SECURITY AGREEMENT
Securing a $450,000 - One Year Convertible Note
THIS SECURITY AGREEMENT ("Agreement") is made effective as of the 16th
day of October, 2000, by and between Accesspoint Corporation, a Nevada
corporation ("Accesspoint"), Processing Source International, Inc., a California
corporation ("PSI"), and RoyCap Inc., a Canadian corporation ("Secured Party").
Accesspoint and PSI are sometimes herein referred to individually and/or
collectively as "Debtor." Debtor and Secured Party are sometimes herein referred
to individually as a "party" and collectively as the "parties."
WHEREAS, Secured Party desires to lend to Accesspoint the principal sum
of $450,000.00 evidenced by, and in exchange for, a convertible note issued by
Accesspoint in the principal amount of $450,000.00 bearing interest at the rate
of eight percent (8%) per annum, all due and payable in one (1) year ("Note");
WHEREAS, the parties desire to secure the Note in part against a
reserve account ("Reserve Account") required to be established and maintained by
PSI pursuant to a certain Merchant Program Processing Agreement ("Processing
Agreement") by and between PSI on the one hand, and Chase Merchant Services,
L.L.C., and The Chase Manhattan Bank on the other hand (collectively "Chase");
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, Debtor and Secured Party hereby
agree as follows:
1. GRANT OF SECURITY INTEREST.
1.1 Debtor hereby grants to Secured Party, subject to any prior or
superior security interest or other interest of Chase or other party pursuant to
the Processing Agreement, a security interest in the Reserve Account, all funds
deposited therein, and any and all additions and accessions thereto,
substitutions therefore, and proceeds thereof, up to, but not exceeding, the
total sum of USD$250,000.00 (collectively, the "Collateral"), as collateral
security for the satisfaction and the prompt and full performance of all of
Debtor's obligations under the Note, as the Note may be amended, modified, or
extended from time to time (including, without limitation, the obligation to
make payments of principal and interest thereon).
1.2 The parties acknowledge that the security interest in favor of
Secured Party contemplated herein shall be a lien or encumbrance junior in
priority to any lien or encumbrance arising by reason of the Processing
Agreement and is expressly made subject to the provisions of the Processing
Agreement. Nothing in this Agreement shall
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defeat, impair or prejudice the lien, encumbrance or interest of Chase in and to
the Reserve Account pursuant to the terms of the Processing Agreement or any
other related document or instrument.
1.3 Debtor shall execute and deliver to Secured Party for filing, at
Debtor's cost and expense, a financing statement on Form UCC-1 covering the
Collateral. Debtor shall execute such financing statements and shall take
whatever other actions may be reasonably requested by Secured Party to perfect
and continue Secured Party's security interest in the Collateral.
1.4 A true and correct copy of this Agreement shall be attached to the
Note as an exhibit and the terms of the Note shall be incorporated into this
Agreement by this reference.
2. DEFAULT. Any of the following events shall constitute an event of
default hereunder:
2.1 The failure by Debtor to make full and timely payment when due of
any sum as required to be paid to Secured Party under the Note after any
applicable notice of non-payment provided for in the Note has been given, and
any period within which to cure the non-payment has elapsed.
2.2 This Agreement, or any of the instruments created hereunder, ceases
to be in full force and effect (including the failure of any collateral
documents to create a valid and perfected security interest or lien) at any time
and for any reason.
2.3 The filing by or against Debtor of any petition, or commencement by
Debtor of any proceeding, under the Bankruptcy Act or any state insolvency law
which remains undismissed or otherwise unstayed for a period of sixty (60) days.
2.4 The making by Debtor of any general assignment for the benefit
of creditors.
2.5 The filing of a voluntary or involuntary application for or
appointment of a receiver with regard to Debtor, which filing remains
undismissed or otherwise unstayed for a period of sixty (60) days.
2.6 The occurrence of any such petition, filing or application naming
Debtor which then results in entry of an order for relief and any such
adjudication or appointment remains undischarged, undismissed or unstayed for a
period of sixty (60) days.
2.7 The liquidation of Debtor.
2.8 The dissolution of Debtor.
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2.9 The substantial cessation of business by Debtor for a material
amount of time.
3. INSPECTION OF RECORDS. Secured Party shall have, subject to any
confidentiality or non-disclosure provisions contained in the Processing
Agreement or any other agreement between Debtor and Chase, the right, upon
reasonable prior notice, to inspect all financial books, records and reports of
Debtor regarding the Collateral at Debtor's premises or wherever the same may be
maintained during normal business hours.
