SECURITY AGREEMENT, dated as of July 10, 2003, by and among PAYMENTS INC.,
a New York corporation (the "Company"), and each of the undersigned
(individually referred to as a "Secured Party," and collectively referred to as
the "Secured Parties").
W I T N E S S E T H:
WHEREAS, DCAP Group, Inc., a Delaware corporation and the holder of all of
the outstanding stock of the Company (the "Parent"), and the Secured Parties
have entered into a Unit Purchase Agreement, dated as of July 2, 2003 (the "Unit
Purchase Agreement"), pursuant to which the Secured Parties are purchasing the
Units (as defined in the Unit Purchase Agreement).
WHEREAS, included as a component of the Units are Secured Subordinated
Promissory Notes of the Parent payable to the Secured Parties in the aggregate
principal amount of $3,500,000 (the "Notes").
WHEREAS, the Company has agreed to grant a security interest in all of its
assets (the "Security Interest") to the Secured Parties as security for the
payment by the Parent of all amounts due under the Notes.
WHEREAS, the grant of the Security Interest is to be subordinated to the
security interest granted by the Company to Manufacturers and Traders Trust
Company (together with its successors and assigns, "M&T") with respect thereto.
WHEREAS, pursuant to an Appointment of Representative, dated as of July 2,
2003 (the "Appointment"), the Secured Parties have appointed Xxxx Xxxxxxx (the
"Representative") as their representative and attorney-in-fact with respect to
this Security Agreement.
WHEREAS, capitalized terms used and not otherwise defined herein shall have
the meanings ascribed to them in the Unit Purchase Agreement.
NOW, THEREFORE, the parties hereto agree as follows:
1. Grant of Security Interest; Subordination.
(a) The Company hereby grants to the Secured Parties a security
interest in the Collateral (as hereinafter defined) as security for the payment
by the Parent of all amounts due under the Notes (the "Obligations"). As used
herein, the term "Collateral" shall mean any and all tangible and intangible
assets owned by the Company or in which the Company has or shall have an
interest, now or hereafter existing or acquired, and wherever located, together
with all additions and accessions thereto and replacements and substitutions
thereof and all proceeds and products of the foregoing.
(b) The Secured Parties acknowledge and agree that the security
interest granted herein is subordinate to the security interest granted to M&T
with respect to the Collateral. The terms and conditions of this Security
Agreement are subject to the provisions of those certain
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Subordination Agreements of even date, as such agreements may be amended from
time to time, by the Secured Parties, the Parent and the Company in favor of
M&T.
2. Financing Statement. A UCC-1 Financing Statement shall be filed in the
State of New York to perfect the Security Interest in the Collateral.
3. Representations. The Company represents and warrants to the Secured
Parties as follows:
(a) The Company is a corporation duly incorporated and in good
standing under the laws of the State of New York.
(b) This Security Agreement has been duly authorized by all necessary
corporation action and represents the binding obligation of the Company in
accordance with its terms.
(c) The Company owns the Collateral free and clear of all liens and
other encumbrances.
4. Covenants. From and after the date hereof and continuing so long as
any of the Obligations shall remain unpaid, unless the Representative shall
otherwise consent in writing:
(a) Liens. The Company will not create any lien upon or with respect
to the Collateral, except liens in favor of M&T.
(b) Maintenance of Properties. The Company will keep its property
which is materially useful or necessary in its business in good working order
and condition, ordinary wear and tear excepted.
(c) Maintenance of Records. The Company will keep at all times proper
books of record and account in which true, correct and complete entries will be
made of all dealings or transactions of or in relation to the business and
affairs of the Company in accordance with generally accepted accounting
principles consistently applied throughout the periods involved (except for such
changes as are disclosed in such financial statements or in the notes thereto).
