EXHIBIT 10.6
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (this "Agreement") is dated as of September_, 2003,
and is between Xxxxxx Xxxx ("Secured Party"), Xxxxxxxx Technologies, Inc., a
Florida corporation ("Parent"), and STR Acquisition Corp., a Maryland
corporation. ("Merger Sub"), a Delaware corporation as succeeded in interest by
the surviving corporation of a merger, Security and Technology Research, Inc.
(the "Company"), a Maryland corporation ("Debtor"), such corporation being a
wholly owned subsidiary of Parent.
This Agreement is entered into in connection with a merger of Merger Sub
into the Company. Pursuant to an Agreement and Plan of Merger of even date
herewith by and between Secured Party, Parent, Merger Sub and the Company, the
Company will become a wholly owned subsidiary of Parent. As partial
consideration for such merger transaction Merger Sub delivered a Promissory Note
of even date herewith in the principal amount of $375,000 to Secured Party (the
"Note") that by operation of law will become an obligation of the Company upon
the closing of the merger transaction and is itself subject to the Guaranty of
even date herewith delivered by Parent to Secured Party (the "Guaranty"). In
addition, as part of the merger transaction set forth in the Agreement and Plan
of Merger, Parent will retain Secured Party to perform consulting services for
Parent and Secured Party will agree to perform such consulting services and
covenant to other matters under a "Consulting Agreement" executed on even date
herewith. In consideration for Secured Party's services and covenants Parent
will pay Secured Party a fee as set forth in the Consulting Agreement (the
"Fee").
WHEREFORE, Debtor, Parent and Secured Party agree as follows:
1. GRANT OF SECURITY INTEREST. Each of Debtor and Parent (to the extent
that each owns any portion of the assets constituting the Collateral) hereby
grants a security interest in the Collateral (as defined in Section 2) in favor
of Secured Party to secure the payment of the Obligations (as defined in Section
3).
2. COLLATERAL. The Collateral shall consist of:
2.1 CORPORATE STOCK. Parent's corporate stock in STR in an amount that
is equal to [forty] percent [(40%)J of the outstanding and issued voting, common
shares of STR.
2.2 ACCOUNTS. All present and future net accounts receivable of and
other rights of Debtor to the payment of money no matter how evidenced, all
present and future chattel paper, instruments and other writings evidencing any
such right, all goods repossessed or returned in connection therewith, and all
deposit accounts;
2.3 INVENTORY. All inventory of Debtor now owned or hereafter acquired
(to the fullest extent permitted by present or future law).
1
2.4 EQUIPMENT. All equipment of Debtor now owned or hereafter
acquired, including, without limitation, all machinery, computer hardware and
software, furniture, furnishings and fixtures;
2.5 INTELLECTUAL PROPERTY. All patents, copyrights, service marks,
trademarks, tradenames, trade secrets, web sites, web pages, domain names,
URL's, confidential information, know-how, customer lists and other customer
information owned by Debtor or in which Debtor has an interest, including all
licenses or other rights with respect to any of the foregoing and all
registrations or applications for registration of any of the foregoing. All
other intangibles of Debtor now owned or hereafter acquired;
2.6 BOOKS AND RECORDS. All now existing or hereafter acquired books
and records relating to the foregoing Collateral and all equipment containing
such books and records; and
2.7 PROCEEDS. All proceeds of the foregoing Collateral. For purposes
of this Agreement, the term "proceeds" includes whatever is receivable or
received when Collateral or proceeds are sold, leased, collected, exchanged or
otherwise disposed of, whether such disposition is voluntary or involuntary, and
includes, without limitation, all rights to payment, including return premiums,
with respect to any insurance relating thereto.
3. OBLIGATIONS. The term "Obligations" means and includes obligations of
Debtor to Secured Party arising from the Note and this Agreement, and also
includes all other debts, obligations and liabilities of Debtor to Secured
Party, now or hereafter made which are memorialized in a writing. The term
"Obligations" also means and includes obligations of Parent to Secured Party
arising from the Guaranty and this Agreement, and also includes all other debts,
obligations and liabilities of Debtor to Secured Party, now or hereafter made
which are memorialized in a writing including but not limited to the Fee.
