Exhibit 10.10
EXECUTION COPY
SECURITY AGREEMENT
------------------
This SECURITY AGREEMENT (this "Agreement"), dated as of May 11, 2001, is
---------
entered into by and among Data Race Inc., a Texas corporation doing business as
IP Axess, with headquarters located at 0000 Xxxxxxxxx Xxxxx, Xxxxx 000, Xxxxx,
Xxxxx 00000 (the "Debtor"), in favor of each of the parties listed in Schedule A
------ ----------
attached hereto and made a part hereof (each a "Secured Party," collectively
-------------
(and individually, where applicable) referred to herein as the "Secured
-------
Parties").
1. SECURITY INTEREST. For good and valuable consideration, the receipt
-----------------
and adequacy of which are hereby acknowledged, and subject to the applicable
terms of this Agreement, Debtor assigns and grants to Secured Parties, a
security interest and lien in the Collateral (as defined below) to secure the
payment and the performance of the Obligation (as defined below).
2. COLLATERAL. The security interest created hereby is granted in and to
----------
all personal property of Debtor (other than fixtures) now owned or hereafter
acquired (the "Collateral") including, but not limited to, the following:
----------
(a) Accounts. Any and all accounts, accounts receivable, receivables,
--------
contract rights, book debts, checks, notes, drafts, instruments, chattel
paper, acceptances, choses in action, any and all amounts due to Debtor
from a factor or other forms of obligations and receivables now existing or
hereafter arising out of the business of Debtor, as well as any and all
returned, refused and repossessed goods, and the cash or non-cash proceeds
resulting therefrom.
(b) Inventory. Any and all of Debtor's inventory, including without
---------
limitation any and all goods held for sale or lease or being processed for
sale or lease in Debtor's business as now or hereafter conducted, whether
now owned or hereinafter acquired, including all materials, goods and work
in process, finished goods, and other tangible property held for sale or
lease or furnished or to be furnished under contracts of service or used or
consumed in Debtor's business, along with all documents (including
documents of title) covering inventory, all cash and non-cash proceeds from
the sale of inventory including proceeds from insurance.
(c) Equipment. Any and all of Debtor's furnishings and equipment,
---------
wherever located, whether now owned or hereafter acquired, together with
all increases, parts, fittings, accessories, equipment, and special tools
now or hereafter used in connection therewith,
1
and all products, additions, substitutions, accessions, and all cash and
non-cash proceeds, including proceeds from insurance thereof and thereto.
(d) Instruments and/or Investment Property. All investment property,
--------------------------------------
negotiable instruments, promissory notes, and documents of title owned or
to be owned by Debtor, certificates of deposit, and all liens, security
agreements, leases and other contracts securing or otherwise relating to
any of said investment property, instruments or documents, and all cash and
non-cash proceeds and products thereof and such additional property
receivable or distributed in respect of or in exchange for all or any of
such investment property, instruments or documents.
(e) General Intangibles. All patents, trademarks, service marks,
-------------------
trade secrets, copyrights and exclusive licenses (whether issued or
pending) and all documents, applications, materials and other matters
related thereto, all inventions, and all manufacturing, engineering and
production plans, drawings, specifications, processes and systems, all
trade names, computer programs, data bases, systems and software (including
source and object codes), goodwill, choses in action and all other general
intangibles of Debtor whether now owned or hereafter acquired and all cash
and non-cash proceeds thereof, and all chattel paper, documents and
instruments relating to such intangibles.
(f) Deposit Accounts and Letters of Credit. All deposit accounts of
--------------------------------------
Debtor, and all interests of Debtor under letters of credit, now owned or
hereafter acquired.
(g) Related Property. All substitutes and replacements for,
----------------
accessions, attachments and other additions to, tools, parts and equipment
used in connection with, and proceeds and products of, the above Collateral
(including all income and benefits resulting from any of the above, such as
dividends payable or distributable in cash, property or stock; interest,
premium and principal payments; redemption proceeds and subscription of
rights; all certificates of title, manufacturer's statements of origin,
other documents, accounts and chattel paper arising from or related to the
above Collateral, and returned or repossessed Collateral, any of which, if
received by Debtor, upon request shall be delivered immediately to Secured
Parties).
(h) Claims. Any claim of Debtor against a third party, now or
------
hereafter existing, liquidated or unliquidated, and all money, instruments,
securities, documents, chattel paper, credits, claims, demands, income, and
any other property, rights and interests of Debtor which at any time shall
come into the possession or custody or under the control of a Secured Party
or any of its agents, affiliates or correspondents, for any purpose, and
the proceeds of any thereof. Secured Parties shall be deemed to have
possession of any of the Collateral in transit to or set apart for it or
any of its agents, affiliates or correspondents.
(i) Collateral Not to Include Real Property. The term Collateral
---------------------------------------
shall not include any real property or leasehold interests owned or held by
Debtor.
