Exhibit 99.4
SECURITY AGREEMENT
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THIS AGREEMENT is made as of the 31st day of July, 2003, by SAFERENT, INC.,
a Delaware corporation, EMPLOYEE HEALTH PROGRAMS, INC., a Florida corporation,
SUBSTANCE ABUSE MANAGEMENT, INC., a Florida corporation, HIRECHECK, INC., a
Florida corporation, AMERICAN DRIVING RECORDS, INC., a California corporation,
FIRST AMERICAN REGISTRY, INC., a Nevada corporation and US XXXXXX.XXX, INC., a
Delaware corporation (collectively, the "Pledgors"), whose address is 000
Xxxxxxxxx Xxxxxx Xxxxx, Xxxxx 000, Xx. Xxxxxxxxxx, Xxxxxxx 00000, and BANK OF
AMERICA, N.A. (the "Bank"), whose address is 0000 Xxxxxxxxx Xxxx., Xxxxxxxx 000,
Xxxxxxxxxxxx, Xxxxxxx 00000.
Recitals
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First Advantage Corporation, doing business in Florida as First Advantage
Holding, Inc. (the "Borrower") and the Bank have executed a Loan Agreement (as
amended or restated from time to time, the "Loan Agreement") of even date
herewith. The Borrower, pursuant to the Loan Agreement, has executed and
delivered a Promissory Note (as amended, extended or renewed from time to time,
the "Note") of even date herewith in the original principal amount of
$15,000,000.00 in favor of the Bank. The Pledgors have agreed to secure certain
obligations in accordance with the terms hereof.
Now therefore, for good and valuable consideration, the parties agree as
follows:
1. Defined Terms. Capitalized terms not otherwise defined that are defined
in the UCC shall have the meaning set forth therein. In addition to any other
terms defined elsewhere in this Agreement, the following terms shall have the
following meanings:
"Accounts" shall mean all accounts as that term is defined in the UCC
and all rights of each Pledgor now existing and hereafter acquired to
payment for goods sold or leased or for services rendered that are not
evidenced by an Instrument or Chattel Paper, whether or not earned by
performance, together with (i) all security interests or other security
held by or granted to any Pledgor to secure such rights to payment, (ii)
all other rights related thereto (including rights of stoppage in transit)
and (iii) all rights in any of such sold or leased goods that are returned
or repossessed.
"Chattel Paper" shall mean all chattel paper as that term is defined
in the UCC and any document or documents that evidence both a monetary
obligation and a security interest in, or a lease or consignment of,
specific goods (except, however, that when a transaction is evidenced both
by a security agreement or a lease and by an Instrument or series of
Instruments, the group of documents taken together constitute Chattel
Paper).
"Collateral" shall mean all of the following assets (whether now owned
or existing or hereafter acquired or arising): (a) all of each Pledgor's
Accounts, together with all Chattel Paper, Contract Rights, Deposit
Accounts, Documents, General Intangibles and Instruments related to each
Pledgor's Accounts; (b) all of each Pledgor's books and records (in
whatever form or medium), customer lists, credit files, computer files,
programs, printouts, source codes, software and other computer materials
and records related to the Pledgor's Accounts; and (c) all Proceeds
(including, without limitation, all proceeds as that term is defined in the
UCC), insurance proceeds, unearned premiums, tax refunds, rents, profits
and products related to each Pledgor's Accounts. The Collateral shall
exclude, however, any intellectual property that is expressly prohibited by
its terms from being pledged as security or that terminates upon being
pledged (but only to the extent of and until the termination of such
prohibition or until such property is no longer subject to termination).
"Contract Rights" shall mean any right to payment under a contract not
yet earned by performance and not evidenced by an Instrument or Chattel
Paper.
"Documents" shall mean all documents as that term is defined in the
UCC, related to the Collateral, together with any other document that in
the regular course of business or financing is treated as adequately
evidencing that the person or entity in possession of it is entitled to
receive, hold and dispose of such document and the goods it covers.