4. REPRESENTATIONS AND WARRANTIES. Each of Debtor and Parent represents and
warrants to Secured Party that: (a) Debtor or Parent, as the case may be, is the
owner of its portion of the Collateral free and clear of all liens, encumbrances
and security interests (other than as permitted by Section 9 below); (bit has
the right and power to make this Agreement; and (c) the Collateral will be kept
at the address specified below.
5. DEFENSE OF CLAIM. Debtor and Parent agree to defend their respective
portions of the Collateral against claims and demands of all persons.
6. INSURANCE. Debtor will insure its portion of the Collateral against all
hazards in an amount at least equal to the remaining principal balance of the
Note. If Debtor fails to obtain insurance, Secured Party shall have the right to
obtain it at Debtor's expense. Debtor hereby assigns to Secured Party all rights
to receive proceeds of insurance not exceeding the unpaid balance under the
Obligations, directs any insurer to pay all proceeds directed to Secured Party,
and authorizes Secured Party to endorse any draft for the proceeds.
2
7. POSSESSION; CONDITION. Until default, Debtor may retain possession of
its portion of the Collateral and use it in any lawful manner not inconsistent
with either the Debtor's obligations herein or the terms and conditions of any
policy of insurance thereon. Debtor agrees to keep its portion of the Collateral
in good condition and repair, reasonable wear and tear excepted, and will permit
Secured Party or its agents to inspect Debtor's portion of the Collateral at any
time. Until default, Parent may retain possession of, but may not in any form or
manner sell, transfer, assign, pledge, hypothecate or in any form or manner
encumber its portion of the Collateral.
8. SALE. Other than in the ordinary course of business, Debtor agrees not
to sell the Collateral without the prior written consent of the Secured Party,
which consent will not be unreasonably withheld.
9. APPOINTMENT. Secured Party is hereby appointed Debtor's and Parent's
attorney-in-fact to do all acts and things which Secured Party may deem
necessary to perfect and continue to perfect the security interest created by
this Security Agreement and to protect the Collateral. Without limiting the
foregoing, Debtor and Parent hereby authorizes Secured Party to file all
financing statements that Secured Party believes necessary to perfect the
security interest granted hereby, and further authorizes Secured Party to make
filings with the U.S. Patent and Trademark Office in connection with the
security interest granted hereby.
10. EVENTS OF DEFAULT. The occurrence of any of the following, whatever the
reason therefor, shall constitute an Event of Default:
10.1 DEFAULT UNDER GUARANTY. The occurrence of any Event of Default as
defined in the Guaranty.
10.2 BREACH OF THE AGREEMENT AND PLAN OF MERGER. Any material breach
of any covenant or agreement or non-fulfillment of any obligation of Debtor or
Parent set forth in the Agreement and Plan of Merger.
10.3 NONPAYMENT. Debtor or Parent fails to pay any amount owing to
Secured Party under the Obligations after the expiration of any grace period or
notice period for such payment provided in the Obligations.
10.4 NONPERFORMANCE. Debtor or Parent fails to perform or observe any
other terms, covenant or agreement contained hereunder, and such failure
continues uncured for a period of ten (10) days following Secured Party's
delivery of written notice of such failure to Debtor or Parent, as the case may
be.
10.5 FAILURE OF WARRANTY. Any representation or warranty under any of
the Obligations or in any other document made or delivered pursuant to or in
connection with any of the Obligations proves to have been incorrect in any
material respect when made.
3
11. EFFECT OF DEFAULT. Upon any Event of Default hereunder:
11.1 ACCELERATION. Secured Party may accelerate the outstanding
amounts (if any) on the Note and/or the Fee by delivering written notice of such
acceleration.
11.2 OTHER REMEDIES. Secured Party shall have all of the rights and
remedies of a secured party under the Uniform Commercial Code or other
applicable law.
All rights and remedies provided herein or in the Obligations (including the
Guaranty) shall, to the full extent permitted by law, be cumulative. After
default, Secured Party may require Debtor and/or Parent to assemble the
Collateral and make it available to Secured Party at a place to be designated by
Secured Party that is reasonably convenient to Secured Party and Debtor. Any
notice of sale, disposition or other intended action by Secured Party, sent to
Debtor at the address specified below, or such other address of Debtor as may
from time to time be shown on Secured Party's records, at least five (5) days
prior to such action, shall constitute reasonable notice to Debtor.