2
3. OBLIGATION. The following obligations ("Obligation") are secured by
---------- ----------
this Agreement:
(a) All debts, obligations, liabilities and agreements of Debtor to
Secured Parties, now or hereafter existing, arising directly or indirectly
between Debtor and Secured Parties whether absolute or contingent, joint or
several, secured or unsecured, due or not due, contractual or tortious,
liquidated or unliquidated, arising by operation of law or otherwise, and
all renewals, extensions or rearrangement of any of the above;
(b) the indebtedness evidenced by any of the several 10% Secured
Convertible Promissory Notes (the "Notes") executed by Borrower and payable
-----
to the order of a Secured Party pursuant to the terms of that certain
Securities Purchase Agreement entered into by Debtor and the Secured
Parties on the date hereof (the "Securities Purchase Agreement").
-----------------------------
(c) Secured Parties' participation in any loan or other debt of Debtor
to another person;
(d) All costs incurred by Secured Parties to obtain, preserve, perfect
and enforce this Agreement and maintain, preserve, collect and enforce the
Collateral;
(e) Interest on the above amounts at the rate set forth in the Notes;
(f) All debt, obligations and liabilities of any direct or indirect
parent company, subsidiary, or affiliate of Debtor (such parent companies,
subsidiaries, and affiliates, together with the Debtor named above, being
hereinafter referred to collectively as "Debtor") to Secured Parties of the
------
kinds described in this Section 3, now existing or hereafter arising;
(g) All expenses of the Secured Parties, including fees and expenses
of the Secured Parties' counsel, incident to the enforcement of payment of
all obligations of the Debtor by any action or participation in, or in
connection with a case or proceeding under the Bankruptcy Code, or any
successor statute thereto; and
(h) All amounts which may be owed to Secured Parties pursuant to all
other loan documents executed between Secured Parties and any Debtor.
4. DEBTOR'S WARRANTIES. Debtor hereby represents and warrants to Secured
-------------------
Parties as follows:
(a) Authority. The execution, delivery and performance of this
---------
Agreement and all of the other Transaction Documents (as such term is
defined in the Securities Purchase Agreement) by Debtor have been duly
authorized by all necessary corporate action of Debtor.
3
(b) Accuracy of Information. All information heretofore, herein or
-----------------------
hereafter supplied to Secured Parties by or on behalf of Debtor with
respect to the Collateral is true and correct.
(c) Enforceability. This Agreement and the other Transaction
--------------
Documents constitute legal, valid and binding obligations of Debtor,
enforceable in accordance with their respective terms, except as limited by
bankruptcy, insolvency or similar laws of general application relating to
the enforcement of creditors' rights and except to the extent specific
remedies may generally be limited by equitable principles.
(d) Ownership and Liens. Except as set forth on Schedule B, Debtor
------------------- ----------
has good and marketable title to the Collateral free and clear of all
liens, security interests, encumbrances or adverse claims, except for the
security interest created by this Agreement. No dispute, right of setoff,
counterclaim or defense exists with respect to all or any part of the
Collateral. Except as set forth in Schedule B, Debtor has not executed any
----------
other security agreement currently affecting the Collateral and no
financing statement or other instrument similar in effect covering all or
any part of the Collateral is on file in any recording office except as may
have been executed or filed in favor of Secured Parties.
(e) No Conflicts or Consents. Neither the ownership, the intended use
------------------------
of the Collateral by Debtor, the grant of the security interest by Debtor
to Secured Parties herein nor the exercise by Secured Parties of their
rights or remedies hereunder, will (i) conflict with any provision of (A)
any domestic or foreign law, statute, rule or regulation, (B) the articles
or certificate of incorporation, charter, bylaws or partnership agreement,
as the case may be, of Debtor, or (C) any agreement, judgment, license,
order or permit applicable to or binding upon Debtor or otherwise affecting
the Collateral, or (ii) result in or require the creation of any lien,
charge or encumbrance upon any assets or properties of Debtor or of any
person except as may be expressly contemplated in the Transaction
Documents. Except as expressly contemplated in the Transaction Documents,
no consent, approval, authorization or order of, and no notice to or filing
with, any court, governmental authority or third party is required in
connection with the grant by Debtor of the security interest herein or the
exercise by Secured Parties of their rights and remedies hereunder, other
than such consents, approvals or authorizations that have been heretofore
obtained, or will have been obtained prior to the time such performance is
due or request for advance made.
(f) Security Interest. Except as set forth in Schedule B, Debtor has
----------------- ----------
and will have at all times full right, power and authority to grant a
security interest in the Collateral to Secured Parties in the manner
provided herein, free and clear of any lien, security interest or other
charge or encumbrance. This Agreement creates a legal, valid and binding
security interest in favor of Secured Parties in the Collateral.
