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EXHIBIT 10.31
SECURITY AGREEMENT
THIS SECURITY AGREEMENT dated as of September 23, 1997, is made by
Continuus Software Corporation, a California corporation ("Grantor"), in favor
of London Pacific Life & Annuity Company, a North Carolina joint stock life
insurer ("Lender").
RECITALS
A. Lender has made a loan to Grantor as evidenced by that certain Senior
Secured Convertible Debenture (the "Debenture") dated of even date herewith
executed by Grantor in favor of Lender (the "Loan") and issued pursuant to that
certain Senior Secured Convertible Debenture Purchase Agreement.
B. Lender is willing to make the Loan to Grantor, but only upon the
condition, among others, that Grantor shall have executed and delivered to
Lender this Security Agreement.
AGREEMENT
NOW, THEREFORE, in order to induce Lender to make the Loan and for other
good and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, and intending to be legally bound, Grantor hereby represents,
warrants, covenants and agrees as follows:
SECTION 1. DEFINITIONS.
1.1 DEFINED TERMS. Unless otherwise defined herein the following terms
shall have the following meanings (such meanings being equally applicable to
both the singular and plural forms of the terms defined):
"COLLATERAL" shall have the meaning assigned to such term in Section 3
of this Security Agreement.
"CONTRACTS" means all contracts or other agreements in or under which
Grantor may now or hereafter have any right, title or interest.
"COPYRIGHT" means all of the following in which Grantor now holds or
hereafter acquires any interest: (a) all copyrights, whether registered or
unregistered, held pursuant to the laws of the United States, any State thereof
or any other country; (b) registrations, application and recordings in the
United States Copyright Office or in any similar office or agency of the United
States, any state thereof or any other country; (c) any
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continuations, renewals or extensions thereof; and (d) any registrations to be
issued in any pending applications.
"EVENT OF DEFAULT" shall have the meaning assigned to such term in
Section 3 of the Debenture.
"LICENSE" means any Patent License, Trademark License or other license
of rights or interests now held or hereafter acquired by Grantor.
"PATENT LICENSE" means any written agreement granting any right with
respect to any invention on which a Patent is in existence.
"PATENTS" means all of the following in which Grantor now holds or
hereafter acquires any interest: (a) letters patent of the United States or any
other country, all registrations and recordings thereof, and all applications
for letters patent of the United States or any other country and all rights
corresponding thereto, including, without limitation, registrations, recordings
and applications in the United States Patent and Trademark Office or in any
similar office or agency of the United States, any State thereof or any other
country and (b) all reissues, divisions, continuations, renewals,
continuations-in-part or extensions thereof.
"PERMITTED LIENS" means any interest in the Collateral securing a credit
to Grantor which is listed on the attached Schedule A.
"SECURED OBLIGATIONS" means (a) the obligation of Grantor to repay
Lender under Section 2 below and to pay fees, costs and expenses of Lender under
Section 7.2 below, and (b) all other indebtedness, liabilities and obligations
of Grantor to Lender, whether now existing or hereafter incurred.
"TRADEMARK LICENSE" means any of the following now owned or hereafter
acquired by Grantor: any written agreement granting any right to use any
Trademark or Trademark registration.
"TRADEMARKS" means any of the following now owned or hereafter acquired
by Grantor: (a) any trademarks, tradenames, corporate names, business names,
trade styles, service marks, logos, other source or business identifiers, prints
and labels on which any of the foregoing have appeared or appear, designs and
general intangibles of like nature, now existing or hereafter adopted or
acquired, all registrations and recordings thereof, and any applications in
connection therewith, including, without limitation, registrations, recordings
and applications in the United States Patent and Trademark Office or in any
similar office or agency of the United States, any State thereof or any other
country or any political subdivision thereof and (b) any reissues, extensions or
renewals thereof.
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"UCC" means the Uniform Commercial Code as the same may, from time to
time, be in effect in the State of California; provided, however, in the event
that, by reason of mandatory provisions of law, any or all of the attachment,
perfection or priority of Lender's security interest in any collateral is
governed by the Uniform Commercial Code as in effect in a jurisdiction other
than the State of California, the term "UCC" shall mean the Uniform Commercial
Code as in effect in such other jurisdiction for purposes of the provisions
hereof relating to such attachment, perfection of priority and for purposes of
definitions related to such provisions.