4. REMEDIES UPON DEFAULT.
4.1 Subject to the terms of the Processing Agreement, upon the
occurrence of an event of default, in addition to any and all other remedies at
law or in equity available to Secured Party, Debtor hereby authorizes and
empowers Secured Party, at Secured Party's option and without notice to Debtor,
except as specifically herein provided (and, to the extent necessary, hereby
irrevocably appoints Secured Party as Debtor's attorney-in-fact for such
purposes) to require Debtor to assemble any and all of the deposit or account
documents pertaining to the Collateral and make the same available to Secured
Party at the premises wherein the same is located and execute such drafts,
assignments, documents or instruments as may be reasonably required by Secured
Party to access and apply the funds in the Reserve Account as set forth herein.
4.2 In the event of any such default, the Collateral shall, subject to
the terms of the Processing Agreement, be applied to pay, satisfy and discharge
the obligations of Debtor to Secured Party under the Note which are then due and
payable pursuant to the terms of the Note. If all of the Note obligations
secured by this Agreement are then discharged and satisfied, Secured Party shall
pay the surplus, if any, to Debtor.
5. COVENANTS AND REPRESENTATIONS OF DEBTOR.Debtor hereby makes the follow-
ing covenants and representations for the benefit of Secured Party, subject only
the Processing Agreement:
5.1 Debtor is contractually obligated pursuant to the terms of the
Processing Agreement to establish the Reserve Account. Debtor is further
contractually obligated pursuant to the terms of the Processing Agreement to
replenish the amount of funds held in the Reserve Account if such funds fall
below certain amounts.
5.2 The Processing Agreement expressly grants to Chase a lien and
security interest in and to any funds in the Reserve Account. The Processing
Agreement allows Chase to set off, recoup and appropriate funds in the Reserve
Account, without notice to Debtor, in order to cover chargebacks, adjustments,
fees and other charges which
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are owed by Debtor (or merchants) to Chase under the Processing Agreement or any
other any other agreement between Debtor and Chase. There is no other agreement
or obligation owed by Debtor to Chase.
5.3 Nothing in the Processing Agreement purports to prevent Debtor from
granting the security interest granted to Secured Party hereunder. Nothing in
the Processing Agreement purports to prevent Secured Party from exercising
Secured Party's rights and remedies under this Agreement.
5.4 Nothing in the Processing Agreement purports to provide Chase with
the right to access the Reserve Account solely because of the creation or grant
of the security interest set forth in this agreement.
5.5 Debtor shall at all times maintain the Collateral in accordance
with the Processing Agreement and consistent with good business practice and
will pay any and all taxes thereon or applicable thereto prior to delinquency.
5.6 Debtor shall not remove the Collateral from any location or
depository without the prior written consent of Secured Party.
5.7 Debtor shall promptly notify Secured Party upon the termination of
the Processing Agreement and/or upon the termination or amendment of any
provisions thereof which might relieve Debtor of the obligation to maintain the
Reserve Account.
5.8 Debtor shall not sell, transfer, assign, encumber, hypothecate or
otherwise alienated any part of the Collateral, or any interest of Debtor in and
to the Collateral, or any part thereof, without the prior written consent of
Secured Party.
6. DEBTOR'S RIGHT TO POSSESSION. Subject to the terms of the Processing
Agreement, until default, Debtor may have possession of the tangible personal
property and beneficial use of all the Collateral and may use it in any lawful
manner not inconsistent with this Agreement, provided that Debtors right to
possession and beneficial use shall not apply to any Collateral where possession
of the Collateral by Secured Party is required by law to perfect Secured Party's
security interest in such Collateral. If Secured Party at any time has
possession of any Collateral, whether before or after an Event of Default,
Secured Party shall be deemed to have exercised reasonable care in the custody
and preservation of the Collateral if Secured Party takes such action for that
purpose as Debtor shall request or as Secured Party, in Secured Party's sole
discretion, shall deem appropriate under the circumstances, but failure to honor
any request by Debtor shall not of itself be deemed to be a failure to exercise
reasonable care. Secured Party shall not be required to take any steps necessary
to preserve any rights in the Collateral against prior parties except as may be
directed by Chase or its agents or representatives.
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7. NO WAIVER BY SECURED PARTY. Any forbearance, failure, or delay by Secured
Party in exercising any right, power or remedy hereunder shall not be deemed to
be a waiver of such right, power, or remedy, and any single or partial exercise
of any right, power or remedy of Secured Party shall not preclude the later
exercise of any other right, power, or remedy, each of which shall continue in
full force and effect until such right, power, or remedy is specifically waived
by an instrument in writing, executed by Secured Party.
8. EFFECTIVENESS OF AGREEMENT. This Agreement and Debtor's duties and
obligations and Secured Party's powers to dispose of the Collateral, and all
other rights, powers, and remedies granted to Secured Party hereunder shall
remain in full force and effect until Debtor shall have satisfied and discharged
all of Debtor's obligations to Secured Party secured hereby.
9. WAIVER BY DEBTOR. All provisions of law, in equity and by statue providing
for, relating to, or pertaining to pledges or security interests and the sale of
pledged property or property in which a security interest is granted, or which
prescribe, prohibit, limit or restrict the right to, or conditions, notice or
manner of sale, together with all limitations of law, in equity, or by statute,
on the right of attachment in the case of secured obligations, are hereby
expressly waived by Debtor to the fullest extent Debtor may lawfully waive the
same.
