SECURITY AGREEMENT
SECURITY AGREEMENT , dated as of the 13th day of September,
2007, by and between FORTIFIED DATA COMMUNICATIONS, INC.
(formerly Aegis Merger Corporation) , a Delaware corporation
(the " Debtor "), and THOMAS KEENAN VENTURES, LLC
(hereinafter, the " Secured Party ").
WHEREAS,
Fortified Holdings Corp. (" Borrower ") has requested from
Secured Party, and Secured Party has agreed to extend to Borrower,
a $5,000,000 term loan, as evidenced by that certain Term Loan Note
made by Borrower to the order of Secured Party dated as of even
date herewith (the " Note "); and
WHEREAS,
it is a condition precedent to Secured Party’s extending the
term loan evidenced by the Note to Borrower that Debtor execute and
deliver to Secured Party (i) a Continuing Guaranty Agreement in
favor of Secured Party (the " Guaranty ") guaranteeing
Borrower’s obligations to Secured Party and (ii) a security
agreement in substantially the form hereof; and
WHEREAS,
Debtor desires to grant to Secured Party, as security for
Debtor’s obligations set forth in the Guaranty (the "
Obligations "), a first priority security interest in the
Collateral (as defined below).
NOW,
THEREFORE, in consideration of the promises contained herein and
for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto
agree, as follows:
1.
Definitions; Rules of Interpretation . All
capitalized terms used herein without definitions (whether in the
plural or singular form), including, but not limited to, the terms
"Loan Documents" and "Event of Default" , shall have the
respective meanings provided therefor in the Note. The term
"State", as used herein, means the State of Connecticut. All terms
defined in the Uniform Commercial Code of the State and used herein
shall have the same definitions herein as specified therein.
However, if a term is defined in Article 9 of the Uniform
Commercial Code of the State differently than in another Article of
the Uniform Commercial Code of the State, the term has the meaning
specified in Article 9. No reference to "proceeds" in this
Agreement authorizes any sale, transfer, or other disposition of
Collateral by Debtor.
2.
Grant of Security Interest . Debtor hereby
grants to Secured Party, to secure the payment and performance in
full of all of the Debtor’s Obligations, a security interest
in and so pledges and assigns to Secured Party the following
properties, assets and rights of Debtor, wherever located, whether
now owned or hereafter acquired or arising, and any and all
proceeds and products of any thereof (all of the same being
hereinafter called the " Collateral "): all personal and
fixture property of every kind and nature including, without
limitation, all goods (including inventory, equipment and any
accessions thereto), instruments (including promissory notes),
documents, accounts, chattel paper (whether tangible or
electronic), deposit accounts, letter-of-credit rights
(whether or not the letter of credit is
evidenced by a writing), commercial tort claims, securities and all
other investment property, supporting obligations, any other
contract rights or rights to the payment of money, insurance claims
and proceeds, and all general intangibles (including all payment
intangibles and software), including all patents, trademarks,
applications and registrations thereof, service marks and other
intellectual property. Secured Party acknowledges that the
attachment of its security interest in any commercial tort claim as
original collateral is subject to Debtor's compliance with
§4.7.
3.
Authorization to File Financing Statements
. Debtor hereby irrevocably authorizes Secured Party at
any time and from time to time to file in any filing office in any
Uniform Commercial Code jurisdiction any initial financing
statements and amendments thereto that (a) indicate the Collateral
(i) as all assets of Debtor or words of similar effect, regardless
of whether any particular asset comprised in the Collateral falls
within the scope of Article 9 of the Uniform Commercial Code of the
State or such jurisdiction, or (ii) as being of an equal or lesser
scope or with greater detail, and (b) provide any other information
required by part 5 of Article 9 of the Uniform Commercial Code of
the State, or such other jurisdiction, for the sufficiency or
filing office acceptance of any financing statement or amendment,
including (i) whether Debtor is an organization, the type of
organization and any organizational identification number issued to
Debtor and, (ii) in the case of a financing statement filed as a
fixture filing, a sufficient description of real property to which
the Collateral relates. Debtor agrees to furnish any such
information to Secured Party promptly upon Secured Party's request.
Debtor also ratifies its authorization for Secured Party to have
filed in any Uniform Commercial Code jurisdiction any like initial
financing statements or amendments thereto if filed prior to the
date hereof.
4.
