EXHIBIT 10.1
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (the "Security Agreement") is entered into as of
the __ day of March, 2003 (the "Effective Date") by and between nSTOR
TECHNOLOGIES, INC., a Delaware corporation (the "Company"), nSTOR CORPORATION,
INC., a Delaware corporation (the "Subsidiary" and along with the Company, the
Debtor"), having offices at 000 Xxxxxxx Xxxxxxxxx, Xxxx Xxxx Xxxxx, Xxxxxxx and
Xxxxxxx X. Xxxxxx, individually ("Xxxxxx") and as agent for the Secured Parties
(the "Agent"), The Xxxxxxxxx Xxxxxx 1993 Trust (the "Trust"), Xxxx Xxxxxx
("Xxxxxx") and WRS Advisors III LLC ("WRS" and together with Xxxxxx, the Trust
and Xxxxxx, the "Secured Parties").
RECITALS:
WHEREAS, Debtor has made (i) that certain promissory note of even date
herewith in the original principal amount of $1,700,000 in favor of Xxxxxx (the
"Xxxxxx Note"), (ii) that certain promissory note of even date herewith in the
original principal amount of $500,000 in favor of the Trust (the "Trust Note"),
(iii) that certain promissory note of even date herewith in the original
principal amount of $250,000 in favor of Xxxxxx (the "Xxxxxx Note") and (iv)
that certain promissory note of even date herewith in the original principal
amount of $250,000 in favor of WRS (the "WRS Note" and together with the WRS
Note, Xxxxxx Note and Trust Note, the "Notes");
WHEREAS, pursuant to the terms of the Notes, and as security for payment
of the Notes, Debtor has agreed to grant to the Agent, for the benefit of the
Secured Parties a security interest, as defined in Article 9 of the Uniform
Commercial Code, as enacted in the State of Florida, in the collateral described
herein, on the terms and conditions set forth in this Security Agreement.
NOW, THEREFORE, in consideration of the mutual promises contained
herein, and other good and valuable considerations, the receipt, adequacy and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:
1. Incorporation of Recitals. The foregoing Recitals are true and
correct and are incorporated herein by this reference, as if set forth herein.
2. Security Interest in Assets. As collateral security for the payment
of all of the obligations of Debtor owing to or in favor of the Secured Parties
under the Notes (such indebtedness and all other terms, conditions, covenants,
representations and warranties of all of the foregoing instruments being
hereinafter called the "Obligations"), Debtor hereby pledges, assigns and
hypothecates to the Agent, and grants to the Agent, for the benefit of the
Secured Parties, a first-priority security interest in those assets of Debtor
described in Exhibit "A" attached hereto and made a part hereof and any and all
proceeds (as defined in Article 9 of the Uniform Commercial Code), products,
replacements, refurbishments, extensions, accessions, insurance proceeds and
modifications thereto and/or arising therefrom (all hereinafter referred to
herein as the "Collateral").
3. Security for Obligations. This Security Agreement, and the grant of
the security interest in the Collateral granted hereunder, is made to the Agent
for the benefit of the Secured Parties, as security for the Obligations for the
benefit of the Secured Parties, all as contemplated by the Recitals hereto and
paragraph 2 hereof.
4. Secured Parties' Right to Cure. Debtor will pay promptly when due all
taxes and assessments upon the Collateral or for its use or operation thereof.
At its option, the Agent may discharge taxes, liens or security interests or
other encumbrances at any time levied or placed on the Collateral. Debtor agrees
to reimburse the Agent on demand for any such payments made, or any expense
incurred, by the Agent, pursuant to the foregoing authorization. Until default,
Debtor may have possession of the Collateral and use it in any lawful manner not
inconsistent with this Security Agreement.
5. Events of Default. Any of the following shall be an Event of Default
under this Security Agreement:
(a) Default in Payment. The failure to make any payment required
under any Note; and
(b) Default under this Security Agreement. Any default or breach
of a representation, warranty or covenant under this Security Agreement.
6. Remedies in Case of an Event of Default. Upon an Event of Default,
the Agent shall have the following rights and remedies (to the extent permitted
by applicable law) on behalf of the Secured Parties in addition to the rights
and remedies granted to the Secured Parties in the Notes (including, without
limitation, acceleration of the balance due thereunder), as well as those of a
secured party under the Uniform Commercial Code as enacted in the State of
Florida, all such rights and remedies being cumulative, non-exclusive and
enforceable alternatively, successively or concurrently:
(a) Realization and Disposition of Collateral. The Agent, on
behalf of the Secured Parties, may demand, xxx for, collect or make any
compromise or settlement which the Agent deems suitable in respect of any
Collateral encumbered by the security interest granted to the Agent hereunder.