(g) Location. Debtor's residence or chief executive office, as the
--------
case may be, and the office where the records concerning the Collateral are
kept is located at its address set forth on the first page hereof.
4
(h) Solvency of Debtor. As of the date hereof, and after giving
------------------
effect to this Agreement and the completion of all other transactions
contemplated by Debtor at the time of the execution of this Agreement, (i)
Debtor is and will be solvent, (ii) the fair saleable value of Debtor's
assets exceeds and will continue to exceed Debtor's liabilities (both fixed
and contingent), (iii) Debtor is paying and will continue to be able to pay
its debts as they mature, and (iv) if Debtor is not an individual, Debtor
has and will have sufficient capital to carry on Debtor's businesses and
all businesses in which Debtor is about to engage.
(i) Securities. Any certificates evidencing securities pledged as
----------
Collateral are valid and genuine and have not been altered. All securities
pledged as Collateral have been duly authorized and validly issued, are
fully paid and non-assessable, and were not issued in violation of the
preemptive rights of any party or of any agreement by which Debtor or the
issuer thereof is bound. No restrictions or conditions exist with respect
to the transfer or voting of any securities pledged as Collateral, except
as has been disclosed to Secured Parties in writing. To the best of
Debtor's knowledge, no issuer of such securities (other than securities of
a class which are publicly traded) has any outstanding stock rights, rights
to subscribe, options, warrants or convertible securities outstanding or
any other rights outstanding entitling any party to have issued to such
party capital stock of such issuer, except as has been disclosed to Secured
Parties in writing.
5. DEBTOR'S COVENANTS. Until full payment and performance of all
------------------
Obligations and termination or expiration of any obligation or commitment of
Secured Parties to make advances or loans to Debtor, unless Secured Parties
holding two-thirds or more of the then unpaid aggregate principal amount of the
Notes (a "Supermajority of Secured Parties") otherwise consents in writing:
---------------------------------
(a) Obligation and This Agreement. Debtor shall perform all of its
-----------------------------
obligations under the Transaction Documents and in any other agreements
between Debtor and a Secured Party.
(b) Ownership of Collateral. Debtor shall defend the Collateral against
-----------------------
all claims and demands of all persons at any time claiming any interest
therein adverse to Secured Parties, which have not been expressly disclosed
in Schedule B. Debtor shall keep such Collateral free from all liens and
----------
security interests except those for property taxes not yet delinquent and
the security interest created hereby.
(c) Insurance. Debtor shall insure the tangible Collateral with companies
---------
acceptable to a Supermajority of Secured Parties. Such insurance shall be
in an amount not less than the fair market value of the tangible Collateral
and shall be against such casualties, with such deductible amounts as a
Supermajority of Secured Parties shall approve. All insurance policies
shall be written for the benefit of Debtor and Secured Parties as their
interests may appear, payable to Secured Parties as loss payees, or in
other form satisfactory to a Supermajority of Secured Parties, and such
policies or certificates evidencing the same shall be furnished to Secured
Parties. All policies of insurance shall provide for written notice to
Secured Parties at least 30 days prior to cancellation. Risk of
5
loss or damage is Debtor's to the extent of any deficiency in any effective
insurance coverage.
(d) Maintenance. Debtor shall keep all tangible Collateral in good
-----------
condition.
(e) Secured Parties' Costs. Debtor shall pay all costs necessary to
----------------------
obtain, preserve, perfect, defend and enforce the security interest created
hereby, and to preserve, defend, enforce and collect the Collateral,
including but not limited to taxes, assessments, insurance premiums,
repairs, reasonable attorney's fees and legal expenses, feed, rent, storage
costs and expenses of sales. Whether Collateral is or is not in Secured
Parties' possession, and without any obligation to do so and without
waiving Debtor's default for failure to make any such payment, Secured
Parties may in the discretion of a Supermajority of Secured Parties, pay
any such costs and expenses, discharge encumbrances on Collateral, and pay
for insurance of Collateral, and such payment shall be a part of the
Obligation and bear interest at the rate set out in the Notes. Debtor
agrees to reimburse Secured Parties on demand for any costs so incurred.
(f) Information and Inspection. Debtor shall (i) promptly furnish
--------------------------
Secured Parties any information with respect to Collateral requested by
Secured Parties; (ii) allow Secured Parties or their representatives to
inspect the Collateral at any time and wherever located, and to inspect and
copy, or furnish Secured Parties or their representatives with copies of,
all records relating to the Collateral and the Obligation; (iii) furnish
Secured Parties or their representatives such information as Secured
Parties may request to identify Collateral, at the time and in the form
requested by Secured Parties; and (iv) deliver upon request to Secured
Parties shipping and delivery receipts evidencing the shipment of goods and
invoices evidencing the receipt of, and the payment for, Collateral.
