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Exhibit 10.3
SECURITY AGREEMENT
THIS SECURITY AGREEMENT ("Agreement") is dated as of the 3Oth day of
June 1997, by and between MERGE TECHNOLOGIES INCORPORATED, a Wisconsin
corporation ("Borrower"), and SIRROM CAPITAL CORPORATION, a Tennessee
corporation ("Lender").
WITNESSETH:
WHEREAS, Lender is making a loan (the "Loan") in the amount of
$2,000,000 to Borrower, pursuant to that certain Loan Agreement of even date
herewith by and between Borrower and Lender (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 and any and all proceeds
and products thereof and accessions thereto (collectively the "Collateral"):
(a) Equipment. All equipment of Borrower of any kind and
description, whether now owned or hereafter acquired and wherever located,
together with all parts, accessories and attachments and all replacements
thereof and additions thereto;
(b) Inventory, Accounts, Contract Rights, Chattel Paper and General
Intangibles. All of Borrower's inventory and any agreements for lease of same
and rentals therefrom and all of Borrower's accounts, accounts receivable,
contract rights, chattel paper and general intangibles and the proceeds
therefrom, whether now in existence or owned or hereafter arising or
acquired, entered into or created, and wherever located; and whether held for
lease or sale, or furnished or to be furnished under contracts of service;
(c) Trademarks, Etc. All trademarks and service marks now held or
hereafter acquired by Borrower, both those that are registered with the
United States Patent and Trademark Office and any unregistered marks used by
Borrower in the United States, and trade dress, including logos and designs,
in connection with which any such marks are used, together with all
registrations regarding such marks and the rights to renewals thereof, and
the goodwill of the business of Borrower symbolized by such marks;
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(d) Copyrights. All copyrights now held or hereafter acquired by
Borrower and any applications for U.S. copyrights hereafter made by Borrower;
and
(e) Proprietary Information, Computer Data, Etc. All proprietary
information and trade secrets of Borrower with respect to Borrower's business
and all of Borrower's computer programs and the information contained therein
and all intellectual property rights with respect thereto, it is understood
and agreed that proprietary information which is owned by third parties, but
made available to Borrower pursuant to confidentiality agreements or
otherwise, is hereby expressly excluded form the Collateral.
2. Secured Indebtedness. The obligations secured hereby shall include (a)
loans to be made concurrently or in connection with this Agreement or the Loan
Agreement as evidenced by one or more promissory notes payable to the order of
Lender that shall be due and payable as set forth in such promissory notes, and
any renewals or extensions thereof, (b) the full and prompt payment and
performance of any and all other indebtednesses and other obligations of
Borrower to Lender, direct or contingent (including but not limited to
obligations incurred as indorser, guarantor or surety), however evidenced or
denominated, and however and whenever incurred, including but not limited to
indebtednesses incurred pursuant to any present or future commitment of Lender
to Borrower and (c) all future advances made by Lender for taxes, levies,
insurance and preservation of the Collateral and all attorney's fees, court
costs and expenses of whatever kind incident to the collection of any of said
indebtedness or other obligations and the enforcement and protection of the
security interest created hereby.
3. Representations, Warranties and Agreements of Borrower. Borrower
represents, warrants and agrees as follows:
(a) Borrower will promptly notify Lender, in writing, of any new place or
places of business if the Collateral is used in business, or of any change in
Borrower's residence if the Collateral is not used in business, and
regardless of use, of any change in the location of the Collateral or any
records pertaining thereto; provided however, Borrower shall not be obligated
to notify Lender of any new place in which less that $10,000 of Collateral is
located.
(b) Except as set forth on Schedule 3(b) 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 Permitted Encumbrances.
(c) Borrower will pay to Lender all amounts secured hereby as and when the
same shall be due and payable, whether at maturity, by acceleration or
otherwise, and will promptly perform all terms of said indebtedness and this
or any other security or loan agreement between Borrower and Lender, and will
promptly discharge all said liabilities.
