EXHIBIT 10.21
SECURITY AGREEMENT
THIS SECURITY AGREEMENT ("Agreement"), dated as of the 26th day of
September, 1997, is made and entered into by and between PAYSYS INTERNATIONAL,
INC., a Florida corporation ("Borrower"), and SIRROM CAPITAL CORPORATION, a
Tennessee corporation ("Lender").
WITNESSETH:
WHEREAS, Lender is making a loan (the "Loan") in the amount of $4,000,000
to Borrower, pursuant to that certain Loan Agreement of even date herewith by
and between Borrower and Lender (the "Loan Agreement"); and
WHEREAS, in connection with the making of the Loan, Lender desires to
obtain from Borrower and Borrower desires to grant to Lender a security interest
in certain collateral more particularly described below.
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. Borrower hereby grants to Lender a
security interest in the following described property and any and all proceeds
(although proceeds are covered, Lender does not authorize the sale of any of the
following, except to the extent permitted under Sections 10 and 11 hereof) and
products thereof and accessions thereto (collectively the "Collateral"):
(a) Equipment. All equipment and other tangible personal
property of Borrower of any kind and description, whether now owned or
hereafter acquired and wherever located, together with all parts,
accessories and attachments and all replacements thereof and additions
thereto;
(b) Inventory, Accounts, Contract Rights, Chattel Paper,
Documents, Instruments and General Intangibles. All of Borrower's
inventory and any agreements for lease of same and rentals therefrom, and
all of Borrower's accounts, accounts receivable, contract rights, chattel
paper,
software, documents, instruments and general intangibles (including but not
limited to goodwill, patents and trademarks) and the proceeds therefrom,
whether now in existence or owned or hereafter arising or acquired, entered
into or created, and wherever located; and whether held for lease or sale,
or furnished or to be furnished under contracts of service;
(c) Trademarks, Etc. All trademarks, trade names, and service
marks now held or hereafter acquired by Borrower, both those that are
registered with the United States Patent and Trademark Office and any
unregistered marks used by Borrower in the United States, and trade dress,
including logos and designs, in connection with which any such marks are
used, together with all registrations regarding such marks and the rights
to renewals thereof, and the goodwill of the business of Borrower
symbolized by such marks, and all patents, licenses, technology and other
intangible property of Borrower, whether now owned or hereafter acquired;
(d) Copyrights. All copyrights now held or hereafter acquired
by Borrower and any applications for U.S. copyrights hereafter made by
Borrower; and
(e) Proprietary Information, Computer Data, Etc. All
proprietary information and trade secrets of Borrower with respect to
Borrower's business, whether now owned or hereafter acquired, and all of
Borrower's computer programs and the information contained therein and all
intellectual property rights with respect thereto, whether now owned or
hereafter acquired.
2. Secured Indebtedness. The obligations secured hereby shall
include (a) loans to be made concurrently or in connection with this Agreement
or the Loan Agreement as evidenced by one or more promissory notes payable to
the order of Lender that shall be due and payable as set forth in such
promissory notes, and any renewals or extensions thereof, (b) the full and
prompt payment and performance of any and all other indebtednesses and other
obligations of Borrower to Lender, direct or contingent (including but not
limited to obligations incurred as indorser, guarantor or surety), however
evidenced or denominated, and however and whenever incurred, including but not
limited to indebtednesses incurred pursuant to any present or future commitment
of Lender to Borrower and any and all future advances regardless of the class of
such future advances, and (c) all future advances made by Lender for taxes,
levies, insurance and
2
preservation of the Collateral and 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.
3
3. Representations, Warranties and Agreements of Borrower. Borrower
represents, warrants and agrees as follows:
(a) Borrower will promptly notify Lender, in writing, of any
change in Borrower's place or places of business if the Collateral is used
in business, or of any change in Borrower's residence if the Collateral is
not used in business, and regardless of use, of any change in the location
of the Collateral or any records pertaining thereto.
(b) Except as set forth on Schedule 2.1(l) of the Loan
Agreement, Borrower is the owner of the Collateral free and clear of any
liens, security interests, claims and encumbrances, contingent or
otherwise. Borrower will defend the Collateral against the claims and
demands of all persons.
(c) Borrower will pay to Lender all amounts secured hereby as
and when the same shall be due and payable, whether at maturity, by
acceleration or otherwise, and will promptly perform all terms of said
indebtedness and this or any other security or loan agreement between
Borrower and Lender, and will promptly discharge all said liabilities.
(d) Borrower will at all times keep the Collateral insured
against all insurable hazards in amounts equal to the full cash value of
the Collateral. Such insurance shall be obtained from such companies as
may be acceptable to Lender, with provisions satisfactory to Lender for
payment of all losses thereunder to Lender as its interests may appear. If
required by Lender, Borrower shall deposit the policies with Lender. If an
Event of Default (as defined in the Loan Agreement) has occurred and is
continuing, any money received by Lender 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 Lender to Borrower for
the purpose of repairing or restoring the Collateral. Borrower assigns to
Lender all right to receive proceeds of insurance not exceeding the amounts
secured hereby, directs any insurer to pay all proceeds directly to Lender,
and appoints Lender Borrower's attorney in fact to endorse any draft or
check made payable to Borrower in order to collect the benefits of such
insurance. If Borrower fails to keep the Collateral insured as required by
Lender, Lender shall have the right to obtain such insurance at Borrower's
expense and add the cost thereof to the other amounts secured hereby.
