EXHIBIT 10.40
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (this "Agreement"), dated as of April 5 , 2000, is
made and entered into by and among EGLOBE/COAST, INC., a corporation organized
under the laws of Delaware (the "Company"), EXTL INVESTORS, LLC, a limited
liability company organized under the laws of Nevada ("EXTL Investors"), SPECIAL
INVESTMENT RISKS, LLC, a limited liability company organized under the laws of
Nevada ("Special Investment" and together with EXTL Investors, the "Secured
Parties") and EXTL INVESTORS, LLC, as collateral agent (with its successors, the
"Collateral Agent").
WITNESSETH:
WHEREAS, eGlobe Financing Corporation, a Delaware corporation ("eGlobe
Financing") and a wholly owned subsidiary of eGlobe, Inc., a Delaware
corporation (the "Parent"), IDX Financing Corporation, a Delaware corporation
and a wholly owned subsidiary of IDX International, Inc., a wholly owned
subsidiary of the Parent ("IDX Financing"), and Telekey Financing Corporation, a
Delaware corporation and a wholly owned subsidiary of Telekey, Inc., a wholly
owned subsidiary of the Parent ("Telekey Financing" and together with eGlobe
Financing and IDX Financing, the "Financing Companies"), issued and sold to EXTL
Investors as of June 30, 1999, and EXTL Investors purchased from the Financing
Companies, the Financing Companies' 5% Secured Notes (the "Secured Notes") and
the Financing Companies executed and delivered a revolving note based on the
balance of accounts receivable (the "A/R Note"), pursuant to the terms and
conditions of the Loan and Note Purchase Agreement dated April 9, 1999 by and
among eGlobe Financing, the Parent, and EXTL Investors, as amended by a letter
agreement dated June 16, 1999, Amendment No. 1 to the Loan and Note Purchase
Agreement dated as of June 30, 1999 and Amendment No. 2 to the Loan and Note
Purchase Agreement dated as of the date hereof (as amended, the "Loan and Note
Purchase Agreement"); and
WHEREAS, on December 2, 1999, Coast International, Inc. ("Coast") merged
with and into the Company pursuant to the terms of an Agreement and Plan of
Merger dated November 29, 1999 among Parent, the Company, Coast and the
stockholders of Coast, as a result of which the Company was the surviving
company and remained a wholly owned subsidiary of Parent (the "Coast Merger");
WHEREAS, prior to the Coast Merger and pursuant to a certain Revolving
Credit Note Agreement dated March 5, 1999, Special Investment has lent to Coast
an aggregate principal amount of $3,250,000 as evidenced by a promissory note
(the "Special Investment Note"); and
WHEREAS, in connection with the consummation of the Coast Merger, the
Company assumed Coast's obligations to repay all amounts due and payable under
the Special Investment Note, whether at maturity, by acceleration or otherwise,
in accordance with the terms of the Special Investment Note; and
WHEREAS, the Company is guaranteeing the payment and performance by the
Financing Companies of obligations under the Loan and Note Purchase Agreement as
more fully set forth in the Guaranty dated as of the date hereof for the benefit
of EXTL Investors (the "Guaranty"); and
WHEREAS, in connection with the Company's assumption of the obligations
under the Special Investment Note and EXTL Investors' waiver of its right under
the Loan and Note Purchase Agreement to cause the Parent to convey to one of the
Financing Companies the assets acquired in the Coast Merger, the Secured Parties
desire to obtain from the Company and the Company desires to provide to the
Secured Parties a security interest in the collateral more particularly
described below; and
WHEREAS, capitalized terms used in this Agreement and not otherwise defined
herein shall have the meanings given such terms in the Loan and Note Purchase
Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. GRANT OF SECURITY INTEREST. For the purpose of securing the
Obligations (as defined below), the Company hereby grants to the Secured Parties
for their ratable benefit (subject to Section 6(a) hereof) a security interest
in all equipment and other tangible personal property of the Company which is
movable or which are fixtures and which are used or bought for use primarily in
the Company's business, whether now owned or hereafter acquired and wherever
located, together with all proceeds and products thereof and accessions
therefor, including without limitation the equipment and other property
described on Schedule 1 hereto, in each case only to the extent that the grant
by the Company of a security interest pursuant to this Agreement would not
violate any Material Contract (as defined in the Loan and Note Purchase
Agreement) (collectively, the "Collateral"); provided, however, that should the
prohibition on the grant of a security interest under a Material Contract be
extinquished, such security interest shall immediately attach to such
Collateral.