Other Actions . To further the attachment,
perfection and first priority of, and the ability of Secured Party
to enforce, Secured Party's security interest in the Collateral,
and without limitation on Debtor's other obligations in this
Agreement, Debtor agrees, in each case at Debtor's expense and upon
the written request of Secured Party, to take the following actions
with respect to the following Collateral:
4.1
Promissory Notes and Tangible Chattel Paper
. If Debtor shall at any time hold or acquire any promissory
notes or tangible chattel paper, Debtor shall forthwith endorse,
assign and deliver the same to Secured Party, accompanied by such
instruments of transfer or assignment duly executed in blank as
Secured Party may from time to time specify.
4.2
Deposit Accounts . For each deposit account
that Debtor at any time opens or maintains, Debtor shall, at
Secured Party's request and option, pursuant to an agreement in
form and substance reasonably satisfactory to Secured Party, either
(a) cause the depositary bank to comply at any time with
instructions from Secured Party to such depositary bank directing
the disposition of funds from time to time credited to such deposit
account, without further consent of Debtor, or (b) arrange for
Secured Party to become the customer of the depositary bank with
respect to the deposit account, with Debtor being permitted, only
with the consent of Secured Party (which consent shall, so long as
no Event
of Default has occurred
and is continuing, be promptly given), to exercise rights to
withdraw funds from such deposit account. Secured Party agrees with
Debtor that Secured Party shall not give any such instructions or
withhold any withdrawal rights from Debtor, unless an Event of
Default has occurred and is continuing, or would occur, if effect
were given to any withdrawal not otherwise permitted by the Loan
Documents. The provisions of this paragraph shall not apply to (i)
any deposit account for which Debtor, the depositary bank and
Secured Party have entered into a cash collateral agreement
specially negotiated among Debtor, the depositary bank and Secured
Party for the specific purpose set forth therein, (ii) a deposit
account for which Secured Party is the depositary bank and is in
automatic control, and (iii) deposit accounts specially and
exclusively used for payroll, payroll taxes and other employee wage
and benefit payments to or for the benefit of Debtor's salaried
employees.
4.3
Investment Property . If Debtor shall at any
time hold or acquire any certificated securities, Debtor shall
forthwith endorse, assign and deliver the same to Secured Party,
accompanied by such instruments of transfer or assignment duly
executed in blank as Secured Party may from time to time specify.
If any securities now or hereafter acquired by Debtor are
uncertificated and are issued to Debtor or its nominee directly by
the issuer thereof, Debtor shall immediately notify Secured Party
thereof and, at Secured Party's request and option, pursuant to an
agreement in form and substance reasonably satisfactory to Secured
Party, either (a) cause the issuer to agree to comply with
instructions from Secured Party as to such securities, without
further consent of Debtor or such nominee, or (b) arrange for
Secured Party to become the registered owner of the securities. If
any securities, whether certificated or uncertificated, or other
investment property now or hereafter acquired by Debtor are held by
Debtor or its nominee through a securities intermediary or
commodity intermediary, Debtor shall immediately notify Secured
Party thereof and, at Secured Party's request and option, pursuant
to an agreement in form and substance reasonably satisfactory to
Secured Party, either (i) cause such securities intermediary or (as
the case may be) commodity intermediary to agree to comply with
entitlement orders or other instructions from Secured Party to such
securities intermediary as to such securities or other investment
property, or (as the case may be) to apply any value distributed on
account of any commodity contract as directed by Secured Party to
such commodity intermediary, in each case without further consent
of Debtor or such nominee, or (ii) in the case of financial assets
or other investment property held through a securities
intermediary, arrange for Secured Party to become the entitlement
holder with respect to such investment property, with Debtor being
permitted, only with the consent of Secured Party (which consent
shall, so long as no Event of Default has occurred and is
continuing, be promptly given), to exercise rights to withdraw or
otherwise deal with such investment property. Secured Party agrees
with Debtor that Secured Party shall not give any such entitlement
orders or instructions or directions to any such issuer, securities
intermediary or commodity intermediary, and shall not withhold its
consent to the exercise of any withdrawal or dealing rights by
Debtor, unless an Event of Default has occurred and is continuing,
or, after giving effect to any such investment and
withdrawal rights not
otherwise permitted by the Loan Documents, would occur. The
provisions of this paragraph shall not apply to any financial
assets credited to a securities account for which Secured Party is
the securities intermediary.