(g) Additional Documents. Debtor will contemporaneously with the
--------------------
execution hereof and from time to time thereafter at its expense promptly
execute and deliver all further instruments and documents and take all
further action necessary or appropriate or that a Secured Parties may
request in order (i) to perfect and protect the security interest created
or purported to be created hereby and the first priority of such security
interest, (ii) to enable Secured Parties to exercise and enforce their
rights and remedies hereunder in respect of the Collateral, and (iii) to
otherwise effect the purposes of this Agreement, including without
limitation executing and filing any financing or continuation statements,
or any amendments thereto. If all or any part of the Collateral is
intellectual property covered by any patent or copyright protection in the
United States or elsewhere, Debtor covenants and agrees, at a Secured
Party's request, to prepare, execute and file with the appropriate
governmental authorities all documents required to perfect a security
interest in such Collateral.
(h) Parties Liable on Collateral. Debtor will preserve the liability of
----------------------------
all obligors on any Collateral, will preserve the priority of all security
therefor, and will deliver to Secured Parties the original certificates of
title on all motor vehicles or other titled vehicles constituting the
Collateral. Secured Parties shall have no duty to preserve such
6
liability or security, but may do so at the expense of Debtor, without
waiving Debtor's default.
(i) Right of Secured Parties to Notify Debtors. Upon the occurrence of an
------------------------------------------
Event of Default, Secured Parties may, in the discretion of a Supermajority
of Secured Parties, notify persons obligated on any Collateral to make
payments directly to Secured Parties and Secured Parties may take control
of all proceeds of any Collateral. Until Secured Parties elect to exercise
such rights, Debtor, as agent of Secured Parties, shall collect and enforce
all payments owed on Collateral.
(j) Records of Collateral. Debtor at all times will maintain accurate
---------------------
books and records covering the Collateral. Debtor immediately will xxxx all
books and records with an entry showing the absolute assignment of all
Collateral to Secured Parties and Secured Parties are hereby given the
right to audit the books and records of Debtor relating to Collateral at
any time and from time to time. The amounts shown as owed to Debtor on
Debtor's books and on any assignment schedule will be the undisputed
amounts owing and unpaid.
(k) Disposition of Collateral. No Collateral may be sold, leased,
-------------------------
manufactured, processed or otherwise disposed of by Debtor in any manner
without the prior written consent of a Supermajority of Secured Parties,
except Collateral sold, leased, licensed, manufactured, processed or
consumed in the ordinary course of business.
(l) Accounts. Each account held as Collateral will represent the valid
--------
and legally enforceable obligation of third parties, and shall not be
evidenced by any instrument or chattel paper.
(m) Location of Collateral. Debtor shall give Secured Parties written
----------------------
notice of each office of Debtor in which records of Debtor pertaining to
accounts held as Collateral are kept, and each location at which Collateral
is or will be kept, and of any change of any such location. If no such
notice is given, all records of Debtor pertaining to Collateral are and
shall be kept at Debtor's address as set forth above.
(n) Notice of Changes. Debtor will notify Secured Parties immediately of
-----------------
any material change in the Collateral, of a change in Debtor's residence or
location, of a change in any matter warranted or represented by Debtor in
this Agreement or furnished to Secured Parties, and of any Event of Default
(as defined below).
(o) Use and Removal of Collateral. Debtor will not use the Collateral
-----------------------------
illegally nor, unless previously indicated as a fixture, permit the
Collateral to be affixed to real or personal property without the prior
written consent of a Supermajority of Secured Parties. Debtor will not
permit any of the Collateral to be removed from the locations specified
herein without the prior written consent of Secured Parties, except for the
sale, lease or licenseof inventory in the ordinary course of business.
7
(p) Possession of Collateral. Debtor will deliver all other instruments,
------------------------
documents and chattel paper which are part of the Collateral and in
Debtor's possession to the Secured Parties immediately, or if hereafter
acquired, immediately following acquisition, appropriately indorsed to
Secured Parties' order, or with appropriate, executed powers. Debtor waives
presentment, notice of acceleration, demand, notice of dishonor, protest,
and all other notices with respect thereto.
(q) Consumer Credit. If any Collateral or proceeds includes obligations
---------------
of third parties to Debtor, the transactions giving rise to the Collateral
shall conform in all respects to the applicable state or federal law
including but not limited to consumer credit law. Debtor shall hold
harmless and indemnify Secured Parties against any cost, loss or expense
arising from Debtor's breach of this covenant.
(r) Change of Name/Status. Except to the extent described in Schedule
---------------------
5(r), attached hereto, without the written consent of a Supermajority of
Secured Parties, Debtor shall not change its name, change its corporate
status, use any trade name or engage in any business in which it was not
engaged on the date of this Agreement.