In addition, the following terms shall be defined terms having the
meaning set forth for such terms in the UCC (definition sections of the UCC are
noted parenthetically): "Account Debtor" (9105(1)(a)); "Accounts" (9106);
"Chattel Paper" (9105(1)(b)); "Documents" (9105(1)(f)); "Equipment" (9109(2));
"Fixtures" (9313(1)(a)); "General Intangibles" (9106); "Instruments"
(9105(1)(i); "Inventory" (9109(4)); "Proceeds" (9306(1)). Each of the foregoing
defined terms shall include all of such items now owned, or hereafter acquired,
by Grantor.
SECTION 2. SECURED OBLIGATION.
Grantor agrees forthwith to pay to Lender all of the unpaid principal
amount of, and accrued interest on, the Debenture and all other indebtedness,
liabilities and obligations of Grantor to Lender arising thereunder or
hereunder, whether now existing or hereafter incurred, and whether created
under, arising out of or in connection with any written agreement or otherwise.
SECTION 3. GRANT OF SECURITY INTEREST.
As collateral security for the prompt and complete payment and
performance when due (whether at stated maturity, by acceleration or otherwise)
of all the Secured Obligations and in order to induce Lender to cause the Loan
to be made, Grantor hereby assigns, conveys, mortgages, pledges, hypothecates
and transfers to Lender, and hereby grants to Lender, a security interest in all
of Grantor's right, title and interest in, to and under the following whether
now owned or hereafter acquired (all of which being herein collectively called
the "Collateral"):
(a) All Accounts of Grantor;
(b) All Chattel Paper of Grantor;
(c) All Contracts of Grantor;
(d) All Documents of Grantor;
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(e) All Equipment of Grantor;
(f) All Fixtures of Grantor;
(g) All General Intangibles of Grantor including, without
limitation, all Copyrights, Patents and Trademarks;
(h) All Instruments of Grantor;
(i) All Inventory of Grantor;
(j) All property of Grantor held by Lender, or any other party
for whom Lender is acting as agent hereunder, including, without limitation, all
property of every description now or hereafter in the possession or custody of
or in transit to Lender or such other party for any purpose, including, without
limitation, safekeeping, collection or pledge, for the account of Grantor, or as
to which Grantor may have any right or power;
(k) All other goods and personal property of Grantor whether
tangible or intangible and whether now or hereafter owned or existing, leased,
consigned by or to, or acquired by, Grantor and wherever located; and
(l) To the extent not otherwise included, all Proceeds of each of
the foregoing and all accessions to, substitutions and replacements for, and
rents, profits and products of each of the foregoing.
SECTION 4. RIGHTS OF LENDER; COLLECTION OF ACCOUNTS.
4.1 Notwithstanding anything contained in this Security Agreement to the
contrary, Grantor expressly agrees that it shall remain liable under each of its
Contracts and each of its Licenses to observe and perform all the conditions and
obligations to be observed and performed by it thereunder and that it shall
perform all of its duties and obligations thereunder, all in accordance with and
pursuant to the terms and provisions of each such Contract or License. Lender
shall not have any obligation or liability under any Contract or License by
reason of or arising out of this Security Agreement or the granting to Lender of
a lien therein or the receipt by Lender of any payment relating to any Contract
or License pursuant hereto, nor shall Lender be required or obligated in any
manner to perform or fulfill any of the obligations of Grantor under or pursuant
to any Contract or License, or to make any payment, or to make any inquiry as to
the nature or the sufficiency of any payment received by it or the sufficiency
of any performance by any party under any Contract or License, or to present or
file any claim, or to take any action to collect or enforce any performance or
the payment of any amounts which may have been assigned to it or to which it may
be entitled at any time or times.
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SECTION 5. REPRESENTATIONS AND WARRANTIES.