4.4
Collateral in the Possession of a Bailee . If
any Collateral is at any time in the possession of a bailee, Debtor
shall promptly notify Secured Party thereof and, at Secured Party's
request and option, shall promptly obtain an acknowledgement from
the bailee, in form and substance reasonably satisfactory to
Secured Party, that the bailee holds such Collateral for the
benefit of Secured Party, and that such bailee agrees to comply,
without further consent of Debtor, with instructions from Secured
Party as to such Collateral; provided, however, that until
such instructions are given by the Secured Party, Debtor may
withdraw such Collateral and otherwise deal with such Collateral.
Secured Party agrees with Debtor that Secured Party shall not give
any such instructions unless an Event of Default has occurred and
is continuing or would occur after taking into account any action
by Debtor with respect to the bailee.
4.5
Electronic Chattel Paper and Transferable Records .
If Debtor at any time holds or acquires an interest in any
electronic chattel paper or any "transferable record," as that term
is defined in Section 201 of the federal Electronic Signatures in
Global and National Commerce Act, or in §16 of the Uniform
Electronic Transactions Act as in effect in any relevant
jurisdiction, Debtor shall promptly notify Secured Party thereof
and, at the request and option of Secured Party, shall take such
action as Secured Party may reasonably request to vest in Secured
Party control, under §9-105 of the Uniform Commercial Code, of
such electronic chattel paper or control under Section 201 of the
federal Electronic Signatures in Global and National Commerce Act
or, as the case may be, §16 of the Uniform Electronic
Transactions Act, as so in effect in such jurisdiction, of such
transferable record. Secured Party agrees with Debtor that Secured
Party will arrange, pursuant to procedures satisfactory to Secured
Party and so long as such procedures will not result in Secured
Party's loss of control, for Debtor to make alterations to the
electronic chattel paper or transferable record permitted under UCC
§9-105 or, as the case may be, Section 201 of the federal
Electronic Signatures in Global and National Commerce Act or
§16 of the Uniform Electronic Transactions Act for a party in
control to make without loss of control, unless a Default has
occurred and is continuing or would occur after taking into account
any action by Debtor with respect to such electronic chattel paper
or transferable record.
4.6
Letter-of-Credit Rights . If Debtor is at any
time a beneficiary under a letter of credit, Debtor shall promptly
notify Secured Party thereof and, at the request and option of
Secured Party, Debtor shall, pursuant to an agreement in form and
substance reasonably satisfactory to Secured Party, either (i)
arrange for the issuer and any confirmer or other nominated person
of such letter of credit to consent to an assignment to Secured
Party of the proceeds of the letter of credit or (ii) arrange for
Secured Party to become the transferee beneficiary of the letter of
credit, with Secured Party agreeing, in each case, that the
proceeds of the letter of
credit are to be held by
Secured Party as cash collateral for the Obligations. Secured Party
shall, so long as no Event of Default has occurred and is
continuing, disburse all such proceeds so held as cash collateral
directly to Debtor; provided, however , that Secured Party
may, if an Event of Default has occurred and is continuing, at its
sole option, apply all or any part of such proceeds to the
Obligations in such order or preference as Secured Party may
determine, in its sole discretion.
4.7 Commercial
Tort Claims . If Debtor shall at any time hold or
acquire a commercial tort claim, Debtor shall immediately notify
Secured Party in a writing signed by Debtor of the particulars
thereof and grant to Secured Party in such writing a security
interest therein and in the proceeds thereof, all upon the terms of
this Agreement, with such writing to be in form and substance
satisfactory to Secured Party.
4.8 Other
Actions as to any and all Collateral . Debtor further
agrees, at the request and option of Secured Party, to take any and
all other actions Secured Party may determine to be reasonably
necessary or useful for the attachment, perfection and first
priority of, and the ability of Secured Party to enforce, Secured
Party's security interest in any and all of the Collateral,
including, without limitation, (a) executing, delivering and, where
appropriate, filing financing statements and amendments relating
thereto under the Uniform Commercial Code, to the extent, if any,
that Debtor's signature thereon is required therefor, (b) causing
Secured Party's name to be noted as secured party on any
certificate of title for a titled good if such notation is a
condition to attachment, perfection or priority of, or ability of
Secured Party to enforce, Secured Party's security interest in such
Collateral, (c) complying with any provision of any statute,
regulation or treaty of the United States as to any Collateral if
compliance with such provision is a condition to attachment,
perfection or priority of, or ability of Secured Party to enforce,
Secured Party's security interest in such Collateral, (d)
obtaining, if possible, governmental and other third party waivers,
consents and approvals in form and substance satisfactory to
Secured Party, including, without limitation, any consent of any
licensor, lessor or other person obligated on Collateral, (e)
obtaining waivers from mortgagees and landlords in form and
substance reasonably satisfactory to Secured Party and (f) taking
all actions under any earlier versions of the Uniform Commercial
Code or under any other law, as reasonably determined by Secured
Party to be applicable in any relevant Uniform Commercial Code or
other jurisdiction, including any foreign jurisdiction.