2. THE OBLIGATIONS. The obligations secured hereby shall include (a) the
due and punctual payment of all obligations under the Guaranty, (b) the due and
punctual payment (pursuant to the terms of the Special Investment Note) of the
principal, interest and any other amounts payable in respect of the Special
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Investment Note, (c) all attorney's fees, court costs and expenses of whatever
kind incident to the collection of any of said indebtedness or other obligations
and the enforcement and protection of the security interest created hereby and
(d) the performance of all obligations under the Loan and Note Purchase
Agreement where the failure to perform would constitute an Event of Default
thereunder (collectively, the "Obligations").
3. PRIORITY OF SECURITY INTERESTS IN THE COLLATERAL.
(a) Notwithstanding anything herein to the contrary, and irrespective
of the time, order or method of attachment or perfection of the liens and
security interests granted in the Collateral, or the time or order of filing or
recording of financing statements or other liens, mortgages or security
interests, and irrespective of anything contained in any filing or agreement to
which the Secured Parties may now or hereafter be a party, the Secured Parties
hereby agree that the respective liens and security interests of the Secured
Parties in the Collateral shall be equal and none of the Secured Parties shall
have any priority over the other with regard to the Collateral, except in
accordance with the provisions of this Agreement.
(b) The foregoing pari passu nature of the Secured Parties' interests
in the Collateral shall continue in full force and effect notwithstanding any
one or more of the following: (1) any release by any Secured Party of all or any
part of the Collateral now or hereafter subject to the respective liens of the
Secured Parties, except with respect to any Collateral so released; (2) any
Insolvency Proceeding (as defined below) affecting the Company; (3) any change,
waiver, extension, compromise, settlement, indulgence, or other action or
omission in respect of the Obligations or the security interests in the
Collateral; (4) the supplementing, modification or amendment, whether material
or otherwise, of any of the instruments creating the Obligations or the Secured
Parties' interests in the Collateral; (5) the renewal, rearrangement,
modification, replacement, substitution, consolidation, extension or novation of
any of the Obligations or the Secured Parties' interests in the Collateral; and
(6) the fact that any Obligation owed to any Secured Party or any claim for such
Obligation is modified, subordinated, avoided or disallowed, in whole or in
part, in any Insolvency Proceeding. As used herein, "Insolvency Proceeding"
shall mean any insolvency or receivership proceeding, or any proceeding under
the Federal Bankruptcy Code, or any other proceeding under any other bankruptcy
or insolvency laws or other laws relating to the relief of debtors or the
readjustment, extension or composition of debts, and which is brought by or
against the Company and any assignment for the benefit of creditors or
agreements for forbearance, readjustment of indebtedness, collateral pooling,
liquidation, reorganization or similar arrangement, whether judicial or
non-judicial, for payment of debts.
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4. APPOINTMENT OF COLLATERAL AGENT. Each Secured Party, separately, does
hereby appoint EXTL Investors and EXTL Investors accepts such appointment, to
act as the Collateral Agent under this Agreement and to perform the duties of
the Collateral Agent described herein. EXTL Investors shall serve as the
Collateral Agent for so long as this Agreement remains in effect, unless EXTL
Investors resigns as Collateral Agent, in its sole discretion, by providing
prior written notice to Special Investment and to the Company. A resignation by
EXTL Investors as the Collateral Agent shall be effective immediately upon the
appointment of a replacement Collateral Agent as provided hereafter. In the
event of a resignation of EXTL Investors as Collateral Agent, EXTL Investors,
acting in its individual capacity, shall promptly appoint, a replacement to
serve as Collateral Agent. Upon the appointment of a successor Collateral Agent,
EXTL Investors shall have no further rights or obligations under this Agreement
other than as a Secured Party hereunder.