(d) Insurance. The Company will carry and maintain in full force and
effect at all times with reputable insurers (or, as to workers' compensation or
similar insurance, in an insurance fund or by self-insurance authorized by the
jurisdiction in which its operations are carried on) insurance against such
risks as are usually insured against by persons of established reputation
engaged in the same or similar businesses. All such insurance shall be in the
name of and with loss or damage payable to the Company and to the Secured
Parties, as their interests may appear. The Company shall deliver to the Secured
Parties the original or duplicate policies, or certificates, or other evidence
satisfactory to the Representative, of compliance with the foregoing insurance
provisions.
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(e) Inspection. The Company will permit the Representative, or any
person designated by the Representative in writing, from time to time hereafter,
to call at the Company's place or places of business (or any other place where
the Collateral or any information relating thereto is kept or located) during
all business hours, upon reasonable prior notice (provided that the
Representative or such designees shall not unreasonably disrupt the day-to-day
operations of the Company), (i) to inspect, audit, check and make copies of and
extracts from the Company's books, records, journals, orders, receipts and any
correspondence and other data relating to the Company's business or to any
transaction between the parties hereto, (ii) to make such verification
concerning the Collateral as the Representative may consider reasonable under
the circumstances, and (iii) to discuss the affairs, finances and business of
the Company with any of its respective officers, directors or outside auditors.
All documents and other information received by the Representative shall be held
in the strictest confidence by the Representative.
(f) Perfection of Security Interest.
(i) The Company will, from time to time, do whatever the
Representative may reasonably request by way of obtaining, executing, delivering
and/or filing financing statements, and other notices and amendments and
renewals thereof, and will take any and all steps and observe such formalities
as the Representative may request, in order to create, perfect and maintain a
valid continuing security interest upon the Collateral as contemplated by this
Security Agreement.
(ii) The Company hereby irrevocably appoints the Representative
as its lawful attorney and agent, with full power of substitution, to execute
and deliver, on behalf of and in the name of the Company, such financing
statements, assignments, notices, pledges and other documents and agreements,
and to take such other actions as the Representative may deem necessary for the
purpose of the creation, perfection, maintenance or continuation of the Security
Interest, under any applicable law, and the Representative is hereby authorized
to file on behalf of and in the name of the Company, at the Company's expense,
such financing statements, assignments, notices, pledges and other documents and
agreements in any appropriate governmental office. The right is expressly
granted to the Representative, in his discretion, in those jurisdictions where
the same is permitted, to file one or more financing statements (including
amendments and renewals thereof) under the Uniform Commercial Code or similar
law signed only by the Representative, naming the Company as debtor and naming
the Secured Parties as secured party and indicating therein the types, or
describing the items, of the Collateral.
(g) Further Assurances. The Company shall at any time or from time to
time execute and deliver such further instruments and documents and take such
further action as may reasonably be requested by the Representative to carry
out, to the reasonable satisfaction of the Representative, the transactions
contemplated hereby.
6. Remedies of the Secured Parties upon Default. In the event that there
shall occur an Event of Default (as defined in the Notes), the Secured Parties,
acting through the Representative, shall have all of the rights and remedies
afforded to secured parties with respect to the Collateral as set forth in the
Uniform Commercial Code from time to time in effect in the State of New York.
7. Termination of Agreement. Upon (i) the Parent's satisfaction of the
Obligations in full (at which time the Company shall be entitled to file a UCC-3
Termination Statement with
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respect to the Collateral) or (ii) the conclusion of the actions contemplated by
Section 6 hereof, this Security Agreement shall terminate.
8. Representative. The Secured Parties acknowledge and agree that,
pursuant to the Appointment, the Representative has been appointed the
representative and attorney-in-fact for each of the Secured Parties with respect
to this Security Agreement.
9. Miscellaneous.
(a) This Security Agreement constitutes the entire agreement among
the parties pertaining to the subject matter hereof, and supersedes all prior
agreements or understandings as to such subject matter.
