SECURITY AGREEMENT
1. DATA NATIONAL CORPORATION (hereinafter called "Debtor"), whose
address is 11415 West I-70 Frontage Road North, Wheat Ridge, Colorado 80033,
for value received, hereby grants to Norwest Business Credit, Inc., a
Minnesota corporation (hereinafter called "Secured Party"), whose address is
1740 Broadway, Denver, Colorado 80274-8625, a security interest in the
"Collateral" (as hereinafter defined) to secure all obligations of the Debtor
under a guaranty (hereinafter called the "Guaranty") entered into by Debtor
in favor of Secured Party to guarantee any and all obligations of Service
Business Systems, Inc., a Colorado corporation and subsidiary of Debtor
("SBS") to Secured Party, all obligations of Debtor hereunder, and in the
protection, maintenance and liquidation of the security interests hereby
granted, with interest at the maximum legal rate on such costs, expenses,
advances and liabilities, and all other obligations of Debtor to the Secured
Party however created, arising or evidenced, whether direct or indirect,
absolute or contingent, now or hereafter existing, due or to become due.
The Guaranty, the SBS Note and all other obligations secured hereby are
herein collectively called the "Liabilities".
2. The property (herein called the "Collateral") in which the
security interests are granted is all of the Debtor's property described
below, together with all proceeds and products therefrom:
(a) All inventory, raw materials, work in process and supplies now
owned or hereafter acquired; and
(b) All equipment and machinery whether now owned or hereafter
acquired;
(c) All accounts, and each and every right of Debtor to the payment
of money, whether such right to payment now exists or hereafter
arises, whether such right to payment arises out of a sale, lease
or other disposition of goods or other property, out of a
rendering of services, out of a loan, out of the overpayment of
taxes or other liabilities, or otherwise arises under any contract
or agreement, whether such right to payment is created, generated
or earned by Debtor or by some other person who subsequently
transfers such person's interest to Debtor, whether such right to
payment is or is not already earned by performance and howsoever
such right to payment may be evidenced, together with all other
rights and interests (including all liens and security interests)
which Debtor may at any time have by law or against any property
of such account debtor or other obligor; all including but not
limited to all present and future accounts, contract rights,
loans and obligations receivable, chattel papers, bonds, notes
and other debt instruments, tax refunds and rights to payment in
the nature of general intangibles; and
(d) All general intangibles of Debtor whether now owned or hereafter
acquired, including (without limitation) all present and future
patents, patent applications, copyrights, trademarks, trade names,
trade secrets, customer or supplier lists and contracts, manuals,
operating instructions, permits, franchises, the right to use
Debtor's name, and the goodwill of Debtor's business.
3. Debtor represents and warrants to, and covenants and agrees with,
the Secured Party as follows:
(a) The Collateral will be kept at the address of Debtor set forth
above unless the Secured Party shall otherwise consent in
writing.
(b) Debtor shall not conduct business under any name other than that
given above, nor change or reorganize the type of business entity
under which it does business without the prior written consent of
the Secured Party.
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(c) Debtor has full title to the Collateral and will at all times keep
the Collateral free of all liens and claims whatsoever, other than
the security interest granted hereunder and a second priority
security interest granted pursuant to that certain Amended and
Restated Promissory Note dated January 3, 1997 by Debtor in favor
of Ray E. Dillon, Jr. and Ray E. Dillon, III in the original
principal amount of $551,400.
(d) Debtor will not sell, transfer, lease or otherwise dispose of
any of the Collateral or any interest thereon, without the prior
written approval of the Secured Party, except that Debtor may
sell the inventory listed in the ordinary course of business on
customary terms and at usual prices, until advised otherwise by
Secured Party.
(e) No financing statement covering any of the Collateral is on file
in any public office and Debtor will, from time to time on
request of the Secured Party, execute such financing statement
and other documents (and pay the costs of filing or recording the
same in all public offices deemed necessary by the Secured Party)
and do such other acts and things, and pay the cost thereof, as
the Secured Party may request, to establish, maintain,
perfect, extend, modify or terminate the security interests
granted hereunder, including, without limitation, depositing with
the Secured Party any certificate of title issuable with respect
to any of the Collateral and noting the security interest granted
hereunder thereon.