(s) Power of Attorney. Effective upon the date of any Event of Default
-----------------
and thereafter, Debtor hereby appoints First Capital Group of Texas II,
L.P., being one of the Secured Parties ("FCGTII") as Debtor's attorney-in-
fact with full power in Debtor's name and behalf to do every act which
Debtor is obligated to do or may be required to do hereunder, however,
nothing in this paragraph shall be construed to obligate FCGT II to take
any action hereunder nor shall FCGT II or Secured Parties be liable to
Debtor for failure to take any action hereunder. This appointment shall be
deemed a power coupled with an interest and shall not be terminable as long
as the Obligation is outstanding.
(t) Waivers by Debtor. Debtor waives notice of the creation, advance,
-----------------
increase, existence, extension or renewal of, and of any indulgence with
respect to, the Obligation; waives presentment, demand, notice of dishonor,
and protest; waives notice of the amount of the Obligation outstanding at
any time, notice of any change in financial condition of any person liable
for the Obligation or any part thereof, notice of any event of default, and
all other notices respecting the Obligation; and agrees that maturity of
the Obligation and any part thereof may be accelerated, extended or renewed
one or more times by Secured Parties in the discretion of a Supermajority
of Secured Parties, without notice to Debtor. Debtor waives any right to
require that any action be brought against any other person or to require
that resort be had to any other security or to any balance of any deposit
account. The Debtor further waives any right of subrogation or to enforce
any right of action against any other Debtor until the Obligation is paid
in full.
(u) Other Parties and Other Collateral. No renewal or extension of or any
----------------------------------
other indulgence with respect to the Obligation or any part thereof, no
release of any security, no release of any person (including any maker,
indorser, guarantor or surety) liable on the Obligation, no delay in
enforcement of payment, and no delay or omission or lack of diligence or
care in exercising any right or power with respect to the Obligation or any
8
security therefor or guaranty thereof or under this Agreement shall in any
manner impair or affect the rights of Secured Parties under the law,
hereunder, or under any other agreement pertaining to the Collateral.
Secured Parties need not file suit or assert a claim for personal judgment
against any person for any part of the Obligation or seek to realize upon
any other security for the Obligation, before foreclosing or otherwise
realizing upon the Collateral for the purpose of paying the Obligation.
Debtor waives any right to the benefit of or to require or control
application of any other security or proceeds thereof, and agrees that
Secured Parties shall have no duty or obligation to Debtor to apply to the
Obligation any such other security or proceeds thereof.
(v) Collection and Segregation of Accounts. The Secured Parties hereby
--------------------------------------
authorize the Debtor to collect the Collateral; provided, however, that
upon the occurrence of an Event of Default, such authority shall be
thereafter subject to the direction and control of the Secured Parties, and
after the occurrence of an Event of Default, the Secured Parties may,
without cause or notice, curtail or terminate said authority at any time.
Upon written notice by a Supermajority of Secured Parties following the
occurrence of an Event of Default, the Debtor shall forthwith upon receipt
of all checks, drafts, cash, and other remittances in payment of or on
account of the Collateral, deposit the same in one or more special accounts
maintained with the Secured Parties over which the Secured Parties alone
shall have the power of withdrawal. The remittance of the proceeds of such
Collateral shall not, however, constitute payment or liquidation of such
Collateral until the Secured Parties shall receive good funds for such
proceeds. Funds placed in such special accounts shall be held by the
Secured Parties as security for all Obligations secured hereunder. Such
proceeds shall be deposited in precisely the form received, except for the
indorsement of the Debtor where necessary to permit collection of items,
which indorsement the Debtor agrees to make, and which indorsement FCGT II
is also hereby authorized, as attorney-in-fact, to make on behalf of the
Debtor. In the event the Secured Parties have notified the Debtor to make
deposits to a special account, pending such deposit, the Debtor agrees that
it will not commingle any such checks, drafts, cash or other remittances
with any funds or other property of the Debtor, but will hold them separate
and apart therefrom, and upon an express trust for the Secured Parties
until deposit thereof is made in the special account. The Secured Parties
will, from time to time, apply the whole or any part of the Collateral
funds on deposit in this special account against such Obligations as are
secured hereby as the Secured Parties may in the discretion of a
Supermajority of Secured Parties, elect. In the discretion of a
Supermajority of Secured Parties, any portion of said funds on deposit in
the special account which a Supermajority of Secured Parties shall elect
not to apply to the Obligations, may be paid over by the Secured Parties to
the Debtor.
6. RIGHTS AND POWERS OF SECURED PARTIES
------------------------------------
(a) General.