"General Intangibles" shall mean all general intangibles as that term
is defined in the UCC and all payment intangibles and all intangible
personal property of every kind and nature other than Accounts (including,
without limitation, all Contract Rights, other rights to receive payments
of money).
"Instruments" shall mean all negotiable instruments (as that term is
defined in the UCC), and any replacements therefore and other writings that
evidence rights to the payment of money (whether absolute or contingent)
and that are not themselves security agreements or leases and are of a type
that in the ordinary course of business are transferred by delivery with
any necessary endorsement or assignment (including, without limitation, all
checks, drafts, notes, bonds, debentures, government securities,
certificates of deposit, letters of credit, preferred and common stocks,
options and warrants).
"Proceeds" shall mean all proceeds (as that term is defined in the
UCC) and any and all amounts or items of property received when any
Collateral or proceeds thereof are sold, exchanged, collected or otherwise
disposed of, both cash and non-cash, including proceeds of insurance,
indemnity, warranty or guarantee paid or payable on or in connection with
any Collateral.
"UCC" shall mean the Uniform Commercial Code as in effect in any
applicable jurisdiction.
2. Security Interest. Each Pledgor hereby gives the Bank a continuing and
unconditional security interest (the "Security Interest") in the Collateral.
3. Obligations Secured. The Security Interest secures payment when due of
all Secured Obligations (as defined herein) to the Bank. As used in this
Agreement, the term "Secured Obligations" means: (a) all principal, interest,
costs, expenses and other amounts now or hereafter due under the Note
(including, without limitation, all principal amounts advanced
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thereunder before, on or after the date hereof); and (b) all other amounts now
or hereafter payable by the Borrower under any of the Loan Documents (as such
term is defined in the Loan Agreement).
4. Warranties of Pledgors. The Pledgors warrant and so long as this
Agreement continues in force shall be deemed continuously to warrant that:
(a) The Pledgors are the owners of the Collateral free of all security
interests or other encumbrances except for the Security Interest and except
for Permitted Liens (as defined in the Loan Agreement).
(b) The Pledgors are authorized to enter into the Security Agreement.
(c) The Collateral is used or bought for use primarily in business or
professional operations.
(d) The Collateral is or will be located at each Pledgor's address set
forth above.
(e) The chief executive office of each Pledgor is at the address set
forth on Exhibit "A' hereto.
(f) The exact legal name of each Pledgor is set forth in the
introductory paragraph hereof, and the jurisdiction of organization or
incorporation of each Pledgor is set forth in the introductory paragraph
hereof.
5. Covenants of Pledgors. So long as this Agreement has not been terminated
as provided hereafter, the Pledgors: (a) will defend the Collateral against the
claims of all other persons; (b) will keep the Collateral free from all security
interests or other encumbrances, except for the Security Interest and except for
Permitted Liens (as defined in the Loan Agreement); (c) except as permitted by
the Loan Agreement, will not assign, deliver, sell, transfer, lease or otherwise
dispose of any of the Collateral or any interest therein without the prior
written consent of the Bank; (d) will keep in accordance with generally accepted
accounting principles consistently applied, accurate and complete records with
respect to such Collateral, and upon the Bank's request will xxxx any of such
records and all or any other Collateral to give notice of the Security Interest
and will permit the Bank or its agents to inspect the Collateral and to audit
and make abstracts of such records or any Pledgor's books, ledgers, reports,
correspondence and other records (subject to the limitations set forth in the
Loan Agreement); (e) upon demand, will deliver to the Bank any Documents and any
Chattel Paper representing or relating to the Collateral or any part thereof or
any other documents representing or relating to any dispositions of the
Collateral and Proceeds thereof and any and all other schedules, documents and
statements that the Bank may from time to time request; (f) will keep the
Collateral at the addresses set forth above until the Bank is notified in
writing of any change in its location, and no Pledgor will change the location
of the Pledgor's chief executive office without prior written notice given to
the Bank; (g) will notify the Bank promptly in writing of any change in any
Pledgor's address,
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name, trade names or identity from that specified above or of any change in the
location of the Collateral; (h) will not change its legal name or reincorporate
or reorganize itself under the laws of any other jurisdiction; (i) will permit
the Bank or its agents to inspect the Collateral (subject to any limitations set
forth in the Loan Agreement); (j) will not use the Collateral in violation of
any provisions of this Agreement, any applicable statute, regulation or
ordinance or any policy of insurance insuring the Collateral; (k) will execute
and deliver to the Bank such financing statements and other documents requested
by the Bank, and take such other action and provide such further assurances as
the Bank may deem advisable to evidence, perfect or enforce the Security
Interest created by this Agreement; and (l) will pay all taxes, assessments and
other charges of every nature that may be levied or assessed against the
Collateral (unless the same are being contested in good faith).