(f) Debtor shall at all times keep the Collateral in first class
order and repair, pay promptly all taxes, judgments or charges of
any kind levied or assessed thereon, and keep current all rent
due on the premises where the Collateral is located.
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(g) Debtor shall, at all times, maintain insurance on all Collateral
against such hazards and in such amounts and with such companies
as the Secured Party may demand, all such insurance policies to
be in the possession of the Secured Party and to contain a
lender's loss payable clause naming the Secured Party in an
amount satisfactory to the Secured Party. Debtor hereby assigns
to the Secured Party any proceeds of such policies and all
unearned premiums thereon and authorizes and empowers the Secured
Party to collect such sums and to execute and endorse in Debtor's
name all proofs of loss, drafts, checks and any other documents
necessary to accomplish such collections, and any persons or
entities making payments to the Secured Party under the terms of
this paragraph are hereby relieved absolutely from any obligation
to see to the application of any sums so paid.
(h) The Collateral, whether fixed to realty or not, shall remain
personal property.
(i) The Secured Party may examine and inspect the Collateral or any
portion thereof, wherever located, at any reasonable time or
times.
4. The Secured Party may, from time to time, at its option,
perform any agreement of Debtor hereunder which Debtor shall fail to perform
and take any other action which the Secured Party deems necessary for the
maintenance or preservation of any of the Collateral or its interest
therein, and Debtor agrees to forthwith reimburse the Secured Party for all
expenses of the Secured Party in connection with the foregoing, together with
interest thereon at the maximum legal rate from the date incurred until
reimbursed by Debtor.
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5. If the Collateral, or any part thereof, is repossessed by the
Secured Party, Debtor agrees to send notice by registered or certified mail
to the Secured Party within 24 hours thereafter if Debtor claims that any
article not constituting a part of the Collateral was contained therein at
the time of repossession, and agrees that failure to do so shall be a waiver
of, and a bar to, any subsequent claim therefor.
6. The occurrence of any of the following events shall constitute a
default (herein called a "Default") hereunder:
(a) Nonpayment when due of any amount payable on any of the
Liabilities or failure to perform any agreement of Debtor
contained herein or in the Guaranty;
(b) Any statement, representation or warranty of Debtor herein or any
other writing at any time furnished by Debtor to the Secured Party
is untrue in any material respect as of the date made;
(c) The Debtor shall become insolvent or unable to pay debts as they
mature or makes an assignment for the benefit of creditors, or any
proceedings are instituted by or against any obligor alleging that
such obligor is insolvent or unable to pay debts as they mature;
(d) Entry of any judgments against the Debtor in an amount in excess
of $35,000;
(e) Dissolution, merger or consolidation or transfer of a substantial
part of the property of the Debtor;
(f) Appointment of a receiver for the Collateral or any property in
which Debtor has an interest; and
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(g) Seizure of the Collateral.
When a Default shall have occurred, all obligations of the Debtor under
the Guaranty and all other Liabilities (notwithstanding any provision
thereof) shall, at the option of the Secured Party, and without demand or
notice of any kind, become immediately due and payable and the Secured Party
may exercise from time to time any rights and remedies available to it under
applicable law. Debtor agrees, in the case of a Default, to assemble and
make available at its expense all of the Collateral at a convenient place
acceptable to the Secured Party and to pay all costs of the Secured
Party of collection of the Guaranty and all other Liabilities, enforcement
of rights hereunder, including reasonable attorney's fees and legal expenses,
and expenses of any repairs to any realty or other property to which any of
the Collateral may be affixed or be a part. If any notification of any
intended disposition of any of the Collateral is required by law, such
notification, if mailed, shall be deemed reasonably and properly given if
mailed at least five days before such disposition, postage prepaid, addressed
to Debtor either at the address shown hereinabove, or at any other address of
Debtor appearing on the records of the Secured Party and in reference to a
private sale, need only state that the Secured Party intends to negotiate
such a sale. Disposition of Collateral shall be deemed commercially
reasonable if made pursuant to a public offering advertised at least twice in
a newspaper of general circulation in the community where the Collateral is
located or by a private sale for a sum equal to or in excess of the
liquidation value of the Collateral as determined by the Secured Party. Any
proceeds of the disposition of the Collateral may be applied by the Secured
Party to the payment of expenses in connection with the Collateral, including
reasonable attorney's fees and legal expenses, and any balance of such
proceeds may be applied by the Secured Party toward the payment of such of
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the Liabilities, and in such order of application, as the Secured Party may
from time to time elect.