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents
and warrants as follows:
(a) Except as set forth on Schedule 1 hereto, the Company is the owner
of the Collateral and has good and marketable title to the Collateral free
and clear of any liens, security interests, claims and encumbrances except
for those in favor of the Secured Parties and those previously disclosed in
writing to the Secured Parties, contingent or otherwise.
(b) The addresses set forth on Schedule 1 hereto are all of the
locations of all Collateral.
(c) The execution and delivery of this Agreement and the financing
statements delivered in connection herewith by the Company do not conflict
with or violate any Law (including, without limitation, any judgment or
injunction) applicable to the Company or its assets or properties or any
contract or security agreement to which the Company is a party or by which
its assets or properties are encumbered.
6. COVENANTS. The Company covenants and agrees as follows:
(a) Except with the prior written consent of the Collateral Agent, the
Company will not grant or permit to exist any liens or security interests
other than (i) those created by this Agreement, (ii) Permitted Liens
pursuant to the Loan and Note Purchase Agreement, and (iii) Encumbrances
not prohibited by Section 4.9 of the Loan and Note Purchase Agreement, to
attach to any of the Collateral, nor permit any of the Collateral to be
levied upon under any legal or private process. To the extent that an item
of Collateral is subject to a Permitted Lien or an Encumbrance not
prohibited by such Section 4.9 of the Loan and Note Purchase Agreement, or
is included
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in Schedule 1 hereto as an exception pursuant to Section 3(a), the lien
created by this Agreement is intended to be junior in lien and effect to
such liens and encumbrances, but only if such junior lien is not prohibited
by the terms of any agreement relating to any such liens or encumbrances.
If any such agreement does prohibit such junior lien, then such item of
Collateral shall not be subject to the security interest contemplated by
this Agreement. The Company shall use all reasonable efforts to obtain such
consents, waivers or amendments as may be necessary or appropriate to
permit such junior lien, and upon obtaining the same to reflect that such
item of Collateral shall be subject to the security interest contemplated
by this Agreement. The Company shall promptly notify the Collateral Agent
of any default or alleged default by the Company under any lien prior to
the lien created by this Agreement on the Collateral, or any portion
thereof.
(b) The Company will not permit any of the Collateral to be removed
from the location specified on Schedule 1, except for temporary periods in
the normal and customary use thereof, without the prior written consent of
the Collateral Agent, and will permit the Collateral Agent to inspect the
Collateral at any reasonable time following reasonable advance notice from
the Collateral Agent to the Company.
(c) If any of the Collateral is equipment of a type normally used in
more than one state or country (whether or not actually so used), the
Company will contemporaneously herewith furnish the Collateral Agent a list
of the states and countries wherein such equipment is or will be used, and
hereafter will notify the Collateral Agent in writing of any other states
and countries in which such equipment is so used.
(d) The Company will not sell, exchange, lease or otherwise dispose of
any of the Collateral or any interest therein without the prior written
consent of the Collateral Agent, except for any items of Collateral which
become obsolete or which, in the Company's reasonable judgment, is no
longer useful in the conduct of the Company's business, or which is
replaced by other Collateral, unless such sale, exchange, lease or other
disposition is on an arm's length basis for fair value and in the ordinary
course of business.
(e) The Company will, in all material respects, maintain, preserve and
keep the Collateral (whether owned in fee or a leasehold interest) in good
repair and working order, reasonable wear and tear excepted, and from time
to time will make all necessary repairs, replacements, renewals and
additions so that at all times the economic efficiency thereof will be
maintained and will pay and discharge all taxes, levies and other
impositions levied thereon as well as the cost of repairs to or maintenance
of same. If the Company fails to pay such sums, the Collateral Agent may do
so for the
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Company's accounts and add the amount thereof to the other amounts secured
hereby.