The Agent may sell, resell, assign and deliver, or otherwise dispose of any or
all of the Collateral, for cash and/or credit, upon such terms as are
reasonable, and at such place or places and to such persons, firms, companies or
corporations as the Agent deems reasonably expedient, provided that the Agent
gives notice to Debtor of the time and place of public or private sale. Debtor
hereby agrees that the sending of ten (10) days' written notice by first-class
mail, postage prepaid, to Debtor pursuant to Section 12 hereof of the time and
place of any public sale, or of the time after which any private sale or other
intended disposition is to be made, shall be deemed commercially reasonable
notice thereof.
(b) Enforcement of Rights. The Agent may enforce the rights of
the Secured Parties hereunder without the necessity of any judicial or other
hearing and without compliance with any other condition, unless such condition
is hereafter imposed by statute or rule of law. If any of the Collateral is sold
by the Agent upon credit or for future delivery, the Agent shall not be liable
for the failure of the purchaser to pay for same and in such event the Agent may
resell such Collateral. The Agent may buy any part or all of the Collateral on
behalf of the Secured Parties at any public sale and if any part or all of the
Collateral is of a type customarily sold in a recognized market or is of the
type which is the subject of widely distributed standard price quotations, the
Agent may buy at a private sale and may make payments therefor by any means.
7. Agency.
(a) Management of Collateral. Each Secured Party hereby
irrevocably designates and appoints Xxxxxx as the Agent of such Secured Party
under this Security Agreement. Each Secured Party agrees that the Agent shall
have the exclusive right to manage, perform and enforce the terms of this
Security Agreement with respect to the Collateral and to exercise and enforce
all privileges and rights thereunder according to its discretion and the
exercise of its business judgment, including, without limitation, the exclusive
right to enforce or settle insurance claims, take or retake control or
possession of such Collateral and to hold, prepare for sale, process, sell,
lease, dispose of, or liquidate such Collateral; provided, however, that the
Agent must receive the consent of Secured Parties holding at least fifty-one
percent (51%) of the outstanding principal amount of the Notes prior to
enforcing the rights of the Secured Parties granted hereunder in the Collateral.
In connection therewith, each of the Secured Parties waives any and all rights
it may have as a secured creditor to affect the method or challenge the
appropriateness of any action by Agent. The Agent must provide prior notice to
all of the Secured Parties with respect to any action related to enforcing the
Secured Parties' rights to the Collateral. The Agent shall not have any duties
or responsibilities, except those expressly set forth herein, or any fiduciary
relationship with any Secured Party, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Security Agreement or otherwise exist against the Agent.
(b) Sale of Collateral. Notwithstanding anything to the contrary
contained in this Security Agreement, only Agent shall have the right to
restrict or permit, or approve or disapprove, the sale, transfer or other
disposition of Collateral. The Agent may first apply the cash proceeds actually
received from any sale or other disposition of the Collateral to the reasonable
expenses which may be incurred by the Agent in attempting to collect the
Obligations or to enforce this Security Agreement. Each Secured Party agrees
that the remaining proceeds received from the sale of any Collateral shall be
(i) distributed pro rata to each Secured Party based on the sum of the
outstanding principal balance of, and accrued but unpaid interest on, each Note
and (ii) applied first against unpaid interest accrued on each Note and then to
reduce principal thereof. The Secured Parties will, immediately upon the request
of Agent, release or otherwise terminate any liens upon the Collateral, to the
extent such Collateral is sold or otherwise disposed of either by Agent, its
agents or Company with the consent of Agent, and the Secured Parties will
promptly deliver such release documents as Agent may reasonably require in
connection therewith.
(c) Remedies. In no event shall the Secured Parties exercise any
remedies available under this agreement without consent of the Agent. In the
event a Secured Party shall receive any payment or distribution of any kind
representing proceeds of any Collateral, such sums shall be held in trust by the
Secured Party for the benefit and on account of Agent and such amounts shall be
paid to Agent.
(d) Exculpatory Provisions. The Agent shall not be liable for any
action lawfully taken or omitted to be taken by it in connection with this
Security Agreement (except to the extent that any of the foregoing are found by
a final and nonappealable decision of a court of competent jurisdiction to have
resulted from its or such person's own gross negligence or willful misconduct).