(d) 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
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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 copies of the
policies with Lender. Any money received by Lender under said policies
may be applied to the payment of any indebtedness secured hereby, 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 other amounts secured hereby.
Notwithstanding the foregoing, to the extent that Borrower is required to
make available any of such insurance proceeds to or for the benefit of any
senior secured lender as permitted under the Loan Agreement, then Borrower's
failure to assign or deliver such proceeds to Lender shall not be deemed a
default of this Section 3(d).
(e) 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.
(f) The addresses set forth after Borrower's signature on this Agreement
and on Schedule 3(f) hereto are Borrower's principal place of business and
the location of all tangible Collateral and the place where the records
concerning all intangible Collateral are kept and/or maintained.
(g) Notwithstanding anything to the contrary contained hereunder,
Borrower shall have no obligation to take action necessary to perfect
Lender's security interest in or to otherwise protect from encumbrance, any
Collateral situated in any location other than Wisconsin to the extent that
the fair market value of such Collateral in such state or country in the
aggregate is less than $10,000 (except for the purposes of the state of
California, the value of such Collateral is less than $15,000). In addition,
Borrower shall have no obligation to perfect Lender's security interest in
Collateral located in Nuenen, Netherlands, or in any other foreign location
where the fair market value of the Collateral is below $10,000.
4. Default. Borrower shall be in default upon failure to observe or perform
any of Borrower's agreements herein contained, or upon the occurrence of a
default or Event of Default under the Loan Agreement or any other Loan Document
(as defined in the Loan Agreement) that has not been cured during the
applicable grace period, or if any warranty or statement by Borrower herein or
furnished in connection herewith is false or misleading in any material
respect.
5. Remedies Upon Default. Upon default hereunder, all sums secured
hereby shall immediately become due and payable at Lender's option, and Lender
may proceed to enforce payment
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of same and to exercise any and all rights and remedies provided by the Uniform
Commercial Code (Tennessee) or other applicable law, as well as all other rights
and remedies possessed by Lender, all of which shall be cumulative. Whenever
Borrower is in default hereunder, and upon demand by Lender, Borrower shall
assemble the Collateral and make it available to Lender at a place reasonably
convenient to Lender and Borrower. Any notice of sale, lease or other intended
disposition of the Collateral by Lender sent to Borrower at the address
hereinafter set forth, or at such other address of Borrower as may be shown on
Lender's records, at least five (5) business days prior to such action, shall
constitute reasonable notice to Borrower.
Lender may waive any default before or after the same has been declared
without impairing its right to declare a subsequent default hereunder, this
right being a continuing one.
6. 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.
7. 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. If Borrower is comprised of more than one person, firm
and/or entity, their obligations hereunder shall be joint and several.
8. Financial Reporting. Borrower has no material (i.e. value of $5,000 or
more) undisclosed or contingent liabilities that are not reflected in the
financial statements on file with Lender at the execution of this Agreement.
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 be secured by the security interest
granted hereby.
9. Termination Statement. Borrower agrees that, notwithstanding the
payment in full of all indebtedness secured hereby and whether or not there is
any outstanding obligation of Lender to make future advances, Lender shall not
be required to send Borrower a termination statement with respect to any
financing statement filed to perfect Lender's security interest(s) in any of
the Collateral, unless and until Borrower shall have made written demand
therefor. Upon receipt of proper written demand, Lender may at its option, in
lieu of sending a termination statement to Borrower, cause said termination
statement to be filed with the appropriate filing officer(s).
10. Protection of Collateral. Borrower will not permit any liens or
security interests other than those created by this Agreement and the Permitted
Encumbrances (or the Permitted Encumbrances permitted under Section 3.15 of the
Loan Agreement) 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
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prior written consent of Lender.
11. Special Agreements With Respect to Certain Tangible Collateral.
Borrower additionally agrees and warrants 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, and
will permit Lender to inspect the Collateral at any time, notwithstanding
anything to the contrary herein, Borrower shall be permitted to deliver
Collateral: (i) to suppliers in the ordinary course of business for
additional assembly work or for the provision of other value added goods or
services, and (ii) to customers for usage or testing at their places of
business, provided such Collateral provision is in the ordinary course of
business.