(f) The Company will defend the Collateral against the claims and
demands of all persons.
(g) The Company will pay to the Secured Parties all amounts secured
hereby as and when the same shall be due and payable, whether at maturity,
by acceleration or otherwise, and such payments shall be made in accordance
with the terms of the Guaranty or the Special Investment Note, as the case
may be.
(h) The Company shall carry and maintain in full force and effect, at
all times with financially sound and reputable institutions, insurance in
such forms and amounts and against such risks as may be reasonable and
prudent in the circumstances for a company holding the assets it holds and
as may be required by applicable Laws. The Company assigns to the
Collateral Agent on behalf of the Secured Parties all right to receive
proceeds of insurance not exceeding the amounts secured hereby, directs any
insurer to pay all such proceeds directly to the Collateral Agent, and
appoints the Collateral Agent the Company's attorney in fact to endorse any
draft or check from such insurer made payable to the Company in order to
collect the benefits of such insurance. The Company will, to the extent
permitted by such insurance policies, add the Collateral Agent on behalf of
the Secured Parties as an additional insured thereunder. If an event of
default (as defined under the Secured Notes, the A/R Note and the Special
Investment Note to which a Secured Party is owed repayment) has occurred
and is continuing, any money received by the Collateral Agent under said
policies may be applied to the payment of any indebtedness secured hereby,
whether or not due and payable, otherwise said money shall be delivered by
the Collateral Agent to the Company for the purpose of repairing or
restoring the Collateral. If the Company fails to keep the Collateral
insured as required above, the Collateral Agent shall have the right to
obtain such insurance at the Company's expense and add the cost thereof to
the other amounts secured hereby.
(i) The Company will file, and pay all costs of filing, such
financing, continuation and termination statements with respect to the
security interests created hereby as the Collateral Agent may reasonably
request, and the Collateral Agent is authorized to do all things that it
deems necessary to perfect and continue perfection of the security
interests created hereby.
(j) The Company shall deliver to the Collateral Agent, on a monthly
basis, reports certified by its chief financial officer or treasurer
indicating whether any additional lien or security interest has been
created
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with respect to the Collateral, indicating the type of lien or security
interest and describing the obligation secured, or stating that no
additional lien has been created.
(k) The Company shall take or cause to be taken such further actions,
shall execute, deliver, and file or cause to be executed, delivered, and
filed such further documents and instruments, and shall obtain such
consents as may be necessary or as the Collateral Agent may reasonably
request to effectuate the purposes, terms, and conditions of this
Agreement.
7. RIGHTS AND REMEDIES WITH RESPECT TO THE COLLATERAL.
(a) The Secured Parties hereby agree that the Collateral Agent shall manage
the Collateral as the Collateral Agent, in its sole discretion, considers
appropriate under the circumstances and consistent with the terms of this
Agreement and the Collateral Agent shall have no liability to any Secured Party
for, and each Secured Party hereby waives any claim which it may now or
hereafter have against the Collateral Agent arising out of, any or all actions
which the Collateral Agent, without gross negligence or willful misconduct on
its part, takes or omits to take with respect to the Collateral or any portion
or proceeds thereof. As between the Secured Parties, and in accordance with the
provisions of this Agreement, the Collateral Agent shall have sole authority to
manage the Collateral on behalf of the Secured Parties, and none of the Secured
Parties shall take any action with respect to the management of the Collateral
without the prior written consent of the Collateral Agent.
