EXHIBIT 10.115(c)
SECURITY AGREEMENT
This Security Agreement (Agreement) is made, entered into and executed as
of February 13, 2004 by and between NOW Solutions, LLC (Debtor) and Arglen
Acquisitions, LLC (Secured Party) with respect to the following:
RECITALS
A. Vertical Computer Systems, Inc. (Vertical) and Debtor are indebted to
Secured Party for the principal sum of Six Hundred Thousand Dollars ($600,000)
(Obligation), which Obligation is evidenced by a promissory note (Note) of even
date herewith, wherein Debtor and Vertical are Borrowers and Secured Party is
Lender.
B. Debtor desires to pledge to Secured Party its rights in certain
intellectual property and personal property, and the proceeds therefrom, as
security for the payment of the Note and for the performance of the obligations
in this Security Agreement.
AGREEMENT
In consideration of the Obligation, which is of direct and substantial
benefit to Debtor, the mutual covenants contained in this Agreement, and for
other good and valuable considerations, the receipt and sufficiency of which are
acknowledged, Debtor agrees as follows:
1. Definitions.
(a) The term "Accounts" means any right to payment for goods sold or
leased, or to be sold or to be leased, or for services rendered or to be
rendered, no matter how evidenced, including accounts receivable, contract
rights, general intangibles, notes, drafts, acceptances, and other forms of
obligations and receivables.
(b) The term "Collateral" means any and all intellectual and
personal property of Debtor that is hereby assigned or hereafter is assigned to
Secured Party as security or in which Secured Party now has or later acquires a
security interest, including but not limited to the personal property described
in Section 3 hereof.
(c) The term "Debt(s)" or "Obligation(s)" means the payment of the
Note and the obligations and undertakings in this Security Agreement.
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(d) The term "Equipment" means all of Debtor's equipment, including
all furniture, fixtures, machinery and equipment, whether the same constitutes
personal property or fixtures, now owned or hereafter acquired by Debtor,
wherever situated, including all substitutions, accretions, component parts,
replacements thereof and additions thereto, and the proceeds of all the
foregoing.
(e) The term "Intellectual Property" means (i) each of the
copyrights and rights and interests capable of being protected as copyrights,
which are presently, or in the future may be, owned, authored, acquired, or used
by Debtor including all proceeds thereof and all tangible property embodying the
copyrights; (ii) each of the trademarks and rights and interests which are
capable of being protected as trademarks, which are presently, or in the future
may be, owned, created, acquired, or used by Debtor, including all proceeds
thereof and all tangible property embodying the trademarks; and (iii) each of
the patents and patent applications which are presently, or in the future may
be, owned, issued, acquired, or used by Debtor, including all proceeds thereof
and all tangible property embodying the patents.
(f) The term "Inventory" means all of Debtor's inventory consisting
of raw materials, work in process, materials used or consumed in its business
and all goods held for sale or lease or to be furnished under contract of
service, or if they have been leased or so furnished, now owned or later
acquired, wherever located.
2. Grant of Security Interest. Debtor hereby grants, conveys, and assigns
to Secured Party, as collateral to secure the performance of the obligations of
Debtor as a maker under the Note, all of Debtor's existing and future right,
title and interest in, to and under the property listed in Section 3 of this
Agreement. The security interest granted herein in the Collateral will be junior
to Debtor's present indebtedness to WAMCO 31, Ltd. (WAMCO), as assignee of Coast
Business Credit of its successors and assigns. The Secured Party agrees that
WAMCO will have the right to require, as a condition to its consent of the
security interest provided to the Secured Party herein, that the Secured Party
as the holder of the additional security interest or lien sign an intercreditor
agreement on WAMCO's then standard form, acknowledge that the security interest
is subordinate to the security interest in favor of WAMCO. The Secured Party
will not take any action to enforce its subordinate security interest so long as
any Obligations, as defined in the Loan Documents between Debtor and WAMCO,
remain outstanding.
3. Description of Property. The Collateral subject to the security
interest is as follows:
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(a) Intellectual Property. All of Debtor's present and future
Intellectual Property;
(b) Equipment. All of Debtor's present and future Equipment.
(c) Accounts Receivable. All of Debtor's present and future accounts
and accounts receivable, including all proceeds due under them;
(d) Inventory. All of Debtor's present and future inventory and the
proceeds and products thereof;
(e) Other Property. All of Debtor's present and future cash, bank
accounts, contract rights, and general intangibles; whether any of the foregoing
is owned now or acquired later;
(f) Replacements. All accessions, additions, replacements, and
substitutions related to any of the foregoing and all records of any kind
relating to any of the foregoing; and
(g) Proceeds. All proceeds of the sale or other disposition of any
of the Collateral described or referenced herein.