-------
(i) Secured Parties, without liability to Debtor may, upon the
occurrence of an Event of Default, (A) obtain from any person
information regarding Debtor or Debtor's
9
business, which information any such person also may furnish without
liabi lity to Debtor; (B) require Debtor to give possession or control
of any Collateral to Secured Parties; (C) indorse as Debtor's agent
any instruments, documents or chattel paper in Collateral or
representing proceeds of Collateral; (D) contact account debtors
directly to verify information furnished by Debtor; (E) take control
of proceeds, including stock received as dividends or by reason of
stock splits; (F) take control of funds generated by the Collateral,
such as cash dividends, interest and proceeds or refunds from
insurance, and use same to reduce any part of the Obligation and
exercise any other rights which an owner of such Collateral may
exercise, except the right to vote or dispose of Collateral before an
event of default; and (G) demand, collect, convert, redeem, receipt
for, settle, compromise, adjust, xxx for, foreclose or realize upon
Collateral, in its own name or in the name of Debtor, as Secured
Parties may determine.
(ii) Secured Parties may, at any time, (A) release Collateral in
its possession to any Debtor, temporarily or otherwise; and (B) reject
as unsatisfactory any property hereafter offered by Debtor as
Collateral.
(iii) Secured Parties shall not be liable for failure to collect
any account or instruments, or for any act or omission on the part of
the Secured Parties, its officers, agents or employees, except willful
misconduct and gross negligence. The foregoing rights and powers of
Secured Parties will be in addition to, and not a limitation upon, any
rights and powers of Secured Parties given by law, elsewhere in this
Agreement, or otherwise. If Debtor fails to maintain any required
insurance, to the extent permitted by applicable law Secured Parties
may (but are not obligated to) purchase single interest insurance
coverage for the Collateral which insurance may in the discretion of a
Supermajority of Secured Parties, (i) protect only Secured Parties and
not provide any remuneration or protection for Debtor directly and
(ii) provide coverage only after the Obligation has been declared due
as herein provided. The premiums for any such insurance purchased by
Secured Parties shall be a part of the Obligation and shall bear
interest at the rate set forth in the Note.
(b) Convertible Collateral. Secured Parties may present for conversion
----------------------
any Collateral which is convertible into any other instrument or investment
property or a combination thereof with cash, but Secured Parties shall not
have any duty to present for conversion any Collateral unless it shall have
received from Debtor detailed written instructions to that effect at a time
reasonably far in advance of the final conversion date to make such
conversion possible.
(c) Actions of Secured Parties. With respect to all rights, obligations
--------------------------
and actions reserved to the discretion, option or opinion of the Secured
Parties under this Agreement, except as otherwise expressly provided
herein, Secured Parties shall act upon such rights, obligations and
discretionary matters only upon the consent of a Supermajority of Secured
Parties.
7. DEFAULT
-------
10
(a) Event of Default. An "Event of Default" shall occur if: (i) there is
---------------- ----------------
a loss, theft, damage or destruction of any material portion of the
Collateral for which there is no insurance coverage or for which, in the
opinion of the Secured Parties there is insufficient insurance coverage; or
(ii) any Debtor or any other obligor on the Obligation shall fail to timely
and properly pay to Secured Parties any indebtedness that is part of the
Obligation when due or fail to timely or properly observe, keep or perform
any term, covenant, agreement or condition in this Agreement or in any
other agreement between Debtor and any other obligor on the Obligation,
including in any other note or instrument, loan agreement, security
agreement, deed of trust, mortgage, promissory note, assignment or other
agreement or instrument concerning the Obligation.
(b) Rights and Remedies. If any Event of Default shall occur, then, in
-------------------
each and every such case, the Secured Parties may, without presentment,
demand, or protest, notice of default, dishonor, demand, non-payment, or
protest, notice of intent to accelerate all or any part of the Obligation,
notice of acceleration of all or any part of the Obligation, or notice of
any other kind, all of which Debtor hereby expressly waives, (except for
any notice required under this Agreement, any other loan document or
applicable law), at any time thereafter exercise and/or enforce any of the
following rights and remedies:
(i) Possession and Collection of Collateral. At the option of
---------------------------------------
a Supermajority of Secured Parties: (i) take possession or control of,
store, lease, operate, manage, sell or otherwise dispose of, all or
any part of the Collateral; (ii) notify all parties under any account
or contract right forming all or any part of the Collateral to make
any payments otherwise due to Debtor directly to the Secured Parties;
(iii) in the Secured Parties' own name, or in the name of Debtor,
demand, collect, receive, xxx for, and give receipts and releases for,
any and an amounts due under such accounts and contract rights; (iv)
indorse as the agent of the Debtor any check, note, chattel paper,
documents, or instruments forming all or any part of the Collateral;
(v) make formal application for transfer to the Secured Parties (or to
any assignee of the Secured Parties to any purchaser of any of the
Collateral) of all of the Debtor's permits, licenses, approvals,
agreements, and the like relating to the Collateral or to the Debtor's
business; (vi) take any other action which the Secured Parties deem
necessary or desirable to protect and realize upon its security
interest in the Collateral; and (vii) in addition to the foregoing,
and not in substitution therefor, exercise any one or more of the
rights and remedies exerciseable by the Secured Parties under any
other provision of this Agreement, under any of the other loan
documents, or as provided by applicable law (including, without
limitation, the Texas Uniform Commercial Code (hereinafter referred to
as the "UCC")). In taking possession of the Collateral the Secured
---
Parties may enter the Debtor premises and otherwise proceed without
legal process, if this can be done without breach of the peace. The
Debtor shall, upon the Secured Parties' demand, promptly make the
Collateral or other security available to the Secured Parties at a
place designated by the Secured Parties, which place shall be
reasonably convenient to both parties. The Secured Parties
11
shall not be liable for, nor be prejudiced by any loss, depreciation
or other damages to the Collateral, unless caused by the Secured
Parties' willful and malicious act. The Secured Parties shall have no
duty to take any action to preserve or collect the Collateral.
