SECURITY AGREEMENT
AGREEMENT, dated as of December 31, 1996 between NETWORK IMAGING CORP.,
INC., a corporation duly organized and validly existing under the laws of the
State of Delaware ("Debtor"), and ▇▇▇▇ ▇▇▇▇▇▇▇ (the "Secured Party").
W I T N E S S E T H:
In consideration of the mutual covenants and agreements contained
herein, the parties hereto hereby agree as follows:
1. Definitions. All terms used herein, unless otherwise defined,
shall have the meanings ascribed to them in the Loan Agreement, dated as of Dec.
31, 1996 (the "Loan Agreement"), between the Debtor, on the one hand, and the
Secured Party, on the other, providing for loans by the Secured Party to the
Debtor in the principal amount of up to $5,000,000.
"Liabilities" shall mean all Indebtedness and other
liabilities and obligations, whether now existing or hereafter arising, of the
Debtor to the Secured Party pursuant to the Loan Agreement including, without
limitation, increases in the amounts of or refinancings of or other changes to
the principal amount thereof and any other loans or other indebtedness that may
be created by any amendment, supplement or other modification to, or restatement
of the Loan Agreement.
2. Grant of Security Interest.
(a) As security for the prompt payment and performance when
due (whether at stated maturity, by acceleration or otherwise) of the
Liabilities, Debtor hereby grants to the Secured Party a security interest in
the Collateral, whether now owned or hereafter acquired by Debtor.
(b) As used herein, the term "Collateral" shall mean all
accounts receivable of Debtor, now or hereafter existing, arising out of or in
connection with the sale or lease of goods, the rendering of services or
otherwise.
3. Covenants of the Debtors.
(a) Upon request of the Secured Party, Debtor will, upon
reasonable notice, permit representatives of the Secured Party, during normal
business hours, to inspect its properties included in the Collateral and to
inspect and make abstracts from its books and records pertaining to the
Collateral.
(b) All policies of insurance maintained by Debtor on or with
respect to the Collateral shall, unless otherwise specified by the Secured
Party, be written for the benefit of the Debtor and the Secured Party (as an
additional named insured) as their interests may appear, and all such policies,
or certificates evidencing the same, shall be furnished to the Secured Party.
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The Debtor will cause the carriers of its insurance to issue loss payee clauses
in favor of the Secured Party with respect to such insurance and to cause such
carriers to give not less than 10 days' prior notice to the Secured Party of the
cancellation or non-renewal of any of such policies.
(c) Debtor will not, without the prior written consent of the
Secured Party:
(1) Permit any of the Collateral to be levied upon under legal
process or to fall under any other Lien, other than Permitted Liens,
unless promptly discharged; or
(2) Cause, directly or indirectly, anything to be done outside
of the ordinary course of business of such Debtor which, or fail to
take any action outside of the ordinary course of business of such
Debtor which failure, may impair the value of the Collateral in any
material respect (other than normal wear and tear) or the liens and
security interests herein granted and/or intended to be granted hereby;
or
(3) Sell, lease, transfer, assign (including by virtue of
assignments by operation of law), mortgage, pledge or otherwise dispose
of or encumber any of the Collateral except for dispositions or
encumbrances in the ordinary course of business, or permit any party
other than the Secured Party and parties holding liens permitted under
(1) above to perfect any security interest in such Collateral.
(d) Debtor will maintain its books and records and its chief
place of business only at the location specified in Section 6 hereof and will
not change the location of its books and records or its name, or the name under
which it conducts its business, or either of its addresses without giving the
Secured Party 30 days' prior written notice thereof.
(e) If any Event of Default shall have occurred and shall be
continuing, Debtor will keep and stamp or otherwise ▇▇▇▇ any and all books and
records relating to the Collateral in such manner as the Secured Party may
reasonably require.