7. (a) Time is of the essence of this Agreement.
(b) This Agreement shall be governed by and construed in accordance
with the laws of the State of Colorado.
(c) No waiver of any breach of any covenant, agreement or
undertaking contained herein shall operate as a waiver of any
subsequent breach of the same covenant, agreement or
undertaking or as a waiver of any breach of any other
covenant, agreement or undertaking. In the case of a breach
by any party of any covenant, agreement or undertaking,
the nonbreaching party may nevertheless accept from the other,
any payment or performance without waiving its right to
exercise any right or remedy provided herein or otherwise,
with respect to any such breach which was in existence at the
time such payment or performance were accepted by it. No
failure of any party to exercise any power given herein or to
insist upon strict compliance with any covenant, agreement or
undertaking contained herein, and no custom or practice which
varies from the terms hereof, shall constitute a waiver of
such party's right to demand exact compliance with the terms
hereof. The waiver by any party of a breach of any covenant,
agreement or undertaking contained herein shall be made only
by a written waiver in each case, and no such waiver shall
operate or be construed as a waiver of any prior or subsequent
breach.
(d) If any provision of this Agreement shall, to any extent, be
held invalid, illegal or unenforceable, in whole or in part,
the validity, legality, and enforceability of the remaining
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part of such provision, and the validity, legality and
enforceability of the other provisions hereof, shall not be
affected thereby. Any provision of this Agreement which is
held invalid, illegal or unenforceable in any jurisdiction
shall not be deemed invalid, illegal or unenforceable in any
other jurisdiction.
(e) This Agreement may not be amended, changed, modified, altered
or terminated except in writing executed by all parties with
the same formality as this Agreement is executed.
(f) Except as otherwise expressly provided herein, all rights,
powers and privileges conferred hereunder upon any party shall
be cumulative and not restrictive of those given by law. No
remedy herein conferred is exclusive of any other available
remedy, but each and every such remedy shall be cumulative and
shall be in addition to every other remedy given by agreement
or now or hereafter existing at law or in equity or by statute.
(g) This Agreement shall be binding upon, shall inure to the
benefit of, and shall be enforceable by and against all the
parties and their respective heirs, legal representatives,
successors and assigns. Nothing in this Agreement, expressed
or implied, is intended to or shall confer upon any person
other than the parties, and their respective heirs, legal
representatives, successors and assigns, any rights, remedies,
obligations or liabilities.
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(h) Use of the terms "herein", "hereby", "hereunder", "hereof',
"hereinbefore", "hereinafter", and other equivalent words
refer to this Agreement in its entirety and not solely to the
particular portion of the Agreement in which such word is
used. Reference to "this Article", "this Section", or a
similar reference to a specific part of this Agreement shall
refer to the particular Article, Section or specific part in
which such reference appears. Wherever used herein, any
pronoun shall be deemed to include both singular and plural
and all genders.
(i) Debtor will execute, deliver, acknowledge and supply such
further documents, instruments and assurances as shall be
reasonably necessary or appropriate to carry out the full
intent and purposes of this Agreement.
IN WITNESS WHEREOF, the Debtor has executed this Security Agreement as
of the 3rd day of January, 1997.
(Registrant) DATA NATIONAL CORPORATION
BY(Signature) /s/Donald V. Warriner
(Name and Title) Donald V. Warriner,
President and CEO
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