5.
Representations and Warranties Concerning Debtor's
Legal Status. Debtor is, concurrently with the
execution of this Agreement, delivering to Secured Party a
certificate signed by Debtor and entitled "Perfection Certificate"
(the " Perfection Certificate "). Debtor represents and
warrants to Secured Party as follows: (a) Debtor's exact legal name
is that indicated on the Perfection Certificate and on the
signature page hereof, (b) Debtor is an organization of the type,
and is organized in the jurisdiction set forth in the Perfection
Certificate, (c) the Perfection Certificate accurately
sets forth Debtor's organizational
identification number or accurately states that Debtor has none,
(d) the Perfection Certificate accurately sets forth Debtor's place
of business or, if more than one, its chief executive office, as
well as Debtor's mailing address, if different, (e) all other
information set forth on the Perfection Certificate pertaining to
Debtor is accurate and complete in all material respects, and (f)
that there has been no material change in any information provided
in the Perfection Certificate since the date on which it was
executed by Debtor.
6.
Covenants Concerning Debtor’s Legal Status
. Debtor covenants with Secured Party as follows: (a)
without providing at least 30 days prior written notice to Secured
Party, Debtor will not change its name, its place of business or,
if more than one, chief executive office, or its mailing address or
organizational identification number if it has one, (b) if Debtor
does not have an organizational identification number and later
obtains one, Debtor shall forthwith notify Secured Party of such
organizational identification number, and (c) Debtor will not
change its type of organization, jurisdiction of organization or
other legal structure.
7.
Representations and Warranties Concerning Collateral,
Etc . Debtor further represents and warrants to
Secured Party as follows: (a) Debtor is the owner of or has other
rights in or power to transfer the Collateral, free from any right
or claim or any person or any adverse lien, security interest or
other encumbrance, except for the security interest created by this
Agreement, (b) none of the Collateral constitutes, or is the
proceeds of, "farm products" as defined in §9-102(a)(34) of
the Uniform Commercial Code of the State, (c) none of the account
debtors or other persons obligated on any of the Collateral is a
governmental authority covered by the Federal Assignment of Claims
Act or like federal, state or local statute or rule in respect of
such Collateral, (d) Debtor holds no commercial tort claim except
as indicated on the Perfection Certificate, and (e) Debtor has at
all times operated its business in compliance with all applicable
provisions of the federal Fair Labor Standards Act, as amended, and
with all applicable provisions of federal, state and local statutes
and ordinances dealing with the control, shipment, storage or
disposal of hazardous materials or substances, (f) all other
information set forth on the Perfection Certificate pertaining to
the Collateral is accurate and complete in all material respects,
and (g) that there has been no material change in any information
provided in the Perfection Certificate since the date on which it
was executed by Debtor.
8.
Covenants Concerning Collateral, Etc.
Debtor further covenants with Secured Party as follows: (a) the
tangible Collateral, to the extent not delivered to Secured Party
pursuant to §4, will be kept at those locations listed on the
Perfection Certificate and Debtor will not remove the Collateral
from such locations, without providing at least 30 days prior
written notice to Secured Party (with the exception of the movement
of inventory sold by Debtor and removal and replacement of
equipment in the ordinary course of Debtor's business), (b) except
for the security interest herein granted, Debtor shall be the owner
of the Collateral free from any right or claim of any other person,
lien, security interest or other encumbrance, and Debtor shall
defend the same against all claims and demands of all persons at
any time claiming the same or any interests therein adverse to
Secured Party, (c) Debtor shall not pledge, mortgage or create, or
suffer to exist any right of any person in or claim by any person
to the Collateral, or
any security interest, lien or encumbrance in
the Collateral in favor of any person, other than Secured Party,
(d) Debtor will keep the Collateral in good order and repair,
ordinary wear and tear excepted, and will not use the same in
violation of law or any policy of insurance t
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