4. Further Assurances; etc.
(a) If any Event of Default shall have occurred and shall be
continuing, Debtor will, from time to time and at its own expense, promptly
execute, acknowledge, witness and deliver and file and/or record, or cause the
execution, acknowledgment, witnessing and delivery and the filing and/or
recordation of, such specific and further assignments of Collateral and such
other documents or instruments, and shall take or cause to be taken such other
actions, as the Secured Party may reasonably request for the perfection against
Debtor and all third parties whomsoever of the security interests created hereby
in the Collateral or for the continuation and protection thereof, and promptly
give to the Secured Party evidence satisfactory to the Secured Party of such
action. Without limiting the generality of the foregoing, Debtor promptly upon
the execution and delivery of this Agreement, and at any time or from time to
time thereafter upon the request of the Secured Party, shall, at Debtor's
expense, execute, acknowledge, witness and deliver such financing and
continuation statements as the Secured Party may reasonably request for the
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purpose of perfecting, maintaining and protecting such security interests of the
Secured Party, and shall cause this Agreement, any amendment or supplement
hereto or thereto and each such financing and continuation statement, notice and
additional security agreements to be filed or recorded in such manner and in
such places as may be required by applicable law or as the Secured Party may
reasonably request for such purpose. Debtor hereby authorizes the Secured Party
to effect any filing or recording which the Secured Party has requested pursuant
to this Section 4(a) without the signature of such Debtor, to the extent
permitted by applicable law. Notwithstanding the foregoing provisions of this
Section 4(a) or any of the other provisions of this Agreement, the Secured Party
agrees that it shall not communicate with any account debtors or customers of
Debtor in the exercise of the Secured Party's rights hereunder until the
occurrence and during the continuance of an Event of Default.
(b) At any time and from time to time, upon the written
request of the Secured Party, Debtor will, at Debtor's expense, promptly and
duly execute, acknowledge, witness and deliver, or cause to be duly executed,
acknowledged, witnessed and delivered, any and all such further instruments and
documents, and take such further actions, as the Secured Party may reasonably
request, to obtain for the Secured Party the full benefits of this Agreement and
of the rights and powers herein and therein granted.
5. Actions by the Secured Party.
(a) If any Event of Default shall have occurred and shall be
continuing, the Secured Party shall have the power to exchange any of the
Collateral for other property upon any reorganization, recapitalization or other
readjustment and in connection therewith to deposit any of the Collateral with
any committee or depository upon such terms as it may determine, all without
notice and without liability (other than for gross negligence or willful
misconduct), except to account for property actually received by the Secured
Party.
(b) The Secured Party may, at any time and from time to time,
at its option or at the request of the Secured Party, after having given notice
of its intention to do so to the Debtor perform any act which is undertaken by
Debtor to be performed by it hereunder but which it shall have failed to
perform, and the Secured Party may take any other action which the Secured Party
may in its reasonable judgment deem necessary for the maintenance, preservation
or protection of any of the Collateral or the security interests therein and the
Secured Party is hereby irrevocably appointed attorney-in-fact of the Debtors
for this purpose. All moneys advanced by the Secured Party for account of Debtor
in connection with any of the foregoing, together with interest thereon at the
rate of interest set forth in the Loan Agreement from the date of such advance
to the date of the repayment thereof, shall be repaid by the Debtor to the
Secured Party, upon demand, and shall constitute additional Liabilities secured
hereby. The making of any such advance by the Secured Party for account of a
Debtor shall not, however, relieve the Debtor of liability for any default
hereunder until the full amount of all such moneys so advanced and such interest
thereon shall have been repaid to the Secured Party and such default shall have
otherwise been cured.
6. Debtor Representations.
Debtor represents and warrants to the Secured Party that its
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chief place of business is at the address set forth below its name on the
signature pages hereof and that it conducts its business only under the name
specified on the signature pages hereof.
7. Power Upon Default.
(a) Upon the occurrence and during the continuance of any
Event of Default, the Secured Party shall have all the rights and remedies of a
secured party under the UCC, or other applicable law, including the power of
sale upon notice, and all rights provided herein, all of which rights and
remedies shall, to the fullest extent permitted by law, be cumulative.
