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EXHIBIT 10.6
SECURITY AGREEMENT
THIS SECURITY AGREEMENT ("Agreement") is made as of the 31st day of
March, 1998, by and between ONLINE RESOURCES & COMMUNICATIONS CORPORATION, a
Delaware corporation ("Borrower"), and SIRROM CAPITAL CORPORATION, a Tennessee
corporation ("Lender").
RECITALS:
WHEREAS, Lender is making a loan (the "Loan") in the amount of
$6,000,000 to Borrower, pursuant to that certain Loan Agreement of even date
herewith by and between Borrower and Lender, as it may be amended, modified or
extended from time to time (the "Loan Agreement"); and
WHEREAS, in connection with the making of the Loan, Lender desires to
obtain from Borrower and Borrower desires to grant to Lender a security
interest in certain collateral more particularly described below.
AGREEMENT:
NOW, THEREFORE, in consideration of the foregoing premises and other
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
1. Grant of Security Interest. Borrower hereby grants to Lender a
security interest in the following described property (collectively, the
"Collateral"):
(a) presently existing and hereafter arising accounts, contract
rights, and all other forms of obligations owing to Borrower arising
out of the sale or lease of goods or the rendition of services by
Borrower, whether or not earned by performance, and any and all credit
insurance, guaranties, and other security therefor, as well as all
merchandise returned to or reclaimed by Borrower and Borrower's Books
relating to any of the foregoing (collectively, "Accounts");
(b) present and future general intangibles and other personal
property (including choses or things in action, goodwill, patents,
trade names, trademarks, servicemarks, copyrights, blueprints,
drawings, purchase orders, customer lists, monies due or recoverable
from pension funds, route lists, monies due under any royalty or
licensing agreements, infringement claims, computer programs, computer
discs, computer tapes, literature, reports, catalogs deposit accounts,
insurance premium rebates, tax refunds, and tax refund claims) other
than goods and Accounts, and Borrower's
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Books relating to any of the foregoing (collectively, "General
Intangibles");
(c) present and future letters of credit, notes, drafts,
instruments, certificated and uncertificated securities, documents,
leases, and chattel paper, and Borrower's Books relating to any of the
foregoing (collectively, "Negotiable Collateral");
(d) present and future inventory in which Borrower has any interest,
including goods held for sale or lease or to be furnished under a
contract of service and all of Borrower's present and future raw
materials, work in process, finished goods, and packing and shipping
materials, wherever located, and any documents of title representing
any of the above, and Borrower's Books relating to any of the foregoing
(collectively, "Inventory");
(e) present and hereafter acquired machinery, machine tools, motors,
equipment, furniture, furnishings, fixtures, vehicles (including motor
vehicles and trailers), tools, parts, dies, jigs, goods (other than
consumer goods or farm products), and any interest in any of the
foregoing, and all attachments, accessories, accessions, replacements,
substitutions, additions, and improvements to any of the foregoing,
wherever located (collectively, "Equipment");
(f) books and records including: ledgers; records indicating,
summarizing, or evidencing Borrower's assets or liabilities, or the
collateral; all information relating to Borrower's business operations
or financial condition; and all computer programs, disc or tape files,
printouts, funds or other computer prepared information, and the
equipment containing such information (collectively, "Borrower's
Books");
(g) substitutions, replacements, additions, accessions, proceeds,
products to or of any of the foregoing, including, but not limited to,
proceeds of insurance covering any of the foregoing, or any portion
thereof, and any and all Accounts, General Intangibles, Negotiables,
Collateral, Inventory, Equipment, money, deposits, accounts, or other
tangible or intangible property resulting from the sale or other
disposition of the accounts, General Intangibles, Negotiable
Collateral, Inventory, Equipment, or any portion thereof or interest
therein and the proceeds thereof.
2. Secured Indebtedness. The security interest granted hereby shall
secure the prompt payment of the Obligations (as defined in the Loan Agreement)
and the prompt performance of each of the covenants and duties under the Loan
Documents (as defined in the Loan Agreement).