10. RELEASE OF COLLATERAL. Upon payment in full by Debtor, in lawful money of
the United States of America, to Secured Party at the address set forth in the
Note of all amounts secured hereby, and upon the request of Debtor therefor,
Secured Party will deliver to Debtor, at Debtor's sole cost and expense, such
termination statements and such other documents of release, reconveyance and
reassignments as shall be sufficient to discharge Debtor of the liabilities
secured hereby and to terminate and release the security interest in the
Collateral created hereby.
11. MISCELLANEOUS.
11.1 The provisions of this Agreement were negotiated by all of the
parties hereto and this Agreement shall be deemed to have been drafted equally
by all the parties hereto.
11.2 This Agreement and all of its terms and provisions shall be
binding upon the heirs, successors, transferees and assigns of each of the
parties hereto.
11.3 In the event any portion of this Agreement is held invalid, the
remaining portions shall remain in full force and effect as if that invalid
portion had never been a part hereof.
11.4 In the event litigation is commenced to enforce or interpret this
Agreement, or any provision hereof, the prevailing party shall be entitled to
recover its
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actual attorneys' fees.
11.5 Any and all notices, demands, requests, or other communications
required or permitted by this Agreement or by law to be served on, given to, or
delivered to any party hereto by any other party to this Agreement shall be in
writing and shall be deemed duly served, given, or delivered when personally
delivered to the party or to an officer of the party, or in lieu of such
personal delivery, when deposited in the United States mail, first-class postage
prepaid addressed to the party at any address provided by the party from time to
time for such purposes.
11.6 This Agreement constitutes the entire agreement between the
parties pertaining to the subject matter contained in it and supersedes all
prior and contemporaneous agreements, representations and understandings of the
parties. No waiver of any of the provisions of this Agreement shall be deemed,
or shall constitute a waiver of any other provision, whether or not similar, nor
shall any waiver constitute a continuing waiver. No waiver shall be binding
unless executed in writing by the party making the waiver.
11.7 This Agreement may be executed simultaneously in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. The exhibits attached
hereto and initialed by the parties are made a part hereof and incorporated
herein by this reference.
11.8 Nothing in this Agreement, whether express or implied, is intended
to confer any rights or remedies under or by reason of this Agreement on any
persons other than the parties to it and their respective successors and
assigns, nor is anything in this Agreement intended to relieve or discharge the
obligations or liability of any third persons to any party to this Agreement,
nor shall any provision give any third person any right of subrogation or action
over against any party to this Agreement.
11.9 Each party's obligations under this Agreement are unique. If any
party should default in its obligations under this Agreement, the parties each
acknowledge that it would be extremely impracticable to measure the resulting
damages; accordingly, the nondefaulting party, in addition to any other
available rights or remedies, may xxx in equity for specific performance without
the necessity of posting a bond or other security, and the parties each
expressly waive the defense that a remedy in damages will be adequate.
11.10 All representations, warranties and agreements of the parties
contained in this Agreement, or in any instrument, certificate, opinion or other
writing provided for in it, shall survive the completion of all acts
contemplated herein.
11.11 If any legal action, arbitration or other proceeding is brought
for the enforcement of this Agreement, or because of an alleged dispute, breach,
default or misrepresentation in connection with any of the provisions of this
Agreement, the
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successful or prevailing party or parties shall be entitled to recover as an
element of their damages reasonable attorney's fees and other costs incurred in
that action or proceeding, in addition to any other relief to which said
prevailing party may be entitled.
11.12 Time is the essence of this Agreement.
11.13 Whenever the context of this Agreement requires, the masculine
gender includes the feminine or neuter gender, and the singular number includes
the plural.
11.14 As used herein, the word "days" shall refer to calendar day,
including holidays, weekend, non-business days, etc. All dollar amounts set
forth herein shall be expressed in U.S. dollars.
11.15 The captions contained herein do not constitute part of this
Agreement and are used solely for convenience and shall in no way be used to
construe, modify, limit or otherwise affect this Agreement.
IN WITNESS WHEREOF, this Agreement is made effective as of the date
first set forth above.
DEBTOR:
Accesspoint:
Accesspoint Corporation, a Nevada corporation
By: /s/ XXX X. XXXXXXXXX
------------------------------------
Xxx X. Xxxxxxxxx,
Chief Executive Officer
PSI:
Processing Source International, Inc, a
California corporation
By: /s/ XXXXXX XXXXXX
------------------------------------
Xxxxxx Xxxxxx,
President
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SECURED PARTY:
RoyCap Inc.,
An Ontario, Canada corporation
By: /s/ XXXXX XXXXX
---------------------------------
Xxxxx Xxxxx,
President
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