(ii) Receiver. Obtain the appointment of a receiver for all or
--------
any of the Collateral, the Debtor hereby consenting to the appointment
of such a receiver and agreeing not to oppose any such appointment.
(iii) Right of Set Off. Without notice or demand to the Debtor,
----------------
set off and apply against any and all of the Obligations any and all
deposits (general or special, time or demand, provisional or final)
and any other indebtedness, at any time held or owing by the Secured
Parties to or for the credit of the account of the Debtor.
(iv) Books and Records. Secured Parties shall be entitled to
-----------------
immediate possession of all books and records evidencing any
Collateral or pertaining to chattel paper covered by this Agreement
and it or its representatives shall have the authority to enter upon
any premises upon which any of the same, or any Collateral, may be
situated and remove the same therefrom without liability.
(v) Insurance. Secured Parties may surrender any insurance
---------
policies in Collateral and receive the unearned premium thereon.
Debtor shall be entitled to any surplus and shall be liable to Secured
Parties for any deficiency.
(vi) Proceeds of Disposition. The proceeds of any disposition
-----------------------
after default available to satisfy the Obligation shall be applied to
the Obligation in such order and in such manner as Secured Parties in
their discretion shall decide.
8. GENERAL
-------
(a) Parties Bound. Secured Parties' rights hereunder shall inure to the
-------------
benefit of their successors and assigns, and in the event of any assignment
or transfer of any of the Obligation or the Collateral, Secured Parties
thereafter shall be fully discharged from any responsibility with respect
to the Collateral so assigned or transferred, but Secured Parties shall
retain all rights and powers hereby given with respect to any of the
Obligation or Collateral not so assigned or transferred. All
representations, warranties and agreements of Debtor if more than one are
joint and several and all shall be binding upon the personal
representatives, heirs, successors and assigns of Debtor.
(b) Waiver. No delay by Secured Parties in exercising any power or right
------
shall operate as a waiver thereof; nor shall any single or partial exercise
of any power or right preclude other or further exercise thereof or the
exercise of any other power or right. No waiver by Secured Parties of any
right hereunder or of any Event of Default by Debtor shall be binding upon
Secured Parties unless in writing, and no failure by Secured Parties
12
to exercise any power or right hereunder or waiver of any default by Debtor
shall operate as a waiver of any other or further exercise of such right or
power or of any further Event of Default. Each right, power and remedy of
the Secured Parties as provided for in any of the Transaction Documents, or
which shall now or hereafter exist at law or in equity or by statute or
otherwise, shall be cumulative and concurrent and shall be in addition to
every other such right, power or remedy. The exercise or beginning of the
exercise by the Secured Parties of any one or more of such rights, powers
or remedies shall not preclude the simultaneous or later exercise by the
Secured Parties of any or an other such rights, powers or remedies.
(c) Agreement Continuing. This Agreement shall constitute a continuing
--------------------
agreement, applying to all future as well as existing transactions, whether
or not of the character contemplated at the date of this Agreement, and if
all transactions between Secured Parties and Debtor shall be closed at any
time, shall be equally applicable to any new transactions thereafter.
Provisions of this Agreement, unless by their terms exclusive, shall be in
addition to other agreements between the parties. Time is of the essence of
this Agreement.
(d) Definitions. Unless the context indicates otherwise, definitions in
-----------
the UCC apply to words and phrases in this Agreement; if UCC definitions
conflict, definitions set forth in Chapter 9 of the UCC apply.
(e) Notice. Notice shall be deemed reasonable if mailed postage prepaid
------
at least 10 days before the related action (or if the UCC elsewhere
specifies a longer period, such longer period) to the address of Debtor
given above.
(f) Modifications. No provision hereof shall be modified or limited
-------------
except by a written agreement expressly referring hereto and to the
provisions so modified or limited and signed by the Debtor and a
Supermajority of Secured Parties, nor by course of conduct, usage of trade.