6. Verification. Subject to the limitations set forth in the Loan
Agreement, the Bank may verify any Collateral in any manner and through any
medium that the Bank may deem appropriate, and the Pledgors shall furnish such
assistance as the Bank may reasonably require in connection therewith.
7. Default.
(a) Each of the following shall constitute an "Event of Default"
hereunder: (i) the occurrence of an Event of Default under the Loan
Agreement; (ii) failure by any Pledgor to perform any material obligations
under this Agreement or under any other agreement for borrowed money
between any Pledgor and the Bank or by any Pledgor in favor of the Bank,
time being of the essence (subject, however, to any applicable notice and
cure periods); (iii) the commencement of any bankruptcy or insolvency
proceedings by or against the Borrower or any Pledgor; (iv) material
falsity in any certificate, statement, representation, warranty or audit at
any time furnished by or on behalf of the Pledgor or any endorser or
guarantor or any other party liable for payment of all or part of the
Secured Obligations, pursuant to or in connection with this Agreement,
including warranties in this Agreement and including any omission to
disclose any substantial contingent or liquidated liabilities or any
material adverse change in facts disclosed by any certificate, statement,
representation, warranty or audit furnished to the Bank; or (v) any
attachment or levy against the Collateral or any other occurrence that
inhibits the Bank's free access to the Collateral.
(b) Upon the occurrence of an Event of Default, the Bank may exercise
such remedies and rights as are available hereunder, under the Loan
Agreement or otherwise (including without limitation, acceleration of the
Secured Obligations or any part thereof). This paragraph is not intended to
affect or impair any rights of the Bank with respect to any Secured
Obligations that may now or hereafter be payable on demand.
(c) Upon the occurrence of any Event of Default, the Bank's rights
with respect to the Collateral shall be those of a secured party under the
UCC and any other applicable law in effect from time to time. The Bank
shall also have any additional rights granted herein and in any other
agreement now or hereafter in effect between each
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Pledgor and the Bank. If requested by the Bank after the occurrence of an
Event of Default, the Pledgors will assemble all Documents, Instruments,
Chattel Paper and any other records relating to the Collateral and make it
available to the Bank at a place to be designated by the Bank.
(d) The Pledgors agree that any notice by the Bank of the sale or
disposition of the Collateral or any other intended action hereunder,
whether required by the UCC or otherwise, shall constitute reasonable
notice to the Pledgors if the notice is mailed by regular or certified
mail, postage prepaid, at least five days before the action to each
Pledgor's address as specified in this Agreement or to any other address
that any Pledgor has specified in writing to the Bank as the address to
which notices shall be given to such Pledgor.
(e) The Pledgors shall pay all costs and expenses incurred by the Bank
in enforcing this Agreement, realizing upon any Collateral and collecting
any Secured Obligations (including attorneys' fees) whether suit is brought
or not and whether incurred in connection with collection, trial, appeal or
otherwise and, to the extent of each Pledgor's liability for repayment of
any of the Secured Obligations, shall be liable for any deficiencies in the
event the Proceeds of disposition of the Collateral do not satisfy the
Secured Obligations in full. Nothing contained herein shall be deemed to
require the Bank to proceed against the Collateral or any part thereof
before or as a condition to the pursuit of any of its other rights and
remedies with respect to the Secured Obligations.