4
(e) Borrower will pay all costs of filing of financing,
continuation and termination statements with respect to the security
interests created hereby, and Lender is authorized to do all things that it
deems necessary to perfect and continue perfection of the security
interests created hereby and to protect the Collateral.
(f) The address set forth after Borrower's signature on this
Agreement is Borrower's principal place of business and the location where
the records concerning all intangible Collateral are kept and/or
maintained. The addresses set forth on Schedule 2.1(ad) of the Loan
Agreement are all of the locations where Borrower does business and the
locations of all tangible Collateral.
4. Default. Borrower shall be in default upon failure to observe or
perform any of Borrower's agreements herein contained, or upon the occurrence of
a default or Event of Default under the Loan Agreement or any other Loan
Document (as defined in the Loan Agreement) that has not been cured during the
applicable grace period, or if any warranty or statement by Borrower set forth
herein or furnished in connection herewith is false or misleading.
5. Remedies Upon Default. Upon the occurrence of an Event of
Default (as defined in the Loan Agreement), all sums secured hereby shall
immediately become due and payable at Lender's option without notice to
Borrower, and Lender may proceed to enforce payment of same and to exercise any
and all rights and remedies provided by the Uniform Commercial Code (Tennessee)
or other applicable law, as well as all other rights and remedies possessed by
Lender, all of which shall be cumulative. Whenever Borrower is in default
hereunder, and upon demand by Lender, Borrower shall assemble the Collateral and
make it available to Lender at a place reasonably convenient to Lender and
Borrower. Any notice of sale, lease or other intended disposition of the
Collateral by Lender sent to Borrower at the address hereinafter set forth, or
at such other address of Borrower as may be shown on Lender's records, at least
five (5) days prior to such action, shall constitute reasonable notice to
Borrower.
Lender may waive any default before or after the same has been declared
without impairing its right to declare a subsequent default hereunder, this
right being a continuing one.
5
Severability. If any provision of this Agreement is held invalid,
such invalidity shall not affect the validity or enforceability of the remaining
provisions of this Agreement.
7. Binding Effect. This Agreement shall inure to the benefit of
Lender's successors and assigns and shall bind Borrower's heirs,
representatives, successors and assigns. If Borrower is composed of more than
one person, firm and/or entity, their obligations hereunder shall be joint and
several.
6
8. Termination Statement. Borrower agrees that, notwithstanding the
payment in full of all indebtedness secured hereby and whether or not there is
any outstanding obligation of Lender to make future advances, Lender shall not
be required to send Borrower a termination statement with respect to any
financing statement filed to perfect Lender's security interest(s) in any of the
Collateral, unless and until Borrower shall have made written demand therefor.
Upon receipt of proper written demand, Lender may at its option, in lieu of
sending a termination statement to Borrower, cause said termination statement to
be filed with the appropriate filing officer(s).
9. Protection of Collateral. Borrower will not permit any liens or
security interests other than those created by this Agreement to attach to any
of the Collateral, nor permit any of the Collateral to be levied upon under any
legal process, nor permit anything to be done that may impair the security
intended to be afforded by this Agreement, nor permit any tangible Collateral to
become attached to or commingled with other goods without the prior written
consent of Lender.
10. Special Agreements With Respect to Certain Tangible Collateral.
Borrower additionally agrees and warrants as follows:
(a) Borrower will not permit any of the Collateral to be removed
from the location specified herein, except for temporary periods in the
normal and customary use thereof, without the prior written consent of
Lender, and will permit Lender to inspect the Collateral at any time.
(b) If any of the Collateral is equipment or goods of a type
normally used in more than one state (whether or not actually so used),
Borrower will contemporaneously herewith furnish Lender a list of the
states wherein such equipment or goods are or will be used, and hereafter
will notify Lender in writing (i) of any other states in which such
equipment or goods are so used, and (ii) of any change in the location of
Borrower's principal place of business.
(c) Borrower will not sell, exchange, lease or otherwise dispose
of any of the Collateral or any interest therein without the prior written
consent of Lender.
(d) Borrower will keep the Collateral in good condition and
repair 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,
and will not
7
permit anything to be done that may impair the value of any of the
Collateral. If Borrower fails to pay such sums, Lender may do so for
Borrower's account and add the amount thereof to the other amounts secured
hereby.
(e) Until default in any of the terms hereof, or the terms of
any indebtedness secured hereby, Borrower shall be entitled to possession
of the Collateral and to use the same in any lawful manner, provided that
such use does not cause excessive wear and tear to the Collateral, cause it
to decline in value at an excessive rate, or violate the terms of any
policy of insurance thereon.