(b) Without limiting the generality of the foregoing:
(1) Upon the occurrence and during the continuance of any
Event of Default, but subject always to any mandatory requirements of applicable
law then in effect, the Secured Party may, at its option, do any one or more or
all of the following acts, as the Secured Party in its sole and complete
discretion may then elect and at such time or times as the Secured Party in its
complete and sole discretion may determine:
(a) exercise all the rights and remedies in
foreclosure and otherwise granted to mortgagees and secured parties
under the provisions of applicable law, including, without limitation,
the UCC;
(b) institute legal proceedings for the specific
performance of any covenant or agreement herein undertaken by a Debtor
or for aid in the execution or any power or remedy herein granted;
(c) institute legal proceedings to foreclose upon
and against any of the liens and security interests created hereby;
(d) institute legal proceedings for the sale, under
the judgment or decree of any court of competent jurisdiction, of any
of the Collateral;
(e) institute legal proceedings for the appointment
of a receiver or receivers pending foreclosure hereunder or the sale of
any of the Collateral under the order of a court of competent
jurisdiction or under other legal process;
(f) personally, or by agents or attorneys, enter into
and upon any premises wherein the Collateral or any part thereof may
then be situated and take possession of all or any part thereof or
render it unusable; and, without being responsible (except for gross
negligence or willful misconduct) for loss or damage, hold, store and
keep idle, or operate, lease or otherwise use or permit the use of the
same or any part thereof for such time and upon such terms as the
Secured Party in its complete and sole discretion may determine, and
demand, collect and retain all hire, earnings and all other sums due
and to become due in respect of the same from any party whomsoever,
accounting only for net earnings arising from such use, if any, after
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charging against all receipts from the use of the same and from any
subsequent sale thereof, by court proceedings or pursuant to subclause
(g) of this Section 7(b)(1) all reasonable costs and expenses of, and
damages or losses by reason of, such use and/or sale; or
(g) personally, or by agents or attorneys, enter upon
and into any place wherein the same may then be located, and take
possession of any part or all of the Collateral owned by Debtor, with
or without process of law and without being responsible for loss or
damage (except such as results from the Secured Party's gross
negligence or willful misconduct), and sell or dispose of all or any
part of the same, free from any and all claims of a Debtor or any other
party claiming by, through or under a Debtor at law, in equity or
otherwise, at one or more public or private sales, in such place or
places, at such time or times, for cash or credit and upon such terms
as the Secured Party may determine, with or without any previous demand
or notice to Debtor or advertisement and demand and any right or equity
of redemption otherwise required by law are hereby waived by Debtor to
the fullest extent permitted by applicable law. The power of sale
hereunder shall not be exhausted by one or more sales, and the Secured
Party may from time to time adjourn any sale to be made pursuant to
this Section 7.
(2) If the Secured Party shall demand possession of the
Collateral or any part thereof pursuant hereto, Debtor will, at its own expense,
forthwith cause the Collateral owned by Debtor or any part thereof designated by
the Secured Party to be assembled and made available and/or delivered to the
Secured Party at any place reasonably designated by the Secured Party.
(3) In the event that any mandatory requirement of applicable
law shall obligate the Secured Party to give prior notice to Debtor of any of
the foregoing acts, Debtor agrees that a notice given to it in writing by
certified U.S. mail, return receipt requested, at least three (3) (or such
longer period as may be required by applicable law) Business Days before the
date of any such act, at its address specified beneath its signature hereto (or
such other address as shall have been notified to the Secured Party in writing),
with a copy by fax, at least three (3) Business Days before the date of such
act, shall be deemed to be reasonable notice of such act, and, specifically,
reasonable notification of the time and place of any public sale hereunder and
reasonable notification of the time after which any private sale or other
intended disposition to be made hereunder is to be made.