(b) If any of the Collateral is equipment or goods of a type normally
used in more than one state (whether or not actually so used), Borrower
will contemporaneously herewith furnish Lender a list of the states wherein
such equipment or goods (have a fair market value of $10,000 or more, for
anyone location) are or will be used, and hereafter will notify Lender in
writing (i) of any other states in which such equipment or goods are so
used, and (ii) of any change in the location of Borrower's chief place of
business.
(c) Borrower will not sell, exchange, lease or otherwise dispose of
any of the Collateral or any interest therein except in the ordinary course
of business without the prior written consent of Lender.
(d) 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 other amounts secured
hereby.
(e) Until default in any of the terms hereof, or the terms of any
indebtedness secured hereby, 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.
(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.
12. Special Agreements With Respect to Intangible and Certain Tangible
Collateral. Borrower additionally warrants and agrees as follows:
(a) So long as Borrower is not in default hereunder, Borrower shall
have the right
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to process and sell Borrower's inventory in the regular course of business.
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.
(b) By the execution of this Agreement, Lender shall not be obligated
to do or perform any of the acts or things provided in any contracts
covered hereby that are to be done or performed by Borrower, but if there
is a default by Borrower in the payment of any amount due in respect of any
indebtedness secured hereby, then Lender may, at its election, perform some
or all of the obligations provided in said contracts to be performed by
Borrower, and if Lender incurs any liability or expenses by reason thereof,
the same shall be payable by Borrower upon demand and shall also be secured
by this Agreement.
(c) At any time after Borrower is in default hereunder or under the
Loan Agreement, Lender shall have the right to notify the account debtors
obligated on any or all of Borrower's accounts receivable to make payment
thereof directly to Lender, and to take control of all proceeds of any such
accounts receivable. Until such time as Lender elects to exercise such
right by mailing to Borrower written notice thereof, Borrower is
authorized, as agent of the Lender, to collect and enforce said accounts
receivable.
13. Power of Attorney. Borrower hereby constitutes the 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 name upon
any notes, acceptances, checks, drafts, money orders, or other evidences of
payment or Collateral that may come into either its or the 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 the Lender may designate; to execute any of the documents referred to in
Section 3(e) hereof in order to perfect and/or maintain the security interests
and liens granted herein by Borrower to the Lender; to do all other acts and
things necessary to carry out this Security 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 secured hereby are paid in full and any
and all promissory notes executed in connection therewith are terminated and
satisfied.
14. Governing Law and Amendments. This Agreement and all of the Loan
Documents 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.
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15. Survival of Representations and Warranties. All representations and
warranties contained herein or made by or furnished on behalf of the Borrowers
in connection herewith shall survive the execution and delivery of this
Agreement.
16. 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.
17. 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 the Borrower, Lender and their respective agents have participated
in the preparation hereof.
18. Senior Debt. Notwithstanding anything to the contrary contained
herein, the parties acknowledge and agree that the Collateral may be subject to
a prior lien in favor of the issuer of a "Senior Credit Facility," as that term
is defined in the Loan Agreement, and all requirements imposed upon Borrower
pursuant to the Senior Credit Facility, including but not limited to said
Lender's priority interest in the Collateral, shall be expressly permitted
hereunder and subordinate in all respects to the rights of the Senior Credit
Facility lender, its successors and assigns, to the extent set forth in a
subordination agreement containing terms reasonably satisfactory to Lender,
executed by Lender in favor of such Senior Credit Facility lender.
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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:
MERGE TECHNOLOGIES INCORPORATED
By: /s/ Xxxxxxx X. Xxxx
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Title: Chief Financial Officer
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Address: 0000 Xxxxx 00xx Xxxxxx
Xxxxx X-000X
Xxxxxxxxx, Xx 00000
LENDER:
SIRROM CAPITAL CORPORATION
By: /s/ Xxxx Dyslia
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Title: Vice President
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