Grantor hereby represents and warrants to Lender that:
5.1 Except for the security interest granted to Lender under this
Security Agreement and other Permitted Liens, Grantor is the sole legal and
equitable owner of each item of the Collateral in which it purports to grant a
security interest hereunder, having good, marketable and insurable title thereto
free and clear of any and all liens other than Permitted Liens.
5.2 No effective security agreement, financing statement, equivalent
security or lien instrument or continuation statement covering all or any part
of the Collateral exists, except such as may have been filed by Grantor in favor
of Lender pursuant to this Security Agreement or such as relate to other
Permitted Liens.
5.3 This Security Agreement creates a legal and valid security interest
on and in all of the Collateral in which Grantor now has rights, and all filings
and other actions necessary or desirable to perfect and protect such security
interest have been duly taken. Accordingly, Lender has a fully perfected first
priority security interest in all of the Collateral in which Grantor now has
rights, subject only to the Permitted Liens. This Security Agreement will create
a legal and valid and fully perfected first priority security interest in the
Collateral in which Grantor later acquires rights, when Grantor acquires those
rights, subject only to the Permitted Liens.
SECTION 6. COVENANTS.
Grantor covenants and agrees with Lender that from and after the date of
this Security Agreement and until the Secured Obligations have been performed
and paid in full:
6.1 FURTHER ASSURANCES; PLEDGE OF INSTRUMENTS. At any time and from time
to time, upon the written request of Lender, and at the sole expense of Grantor,
Grantor shall promptly and duly execute and deliver any and all such further
instruments and documents and take such further action as Lender may reasonably
deem desirable to obtain the full benefits of this Security Agreement.
6.2 MAINTENANCE OF RECORDS. Grantor shall keep and maintain at its own
cost and expense satisfactory and complete records of the Collateral.
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SECTION 7. RIGHTS AND REMEDIES UPON DEFAULT.
7.1 If any Event of Default shall occur and be continuing, Lender may
exercise in addition to all other rights and remedies granted to it under this
Security Agreement, all rights and remedies of a secured party under the UCC.
7.2 Grantor also agrees to pay all fees, costs and expenses of Lender,
including, without limitation, reasonable attorneys' fees, incurred in
connection with the enforcement of any of its rights and remedies hereunder.
7.3 Grantor hereby waives presentment, demand, protest or any notice (to
the maximum extent permitted by applicable law) of any kind in connection with
this Security Agreement or any Collateral.
7.4 The Proceeds of any sale, disposition or other realization upon all
or any part of the Collateral shall be distributed by Lender in the following
order of priorities:
(a) First, to Lender in an amount sufficient to pay in full the
reasonable costs of Lender in connection with such sale, disposition or other
realization, including all fees, costs, expenses, liabilities and advances
incurred or made by Lender in connection therewith, including, without
limitation, reasonable attorneys' fees;
(b) Second, to Lender in an amount equal to the then unpaid
Secured Obligations;
(c) Finally, upon payment in full of the Secured Obligations, to
Grantor or its representatives or as a court of competent jurisdiction may
direct.
SECTION 8. LIMITATION ON LENDER'S DUTY IN RESPECT OF COLLATERAL.
Lender shall be deemed to have acted reasonably in the custody,
preservation and disposition of any of the Collateral if it takes such action as
Grantor requests in writing, but failure of Lender to comply with any such
request shall not in itself be deemed a failure to act reasonably, and no
failure of Lender to do any act not so requested shall be deemed a failure to
act reasonably.
SECTION 9. REINSTATEMENT.
This Security Agreement shall remain in full force and effect and
continue to be effective should any petition be filed by or against Grantor for
liquidation or reorganization, should Grantor become insolvent or make an
assignment for the benefit of creditors or should a receiver or trustee be
appointed for all or any significant part of Grantor's property and assets, and
shall continue to be effective or be reinstated, as the case may be, if at any
time payment and performance of the Secured Obligations, or any
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part thereof, is, pursuant to applicable law, rescinded or reduced in amount, or
must otherwise be restored or returned by any obligee of the Secured
Obligations, whether as a "voidable preference," "fraudulent conveyance," or
otherwise, all as though such payment or performance had not been made. In the
event that any payment, or any part thereof, is rescinded, reduced, restored or
returned, the Secured Obligations shall be reinstated and deemed reduced only by
such amount paid and not so rescinded, reduced, restored or returned.