(f) Borrower will not allow the Collateral to be attached to
real estate in such manner as to become a fixture or a part of any real
estate.
11. Special Agreements With Respect to Intangible and Certain
Tangible Collateral. Borrower additionally warrants and agrees as follows:
(a) So long as Borrower is not in default hereunder, Borrower
shall have the right to process and sell Borrower's inventory in the
regular course of business. Lender's security interest hereunder shall
attach to all proceeds of all sales or other dispositions of the
Collateral. If at any time any such proceeds shall be represented by any
instruments, chattel paper or documents of title, then such instruments,
chattel paper or documents of title shall be promptly delivered to Lender
and shall be subject to the security interest granted hereby. If at any
time any of Borrower's inventory is represented by any document of title,
such document of title will be delivered promptly to Lender and shall be
subject to the security interest granted hereby.
(b) By the execution of this Agreement, Lender shall not be
obligated to do or perform any of the acts or things provided in any
contracts covered hereby that are to be done or performed by Borrower, but
if there is a default by Borrower in the payment of any amount due in
respect of any indebtedness secured hereby, then Lender may, at its
election, perform some or all of the obligations provided in said contracts
to be performed by Borrower, and if Lender incurs any liability or expenses
by reason thereof, the same shall be payable by Borrower upon demand and
shall also be secured by this Agreement.
8
(c) At any time after Borrower is in default hereunder or under
the Loan Agreement, Lender shall have the right to notify the account
debtors obligated on any or all of Borrower's accounts receivable to make
payment thereof directly to Lender, and to take control of all proceeds of
any such accounts receivable. Until such time as Lender elects to exercise
such right by mailing to Borrower written notice thereof, Borrower is
authorized, as agent of the Lender, to collect and enforce said accounts
receivable.
12. Refinancing Prior Debt. Borrower acknowledges and agrees that
the Loan constitutes a refinancing of the debt of Borrower to Sirrom
Investments, Inc. under that certain Loan and Security Agreement dated as of May
29, 1992 (as amended from time to time the "Original Loan Agreement") and that
certain Secured Promissory Note in the original principal amount of One Million
Dollars ($1,000,000) dated as of May 29, 1992 executed by Borrower in favor of
Sirrom Capital, L.P. (as amended from time to time the "Original Note").
Borrower further acknowledges and agrees that the security interest created
under the Original Loan Agreement has been assigned to Lender in connection with
refinancing of debt evidenced by the Original Note.
13. Power of Attorney. Borrower hereby constitutes the Lender or its
designee, as Borrower's attorney-in-fact with power, upon the occurrence and
during the continuance of an Event of Default, to endorse Borrower's name upon
any notes, acceptances, checks, drafts, money orders, or other evidences of
payment or Collateral that may come into either its or the Lender's possession;
to sign the name of Borrower on any invoice or bill of lading relating to any of
the accounts receivable, drafts against customers, assignments and verifications
of accounts receivable and notices to customers; to send verifications of
accounts receivable; to notify the Post Office authorities to change the address
for delivery of mail addressed to Borrower to such address as the Lender may
designate; to execute any of the documents referred to in Section 3(e) hereof in
order to perfect and/or maintain the security interests and liens granted herein
by Borrower to the Lender; and to do all other acts and things necessary to
carry out this Security Agreement. All acts of said attorney or designee are
hereby ratified and approved, and said attorney or designee shall not be liable
for any acts of commission or omission (other than acts of gross negligence or
willful misconduct), nor for any error of judgment or mistake of fact or law;
this power being coupled with an interest is irrevocable until all of the
obligations secured hereby are paid in full and any and all promissory notes
executed in connection therewith are terminated and satisfied.
9
14. Governing Law and Amendments. This Agreement and all of the Loan
Documents shall be construed and enforced under the laws of the State of
Tennessee applicable to contracts to be wholly performed in such State. No
amendment or modification hereof shall be effective except in a writing executed
by each of the parties hereto.
15. Survival of Representations and Warranties. All representations
and warranties contained herein or made by or furnished on behalf of the
Borrowers in connection herewith shall survive the execution and delivery of
this Agreement.
10
16. Counterparts. This Agreement may be executed in any number of
counterparts and by different parties to this Agreement in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same Agreement.
17. Construction and Interpretation. Should any provision of this
Agreement require judicial interpretation, the parties hereto agree that the
court interpreting or construing the same shall not apply a presumption that the
terms hereof shall be more strictly construed against one party by reason of the
rule of construction that a document is to be more strictly construed against
the party that itself or through its agent prepared the same, it being agreed
that the Borrower, Lender and their respective agents have participated in the
preparation hereof.
IN WITNESS WHEREOF, Borrower and Lender have executed this Agreement, or
have caused this Agreement to be executed as of the date first above written.
BORROWER:
PAYSYS INTERNATIONAL, INC.
By:
Title:
Address: 900 Winderley Place
Maitland, Florida 32751
LENDER:
SIRROM CAPITAL CORPORATION
By:
Title:
11