ACTIVE LINK COMMUNICATIONS, INC.
FORM 10-KSB
EXHIBIT 10 (P.4)
SUBSIDIARY SECURITY AGREEMENT
This Security Agreement ("this Agreement") is made as of June 20, 2003 by
and between Mobility Concepts, Inc., a Wisconsin corporation ("Debtor") and
Integrated Mobile Solutions, LLC (referred to as "Secured Party").
1. Grant of Security Interest. Debtor, in consideration of the
indebtedness described in this Agreement, hereby grants, conveys, and assigns to
Secured Party for security all of Debtor's existing and future right, title and
interest in, to, and under the property listed in Paragraph 2 of this Agreement.
This security interest is granted to the Secured Party to (a) secure the payment
of the indebtedness evidenced by Debtor's note payable to Secured Party dated
the date set forth on Exhibit A ("Note") in the aggregate principal sum of
$300,000, with interest thereon, and all renewals, extensions, and modifications
of the Note; (b) the payment, performance and observance of all obligations,
covenants and agreements to be paid, performed or observed by Debtor under the
Note; (c) the payment of all other sums, with interest thereon, advanced under
the terms of this Agreement; and (d) the performance of the agreements and
warranties of Debtor contained in this Agreement, or incorporated in this
Agreement by reference. This security interest is subordinate only to the
security interest of Spectrum Commercial Services ("Spectrum") under Security
Agreements dated December 21, 2001 (the "Spectrum Credit Agreements") and
pre-existing security interests granted to Renaissance US Growth & Income Trust
PLC and Renaissance Capital Growth & Income Fund III, Inc. and Xxxx X. Xxxxxxxx
and Xxxxxx Xxxxxx (collectively, the "Other Investors") as set forth in the
Security Agreements between Debtor and the Other Investors, respectively.
2. Property. Collateral shall include all personal property of the Debtor,
including the following, all whether now owned or hereafter acquired or arising
and wherever located: (i) accounts (including health-care-insurance receivables
and credit card receivables); (ii) securities entitlements, securities accounts,
commodity accounts, commodity contracts and investment property; (iii) deposit
accounts [i-iii collectively referred to as "Accounts"]; (iv) instruments
(including promissory notes); (v) documents (including warehouse receipts); (vi)
chattel paper (including electronic chattel paper and tangible chattel paper);
(vii) inventory, including raw materials, work in process, or materials used or
consumed in Debtor's business, items held for sale or lease or furnished or to
be furnished under contracts of service, sale or lease, goods that are returned,
reclaimed or repossessed; (viii) goods of every nature, including
stock-in-trade, goods on consignment, standing timber that is to be cut and
removed under a conveyance or contract for sale, the unborn young of animals,
crops grown, growing, or to be grown, manufactured homes, computer programs
embedded in such goods and farm products; (ix) equipment, including machinery,
vehicles and furniture; (x) fixtures; (xi) agricultural liens; (xii)
as-extracted collateral; (xiii) commercial tort claims, if any; (xiv) letter of
credit rights; (xv) general intangibles, of every kind and description,
including payment intangibles, software, computer information, source codes,
object codes, records and data, all existing and future customer lists, choses
in action, claims (including claims for indemnification or breach of warranty),
books, records, patents and patent applications, copyrights, trademarks, trade
names, trade styles, trademark applications, goodwill, blueprints, drawings,
designs and plans, trade secrets, contracts, licenses, license agreements,
formulae, tax and any other types of refunds, returned and unearned insurance
premiums, rights and claims under insurance policies; (xvi) all supporting
obligations of all of the foregoing property; (xvii) all property of the Debtor
now or hereafter in the Lender's possession or in transit to or from, or under
the custody or control of, the Lender or any affiliate thereof; (xviii) all cash
and cash equivalents thereof; (xix) all stock and (xx) all cash and noncash
proceeds (including insurance proceeds) of all of the foregoing property, all
products thereof and all additions and accessions thereto, substitutions
therefore and replacements thereof.
3. Covenants of Debtor. The Debtor agrees and covenants as follows:
a. Payment of Principal and Interest. The Debtor shall
promptly pay when due the principal of and interest on the
indebtedness evidenced by the Note, any prepayment and late
charges provided in the Note, and all other sums secured by
this Agreement.
