Exhibit 10.37
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (the "Agreement") is made and
entered into this 26th day of July, 2001, between KLT Telecom
Inc., a Missouri corporation ("Secured Party"), and Digital
Teleport, Inc., a Missouri corporation ("Debtor") with reference
to the following:
WHEREAS, of even date herewith, the parties hereto have
executed an Emergency Promissory Note in the principal amount of
Five Million Five Hundred Thousand Dollars ($5,500,000.00) (the
"Emergency Note"); and
WHEREAS, execution of this Agreement is a condition to
the advance under the Emergency Note.
NOW THEREFORE, in consideration of the mutual covenants
and obligations set forth herein and for other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, and intending to be legally bound, Debtor and
Secured Party agree as follows:
1. COLLATERAL. Debtor hereby grants to Secured Party a security
interest in all of the following property in which Debtor now or
hereafter has rights and wherever located:
a. all machinery, equipment, mechanisms, instrumentation, and
the attachments, parts and accessories thereto and software
embedded therein; and
b. any and all additions, accessions, replacements and
substitutions to or for any of the foregoing and any and all
proceeds and products of any of the foregoing.
2. LIABILITIES AND OBLIGATIONS SECURED. The security interest
described herein is granted to Secured Party to secure the
performance and payment of any and all obligations and
liabilities of Debtor to Secured Party: (a) under that certain
Emergency Term Promissory Note dated of even date herewith (the
"Emergency Note") in the principal amount of $5,500,000.00; (b)
that may exist in the future under any promissory notes or
advances that specifically indicate that they are secured by this
Agreement; (c) that are renewals or extensions thereof and
substitutions therefore; (d) that Secured Party may advance or
spend for the maintenance or preservation of the Collateral; and
(e) under this Agreement (such obligations and liabilities being
referred to herein as the "Secured Obligations").
3. REPRESENTATIONS AND WARRANTIES OF DEBTOR. Debtor
represents, warrants, covenants and agrees as follows:
a. This Agreement is valid and binding upon Debtor and is
enforceable against Debtor and the Collateral in accordance with
the terms herein.
b. The Debtor's exact legal name is as set forth in the first
paragraph of this Agreement.
c. the Debtor's state of incorporation is Missouri (the "Debtor
State").
d. Debtor has the power and authority to own and possess,
and/or grant a security interest in the Collateral.
e. The Collateral will be used primarily for business purposes
other than farming.
f. The Collateral will not be misused, abused, wasted or
allowed to deteriorate, except for the ordinary wear and tear of
its primary use. Debtor will notify Secured Party immediately,
orally and in writing, of any event causing material loss or
depreciation in value of the Collateral and the amount of such
loss or depreciation and of any other event that materially
affects the Collateral.
g. No financing statements covering any of the Collateral are
on file in any public office except as may show Secured Party as
secured party, except for those certain financing statements
filed in the offices of the Missouri Secretary of State on April
4, 1997 and June 24, 1997, as instruments number 2774984 and
2803564, respectively, naming IXC Carrier Inc. as secured party .
h. Except for the security interest granted hereby, and the
security interests or leasehold interests of IXC Carrier Inc. and
Union Electric Company disclosed by Debtor to Security Party
prior to the execution of this Agreement, Debtor owns the
Collateral free from any prior or adverse lien, charge, security
interest or encumbrance.
i. All financial information with respect to Debtor that has
been or is hereafter furnished by or on behalf of Debtor to
Secured Party is or will be, as of the date furnished to Secured
Party, accurate, correct and complete in all material respects.
j. Debtor is a Missouri corporation in good standing.
4. COVENANTS OF DEBTOR. Debtor shall:
a. not reincorporate, change its state of incorporation from
the Debtor State, change its name, change its form of existence
or structure, or otherwise change its "location" as that term is
defined in revised article 9 of the Missouri Uniform Commercial
Code, without first providing six (6) months written notice to
Secured Party of any such change or modification;
b. maintain insurance at all times with respect to the
Collateral against risks of fire (including without
limitation so-called extended coverage), theft and such
other risks, on such terms, in such form and amounts, and
for such periods and written by such
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companies as may be satisfactory to Secured Party, such
insurance to be payable to Secured Party and Debtor as their
respective interests may appear. All such policies of
insurance shall provide for at least 30 days' prior written
notice of cancellation or modification to Secured Party.