(4) The Secured Party shall apply the proceeds from the sale
or other disposition of the Collateral pursuant to the provisions of this
Section 7(b) and any other amounts held by it as Collateral hereunder in the
following order:
FIRST, to the payment of the costs and expenses, if any
(including, without limitation, reasonable attorneys, fees and
expenses), incurred by the Secured Party in preserving its interests in
the Collateral or in enforcing any remedies granted in or realizing
against the security of, this Agreement or any disbursements by the
Secured Party under Section 5 hereof;
SECOND, to the payment to the Secured Party of accrued and
unpaid interest due and payable under the Loan Agreement (whether at
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stated maturity, by acceleration or otherwise);
THIRD, to the payment to the Secured Party of the outstanding
principal amount due and payable under the Loan Agreement (whether at
stated maturity, by acceleration or otherwise);
FOURTH, to the payment to the Secured Party of any and all
other Liabilities due on the date of such application;
FIFTH, to the payment of any other amounts required by
applicable law (including, without limitation, Section 9-504(1)(c) of
the UCC); and
SIXTH, after the payment in full of all of the Liabilities
(including those not due and payable at the time of the applications
above), to the payment to the Debtors of any surplus then remaining
from such proceeds or otherwise as a court of competent jurisdiction
may direct.
(5) No sale or other disposition of all or any part of the
Collateral owned by a Debtor by the Secured Party pursuant to this Section 7(b)
shall be deemed to relieve such Debtor of its obligations in respect of any
Liabilities except to the extent the proceeds thereof are applied to the payment
of such Liabilities.
8. Possession until Default. Until an Event of Default shall occur and
be continuing, except as otherwise provided in this Agreement, Debtor will have
the right to the possession and enjoyment of the Collateral owned by it for the
purpose of conducting the ordinary course of its business.
9. Waiver by Debtor. To the fullest extent it may lawfully so agree,
Debtor agrees that it will not at any time insist upon, claim, plead or take any
benefit or advantage of any appraisement, valuation, stay, extension,
moratorium, redemption or similar law now or hereafter in force in order to
prevent, delay or hinder the enforcement hereof or the absolute sale of any part
of the Collateral or the possession thereof by any purchaser at any sale
pursuant to Section 7(b) hereof; and Debtor, for itself and all who claim
through it, so far as it or they now or hereafter lawfully may do so, hereby
waives the benefit of all such laws, and all right to have the Collateral owned
by it marshalled upon any foreclosure hereof, and agrees that any court having
jurisdiction to foreclose this Agreement may order the sale of the Collateral as
an entirety. Without limiting the generality of the foregoing, Debtor hereby:
(i) authorizes the Secured Party, in its sole discretion and without notice to
or demand upon it and without otherwise affecting its obligations hereunder or
in respect of the Liabilities, from time to time to take and hold other
collateral (in addition to the Collateral) for payment of any Liabilities or any
part thereof and to accept and hold any endorsement or guarantee of payment of
the Liabilities or any part thereof and to release or substitute any endorser or
guarantor or any other party granting security for or in any way obligated upon
the Liabilities or any part thereof and/or to modify or terminate the terms of
subordination of any Indebtedness subordinated to any of the Liabilities; and
(ii) waives and releases any and all right to require the Secured Party to
collect any Liabilities from any specific item or items of Collateral, from any
other party liable as guarantor or in any other manner in respect of any
Liabilities or from any other collateral.
10. Purchases by the Secured Party. At any sale pursuant to Section
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7(b) hereof, the Secured Party may to the extent permitted by applicable law bid
for and purchase the Collateral offered for sale, and, upon compliance in full
with the terms of such sale, may hold, retain and dispose of such property
without further accountability therefor to either Debtor or any other party.