12. COSTS. Debtor and Parent agree that, upon any Event of Default, they
will pay to Secured Party all costs reasonably incurred by Secured Party for the
purpose of enforcing Secured Party's rights hereunder, including, but not
limited to, the cost of foreclosures, the costs of obtaining necessary permits
and consents to the transfer of the Collateral (should any such transfer occur),
and all attorneys' fees, costs and other expenses incurred by Secured Party in
connection therewith, together with interest thereon from the date of demand at
the rate applicable to the principal balance of the Note.
13. NOTICES. All notices and other communications provided for hereunder
shall be in writing (including facsimile) and mailed, telecopied or delivered to
a party at its address shown on the signature page of this Agreement; or in each
case at such other address as shall be designated by Secured Party or Debtor and
Parent in a written notice to the other. All such notices and communications
shall, when mailed, telecopied or sent by courier, be effective when deposited
in the mails, delivered to the courier, as the case may be, or sent by
telecopier.
14. GOVERNING LAW; JURISDICTION. This Agreement shall be construed and
enforced, and the obligations, rights and remedies of the parties hereunder
shall be determined in accordance with and governed by, the laws of the State of
Maryland, without reference to the principles of conflict of laws thereof. By
execution and delivery of this Agreement, each party hereto irrevocably submits
to the exclusive jurisdiction of such court for itself and on behalf of its
permitted successors and assigns.
15. WAIVER OF JURY. DEBTOR, PARENT AND SECURED PARTY HEREBY IRREVOCABLY
AGREE TO WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF
ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY DEALINGS BETWEEN THEM
RELATING TO THE SUBJECT MATTER OF THIS AGREEMENT. The scope of this waiver is
intended to be all encompassing of any and all disputes that may be filed in any
court and that relate to the subject matter of this transaction, including
without limitation contract claims, tort claims, breach of duty claims and all
other common law and
4
statutory claims. Debtor, Parent and Secured Party each (i) acknowledges that
this waiver is a material inducement to enter into a business relationship, that
each has already relied on this waiver in entering into this relationship, and
that each will continue to rely on this waiver in their related future dealings
and (ii) further warrants and represents that each has reviewed this waiver with
its legal counsel and that each knowingly and voluntarily waives its jury trial
rights following consultation with legal counsel. THIS WAIVER IS IRREVOCABLE,
MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THIS WAIVER
SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS
OF THIS AGREEMENT. In the event of litigation, this provision may be filed as a
written consent to a trial by the court.
16. MISCELLANEOUS PROVISIONS. No provision of this Agreement may be
amended, modified, supplemented, changed, waived, discharged or terminated
unless Secured Party consents thereto in writing. In case any one or more of the
provisions contained in this Agreement should be held to be invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein shall not in any way be affected or
impaired thereby. This Agreement shall be binding upon and inure to the benefit
of Debtor, Parent, Secured Party and their respective successors and assigns.
Secured Party shall have the right to sell, assign or otherwise transfer, either
in part or in its entirety, this Agreement and the Guaranty, without Debtor's or
Parent's consent, with any such transferee being entitled to be treated in all
favorable respects as a holder or holders in due course. Time is of the essence
of this Agreement and the performance of each of the covenants and agreements
contained herein, including, but not limited to, the payment of all sums due
hereunder.
5
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
and delivered by their duly authorized officer as of the day and year first
above written.
SECURED PARTY:
/s/ Xxxxxx Xxxx
----------------------------------------
Xxxxxx Xxxx
Address:
Facsimile No.
DEBTOR:
STR Acquisition Corp. (as succeeded in
interest by Security and Technology
Research, Inc.)
By: /s/ Xxx Xxxxx
------------------------------------
Xxx Xxxxx, CFO/President
Address:
Facsimile No.
PARENT:
Xxxxxxxx Technologies, Inc.
By: /s/ Xxx Xxxxx
------------------------------------
Xxx Xxxxx, CFO/President
Address:
Facsimile No.
6