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3. Representations and Warranties of Borrower. Borrower represents,
warrants and agrees as follows:
(a) Except as set forth on Schedule 3(a) hereto (the "Permitted
Encumbrances"), Borrower is the owner of the Collateral free and clear
of any liens and security interests. Borrower will defend the
Collateral against the claims and demands of all persons other than the
holders of the Permitted Encumbrances.
(b) The address set forth on Schedule 3(b) hereto is Borrower's
principal place(s) of business and the location of all tangible
Collateral and the place where the records concerning all intangible
Collateral are kept and/or maintained.
(c) Borrower will pay all costs of filing of financing, continuation
and termination statements with respect to the security interests
created hereby, and Lender is authorized to do all things that it deems
necessary to perfect and continue perfection of the security interests
created hereby and to protect the Collateral.
4. Agreements With Respect to the Collateral. Borrower covenants and
agrees with Lender as follows:
(a) Borrower will not permit any of the Collateral to be removed
from the location specified herein, except for temporary periods, in
the normal and customary use thereof, without the prior written consent
of Lender.
(b) Borrower shall notify Lender in writing of any change in the
location of Borrower's principal place of business (or residence) or
the location of any tangible Collateral or the place(s) where the
records concerning all intangible Collateral and kept or maintained.
(c) Borrower will keep the Collateral in good condition and repair
and will pay and discharge all taxes, levies and other impositions
levied thereon as well as the cost of repairs to or maintenance of
same, and will not permit anything to be done that may impair the value
of any of the Collateral. If Borrower fails to pay such sums, Lender
may do so for Borrower's account and add the amount thereof to the
Obligations.
(d) Until the occurrence of an Event of Default, Borrower shall be
entitled to possession of the Collateral and to use the same in any
lawful manner, provided that such use does not cause excessive wear and
tear to the Collateral, cause it to decline in value at an excessive
rate, or violate the terms of any policy of insurance thereon.
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(e) Borrower will not sell, exchange, lease or otherwise dispose of
any of the Collateral or any interest therein without the prior written
consent of Lender. Notwithstanding the foregoing, so long as an Event
of Default has not occurred, Borrower shall have the right to process
and sell Borrower's inventory in the regular course of business and to
sell obsolete Collateral. Lender's security interest hereunder shall
attach to all proceeds of all sales or other dispositions of the
Collateral. If at any time any such proceeds shall be represented by
any instruments, chattel paper or documents of title, then such
instruments, chattel paper or documents of title shall be promptly
delivered to Lender and subject to the security interest granted
hereby. If at any time any of Borrower's inventory is represented by
any document of title, such document of title will be delivered
promptly to Lender and subject to the security interest granted hereby.
(f) Borrower will not allow the Collateral to be attached to real
estate in such manner as to become a fixture or a part of any real
estate.
(g) Borrower will at all times keep the Collateral insured against
all insurable hazards in amounts equal to the full cash value of the
Collateral. Such insurance shall be in such companies as may be
acceptable to Lender, with provisions satisfactory to Lender for
payment of all losses thereunder to Lender as its interests may appear.
If required by Lender, Borrower shall deposit the policies with Lender.
Any money received by Lender under said policies may be applied to the
payment of the Obligations, whether or not due and payable, or at
Lender's option may be delivered by Lender to Borrower for the purpose
of repairing or restoring the Collateral. Borrower assigns to Lender
all right to receive proceeds of insurance not exceeding the amounts
secured hereby, directs any insurer to pay all proceeds directly to
Lender, and appoints Lender Borrower's attorney-in-fact to endorse any
draft or check made payable to Borrower in order to collect the
benefits of such insurance. If Borrower fails to keep the Collateral
insured as required by Lender, Lender shall have the right to obtain
such insurance at Borrower's expense and add the cost thereof to the
Obligations.
(h) Borrower will not permit any liens or security interests other
than those created by this Agreement and the Permitted Encumbrances to
attach to any of the Collateral, nor permit any of the Collateral to be
levied upon under any legal process, nor permit anything to be done
that may impair the security intended to be afforded by this Agreement,
nor permit any tangible Collateral to become attached to or commingled
with other goods without the prior written consent of Lender.