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b. Corporate Existence. The Debtor is a corporation duly
organized and existing under the laws of the state of
Wisconsin and is duly qualified in every other state in
which it is doing business.
c. Corporate Authority. The execution, delivery, and performance
of this Agreement and the execution and payment of the Note
are within Debtor's corporate powers, have been duly
authorized, and are not in contravention of law or the terms
of the Debtor's articles of incorporation and bylaws, or of
any indenture, agreement, or undertaking to which the Debtor
is a party or by which it is bound.
d. Ownership of Collateral. The Debtor is the sole owner of
the Collateral and will defend the Collateral against the
claims and demands of all other persons at any time
claiming the same or any interest therein.
e. Borrowing Limit. Debtor agrees that at no time shall the
sum of (i) the amount Debtor owes to Spectrum under the
Spectrum Credit Agreement and (ii) the principal amount of
the Note, be more than 80% of the value of the Collateral.
4. Use of Collateral. Until default, debtor may use the collateral in any
lawful manner not inconsistent with this Agreement or with the terms or
conditions of insurance, and may sell the collateral in the ordinary course of
business. A sale in the ordinary course of business does not include a transfer
in partial or total satisfaction of a debt.
5. Perfection of Security Interest. The Debtor agrees to execute and file
financing statements, and do whatever may be necessary under the applicable
Uniform Commercial Code in each state where the Collateral is located, to
perfect and continue the Secured Party's interest in the Collateral, all at the
Debtor's expense.
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6. Taxes and Assessments. The Debtor will pay or cause to be paid promptly
when due all taxes and assessments on the Collateral, this Agreement, and the
Note. The Debtor may, however, withhold payment of any tax assessment or claim
if a good faith dispute exists as to the obligation to pay.
7. Application of Payments. Unless applicable law provides otherwise, all
payments received by the Secured Party from the Debtor under the Note and/or
this Agreement shall be applied by the Secured Party in the following order of
priority: (i) principal of the Note in the manner provided therein; (ii)
interest payable on the Note in the manner provided therein; and (iii) any other
sums secured by this Agreement in such order as the Secured Party, at the
Secured Party's option, may determine.
8. Protection of Secured Party's Security. If the Debtor fails to perform
the covenants and agreements contained or incorporated in this Agreement, or if
any action or proceeding is commenced which affects the Collateral or title
thereto or the interest of the Secured Party therein, including, but not limited
to insolvency or arrangements or proceedings involving a bankrupt or decedent,
then the Secured Party, at the Secured Party's option, may make such appearance,
disburse such sums, and take such action as the Secured Party deems necessary,
in its sole discretion, to protect the Secured Party's interest, including but
not limited to (i) disbursement of attorneys' fees, (ii) entry upon the Debtor's
property to make repairs to the Collateral, and (iii) procurement of
satisfactory insurance. Any amounts disbursed by Secured Party pursuant to this
Paragraph, with interest thereon, shall become additional indebtedness of the
Debtor secured by this Agreement. Unless the Debtor and the Secured Party agree
to other terms of payment, such amounts shall be immediately due and payable and
shall bear interest from the date of disbursement at the default rate stated in
the Note unless collection from the Debtor of interest at such rate would be
contrary to applicable law, in which event such amounts shall bear interest at
the highest rate which may be collected from the Debtor under applicable law.
Nothing contained in this Paragraph shall require the Secured Party to incur any
expense or take any action.
9. Reports; Inspection. Debtor shall deliver to Xxxxx X. Xxxxx, as Agent
for the Secured Party, all reports that it provides to Spectrum pursuant to the
Spectrum Credit Agreements. The Secured Party may make or cause to be made
reasonable entries upon and inspections of the Debtor's premises to inspect the
Collateral.
10. Debtor and Lien Not Released. From time to time, the Secured Party
may, at the Secured Party's option, without giving notice to or obtaining the
consent of the Debtor, the Debtor's successors or assigns or of any other lien
holder or guarantors, without liability on the Secured Party' part, and
notwithstanding the Debtor's breach of any covenant or agreement of the Debtor
in this Agreement, extend the time for payment of said indebtedness or any part
thereof, reduce the payments thereon, accept a renewal note or notes therefor,
modify the terms and the time of payment of said indebtedness, release from the
lien of this Agreement any part of the Collateral, take or release other or
additional security, reconvey any part of the Collateral, join in any extension
or subordination agreement, and agree in writing with the Debtor to modify the
rate of interest of the Note. Any actions taken by the Secured Party pursuant to
the terms of this Paragraph shall not affect the obligation of the Debtor or the
Debtor's successors or assigns to pay the sums secured by this Agreement and to
observe the covenants of the Debtor contained herein, shall not affect the
guaranty of any person, corporation, partnership, or other entity for payment of
the indebtedness secured hereby, and shall not affect the lien or priority of
lien hereof on the Collateral. The Debtor shall pay the Secured Party a
reasonable service charge, together with such insurance premiums and attorneys'
fees as may be incurred at the Secured Party's option for any such action if
taken at the Debtor's request.