Each and all of the above are assigned to Secured Party by Debtor as
security for any and all Obligations of Debtor to Secured Party, whether now
owing or later incurred and whether direct, indirect, absolute or contingent.
4. Covenants of Debtor. Debtor agrees and covenants that Debtor shall
promptly pay when due the principal of and interest on the indebtedness
evidenced by the Note, and all other sums secured by this Agreement.
5. Personal Property Free of Security Interests by Subsidiaries. Debtor
represents that there are no security agreements or financing statements
covering any of the Collateral or its proceeds in favor of Debtor's
subsidiaries, or of Debtor's co-maker under the Note, or of any of said
co-maker's subsidiaries.
6. Perfection of Security Interest. Debtor agrees to execute and file
financing statements, and do whatever may be necessary under the applicable
Uniform Commercial Code in the state or states where the Collateral is located,
to perfect and continue Secured Party's interest in the Collateral, all at
Debtor's sole cost and expense.
7. Debtor and Lien Not Released. Any modification of the terms and
conditions of the Note, to which all parties to the Note agree in writing, shall
not affect the obligations of (i) Debtor, (ii) Debtor's co-maker under the Note,
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or (iii) Debtor's successors or assigns under this Agreement and/or the Note,
and to observe the covenants of Debtor contained herein, and shall not affect
the lien or priority of lien hereof on the Collateral.
8. Forbearance by Secured Party Not a Waiver. Any forbearance by Secured
Party in exercising any right or remedy hereunder, or otherwise afforded by
applicable law, shall not be a waiver of or preclude the exercise of any right
or remedy. The acceptance by Secured Party of payment of any sum secured by this
Agreement and/or under the Note after the due date of such payments shall not be
a waiver of Secured Party's right to either require prompt payment when due of
all other sums so secured, or to declare a default for failure to make prompt
payment.
9. Uniform Commercial Code Security Agreement. This Agreement is intended
to be a security agreement pursuant to the Uniform Commercial Code for any of
the items specified above as part of the Collateral which, under applicable law,
may be subject to a security interest pursuant to the Uniform Commercial Code,
and Debtor hereby grants the Secured Party a security interest in said items.
Debtor agrees that Secured Party may file any appropriate document in the
appropriate index as a financing statement for any of the items specified above
as part of the Collateral. In addition, Debtor agrees to execute and deliver to
Secured Party, upon Secured Party's request, any financing statements, as well
as extensions, renewals and amendments thereof, and reproductions of this
Agreement and/or the Note, in such form as Secured Party may require, to perfect
a security interest with respect to said items. Upon the occurrence of an Event
of Default (defined below), Secured Party shall have the remedies of a secured
party under the Uniform Commercial Code and, at Secured Party's option, may also
invoke the other remedies provided in this Agreement and/or the Note as to such
items. In exercising any of said remedies, Secured Party may proceed against the
items specified above as part of the Collateral separately or together and in
any order whatsoever, without in any way affecting the availability of Secured
Party's remedies under the Uniform Commercial Code or of the other remedies
provided in this Agreement, the Security Instrument and/or the Note.
10. Events of Default. The Debtor shall be in default under this Agreement
when any of the following events or conditions (Event of Default) occur:
(a) The Debtor fails to comply with any term, obligation, covenant,
or condition contained in this Agreement and/or the Note.
(b) Any levy, seizure, attachment, lien, or encumbrance of or on the
Collateral which is not discharged by Debtor within ten (10) days, or any sale,
transfer, or disposition of any interest in the Collateral, other than in the
ordinary course of business or for commercially reasonable value.
11. Acceleration in Case of Borrower's Insolvency. If Debtor shall
voluntarily file a petition under the federal Bankruptcy Code, as such Code may
from time to time be amended, or under any similar or successor federal statute
relating to bankruptcy, insolvency, arrangements or reorganizations, or under
any state bankruptcy or insolvency act, or file an answer in an involuntary
proceeding admitting insolvency or inability to pay debts, or if Debtor shall be
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adjudged a bankrupt, or if a trustee or receiver shall be appointed for Debtor's
property, or if the Collateral shall become subject to the jurisdiction of a
federal bankruptcy court or similar state court, or if Debtor shall make an
assignment for the benefit of its creditors, or if there is an attachment,
receivership, execution or other judicial seizure, then Secured Party may, at
Secured Party's option, invoke any remedies permitted by this Agreement. Any
attorneys' fees and other expenses incurred by Secured Party in connection with
Debtor's bankruptcy or any of the other events described in this Section 12
shall be additional indebtedness of Debtor secured by this Agreement.