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5. Remedies Upon Default. Upon an Event of Default under and as defined
in the Loan Agreement, Lender may pursue any or all of the following remedies,
without any notice to Borrower except as required below:
(a) Lender may give written notice of default to Borrower, following
which Borrower shall not dispose of, conceal, transfer, sell or
encumber any of the Collateral (including, but not limited to, cash
proceeds) without Lender's prior written consent, even if such
disposition is otherwise permitted hereunder in the ordinary course of
business. Any such disposition, concealment, transfer or sale after the
giving of such notice shall constitute a wrongful conversion of the
Collateral. Lender may obtain a temporary restraining order or other
equitable relief to enforce Borrower's obligation to refrain from so
impairing Lender's Collateral.
(b) Lender may take possession of any or all of the Collateral.
Borrower hereby consents to Lender's entry into any of Borrower's
premises to repossess Collateral, and specifically consents to Lender's
forcible entry thereto as long as Lender causes no significant damage
to the premises in the process of entry (drilling of locks, cutting of
chains and the like do not in themselves cause "significant" damage for
the purposes hereof) and provided that Lender accomplishes such entry
without a breach of the peace.
(c) Lender may dispose of the Collateral at private or public sale.
Any required notice of sale shall be deemed commercially reasonable if
given at least five (5) days prior to sale. Lender may adjourn any
public or private sale to a different time or place without notice or
publication of such adjournment, and may adjourn any sale either before
or after offers are received. The Collateral may be sold in such lots
as Lender may elect, in its sole discretion. Lender may take such
action as it may deem necessary to repair, protect, or maintain the
Collateral pending its disposition.
(d) Lender may recover any of all proceeds of accounts from any bank
or other custodian who may have possession thereof. Borrower hereby
authorizes and directs all custodians of Borrower's assets to comply
with any demand for payment made by Lender pursuant to this Agreement,
without the need of confirmation from Borrower and without making any
inquiry as to the existence of an Event of Default or any other matter.
Lender may engage a collection agent to collect accounts for a
reasonable percentage commission or for any other reasonable
compensation arrangement.
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(e) Lender may notify any or all account debtors that subsequent
payments must be made directly to Lender or its designated agent. Such
notice may be made over Lender's signature or over Borrower's name with
no signature or both, in Lender's discretion. Borrower hereby
authorizes and directs all existing or future account debtors to comply
with any such notice given by Lender, without the need of confirmation
from Borrower and without making any inquiry as to the existence of an
Event of Default or as to any other matter.
(f) Lender may, but shall not be obligated to, take such measures as
Lender may deem necessary in order to collect any or all of the
accounts. Without limiting the foregoing, Lender may institute any
administrative or judicial action that it may deem necessary in the
course of collecting and enforcing any or all of the accounts. Any
administrative or judicial action or other action taken by Lender in
the course of collecting the accounts may be taken by Lender in its own
name or in Borrower's name. Lender may compromise any disputed claims
and may otherwise enter into settlements with account debtors or
obligors under the accounts, which compromises or settlements shall be
binding upon Borrower. Lender shall have no duty to pursue collection
of any account, and may abandon efforts to collect any account after
such efforts are initiated.
(g) Lender may, with respect to any account involving uncompleted
performance by Borrower, and with respect to any general intangible or
other Collateral whose value may be preserved by additional performance
on Borrower's part, take such action as Lender may deem appropriate
including, but not limited, to performing or causing the performance of
any obligation of Borrower thereunder, the making of payments to
prevent defaults thereunder, and the granting of adequate assurances to
other parties thereto with respect to future performance. Lender's
action with respect to any such accounts or general intangibles shall
not render Lender liable for further performance thereunder unless
Lender so agrees in writing.
(h) Lender may exercise its lien upon and right of setoff against
any monies, items, credits, deposits or instruments that Lender may
have in its possession and that belong to Borrower or to any other
person or entity liable for the payment of any or all of the
Obligations.
(i) Lender may exercise any right that it may have under any other
document evidencing or securing the Obligations or otherwise available
to Lender at law or equity.