11. Forbearance by Secured Party Not a Waiver. Any forbearance by the
Secured Party in exercising any right or remedy hereunder, or otherwise afforded
by applicable law, shall not be a waiver of or preclude the exercise of any
right or remedy. The acceptance by the Secured Party of payment of any sum
secured by this Agreement after the due date of such payment shall not be a
waiver of the Secured Party's right to either require prompt payment when due of
all other sums so secured or to declare a default for failure to make prompt
payment. The procurement of insurance or the payment of taxes or other liens or
charges by the Secured Party shall not be a waiver of the Secured Party's right
to accelerate the maturity of the indebtedness secured by this Agreement, nor
shall the Secured Party's receipt of any awards, proceeds or damages as provided
in this Agreement operate to cure or waive the Debtor's default in payment of
sums secured by this Agreement.
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12. Uniform Commercial Code Security Agreement. This Agreement is intended
to be a security agreement pursuant to the Uniform Commercial Code for any of
the items specified above as part of the Collateral which, under applicable law,
may be subject to a security interest pursuant to the Uniform Commercial Code,
and the Debtor hereby grants the Secured Party a security interest in said
items. The Debtor agrees that the Secured Party may file any appropriate
document in the appropriate index as a financing statement for any of the items
specified above as part of the Collateral. In addition, the Debtor agrees to
execute and deliver to the Secured Party, upon the Secured Party's request, any
financing statements, as well as extensions, renewals and amendments thereof,
and reproductions of this Agreement in such form as the Secured Party may
require to perfect a security interest with respect to said items. By its
signature hereon, the Debtor hereby irrevocably authorizes the Secured Party to
execute (on behalf of the Debtor) and file against the Debtor one or more
financing, continuation or amendment statements pursuant to the Uniform
Commercial Code in form satisfactory to the Secured Party. The Debtor shall pay
all costs of filing such financing statements and any extensions, renewals,
amendments, and releases thereof, and shall pay all reasonable costs and
expenses of any record searches for financing statements the Secured Party may
reasonably require. Without the prior written consent of the Secured Party, the
Debtor shall not create or suffer to be created pursuant to the Uniform
Commercial Code any other security interest in the Collateral, including
replacements and additions thereto. Upon the occurrence of an event of default,
the Secured Party shall have the remedies of a secured party under the Uniform
Commercial Code and, at the Secured Party's option, may also invoke the other
remedies provided in this Agreement as to such items. In exercising any of said
remedies, the Secured Party may proceed against the items of personal property
specified above as part of the Collateral separately or together and in any
order whatsoever, without in any way affecting the availability of the Secured
Party's remedies under the Uniform Commercial Code or of the other remedies
provided in this Agreement.
13. Events of Default. The Debtor shall be in default under this Agreement
when any of the following events or conditions occurs:
a. Default Under Note. The Debtor or Active Link Communications,
Inc. shall be in default under the Note or under the Spectrum
Credit Agreement.
b. Failure to Comply with Terms of this Agreement. The Debtor or
Active Link Communications, Inc. fails to comply with any
term, obligation, covenant, or condition contained in this
Agreement, within 10 days after receipt of written notice from
the Secured Party demanding such compliance.
c. False Warranty, Covenant, or Representation. Any warranty,
covenant, or representation made to the Secured Party by the
Debtor or Active Link Communications, Inc. under this
Agreement, proves to have been false in any material respect
when made or furnished.
x. Xxxx, Seizure, Attachment, Lien, or Encumbrance on Collateral.
Any levy, seizure, attachment, lien, or encumbrance of or on
the Collateral which is not discharged by the Debtor or Active
Link Communications, Inc. within 10 days or, any sale,
transfer, or disposition of any interest in the Collateral,
other than in the ordinary course of business, without the
written consent of the Secured Party.