(g) Partial Invalidity. The unenforceability or invalidity of any
------------------
provision of this Agreement shall not affect the enforceability or validity
of any other provision herein and the invalidity or unenforceability of any
provision of any loan document to any person or circumstance shall not
affect the enforceability or validity of such provision as it may apply to
other persons or circumstances.
(h) Gender and Number. Where appropriate, the use of one gender shall be
-----------------
construed to include the others or any of them; and the singular number
shall be construed to include the plural, and vice versa.
(i) Applicable Law and Venue. This Agreement has been delivered in the
------------------------
State of Texas and shall be construed in accordance with the laws of that
State. It is performable by Debtor in the county or city of Debtor's
address set out above and Debtor expressly waives any objection as to venue
in any such location. Wherever possible each provision
13
of this Agreement shall be interpreted in such manner as to be effective
and valid under applicable law, but if any provision of this Agreement
shall be prohibited by or invalid under applicable law, such provision
shall be ineffective to the extent of such prohibition or invalid ity,
without invalidating the remainder of such provisions or the remaining
provisions of this Agreement.
(j) Financing Statement. To the extent permitted by applicable law, a
-------------------
carbon, photographic or other reproduction of this Agreement or any
financing statement covering the Collateral shall be sufficient as a
financing statement.
(k) Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be considered to be an original, but all
of which shall constitute one in the same instrument. As used herein "this
Agreement" shall include all schedules, exhibits and attachments and
addenda hereto (if any).
(l) NOTICE OF FINAL AGREEMENT. THIS WRITTEN AGREEMENT AND THE OTHER
TRANSACTION DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND
MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT
ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN OR ORAL AGREEMENTS
BETWEEN THE PARTIES.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed under seal by their duly authorized representatives as of the date
first above written.
DEBTOR: SECURED PARTIES:
------ ---------------
DATA RACE, INC., FIRST CAPITAL GROUP OF TEXAS II, L.P.
a Texas corporation By: First Capital Group Investment,
Partners LP, its General Partner
By: First Capital Group Management
Company, LP, its General Partner
By: By:
---------------------------------- --------------------------------------
Xxxxx X. Xxxxxx, Vice President and Xxxxxxx X. Xxxxxxxxx, Managing Partner
Chief Financial Officer
ICN Capital Ltd.
By: , its
-------------------- --------
14
By:
-------------------------------------
Name:
-----------------------------------
Title:
-----------------------------------
15
Schedule 5(r)
Description of Name Change
In April, 2000 the board of directors of the Company adopted a resolution to
change the Company's name to "IP AXESS, Inc." At the Company's Annual Meeting
of Shareholders held on November 9, 2000, the shareholders approved the name
change. Therefore, the Company may operate under the name IPAXESS, Inc.
16
SCHEDULE A
TO
PLEDGE AND SECURITY AGREEMENT
SCHEDULE OF SECURED PARTIES
---------------------------
Name Contact Information
----------------------------------------------------------------------------
First Capital Group of Texas II, L.P. 000 X. Xxxxxxxx, Xxxxx 000
Xxx Xxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxxxxx
(x) 000-000 0000
(x) 000-000-0000
-----------------------------------------------------------------------------
ICN Capital Ltd. 00 Xxxxx Xxxxxxxx
Xxxxxxx, Xxxx xx Xxx
Xxxxxx Xxxxxxx
0X0 0XX
Attn: Xxx Xxxxxxxxx
(p)011-44-1624-623911
(f)011-44-1624-677313
-----------------------------------------------------------------------------
17
SCHEDULE B
TO
PLEDGE AND SECURITY AGREEMENT
LIENS
The Uniform Commercial Code index maintained by the Texas Secretary of State
reflects the following effective filings regarding IP AXESS:
1. UCC Financing Statement Number 01-00014861 filed on January 22,
2001 at 08:00 A.M. The secured party is listed as The Manifest
Group, 000 X. Xxxxxxxx, Xxxxxxxx, Xxxxxxxxx 00000-0000.
The Uniform Commercial Code index maintained by the Texas Secretary of State
reflects the following effective filings regarding DATA RACE INC:
1. UCC Financing Statement Number 96-00248283 filed on December 16,
1996 at 08:00 A.M. The secured party is listed as Imperial Bank,
000 Xxxxxxx Xxxxxxx, Xxx Xxxx, Xxxxxxxxxx 00000.
2. UCC Financing Statement Number 00-00523541 filed on June 16, 2000
at 08:00 A.M. The secured party is listed as Ameritech Credit
Corporation, 0000 X. Xxxx Xxxx, Xxxxxxx Xxxxxxx, Xxxxxxxx 00000.
3. UCC Financing Statement Number 00-00540732 filed on July 11, 2000
at 08:00 A.M. The secured party is listed as NEC America, Inc.,
000 Xxxxx X. Xxxx Xxxxxxxxx, Xxxxxxx, Xxx Xxxxxx 00000.
18