(b) No waiver of any of the provisions of this Security Agreement
shall be deemed, or shall constitute, a waiver of any other provisions, whether
or not similar, nor shall any waiver constitute a continuing waiver. No waiver
shall be binding unless executed in writing by the Company and the
Representative.
(c) No amendment or modification of this Security Agreement shall be
valid unless made in writing and signed by the Company and the Representative.
(d) This Security Agreement shall be binding upon and shall inure to
the benefit of the parties hereto and their respective heirs, legal
representatives, executors, administrators, successors and assigns.
(e) This Security Agreement shall be construed and interpreted and
the rights granted herein governed in accordance with the laws of the State of
New York, without giving effect to conflict of laws principles.
(f) Each of the parties to this Security Agreement agrees to execute
and deliver any and all additional papers, documents and other assurances, and
shall perform any and all acts and things, reasonably necessary to effectuate
the purposes and intents of this Security Agreement.
(g) This Security Agreement may be executed in any number of
counterparts, each of which shall be deemed an original and all of which shall
constitute one instrument.
(h) All notices or other communications or deliveries required or
permitted hereunder shall be sufficiently given if delivered by hand, or sent by
certified or registered mail (return receipt requested, postage prepaid),
facsimile transmission or overnight mail or courier, addressed as follows:
If to the Company, at:
0000 Xxxxxxxx
Xxxxxxx, Xxx Xxxx 00000
Attn: Chief Executive Officer
Facsimile No.: (000) 000-0000
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With a copy to:
Certilman Balin Xxxxx & Xxxxx, LLP
00 Xxxxxxx Xxxxxx
Xxxx Xxxxxx, Xxx Xxxx 00000
Attn: Xxxx Xxxxxxx, Esq.
Facsimile No.: (000) 000-0000
If to any of the Secured Parties, at:
c/o Xxxx Xxxxxxx
0000 Xxxxxxx Xxxxx Xxxx
Xxxxxxx Xxxxxx, XX 00000
Facsimile No.: (000) 000-0000
with a copy to:
Xxxxx Xxxx Xxxxxxxx Xxxxxxxxx
Xxxxx Cave LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxx, Esq.
Facsimile No.: (000) 000-0000
or at such other address as any party or person shall designate by notice to the
other parties in accordance with the provisions hereof.
(i) If any provision hereof is declared to be invalid and
unenforceable, then, to the fullest extent permitted by law, the other
provisions hereof shall remain in full force and effect and shall be construed
in order to carry out the intentions of the parties hereto as nearly as may be
possible.
10. Representation by Counsel; Interpretation. Each party acknowledges
that he has been represented by counsel, or has been afforded the opportunity to
be represented by counsel, in connection with this Security Agreement and the
transactions contemplated hereby. Accordingly, any rule or law or any legal
decision that would require the interpretation of any claimed ambiguities in
this Security Agreement against the party that drafted it has no application and
is expressly waived by the parties. The provisions of this Security Agreement
shall be interpreted in a reasonable manner to give effect to the intent of the
parties hereto.
11. Gender. All references to the masculine gender herein shall be deemed
to refer to the feminine and neuter where applicable.
Remainder of Page Intentionally Left Blank. Signature Page Follows.
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IN WITNESS WHEREOF, the undersigned have executed this Security Agreement
as of the date first above written.
COMPANY:
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PAYMENTS INC.
By:
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Name: Xxxxx Xxxxxxxxx
Title: Chief Executive Officer
SECURED PARTIES:
TO BE COMPLETED BY INDIVIDUAL TO BE COMPLETED BY CORPORATE,
SECURED PARTY PARTNERSHIP, LIMITED LIABILITY
COMPANY OR TRUST SECURED PARTY
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Name(s) of Secured Party(ies) [Please Print] Name of Secured Party [Please
Print]
___________________________________ By:__________________________________
Signature of Secured Party Authorized Signatory
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Signature of Secured Party, if jointly held Name and Title of Authorized Signatory
[Please Print]
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