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6. Audits and Examinations. Lender shall have the right, at any time,
by its own auditors, accountants or other agents, to examine or audit any of
the books and records of Borrower, or the Collateral, all of which will be made
available upon request. Such accountants or other representatives of Lender
will be permitted to make any verification of the existence of the Collateral
or accuracy of the records that Lender deems necessary or proper. Any
reasonable expenses incurred by Lender in making such examination, inspection,
verification or audit shall be paid by Borrower promptly on demand and shall
constitute part of the Obligations.
7. Termination Statement. Upon receipt of proper written demand
following the payment in full of the Obligations and termination of any
commitment of Lender to make any future advances to Borrower, Lender at its
option, shall send a termination statement with respect to any financing
statement filed to perfect Lender's security interests in any of the Collateral
to Borrower or cause such termination statement to be filed with the
appropriate filing officer(s).
8. Power of Attorney. Borrower hereby constitutes Lender or its
designee, as Borrower's attorney-in-fact with power, upon the occurrence and
during the continuance of an Event of Default, to endorse Borrower's name upon
any notes, acceptances, checks, drafts, money orders, or other evidences of
payment or Collateral that may come into either its or Lender's possession; to
sign the name of Borrower on any invoice or xxxx of lading relating to any of
the accounts receivable, drafts against customers, assignments and
verifications of accounts receivable and notices to customers; to send
verifications of accounts receivable; to notify the Post Office authorities to
change the address for delivery of mail addressed to Borrower to such address
as Lender may designate; to execute any of the documents referred to in Section
3(c) hereof in order to perfect and/or maintain the security interests and
liens granted herein by Borrower to Lender; to do all other acts and things
necessary to carry out the purposes of and remedies provided under this
Agreement. All acts of said attorney or designee are hereby ratified and
approved, and said attorney or designee shall not be liable for any acts of
commission or omission (other than acts of gross negligence or willful
misconduct), nor for any error of judgment or mistake of fact or law. This
power being coupled with an interest is irrevocable until all of the
Obligations are paid in full and any and all promissory notes executed in
connection therewith are terminated and satisfied.
9. Binding Effect. This Agreement shall inure to the benefit of
Lender's successors and assigns and shall bind Borrower's heirs,
representatives, successors and assigns.
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10. Severability. If any provision of this Agreement is held invalid,
such invalidity shall not affect the validity or enforceability of the
remaining provisions of this Agreement.
11. Governing Law and Amendments. This Agreement shall be construed and
enforced under the laws of the State of Tennessee applicable to contracts to be
wholly performed in such State. No amendment or modification hereof shall be
effective except in a writing executed by each of the parties hereto.
12. Survival of Representations and Warranties. All representations and
warranties contained herein or made by or furnished on behalf of Borrower in
connection herewith shall survive the execution and delivery of this Agreement.
13. Counterparts. This Agreement may be executed in any number of
counterparts and by different parties to this Agreement in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same Agreement.
14. Construction and Interpretation. Should any provision of this
Agreement require judicial interpretation, the parties hereto agree that the
court interpreting or construing the same shall not apply a presumption that
the terms hereof shall be more strictly construed against one party by reason
of the rule of construction that a document is to be more strictly construed
against the party that itself or through its agent prepared the same, it being
agreed that Borrower, Lender and their respective agents have participated in
the preparation hereof.
15. Consent to Jurisdiction; Exclusive Venue. Borrower hereby
irrevocably consents to the Jurisdiction of the United States District Court
for the Middle District of Tennessee and of all Tennessee state courts sitting
in Davidson County, Tennessee, for the purpose of any litigation to which
Lender may be a party and which concerns this Agreement or the Obligations. It
is further agreed that venue for any such action shall lie exclusively with
courts sitting in Davidson County, Tennessee, unless Lender agrees to the
contrary in writing.
