforce payment of any account against the account debtor, Debtor or any
guarantor or surety of or in the prosecution or defense of any action or
concerning any matter growing out of or connected with the subject matter of
this Agreement, the Obligations, such Collateral or the Secured Party's rights
or interests therein or thereto. All such
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expenses may be added to the principal amount of any indebtedness owed by Debtor
to the Secured Party and shall constitute part of such Obligations secured
hereby.
8. WAIVERS. Debtor waives demand, presentment, protest, notice of
nonpayment and all other notices. No delay or omission by the Secured Party in
exercising any rights shall operate as a waiver of such right or any other
right. Waiver on any one occasion shall not be construed as a bar to or waiver
of any right or remedy on any future occasion. The Secured Party's rights arid
remedies, whether evidenced hereby or by any other agreement, instrument or
paper, shall be cumulative and may be exercised singularly or concurrently.
9. FURTHER ASSURANCES. The Debtor, at its own expense, shall do, make,
execute and deliver all such additional and further acts, deeds, assurances,
documents, instruments and certificates as the Secured Party may reasonably
require, including, without limitation, (a) executing, delivering and filing
financial statements and continuation statements under the Uniform Commercial
Code as applicable in any relevant jurisdiction, (b) obtaining governmental and
other third party consents and approvals, and (c) obtaining waivers from
mortgagees and landlords.
10. CHOICE OF LAW. THIS AGREEMENT AND THE NOTE SHALL BE GOVERNED BY AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS (AND NOT THE LAW OF
CONFLICTS) OF THE STATE OF NEW YORK.
11. WAIVER OF JURY TRIAL. THE DEBTOR HEREBY WAIVES TRIAL BY JURY IN ANY
JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY MANNER (WHETHER
SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO,
OR CONNECTED WITH THIS AGREEMENT OR THE NOTE OR THE RELATIONSHIP ESTABLISHED
HEREUNDER, THEREUNDER.
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IN WITNESS WHEREOF, the parties hereto have signed this Agreement as of
the day and year first above written.
DEBTOR:
VENDINGDATA CORPORATION
By: /s/ Xxxxxx X. Xxxx
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Name: Xxxxxx X. Xxxx
Title: President & CEO
SECURED PARTY:
JOSEPHTHAL & CO., INC.
By: /s/ Xxxxx Xxxxxxx
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Name: Xxxxx Xxxxxxx
Title: Managing Director
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