8. Miscellaneous.
(a) Each Pledgor authorizes the Bank to file financing statements and
continuation statements and amendments thereto with respect to the
Collateral without authentication by any Pledgor to the extent permitted by
law. The Bank agrees to use reasonable efforts to provide the Pledgors with
copies of any such filings prior to filing. Each Pledgor agrees not to file
any financing statement, amendment or termination statement with respect to
the Collateral prior to the payment and satisfaction in full of all Secured
Obligations. Upon payment in full of all Secured Obligations, the Bank
shall promptly file appropriate documents releasing all filings hereunder.
(b) Each Pledgor hereby irrevocably consents to any act by the Bank or
its agents in entering upon any premises for the purposes of either (i)
inspecting the Collateral or (ii) taking possession of the Collateral after
any Event of Default in any commercially reasonable manner. From and after
the occurrence of an Event of Default , each Pledgor hereby waives its
right to assert against the Bank or its agents any claim based upon
trespass or any similar cause of action for entering upon any premises
where the Collateral may be located.
(c) Each Pledgor authorizes the Bank to collect and apply against the
Secured Obligations any refund of insurance premiums or any insurance
proceeds payable on
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account of the loss or damage to the Collateral and appoints the Bank as
the Pledgor's attorney-in-fact to endorse any check or draft representing
such proceeds or refund.
(d) Upon any Pledgor's failure to perform any of its duties hereunder,
the Bank may, but it shall not be obligated to, perform any of the duties
and the Pledgors shall forthwith upon demand reimburse the Bank for any
expenses incurred by the Bank in so doing.
(e) No delay or omission by the Bank in exercising any right hereunder
or with respect to any Secured Obligations shall operate as a waiver of
that or any other right, and no single or partial exercise of any right
shall preclude the Bank from any other or further exercise of the right or
the exercise of any other right or remedy. The Bank may cure any Event of
Default by the Pledgors in any reasonable manner without waiving the Event
of Default so cured and without waiving any other prior or subsequent Event
of Default by the Pledgors. All rights and remedies of the Bank under this
Agreement and under the UCC shall be deemed cumulative.
(f) The Bank shall exercise reasonable care in the custody and
preservation of the Collateral to the extent required by law and it shall
be deemed to have exercised reasonable care if it takes such action for
that purpose as the Pledgors shall reasonably request in writing. However,
no omission to comply with any requests by the Pledgors, or any of them,
shall of itself be deemed a failure to exercise reasonable care. The Bank
shall have no obligation to take and the Pledgors shall have the sole
responsibility for taking any steps to preserve rights against all prior
parties to any Instrument or Chattel Paper in the Bank's possession as
Collateral or as Proceeds of the Collateral. The Pledgors waive notice of
dishonor and protest of any Instrument constituting Collateral at any time
held by the Bank on which any Pledgor is in any way liable and waive notice
of any other action taken by the Bank.
(g) From and after the occurrence of any Event of Default, the Bank
may notify any Account Debtor of the Security Interest and may also direct
such Account Debtor to make all payments on the Collateral to the Bank. All
payments on and other Proceeds from the Collateral received by the Bank
directly or from any Pledgor shall be applied to the Secured Obligations in
such order and manner and at such time as the Bank shall in its sole
discretion determine. Unless the Bank notifies the Pledgors in writing that
it dispenses with one or more of the following requirements, any payments
on or other Proceeds of the Collateral received by any Pledgor before or
after notification to any Account Debtor shall be held by each Pledgor in
trust for the Bank in the same medium in which received, shall not be
commingled with any assets of the Pledgors and shall be turned over to the
Bank not later than the next business day following the day of their
receipt. From and after the occurrence of an Event of Default, the Pledgors
shall also promptly notify the Bank of the return to or repossession by any
Pledgor of goods underlying any Collateral. For purposes hereof, an
"Account Debtor" shall mean any person or entity who is obligated to pay
any Pledgor any amounts under any of the Collateral.