Debtor shall furnish Secured Party with certificates or
other evidence satisfactory to Secured Party of compliance
with all of the foregoing insurance provisions. Secured
Party is hereby granted authority to act as attorney for
Debtor in obtaining, adjusting and settling any such
insurance and endorsing any drafts issued in connection
therewith. Secured Party may apply the proceeds of any such
insurance toward payment of any of the Secured Obligations,
whether or not the same is due and in any order of priority;
c. execute in form satisfactory to Secured Party one or more
financing statements pursuant to the applicable Uniform
Commercial Code and such other documents and instruments as
Secured Party may from time to time request to evidence,
establish, perfect, continue the perfection of, or protect, the
security interest granted herein;
d. not permit any of the Collateral to become affixed to any
real estate in any manner that would change its character from
that of personal property to real property or a fixture; and
e. defend the Collateral against all claims and demands of all
persons at any time claiming the same or any interest therein.
5. UCC-1 FINANCING STATEMENTS.
a. Debtor hereby authorizes Secured Party to file or record one
or more financing statements in any location and in any
jurisdiction where Secured Party deems it necessary or
appropriate to perfect or give notice of the security interests
granted herein.
b. If applicable law requires Debtor to sign any financing
statement for filing or recording purposes, Debtor hereby
appoints Secured Party and any representative of Secured Party as
Debtor's attorney and agent, with full power of substitution, to
sign or endorse Debtor's name on any such financing statement,
and Debtor authorizes Secured Party to file or record the same.
Secured Party shall provide a copy of such financing statement to
Debtor.
c. Debtor shall pay the cost of filing or recording the
financing statements and other documents referred to above in
this paragraph and this Security Agreement in all public offices
where filing or recording is deemed by Secured Party to be
necessary or desirable.
d. A photographic or other reproduction of this Security
Agreement or any financing statement related hereto shall be
sufficient as a financing statement in any jurisdiction where
filing or recording of such a reproduction is permitted by law.
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6. INSPECTIONS. Secured Party may examine and inspect the
Collateral at any reasonable time or times wherever it is
located. Secured Party may also examine and inspect any other
property or premises of Debtor and Debtor's books and records
during normal business hours.
7. ATTENDANCE AT BOARD OR COMMITTEE MEETINGS. Secured Party
(or its representative) shall have the right to attend all
meetings of the board of directors of Debtor, and of each
committee of the board of directors (the board of directors and
such committees are hereinafter collectively referred to as the
"Board") in a nonvoting observer capacity, to receive notice of
such meetings and to receive the information provided by the
Debtor to the Board; provided, however, that the Debtor may
require as a condition precedent to Secured Party's rights under
this paragraph that each person proposing to attend any meeting
of the Board and each person to have access to any of the
information provided by the Debtor to the Board shall agree to
hold in confidence with respect to all information so received
during such meetings or otherwise; and, provided further, that
the Debtor reserves the right not to provide information and to
exclude Secured Party (or its representative) from any meeting or
portion thereof if delivery of such information or attendance at
such meeting by Secured Party would adversely affect the attorney-
client privilege between the Debtor and its counsel.
8. EVENT OF DEFAULT. The term "Event of Default" as used
herein shall mean any one or more of the following events:
a. Default in the payment or performance of any of the Secured
Obligations when due, including any payment under the Emergency
Note;
b. Default in the performance of or compliance with any
covenant or agreement of Debtor contained herein or in any other
agreement or instrument evidencing or relating to any of the
Secured Obligations.
c. If any warranty, representation or statement made or
furnished to Secured Party by or on behalf of Debtor, including
without limitation any statement made by Debtor in any financial
or credit statement or application for credit made prior to the
date of this Security Agreement, proves to have been false or
misleading in any respect when made or furnished;
d. Secured Party shall receive at any time a report indicating
that Secured Party's security interests granted hereunder in the
Collateral are not prior in time and right to all other security
interests or other interests indicated in such a report.
e. the insolvency, suspension of active business or business
failure of or by Debtor;
f. the appointment of a receiver for, by, or against Debtor or
any part of its property;
g. the assignment for the benefit of creditors of Debtor;
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h. the commencement of a proceeding under any bankruptcy,
insolvency, reorganization, arrangement or other law relating to
the relief of debtors by or against Debtor; PROVIDED, HOWEVER,
that if any such appointment or proceeding is initiated without
the consent or application of Debtor, such appointment or
proceeding shall not constitute an Event of Default until the
same shall have remained in effect for 30 days;
i. the acceleration of the maturity of any liability or
obligation of Debtor to anyone other than Secured Party;
j. the loss, theft, damage, destruction or danger of misuse or
confiscation of any material part of the Collateral;
k. the making of any levy, seizure or attachment of or on the
Collateral or any portion thereof;
l. the issuance of any injunction with respect to the use or
sale of the Collateral or any portion thereof;
m. the service of any warrant of attachment or garnishment or
the making or issuance of any lien, levy or similar process on or
with respect to Debtor.
n. the failure by Debtor to satisfy any final judgment, decree
or order against Debtor which has not been stayed or appealed
within 30 days after entry thereof if, at the end of such 30-day
period, there shall be undischarged any final judgment or
judgments against Debtor for the payment of money which shall
alone or in the aggregate exceed $10,000.00; or
o. if Secured Party determines that the Secured Obligations
are inadequately secured and that the prospect of the payment or
performance of any of the Secured Obligations is impaired.