12. Waiver of Marshaling. Subject to the existence of the security
interest in the Collateral held by WAMCO, Secured Party shall have the right to
determine the order in which any or all of the Collateral shall be subjected to
the remedies provided by this Agreement and/or the Note, and Secured Party shall
have the right to determine the order in which any or all portions of the
indebtedness secured by this Agreement are satisfied from the proceeds realized
upon the exercise of the remedies provided in this Agreement and/or the Note.
13. Waiver of Jury Trial. SECURED PARTY AND DEBTOR HEREBY WAIVE THE RIGHT
TO ANY JURY TRIAL IN ANY ACTION, CROSS-COMPLAINT, COUNTERCLAIM, OR OTHER
PROCEEDING BASED UPON, ARISING OUT OF, OR IN ANY WAY RELATING TO (1) THIS
AGREEMENT, OR (2) ANY OTHER PRESENT OR FUTURE INSTRUMENT OR AGREEMENT BETWEEN
SECURED PARTY AND DEBTOR WITH RESPECT TO THIS AGREEMENT, OR (3) ANY CONDUCT,
ACTS OR OMISSIONS OF SECURED PARTY OR DEBTOR, OR ANY OF THEIR RESPECTIVE
DIRECTORS, OFFICERS, MEMBERS, EMPLOYEES, AGENTS, ATTORNEYS, OR ANY OTHER PERSONS
AFFILIATED WITH SECURED PARTY OR DEBTOR, OR ANY OF THEM, WITH RESPECT TO THIS
AGREEMENT.
14. Miscellaneous
(a) Remedies Cumulative. Each remedy provided in this Agreement
and/or the Note is distinct and cumulative to all other rights or remedies under
this Agreement and/or the Note or afforded by law or equity, and may be
exercised concurrently, independently, or successively, in any order whatsoever.
(b) Notices. Any notices permitted or required under this Agreement
shall be deemed given upon the date of facsimile transmission addressed to
Secured Party at 45 Rockefeller Plaza, Suite 2091, New York, NY 10111, facsimile
number 413-618-9011, with copies to counsel Steven S. Karic at Hamburg, Karic,
Edwards & Martin LLP, 1900 Avenue of the Stars, Suite 1800, Los Angeles,
California 90067-4409, facsimile number 310-552-9291; and addressed to Debtor at
Chase Texas Tower, 201 Main Street, Suite 1455, Fort Worth, Texas 76102,
facsimile number 817-335-7667, with copies to counsel Derek A. Wolman at Wolman,
Babitt & King, L.L.P., 521 Fifth Avenue, 38th Floor, New York, New York 10175,
facsimile number 212-867-3784 ; or at any other facsimile number and address as
any party may, from time to time, designate by notice given in compliance with
this Section 15.
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(c) Law Governing. This Agreement shall be governed by and construed
in accordance with the laws of the State of California.
(d) Titles and Captions. All section titles or captions contained in
this Agreement are for convenience only and shall not be deemed part of the
context nor effect the interpretation of this Agreement.
(e) Agreement Binding. This Agreement shall be binding upon the
heirs, executors, administrators, successors and assigns of the parties hereto.
(f) Presumption. This Agreement or any section thereof shall not be
construed against any party due to the fact that said Agreement or any section
thereof was drafted by said party.
(g) Further Action. The parties hereto shall execute and deliver all
documents, provide all information and take or forbear from all such action as
may be necessary or appropriate to achieve the purposes of this Agreement.
(h) Savings Clause. If any provision of this Agreement, or the
application of such provision to any person or circumstance, shall be held
invalid, the remainder of this Agreement, or the application of such provision
to persons or circumstances other than those as to which it is held invalid,
shall not be affected thereby.
Executed as of the day and year first above stated.
Debtor: Secured Party:
NOW SOLUTIONS, LLC, ARGLEN ACQUISITIONS, LLC,
a Delaware limited liability company a Delaware limited liability company
By:____________________________ By:____________________________
Authorized Officer Authorized Officer
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