11. No Representation, etc. Anything herein contained to the contrary
notwithstanding, neither the Secured Party nor any of its nominees or assignees
shall have any obligation or liability by reason of or arising out of this
Agreement to make any inquiry as to the nature or sufficiency of, to present or
file any claim with respect to, or to take any action to collect or enforce the
payment of, any amounts to which it may be entitled at any time or times by
virtue of this Agreement. The Secured Party makes no representations or
warranties hereunder with respect to the Collateral or any part thereof, and the
Secured Party shall not by virtue of this Agreement be chargeable with any
obligations or liabilities of either Debtor or any other party with respect
thereto. The Secured Party (if it shall have acted in good faith) shall have no
liability or obligation arising out of any claims with respect to the Collateral
settled by the Secured Party.
12. Remedies. Each right, power and remedy herein specifically granted
to the Secured Party or otherwise available to it shall be cumulative, and shall
be in addition to every other right, power and remedy herein specifically given
or now or hereafter existing at law, in equity or otherwise; and each right,
power and remedy, whether specifically granted herein or otherwise existing, may
be exercised, at any time and from time to time as often and in such order as
may be deemed expedient by the Secured Party in its sole and complete discretion
and the exercise or commencement of exercise of any right, power or remedy shall
not be construed as a waiver of the right to exercise, at the same time or
thereafter, the same or any other right, power or remedy. No delay or omission
by the Secured Party in exercising any such right or power, or in pursuing any
such remedy, shall impair any such right, power or remedy or be construed to be
a waiver of any default on the part of either Debtor or an acquiescence therein.
No waiver by the Secured Party of any breach or default of or by either Debtor
hereunder shall be deemed to be a waiver of any other or similar, previous or
subsequent, breach or default.
13. Notices. All notices and other communications provided for herein
shall be by telex, fax, telegraph, cable or in writing and telexed, faxed,
telegraphed, cabled, mailed by registered or certified mail, postage prepaid,
return receipt requested or delivered to the intended recipient at the telephone
number or "Address for Notices" specified below its name on the signature pages
hereof; or, as to any party, at such other telephone number or address as shall
be designated by such party in a notice to the other parties. All notices and
other communications hereunder shall be effective or deemed delivered or
furnished (i) if given by mail on the third Business Day after such
communication is deposited in the mail addressed as above provided, (ii) if
given by telex or fax, when such communication is transmitted to the appropriate
number determined as above provided in this Section 13 and the appropriate
answerback is received or receipt is otherwise acknowledged, and (iii) if
delivered personally, when so delivered to the holder of the office specified as
the office holder to whose attention communications are to be given on the
signature pages hereof.
14. Amendments, etc. This Agreement may not be amended or modified
except by written agreement of the Debtors and the Secured Party, and no consent
or waiver hereunder shall be valid unless in writing and signed by the person or
persons giving such consent or waiver.
15. Term. This Security Agreement shall continue in full force and
effect until all of the Liabilities have been fully and indefeasibly paid in
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full, whereupon this Security Agreement shall terminate.
16. Miscellaneous.
(a) This Agreement shall be binding upon and shall inure to
the benefit of the Debtor and the Secured Party and their respective successors
and assigns; provided that no Debtor may assign its rights or obligations
hereunder without the prior written consent of the Secured Party.
(b) This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument and either of the parties hereto may execute this Agreement by
signing any such counterpart.
(c) This agreement will be construed in accordance with and
governed by the law of the state of Virginia, provided that as to collateral
located in any jurisdiction other than Virginia, the Secured Party shall have
all the rights to which a secured party under the laws of such jurisdiction is
entitled.
(d) The section titles contained in this Agreement shall be
without substantive meaning or content of any kind whatsoever and shall not
govern the interpretation of any of the provisions of this Agreement.
(e) The provisions of Sections 8.3, 8.10, 8.13, and 8.20 of
the Loan Agreement are hereby incorporated herein by reference as if set forth
in full herein, except that for these purposes references to "this Agreement"
shall be deemed references to this Agreement and not references to the Loan
Agreement.
The parties hereto have caused this Agreement to be duly executed as of
the day and year first above written.
NETWORK IMAGING CORPORATION
By:
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Title: ▇▇▇▇▇ ▇▇▇▇, President
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Network Imaging Corp.
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