(e) Authorization to Release Liens. The Agent may release any
lien covering any Collateral that is the subject of a sale or other disposition
upon consent of the Secured Parties holding fifty-one percent (51%) of the
outstanding principal amount of the Notes. .
8. Transfer, etc. by Debtor. Without the prior written consent of all of
the Secured Parties, after the date hereof, Debtor shall not, without first
obtaining all of the Secured Parties' written consent, which may be withheld in
a Secured Party's sole and absolute discretion, sell, assign, transfer or
otherwise dispose of, grant any option with respect to, or pledge or grant any
security interest in or otherwise encumber any of the Collateral except such
transfers of the Collateral which are in the ordinary course of Debtor's
business.
9. Further Assurances. Debtor will do all such acts, and will furnish to
the Secured Parties all such financing statements, certificates, opinions and
other documents, and will do or cause to be done all such things as the Secured
Parties may reasonably require in order to give full effect to this Security
Agreement at any time while any of the Obligations remain unpaid.
10. Termination. Upon the payment in full of the Obligations in
accordance with their terms, then, and in such event, this Security Agreement
shall terminate and Debtor shall be entitled to the return of such of the
Collateral in the possession or control of the Secured Parties as have not
theretofore been disposed of pursuant to the provisions hereof and a release of
the security agreement granted by this Security Agreement.
11. Financing Statements. Debtor agrees that it shall execute and
deliver UCC-1 Financing Statements, to be filed with the Secretary of State of
the states of Florida, Delaware and California, to perfect the Agent's security
interest in the Collateral for the benefit of the Secured Parties. Debtor agrees
that it shall execute and deliver such additional financing statements,
extension statements and other documents and instruments in order to perfect and
extend, as may be necessary, the security interest granted herein, so long as
any of the Obligations hereunder remain unpaid. The Secured Parties agree that,
upon the payment in full of the Obligations in accordance with their terms,
then, and in such event, the Secured Parties will direct the Agent to execute
and deliver a UCC-3 Termination Statement, to be filed with the Secretary of
State of the states of Florida, Delaware and California, to terminate the
Agent's security interest in the Collateral.
12. Notices. All notices, requests, consents and other communications
required or permitted under this Security Agreement shall be in writing and
shall be hand delivered by messenger or courier service, sent by facsimile, or
mailed (airmail if international) by registered or certified mail (postage
prepaid), return receipt requested, addressed to the addresses of the parties
first above written or to such other address as any party may designate by
notice complying with the terms of this Section. Each such notice shall be
deemed delivered (a) on the date delivered if by personal delivery; (b) on the
date of transmission with confirmation of receipt if by facsimile; and (c) on
the date upon which the return receipt is signed or delivery is refused or the
notice is designated by the postal authorities as not deliverable, as the case
may be, if mailed.
13. Miscellaneous Matters.
(a) Waiver; Subsequent Modification. Except as expressly provided
herein, no waiver by any party or any failure or refusal of the other party to
comply with its obligations under this Security Agreement shall be deemed a
waiver of any other or subsequent failure or refusal to so comply by such other
party. No waiver or modification of the terms hereof shall be valid unless in
writing and signed by the party to be charged and then only to the extent
therein set forth.
(b) Governing Law; Venue. This Security Agreement shall be
governed by and construed in accordance with the laws of the State of Florida.
Venue for any action arising out of this Security Agreement shall be Palm Beach
County, Florida.
(c) Cumulative Remedies. Unless expressly provided otherwise
herein, the remedies of the parties provided for herein shall be cumulative and
concurrent, and may be pursued singularly, successively or together, at the sole
discretion of the party for whose benefit such remedy is provided, and may be
exercised as often as occasion therefor shall arise.
(d) Parties Not Partners. Nothing contained in this Security
Agreement, or any of the documents to be executed pursuant hereto, shall operate
to make the Secured Parties or any of their successors, administrators or
assigns a partner(s) with, agent(s) for, or principal(s) of Debtor, its
successors or assigns and vice-versa.
(e) Attorneys' Fees; Costs and Expenses. In any action or
proceeding arising out of this Security Agreement the prevailing party in such
action or proceeding, shall be entitled to recover from the other party thereto
the reasonable attorneys' fees, including one or more appeals, court costs,
filing fees, publication costs and other expenses incurred by the prevailing
party.