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(h) The Pledgors authorize the Bank without affecting any Pledgor's
obligations hereunder from time to time (i) to take from any party and hold
collateral (other than the Collateral) for the payment of the Secured
Obligations or any part thereof, and to exchange, enforce or release such
collateral or any part thereof, (ii) to accept and hold the endorsement or
guaranty of payment of the Secured Obligations or any part thereof and to
release or substitute any such endorser or guarantor or any party who has
given any security interest in any collateral as security for the payment
of the Secured Obligations or any part thereof or any party in any way
obligated to pay the Secured Obligations or any part thereof; and (iii)
upon the occurrence of any Event of Default to direct the manner of the
disposition of the Collateral and any other collateral and the enforcement
of any endorsements or guaranties relating to the Secured Obligations or
any part thereof as the Bank in its sole discretion may determine.
(i) The Bank may demand, collect and xxx for all Proceeds (either in
any Pledgor's name or the Bank's name at the Bank's option), with the right
to enforce, compromise, settle or discharge any Proceeds. Each Pledgor
irrevocably appoints the Bank as the Pledgor's attorney-in-fact to endorse
the Pledgor's name on all checks, commercial paper and other Instruments
pertaining to the Proceeds before or after the occurrence of an Event of
Default.
(j) The rights and benefits of the Bank under this Agreement shall, if
the Bank agrees, inure to any party acquiring an interest in the Secured
Obligations or any part thereof.
(k) The terms "Bank" and "Pledgor" as used in this Agreement include
the heirs, personal representatives and successors or assigns of those
parties.
(l) If more than one Pledgor executes this Agreement, the term
"Pledgor" includes each of the Pledgors as well as all of them, and their
obligations under this Agreement shall be joint and several.
(m) This Agreement may not be modified or amended nor shall any
provision of it be waived except in writing signed by the Pledgors and by
an authorized officer of the Bank.
(n) This Agreement shall be construed under the UCC in effect in
Florida and any other applicable laws in effect from time to time.
(o) This Agreement is a continuing agreement that shall remain in
force until the last to occur of: (i) the payment in full of all Secured
Obligations if such payment of the Secured Obligations has become final and
is not subject to being refunded as a preference or fraudulent transfer
under the Bankruptcy Code or other applicable law; (ii) the termination of
all agreements or obligations (whether or not conditional) of the Bank to
extend credit to the Borrower; and (iii) the termination of the Loan
Agreement.
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(p) When inspecting the Collateral, the Bank will comply with all
applicable privacy laws and with the provisions of any confidentiality
agreements between the Pledgors and the Bank
9. Arbitration. Each Pledgor and the Bank agree to the following
arbitration provisions:
(a) These arbitration provisions govern the resolution of any
controversies or claims between any Pledgor and the Bank, whether arising
in contract, tort or by statute, including but not limited to controversies
or claims (collectively, a "Claim") that arise out of or relate to: (i)
this Security Agreement (including any renewals, restatements, extensions
or modifications hereof); or (ii) any document related to this Security
Agreement.
(b) At the request of any Pledgor or the Bank, any Claim shall be
resolved by binding arbitration in accordance with the Federal Arbitration
Act (Title 9, U. S. Code) (the "Act"). The Act will apply even though this
Security Agreement provides that it is governed by the law of a specified
state. Arbitration proceedings will be determined in accordance with the
Act, the rules and procedures for the arbitration of financial services
disputes of JAMS or any successor thereof ("JAMS"), and the terms of this
Section. In the event of any inconsistency, the terms of this Section shall
control. The arbitration shall be administered by JAMS and conducted in any
United States state where real or tangible personal property collateral for
this credit is located or if there is no such collateral, in Hillsborough
County, Florida. All Claims shall be determined by one arbitrator. However,
if Claims exceed $1,000,000, upon the request of any party, the Claims
shall be decided by three arbitrators. All arbitration hearings shall
commence within 90 days of the demand for arbitration and close within 90
days of commencement and the award of the arbitrator or arbitrators, as the
case may be, shall be issued within 30 days of the close of the hearing.