16. Waiver of Trial by Jury. LENDER AND BORROWER HEREBY KNOWINGLY AND
VOLUNTARILY WITH THE BENEFIT OF COUNSEL WAIVE TRIAL BY JURY IN ANY ACTIONS,
PROCEEDINGS, CLAIMS OR COUNTER-CLAIMS, WHETHER IN CONTRACT OR TORT OR
OTHERWISE, AT LAW OR IN EQUITY, ARISING OUT OF OR IN ANY WAY RELATING TO THIS
AGREEMENT OR THE LOAN DOCUMENTS.
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IN WITNESS WHEREOF, Borrower and Lender have executed this Agreement,
or have caused this Agreement to be executed as of the date first above
written.
BORROWER:
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ONLINE RESOURCES & COMMUNICATIONS
CORPORATION, a Delaware corporation
By: [sig]
--------------------------------
TITLE: CHAIRMAN & CEO
-----------------------------
LENDER:
------
SIRROM CAPITAL CORPORATION,
a Tennessee Corporation
BY: [sig]
-------------------------------
TITLE: TREASURER
----------------------------
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SECURED PROMISSORY NOTE
$6,000,000.00 March 31, 1998
FOR VALUE RECEIVED, the undersigned, ONLINE RESOURCES & COMMUNICATIONS
CORPORATION, a Delaware corporation ("Maker"), promises to pay to the order of
SIRROM CAPITAL CORPORATION, a Tennessee corporation ("Payee"; Payee and any
subsequent holder[s] hereof are hereinafter referred to collectively as
"Holder"), at the office of Payee at Sirrom Capital Corporation, X.X. Xxx
00000, Xxxxxxxxx, XX 00000-0000, or at such other place as Holder may designate
to Maker in writing from time to time, the principal sum of SIX MILLION AND
NO/l00THS DOLLARS ($6,000,000.00), together with interest on the outstanding
principal balance hereof from the date hereof at the rate of twelve and
three-quarters percent (12.75%) per annum (computed on the basis of a 360-day
year).
Interest only on the outstanding principal balance hereof shall be due
and payable monthly, in arrears, with the first installment being payable on
the first (1st) day of May, 1998, and subsequent installments being payable on
the first (1st) day of each succeeding month thereafter until March 30, 2003
(the "Maturity Date"), at which time the entire outstanding principal balance,
together with all accrued and unpaid interest, shall be immediately due and
payable in full.
The indebtedness evidenced hereby may be prepaid in whole or in part,
at any time and from time to time, without premium or penalty. Any such
prepayments shall be credited first to any accrued and unpaid interest and then
to the outstanding principal balance hereof.
Time is of the essence of this Note. It is hereby expressly agreed that
in the event that any Event of Default shall occur under and as defined in that
certain Loan Agreement of even date herewith, between Maker and Payee (the
"Loan Agreement"), which Event of Default is not cured following the giving of
any applicable notice and within any applicable cure period set forth in the
Loan Agreement, then, and in such event, the entire outstanding principal
balance of the indebtedness evidenced hereby, together with any other sums
advanced hereunder, under the Loan Agreement and/or under any other instrument
or document now or hereafter evidencing, securing or in any way relating to the
indebtedness evidenced hereby, together with all unpaid interest accrued
thereon, shall, at the option of Holder and without notice to Maker, at once
become due and payable and may be collected forthwith, regardless of the
stipulated date of maturity. Upon the occurrence of any Event of Default as set
forth herein, at the option of Holder and without notice to Maker, all accrued
and unpaid interest, if any, shall be added to the outstanding principal
balance hereof, and the entire
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outstanding principal balance, as so adjusted, shall bear interest thereafter
until the earlier of the date the Event of Default is cured or this Note is
paid at an annual rate (the "Default Rate") equal to the lesser of (i) the rate
that is seven percentage points (7.0%) in excess of the above-specified
interest rate, or (ii) the maximum rate of interest allowed to be charged under
applicable law (the "Maximum Rate"), regardless of whether or not there has
been an acceleration of the payment of principal as set forth herein. All such
interest shall be paid at the time of and as a condition precedent to the
curing of any such Event of Default.