SECTION 10. MISCELLANEOUS.
10.1 NO WAIVER; CUMULATIVE REMEDIES.
(a) Lender shall not by any act, delay, omission or otherwise be
deemed to have waived any of its respective rights or remedies hereunder, nor
shall any single or partial exercise of any right or remedy hereunder on any one
occasion preclude the further exercise thereof or the exercise of any other
right or remedy.
(b) The rights and remedies hereunder provided are cumulative and
may be exercised singly or concurrently, and are not exclusive of any rights and
remedies provided by law.
(c) None of the terms or provisions of this Security Agreement
may be waived, altered, modified or amended except by an instrument in writing,
duly executed by Grantor and Lender.
10.2 TERMINATION OF THIS SECURITY AGREEMENT. Subject to Section 9
hereof, this Security Agreement shall terminate upon the payment and performance
in full of the Secured Obligations.
10.3 SUCCESSOR AND ASSIGNS. This Security Agreement and all obligations
of Grantor hereunder shall be binding upon the successors and assigns of
Grantor, and shall, together with the rights and remedies of Lender hereunder,
inure to the benefit of Lender, any future holder of the indebtedness and their
respective successors and assigns. No sales of participations, other sales,
assignments, transfers or other dispositions of any agreement governing or
instrument evidencing the Secured Obligations or any portion thereof or interest
therein shall in any manner affect the lien granted to Lender hereunder.
10.4 GOVERNING LAW. In all respects, including all matters of
construction, validity and performance, this Security Agreement and the Secured
Obligations arising hereunder shall be governed by, and construed and enforced
in accordance with, the laws of the State of California applicable to contracts
made and performed in such state by residents of such state, without regard to
the principles thereof regarding conflict of laws.
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IN WITNESS WHEREOF, each of the parties hereto has caused this Security
Agreement to be executed and delivered by its duly authorized officer on the
date first set forth above.
GRANTOR CONTINUUS SOFTWARE CORPORATION
By:/s/ Xxxx Xxxx
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Name:Xxxx X. Xxxx
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Title:President/Chief Executive Officer
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Accepted and acknowledged by:
LONDON PACIFIC LIFE & ANNUITY
COMPANY
By:/s/ Xxxxx X. Xxxxxxx
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Name:Xxxxx X. Xxxxxxx
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Title:Vice President/Treasurer
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SCHEDULE A
LISTING OF PERMITTED LIENS
1. Security interest of Comdisco, Inc. pursuant to line of credit for lease
financing.
2. Security interest of NTFC Capital Corporation pursuant to lease of a Norstar
Phone System.
3. Security interest of AT&T Credit Corporation pursuant to lease of a telephone
system in the Company's San Mateo office.
4. Security interest of Royal Bank of Canada Europe Limited pursuant to
receivables purchasing arrangement.
5. Computerized Medical Systems has an interest in certain of the Company's
software that is held in escrow by Data Security International for the benefit
of Computerized Medical Systems (Flex Safe Escrow Agreement #0315201-00001,
dated February 16, 1996).
6. WalMart Stores Incorporated has an interest in certain of the Company's
software that is held in escrow by Data Security International for the benefit
of WalMart Stores Incorporated (Preferred Registration Technology Escrow
Agreement, dated April 8, 1994).
7. Tandem Computers Inc. has an interest in certain of the Company's software
that is held in escrow by Brambles NSD for the benefit of Tandem Computers Inc.
8. Xxxxxx Xxxxxxx has an interest in certain of the Company's software that is
held in escrow by Fort Xxxx Escrow for the benefit of Xxxxxx Xxxxxxx (Escrow
Agreement dated June 24, 1997).
9. IBM has an interest in certain of the Company's software that is held in
escrow by National Computing Center (U.K.) for the benefit of IBM (Escrow
Agreement #5791, dated March 31, 1995).
10. Lord Chancellors has an interest in certain of the Company's software that
is held in escrow by National Computing Center (U.K.) for the benefit of Lord
Chancellors (Escrow Agreement #6445, dated August 7, 1995).
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