14. Acceleration in Case of Borrower's Insolvency. If the Debtor or Active
Link Communications, Inc. shall voluntarily file a petition under the federal
Bankruptcy Act, as such Act may from time to time be amended, or under any
similar or successor federal statute relating to bankruptcy, insolvency,
arrangements or reorganizations, or under any state bankruptcy or insolvency
act, or file an answer in an involuntary proceeding admitting insolvency or
inability to pay debts, or if the Debtor or Active Link Communications, Inc.
shall be adjudged a bankrupt, or if a trustee or receiver shall be appointed for
the Debtor's or Active Link Communication, Inc.'s property, or if the Collateral
shall become subject to the jurisdiction of a federal bankruptcy court or
similar state court, or if the Debtor or Active Link Communications, Inc. shall
make an assignment for the benefit of its creditors, or if there is an
attachment, receivership, execution or other judicial seizure, then the Secured
Party may, at the Secured Party's option, declare all of the sums secured by
this Agreement to be immediately due and payable without prior notice to the
Debtor or Active Link Communications, Inc., and the Secured Party may invoke any
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remedies permitted by this Agreement. Any attorneys' fees and other expenses
incurred by the Secured Party in connection with the Debtor's or Active Link
Communications, Inc.'s bankruptcy or any of the other events described in this
Paragraph shall be additional indebtedness of the Debtor secured by this
Agreement.
15. Rights of Secured Party.
a. Disposition of Collateral. Upon default, the Secured Party
may require the Debtor to assemble the Collateral and make
it available to the Secured Party at the place to be
designated by the Secured Party that is reasonably
convenient to both parties. The Secured Party may sell all
or any part of the Collateral as a whole or in parcels
either by public auction, private sale, or other method of
disposition. The Secured Party may bid at any public sale
on all or any portion of the Collateral. Unless the
Collateral is perishable or threatens to decline speedily
in value or is of the type customarily sold on a recognized
market, the Secured Party shall give the Debtor reasonable
notice of the time and place of any public sale or of the
time after which any private sale or other disposition of
the Collateral is to be made, and notice given at least 10
days before the time of the sale or other disposition shall
be conclusively presumed to be reasonable. A public sale
in the following fashion shall be conclusively presumed to
be reasonable:
(i) Notice shall be given at least 10 days before the date
of sale by publication once in a newspaper of general
circulation published in the county in which the sale is
to be held;
(ii) The sale shall be held in a county in which the
Collateral or any part is located or in a county in
which the Debtor has a place of business;
(iii) Payment shall be in cash or by certified check
immediately following the close of the sale;
(iv) The sale shall be by auction, but it need not be by a
professional auctioneer.
b. No Obligation to Dispose of Collateral. Notwithstanding
any provision of this Agreement, the Secured Party shall be
under no obligation to offer to sell the Collateral. In
the event the Secured Party offers to sell the Collateral,
the Secured Party will be under no obligation to consummate
a sale of the Collateral if, in its reasonable business
judgment, none of the offers received by it reasonably
approximates the fair value of the Collateral.
c. Retention of Collateral. In the event the Secured Party elects
not to sell the Collateral, the Secured Party may elect to
follow the procedures set forth in the Uniform Commercial Code
for retaining the Collateral in satisfaction of the Debtor's
obligation, subject to the Debtor's rights under such
procedures.
d. Appointment of Receiver. In addition to the rights under
this Agreement and/or the Sales/Loan Agreement, in the
event of a default by the Debtor, the Secured Party shall
be entitled to the appointment of a receiver for the
Collateral as a matter of right whether or not the apparent
value of the Collateral exceeds the outstanding principal
amount of the Note and any receiver appointed may serve
without bond. Employment by the Secured Party shall not
disqualify a person from serving as receiver.
16. Waiver of Statute of Limitations. Debtor hereby waives the right to
assert any statute of limitations as a bar to the enforcement of the lien of
this Agreement or to any action brought to enforce the Note or any other
obligation secured by this Agreement.
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17. Waiver of Marshalling. Notwithstanding the existence of any other
security interest in the Collateral held by the Secured Party or by any other
party, the Secured Party shall have the right to determine the order in which
any or all of the Collateral shall be subjected to the remedies provided by this
Agreement. The Secured Party shall have the right to determine the order in
which any or all portions of the indebtedness secured by this Agreement are
satisfied from the proceeds realized upon the exercise of the remedies provided
in this Agreement. The Debtor, any party who consents to this Agreement, and any
party who now or hereafter acquires a security interest in the Collateral and
who has actual or constructive notice of this Agreement, hereby waives any and
all right to require the marshalling of assets in connection with the exercise
of any of the remedies permitted by applicable law or by this Agreement.