In the event this Note is placed in the hands of an attorney for
collection, or if Holder incurs any costs incident to the collection of the
indebtedness evidenced hereby, Maker and any endorsers hereof agree to pay to
Holder an amount equal to all such costs, including without limitation all
reasonable attorneys' fees and all court costs.
Presentment for payment, demand, protest and notice of demand, protest
and nonpayment are hereby waived by Maker and all other parties hereto. No
failure to accelerate the indebtedness evidenced hereby by reason of an Event
of Default hereunder, acceptance of a past-due installment or other indulgences
granted from time to time, shall be construed as a novation of this Note or as
a waiver of such right of acceleration or of the right of Holder thereafter to
insist upon strict compliance with the terms of this Note or to prevent the
exercise of such right of acceleration or any other right granted hereunder or
by applicable law. No extension of the time for payment of the indebtedness
evidenced hereby or any installment due hereunder, made by agreement with any
person now or hereafter liable for payment of the indebtedness evidenced
hereby, shall operate to release, discharge, modify, change or affect the
original liability of Maker hereunder or that of any other person now or
hereafter liable for payment of the indebtedness evidenced hereby, either in
whole or in part, unless Holder agrees otherwise in writing. This Note may not
be changed orally, but only by an agreement in writing signed by the party
against whom enforcement of any waiver, change, modification or discharge is
sought.
The indebtedness and other obligations evidenced by this Note are
further evidenced by (i) the Loan Agreement and (ii) certain other instruments
and documents, as may be required to protect and preserve the rights of Maker
and Payee, as more specifically described in the Loan Agreement.
All agreements herein made are expressly limited so that in no event
whatsoever, whether by reason of advancement of proceeds hereof, acceleration
of maturity of the unpaid balance hereof or otherwise, shall the amount paid or
agreed to be paid to Holder for the use of the money advanced or to be advanced
hereunder
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exceed the Maximum Rate. If, from any circumstances whatsoever, the fulfillment
of any provision of this Note or any other agreement or instrument now or
hereafter evidencing, securing or in any way relating to the indebtedness
evidenced hereby shall involve the payment of interest in excess of the Maximum
Rate, then, ipso facto, the obligation to pay interest hereunder shall be
reduced to the Maximum Rate; and if from any circumstance whatsoever, Holder
shall ever receive interest, the amount of which would exceed the amount
collectible at the Maximum Rate, such amount as would be excessive interest
shall be applied to the reduction of the principal balance remaining unpaid
hereunder and not to the payment of interest. This provision shall control
every other provision in any and all other agreements and instruments existing
or hereafter arising between Maker and Holder with respect to the indebtedness
evidenced hereby.
This Note is intended as a contract under and shall be construed and
enforceable in accordance with the laws of the State of Tennessee, except to
the extent that federal law may be applicable to the determination of the
Maximum Rate.
Maker hereby irrevocably consents to the jurisdiction of the United
States District Court for the Middle District of Tennessee and of all Tennessee
state courts sitting in Davidson County, Tennessee, for the purpose of any
litigation to which Lender may be a party and which concerns this Note or the
indebtedness evidenced hereby. It is further agreed that venue for any such
action shall lie exclusively with courts sitting in Davidson County, Tennessee,
unless Holder agrees to the contrary in writing.
HOLDER AND MAKER HEREBY KNOWINGLY AND VOLUNTARILY WITH THE BENEFIT OF
COUNSEL WAIVE TRIAL BY JURY IN ANY ACTIONS, PROCEEDINGS, CLAIMS OR
COUNTER-CLAIMS, WHETHER IN CONTRACT OR TORT OR OTHERWISE, AT LAW OR IN EQUITY,
ARISING OUT OF OR IN ANY WAY RELATING TO THIS AGREEMENT OR THE LOAN DOCUMENTS.
As used herein, the terms "Maker" and "Holder" shall be deemed to
include their respective successors, legal representatives and assigns, whether
by voluntary action of the parties or by operation of law.
MAKER:
ONLINE RESOURCES & COMMUNICATIONS
CORPORATION, a Delaware corporation
By: [sig]
-------------------------------
Title: CHAIRMAN & CEO
----------------------------
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