(b) Each of the Secured Parties agrees to notify the Collateral Agent and
the other Secured Parties promptly after becoming aware of the occurrence of an
event of default (which has not been cured within any applicable cure period)
under the Secured Notes, the A/R Note and the Special Investment Note to which
it is owed repayment. If an event of default occurs under the Secured Notes, the
A/R Note and the Special Investment Note and the affected Secured Party wishes
to commence foreclosure, liquidation or similar action with respect to any of
the Collateral, the Collateral Agent shall commence such foreclosure,
liquidation or similar action. The Secured Parties agree that the Collateral
Agent shall have the sole authority to sell, lease, liquidate or otherwise
dispose of the Collateral on behalf of the Secured Parties, and to exercise any
and all other rights and remedies of the Secured Parties with respect thereto.
Each Secured Party agrees that no action with respect to the enforcement of its
security interest in the Collateral or any other action or exercise of any other
rights against the Collateral shall be taken except by and through the
Collateral Agent.
8. SHARING OF THE PROCEEDS OF THE COLLATERAL. Any items of Collateral and
any proceeds from the sale, lease, liquidation, or other disposition of, or as a
result of the Secured Parties' liens and security interests in, any of the
Collateral,
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at any time or from time to time, received or obtained by the Collateral Agent
shall be held in trust for the benefit of the Secured Parties and shall be
applied and made available to the Secured Parties as follows:
(a) First, to pay all costs and expenses, including reasonable
attorney's fees, incurred by the Collateral Agent or the Secured Parties in
connection with the management, sale, liquidation or other disposition or
realization of the Collateral;
(b) Then, to the Secured Parties for application toward the payment of
the then outstanding Obligations owed to each Secured Party, which arise
pursuant to the Secured Notes, the A/R Note and the Special Investment Note,
pro-rata; provided, however, that no amounts shall be disbursed by the
Collateral Agent to a Secured Party which exceed the amount of the Obligations
actually owed to such Secured Party; and
(c) Then, the balance, if any, to be returned to the Company.
9. RELEASE OF SECURITY INTEREST. Upon payment in full of all Obligations,
the Secured Parties shall release the security interest created hereby and shall
execute and deliver to the Company such termination statements and other
agreements and documents as the Company may reasonably request to evidence such
payment and release.
10. POWER OF ATTORNEY. The Company hereby constitutes EXTL Investors as
the Company's attorney-in-fact with power, upon the occurrence and during the
continuance of an event of default (as defined under the Secured Notes, the A/R
Note and the Special Investment Note to which a Secured Party is owed
repayment), to do all acts and things necessary or desirable to enforce the
Secured Parties' rights under this Agreement. This power of attorney is coupled
with an interest and is irrevocable until all of the Obligations are paid in
full.
11. NOTICES. All notices and other communications given or made pursuant
hereto shall be in writing and shall be deemed to have been duly given or made
as of the date delivered, mailed or transmitted, and shall be effective upon
receipt, if delivered personally, mailed by registered or certified mail
(postage prepaid, return receipt requested) to the parties at the following
addresses (or at such other address for a party as shall be specified by like
changes of address) or sent by electronic transmission to the telecopier number
specified below:
(a) If to the Company:
eGlobe/Coast, Inc.
14303 W. 95th Street
Lenexa, Kansas 66215
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Telecopier No.: 202-882-8984
Attention: President
(b) If to EXTL Investors or the Collateral Agent:
EXTL Investors, LLC
850 Cannon, Suite 200
Hurst, TX 76054
Telecopier No.: 817-428-3899
Attention: Ronald Jensen
(c) If to Special Investment:
Special Investment Risks, LLC
850 Cannon, Suite 200
Hurst, TX 76054
Telecopier No.: 817-428-3899
Attention: Ronald Jensen
12. HEADINGS. The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
13. SEVERABILITY. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner materially
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner to the end
that transactions contemplated hereby are fulfilled to the extent possible.