9. NOTIFICATION OF EVENT OF DEFAULT. Debtor shall immediately
notify Secured Party of the occurrence of any of the foregoing
Events of Default.
10. SECURED PARTY'S RIGHTS AND REMEDIES UPON AN EVENT OF
DEFAULT. Upon the occurrence of an Event of Default and at any
time thereafter, in addition to any other rights and remedies of
Secured Party however arising, Secured Party shall have the right
to:
a. notify the obligors on any or all proceeds of the Collateral
consisting of accounts, chattel paper, general intangibles,
contract rights, instruments, insurance policies, things in
action or the like to make payment thereon directly to Secured
Party, and Secured Party may demand, collect, receipt for,
settle, compromise, adjust, sue for, foreclose or realize upon or
with respect to such Collateral;
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b. take control of any or all proceeds constituting a part of
the Collateral.
c. without notice or demand, declare any or all of the Secured
Obligations immediately due and payable, notwithstanding any
provision to the contrary contained in any agreement or
instrument evidencing or relating to any of the Secured
Obligations;
d. set off any deposits or other moneys due from Secured Party
to Debtor against any of the Secured Obligations, whether or not
the same is due and in any order of priority;
e. take possession of the Collateral;
f. require Debtor to assemble the Collateral and make it
available to Secured Party at a place to be designated by Secured
Party which is reasonably convenient to both parties, or, if
Debtor fails or refuses to so assemble the Collateral, Secured
Party may, and Debtor hereby authorizes and empowers Secured
Party to, enter upon the premises wherever the Collateral may be
in order to remove the same, and employ process of law (such as
replevin or receivership) to obtain possession of the Collateral
without notice to Debtor or an opportunity to be heard, such
notice being specifically waived by Debtor;
g. sell lease, or otherwise dispose of the Collateral, or any
portion thereof (the "Foreclosure Sale").
11. FORECLOSURE SALE.
a. At any Foreclosure Sale, Secured Party may sell the
Collateral without giving any warranties as to the Collateral.
Secured Party may specifically disclaim any warranties of title,
possession, quiet enjoyment and the like without in any way
affecting the commercial reasonableness of any such sale.
b. If Secured Party sells any of the Collateral upon credit,
Debtor will be credited only with payments actually made by the
purchaser, received by Secured Party, and applied to the
indebtedness of the purchaser. If the purchaser fails to pay for
the Collateral, Secured Party may resell the Collateral and
Debtor shall be credited with the proceeds of this subsequent
sale.
c. If Secured Party purchases the Collateral at a Foreclosure
Sale, the parties agree that the amount bid by Secured Party (the
"Credit Bid") shall be deemed to be commercially reasonable if it
is based on the lesser of the then owing Secured Obligation or a
forced-liquidation appraisal conducted either internally by
Secured Party or by an appraiser of Secured Party's choice. The
parties hereto agree that such a Credit Bid shall not be deemed
to be significantly below the range of proceeds that would have
been realized from a sale to an independent third person.
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12. COSTS OF COLLECTION. Secured Party's costs of collection,
enforcement and prosecution of its rights and remedies hereunder
or otherwise arising, whether or not involving a case, action or
other proceeding before any state or federal court or other body,
including without limitation attorneys' fees and expenses, shall
be borne solely by Debtor.
13. RISK OF LOSS. Debtor bears all risk of loss of, and with
respect to, the Collateral.
14. WAIVERS. Debtor: (a) waives the right to direct the
application of any and all payments at any time or times
hereafter received by Secured Party on account of the Secured
Obligations, (b) agrees that Secured Party shall have the
continuing exclusive right to apply and reapply any and all such
payments in such manner as Secured Party may deem advisable,
notwithstanding any entry by Secured Party upon any of its books
and records; and (c) waives the right to seek a marshaling of any
of the Collateral.
15. PURSUIT OF COLLATERAL NOT REQUIRED. Repossession and/or
liquidation of the Collateral are not a condition precedent to a
suit for an in personam judgment against Debtor with respect to
the Secured Obligations. In its sole and absolute discretion,
Secured Party shall have the right to realize on none, a portion
of, or all of the Collateral in any manner or order it deems
appropriate. Any failure of Secured Party to pursue collection
from the Collateral shall in no way operate as a release,
impairment or reduction of the obligation of Debtor hereunder and
shall not be a defense by Debtor in any action brought by Secured
Party against Debtor. Secured Party shall have no duty to: (i)
to repossess and/or liquidate the Collateral; (ii) collect from
the Collateral or any income therefrom, including the proceeds of
any insurance, or (iii) pursue collection of the Secured
Obligations from the Collateral. .