(f) Captions. The title of this Security Agreement and the
headings of the various articles, sections and subsections of this Security
Agreement have been inserted only for the purposes of convenience, are not part
of this Security Agreement and shall not be deemed in any manner to modify,
explain, expand or restrict any of the provisions of this Security Agreement.
(g) Entire Agreement. Except as otherwise expressly provided
herein, the Note and this Security Agreement constitute the entire agreement of
the parties hereto with respect to the matters addressed herein and supersede
all prior or contemporaneous contracts, promises, representations, warranties
and statements, whether written or oral, with respect to such matters.
(h) WAIVER OF JURY TRIAL. THE PARTIES HERETO MUTUALLY AND
WILLINGLY WAIVE THE RIGHT TO A TRIAL BY JURY OF ANY AND ALL CLAIMS MADE BETWEEN
THEM WHETHER NOW EXISTING OR ARISING IN THE FUTURE, INCLUDING, WITHOUT
LIMITATION, ANY AND ALL CLAIMS, DEFENSES, COUNTERCLAIMS, CROSS CLAIMS, THIRD
PARTY CLAIMS AND INTERVENOR'S CLAIMS, WHETHER ARISING FROM OR RELATED TO THE
NEGOTIATION, EXECUTION AND PERFORMANCE OF THE TRANSACTIONS TO WHICH THIS
DOCUMENT RELATES.
(i) Counterparts. This Security Agreement may be executed in two
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
[SIGNATURES TO FOLLOW]
IN WITNESS WHEREOF, the Secured Parties and Debtor have each duly
executed this Security Agreement as of the day and year first above written.
SECURED PARTIES:
The Xxxxxxxxx Xxxxxx 1993 Trust
By: /s/ Xxxxxxx X. Xxxxxx
Name & Title: Trustee
/s/ Xxxx Xxxxxx
Xxxx Xxxxxx, individually
WRS Advisors III LLC
By: /s/ Xxxxxxx Xxxx
Name & Title: Xxxxxxx Xxxx, President
-----------------------------
Xxxxxxx X. Xxxxxx, individually
AGENT:
By: /s/ Xxxxxxx X. Xxxxxx
Xxxxxxx X. Xxxxxx, individually as agent
for the Secured Parties
DEBTOR:
nSTOR TECHNOLOGIES, INC.,
a Delaware corporation
By: /s/ Xxxx Xxxxxx
Name & Title: Xxxx Xxxxxx, VP/Treasurer
nSTOR CORPORATION, INC.,
a Delaware corporation
By: /s/ Xxxx Xxxxxx
Name & Title: Xxxx Xxxxxx, VP/Treasurer
EXHIBIT A - COLLATERAL
"Collateral," as used in this Security Agreement, shall mean all
of Debtor's presently owned or hereafter acquired Equipment, Chattel Paper,
Documents, Instruments and General Intangibles, as those terms are hereinafter
defined, together with the proceeds and products of all of the foregoing.
Equipment shall mean all of Debtor's goods, machinery, equipment,
fixtures, furniture, office equipment, tools, parts and other items of personal
property of every kind and description, now owned or hereafter acquired by
Debtor, wheresoever located, together with all additions, attachments,
accessions, parts, replacements and substitutions thereto and thereof.
Chattel Paper shall mean a writing or writings evidencing both a
monetary obligation to Debtor and a security interest in or a lease of specific
goods.
Documents shall have the meaning ascribed to said term in Section
679.105(1)(f) of the Florida Statutes, Uniform Commercial Code.
Instruments shall mean negotiable instruments or securities as
defined by the Uniform Commercial Code or any other writing which evidences a
right by Debtor to payment of monies and is not itself a security agreement or
lease.
General Intangibles shall have the meaning ascribed to said term
in Section 679.106 of the Florida Statutes, Uniform Commercial Code.
"Collateral," as used in this Security Agreement, shall not mean
any of Debtor's presently owned or hereafter acquired Accounts or Inventory, as
those terms are hereinafter defined:
Accounts shall mean a right to payment for goods sold or leased
and for services rendered which is not evidenced by an Instrument or Chattel
Paper, whether or not it has been earned by performance.
Inventory shall mean all goods, merchandise and other personal
property now or hereafter acquired by Debtor, wheresoever located, which are
held for sale or lease or are raw materials, work in process or materials used
or consumed or to be used or consumed in Debtor's business.
Account Debtors shall mean the parties who are obligated on or
under any Account.