18. Provisions of Agreement. In case of a breach by the Debtor of the
covenants and conditions of this Agreement, the Secured Party at the Secured
Party's option (i) may invoke any of the rights or remedies provided in the
Agreement, (ii) may accelerate the sums secured by this Agreement and invoke the
remedies provided in this Agreement or, (iii) may do both.
19. Remedies Cumulative. Each remedy provided in this Agreement is
distinct and cumulative to all other rights or remedies under this Agreement
or afforded by law or equity, and may be exercised concurrently,
independently, or successively, in any order whatsoever.
20. Notices. Any notices or other communications required or permitted to
be given by this Agreement or any other documents and instruments referred to
herein must be (i) given in writing and personally delivered, or sent by
overnight service, such as FedEx, or (ii) made by telex or facsimile
transmission delivered or transmitted to the party to whom such notice or
communication is directed, with confirmation thereupon given in writing and
personally delivered or mailed by prepaid certified or registered mail.
If to Debtor:
Mobility Concepts, Inc.
0000 Xxxxxx Xxxxx Xxxxxx
Xxxxxxxxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attn: President
with a copy to:
Xxxxx X. Xxxxxxx, Esq.
Xxxxxx & Xxxxxxx LLC
0000 Xxxxx Xxxxxx Xxxxxx
Xxxxx 000
Xxxxxx, Xxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If to Secured Party:
Integrated Mobile Solutions, LLC
0000 Xxxxxx Xxxxx Xxxxxx
Xxxxxxxxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attn: Xxxxx Xxxxxx
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with a copy to:
Xxxxx X. Xxxxx, Esq.
Xxxxxxxx & Xxxxxx LLC
00 X. Xxxxxx Xxxxx
Xxxxx 000
Xxxxxxx, XX 00000-0000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Any notice delivered personally in the manner provided herein will be deemed
given to the party to whom it is directed upon the party's (or its agent's)
actual receipt. Any notice addressed and mailed in the manner provided herein
will be deemed given to the party to whom it is addressed at the close of
business, local time of the recipient, on the fourth business day after the day
it is placed in the mail, or, if earlier, the time of actual receipt.
21. Law Governing. This Agreement shall be governed by and construed in
accordance with the laws of the State of Illinois without reference to conflict
of laws principles. Jurisdiction and venue shall lie in federal and state courts
in Xxxx County, Illinois.
22. Titles and Captions. All paragraph titles or captions contained in
this Agreement are for convenience only and shall not be deemed part of the
context nor effect the interpretation of this Agreement.
23. Entire Agreement. This Agreement and the Note and other agreements
executed contemporaneously hereto contain the entire understanding between and
among the parties and supersede any prior understandings and agreements among
them respecting the subject matter of this Agreement.
24. Agreement Binding. This Agreement shall be binding upon the heirs,
executors, administrators, successors, and assigns of the parties hereto.
25. Computation of Time. In computing any period of time pursuant to this
Agreement, the day of the act, event or default from which the designated period
of time begins to run shall be included, unless it is a Saturday, Sunday or a
legal holiday, in which event the period shall begin to run on the next day
which is not a Saturday, Sunday or legal holiday, in which event the period
shall run until the end of the next day thereafter which is not a Saturday,
Sunday or legal holiday.
26. Pronouns and Plurals. All pronouns and any variations thereof shall be
deemed to refer to the masculine, feminine, neuter, singular or plural as the
identity of the person or persons may require.
27. Presumption. This Agreement or any paragraph thereof shall not be
construed against any party due to the fact that said Agreement or any paragraph
thereof was drafted by said party.
28. Further Action. The parties hereto shall execute and deliver all
documents, provide all information and take or forbear from all such action as
may be necessary or appropriate to achieve the purposes of this Agreement.
29. Parties in Interest. Nothing herein shall be construed to be to the
benefit of any third party, nor is it intended that any provision shall be for
the benefit of any third party.
30. Savings Clause. If any provision of this Agreement, or the application
of such provision to any person or circumstance, shall be held invalid, the
remainder of this Agreement, or the application of such provision to persons or
circumstances other than those as to which it is held invalid, shall not be
affected thereby.
Dated: June 20, 2003.
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DEBTOR:
MOBILITY CONCEPTS, INC.
By:
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Xxxxxxx X. Xxxxx
Chief Financial Officer
SECURED PARTY:
INTEGRATED MOBILE SOLUTIONS, LLC
By:
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Xxxxx Xxxxxx
Manager
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EXHIBIT A
NOTE
NAME PRINCIPAL AMOUNT DATE
Integrated Mobile Solutions, LLC $300,000.00 June 20, 2003
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