16. SUCCESSORS AND ASSIGNS. This Security Agreement shall
inure to the benefit of and shall be binding upon Debtor and
Secured Party and their respective successors and assigns, and
further shall bind all persons who become bound as a debtor to
this Agreement.
17. NOTICES. Any demand upon or notice or other communication
to Debtor shall be effective if delivered by hand delivery or
deposited in the mails, postage prepaid, addressed to Debtor at
the address of Debtor set forth below, or, if Debtor has notified
Secured Party in writing of a change of address, to the last
address of which Secured Party has been so notified.
18. GOVERNING LAW. This Security Agreement shall be governed by
and construed in accordance with the laws of the State of
Missouri.
19. SURVIVAL. If any provision of this Security Agreement is
contrary to, prohibited by or deemed invalid under applicable
laws or regulations, such provision shall be inapplicable and
deemed omitted to the extent so contrary, prohibited or invalid,
but the remainder hereof shall not be invalidated thereby and
shall be given effect so far as possible. If any provision of
this Security Agreement is contrary to, prohibited by or deemed
invalid under the applicable laws or
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regulations of any jurisdiction, such provision shall not thereby
be rendered invalid in any other jurisdiction.
20. MULTIPLE COUNTERPARTS. This Security Agreement may be
executed in any number of counterparts, each of which shall be
deemed to be an original and all of which shall constitute but
one and the same instrument.
21. FACSIMILE EXECUTION. This Agreement may be executed by
facsimile signatures which shall be deemed to have the same force
and effect as original signatures.
22. HEADINGS. The headings used in this Security Agreement are
for convenience of reference only and shall in no way define,
limit or describe the scope or intent of any provision of this
Security Agreement.
23. NO ORAL AGREEMENTS. [IN MISSOURI]: ORAL AGREEMENTS OR
COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR TO FORBEAR FROM
ENFORCING REPAYMENT OF A DEBT INCLUDING PROMISES TO EXTEND OR
RENEW SUCH DEBT ARE NOT ENFORCEABLE. TO PROTECT THE PARTIES
HERETO FROM MISUNDERSTANDING OR DISAPPOINTMENT, ANY AGREEMENTS
REACHED COVERING SUCH MATTERS ARE CONTAINED IN THIS WRITING WHICH
IS THE COMPLETE AND EXCLUSIVE STATEMENT OF THE AGREEMENT BETWEEN
THE PARTIES HERETO, EXCEPT AS SUCH PARTIES MAY LATER AGREE IN
WRITING TO MODIFY IT. [In Kansas]: THIS AGREEMENT IS A FINAL
EXPRESSION OF THE AGREEMENT BETWEEN THE PARTIES AND SUCH WRITTEN
AGREEMENT MAY NOT BE CONTRADICTED BY EVIDENCE OF ANY PRIOR ORAL
AGREEMENT OR OF A CONTEMPORANEOUS ORAL AGREEMENT BETWEEN THE
PARTIES.
24. WAIVER OF JURY TRIAL. THE PARTIES HERETO MUTUALLY,
EXPRESSLY, IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY
FOR ANY PROCEEDINGS ARISING OUT OF, UNDER OR IN CONNECTION WITH
THIS AGREEMENT, OR ANY OTHER DOCUMENT ENTERED INTO BY DEBTOR AND
SECURED PARTY IN CONNECTION WITH THIS TRANSACTION, OR ANY CONDUCT
RELATING TO THIS AGREEMENT OR THE LOANS MADE HEREUNDER OR THE
DEBTOR-CREDITOR RELATIONSHIP ESTABLISHED HEREBY, INCLUDING WITH
REGARD TO ANY COUNTERCLAIMS, CAUSES OF ACTION, AND DEFENSES
WHETHER BASED IN CONTRACT OR TORT OR OTHERWISE. THIS WAIVER IS
GRANTED IN THE INTEREST OF AVOIDING DELAYS AND EXPENSES
ASSOCIATED WITH JURY TRIALS. THE PARTIES HERETO ACKNOWLEDGE
THAT THEY HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT IN PART
BY THE PROVISIONS OF THIS PARAGRAPH.
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IN WITNESS WHEREOF, the parties hereto have executed
this Security Agreement on the day and year first above written.
SECURED PARTY:
By: /s/Mark R. Schroeder
Name: Mark R. Schroeder
Title: VP
Address: 10740 Nall #230
Overland Park, KS 66209
DEBTOR:
By: /s/Gary W. Douglass
Name: Gary W. Douglass
Title: SVP & CFO
Address: 8112 Maryland Ave.
St. Louis, MO 63105
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