However, the arbitrator or arbitrators, as the case may be, upon a showing
of good cause, may extend the commencement of the hearing for up to an
additional 60 days. The arbitrator or arbitrators, as the case may be,
shall provide a concise written statement of reasons for the award. The
arbitration award may be submitted to any court having jurisdiction to be
confirmed and enforced.
(c) The arbitrator(s) will have the authority to decide whether any
Claim is barred by the statute of limitations and, if so, to dismiss the
arbitration on that basis. For purposes of the application of the statute
of limitations, the service on JAMS under applicable JAMS rules of a notice
of Claim is the equivalent of the filing of a lawsuit. Any dispute
concerning this arbitration provision or whether a Claim is arbitrable
shall be determined by the arbitrator(s). The arbitrator(s) shall have the
power to award legal fees pursuant to the terms of this Security Agreement.
(d) These arbitration provisions do not limit the right of any Pledgor
or the Bank to: (i) exercise self-help remedies, such as but not limited
to, setoff; (ii) initiate
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judicial or nonjudicial foreclosure against any real or personal property
collateral; (iii) exercise any judicial or power of sale rights, or (iv)
act in a court of law to obtain an interim remedy, such as but not limited
to, injunctive relief, writ of possession or appointment of a receiver, or
additional or supplementary remedies.
(e) By agreeing to binding arbitration, each Pledgor and the Bank
irrevocably and voluntarily waive any right they may have to a trial by
jury in respect of any Claim. Furthermore, without intending in any way to
limit this agreement to arbitrate, to the extent any Claim is not
arbitrated, the parties irrevocably and voluntarily waive any right they
may have to a trial by jury in respect of such Claim. This provision is a
material inducement for each party's executing this Security Agreement. No
provision in this Security Agreement or in any document related hereto
regarding submission to jurisdiction or venue in any court is intended or
shall be construed to be in derogation of the provisions of this Security
Agreement or in any such other document for arbitration of any controversy
or claim.
10. NOTICE OF FINAL AGREEMENT. THIS WRITTEN SECURITY AGREEMENT REPRESENTS
THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE
OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OR UNDERSTANDINGS OF
THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
11. Waiver. IF AN EVENT OF DEFAULT SHOULD OCCUR, EACH PLEDGOR WAIVES ANY
RIGHT THE PLEDGOR MAY HAVE TO NOTICE AND A HEARING BEFORE THE BANK TAKES
POSSESSION OF THE COLLATERAL BY SELF-HELP, REPLEVIN, ATTACHMENT, SETOFF OR
OTHERWISE.
EXECUTED and delivered as of the day and year first above written.
SAFERENT, INC.
By: /s/ Xxxx Xxxxxx
-------------------------------------
Its: VP
---------------------------------
EMPLOYEE HEALTH PROGRAMS, INC.
By: /s/ Xxxx Xxxxxx
-------------------------------------
Its: VP
---------------------------------
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SUBSTANCE ABUSE MANAGEMENT, INC.
By: /s/ Xxxx Xxxxxx
-------------------------------------
Its: VP
---------------------------------
HIRECHECK, INC.
By: /s/ Xxxx Xxxxxx
-------------------------------------
Its: VP
---------------------------------
AMERICAN DRIVING RECORDS, INC.
By: /s/ Xxxx Xxxxxx
-------------------------------------
Its: VP
---------------------------------
FIRST AMERICAN REGISTRY, INC.
By: /s/ Xxxx Xxxxxx
-------------------------------------
Its: VP
---------------------------------
U.S. XXXXXX.XXX, INC.
By: /s/ Xxxx Xxxxxx
-------------------------------------
Its: VP
---------------------------------
BANK OF AMERICA, N.A.
By: /s/ Xxxxx Xxxxxxx
-------------------------------------
Its: Senior Vice President
---------------------------------
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