14. ENTIRE AGREEMENT. This Agreement (together with the Schedules
delivered pursuant hereto, the Loan and Note Purchase Agreement and the
Revolving Credit Note Agreement, as referred to or incorporated herein)
constitutes the entire agreement of the parties and supersedes all prior
agreements and undertakings, both written and oral, between the parties, or any
of them, with respect to the subject matter hereof, except as otherwise
expressly provided herein, are not intended to confer upon any other person any
rights or remedies hereunder.
15. SPECIFIC PERFORMANCE. The transactions contemplated by this Agreement
are unique. Accordingly, each of the parties acknowledges and agrees that, in
addition to all other remedies to which it may be entitled, each of the
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parties hereto is entitled to a decree of specific performance, provided such
party is not in material default hereunder.
16. ASSIGNMENT. Neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by any of the parties hereto (whether by
operation of law or otherwise) without the prior written consent of the other
parties. Subject to the preceding sentence, this Agreement shall be binding
upon, inure to the benefit of and be enforceable by the parties and their
respective successors and assigns.
17. THIRD PARTY BENEFICIARIES. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto, and nothing in this Agreement,
express or implied, is intended to or shall confer upon any other person any
right, benefit or remedy of any nature whatsoever under or by reason of this
Agreement.
18. FEES AND EXPENSES. Except as otherwise provided for in this Agreement,
each party hereto shall pay its own fees, costs and expenses incurred in
connection with this Agreement and in the preparation for and consummation of
the transactions provided for herein.
19. AMENDMENT. This Agreement may not be amended except by an instrument
in writing signed by the parties hereto.
20. CONSENT REQUIRED. Any term, covenant, agreement or condition of this
Agreement may, with the consent of the Company, be amended or compliance
therewith may be waived (either generally or in particular instance and either
retroactively or prospectively), if the Company shall have obtained the consent
in writing of the Secured Parties.
21. GOVERNING LAW. All corporate law matters arising under this Agreement
shall be governed by and construed in accordance with the laws of the State of
Delaware, and all other matters arising under this Agreement shall be governed
by and construed in accordance with the laws of the State of Texas, in each case
regardless of the laws that might otherwise govern under applicable principles
of conflicts of law. Each of the parties consents to the jurisdiction of the
federal courts whose districts encompass any part of the State of Texas or the
state courts of the State of Texas in connection with any dispute arising under
this Agreement and hereby waives, to the maximum extent permitted by law, any
objection, including any objection based on forum non conveniens, to the
bringing of any such proceeding in such jurisdictions.
Notwithstanding the foregoing, it is the intention of the parties that, to
the extent local law would govern with respect to Collateral located in a
particular jurisdiction, this Agreement shall create a security interest,
floating charge or similar grant of rights under such local law with respect to
Collateral located in such jurisdiction.
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22. COUNTERPARTS. This Agreement may be executed and delivered in one or
more counterparts, and by the different parties hereto in separate counterparts,
each of which when executed and delivered shall be deemed to be an original but
all of which taken together shall constitute one and the same agreement.
[Remainder of Page Intentionally Left Blank]
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IN WITNESS WHEREOF, the Company and the Secured Parties have caused this
Agreement to be executed as of the date first above written.
EGLOBE/COAST, INC.
By:
---------------------------
Title:
------------------------
Address: 14303 W. 95th Street
Lenexa, Kansas 66215
EXTL INVESTORS, LLC
By:
---------------------------
Title:
------------------------
Address: 850 Cannon, Suite 200
Hurst, TX 76054
SPECIAL INVESTMENT RISKS, LLC
By:
---------------------------
Title:
------------------------
Address:
----------------------
----------------------
EXTL INVESTORS, LLC, as Collateral Agent
By:
---------------------------
Title:
------------------------
Address: 850 Cannon, Suite 200
Hurst, TX 76054
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SCHEDULE 1
Collateral, Location, Title Exceptions
COLLATERAL DESCRIPTION:
See Attachment A
COLLATERAL LOCATION:
All collateral owned by the Company is located at:
14303 W. 95th Street
Lenexa, Kansas 66215
TITLE EXCEPTIONS:
None