Sample Business Contracts

Security Agreement - JT Storage Inc. and Atari Corp.

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                               SECURITY AGREEMENT

         This SECURITY AGREEMENT, dated as of February 12, 1996, is executed by
JT Storage, Inc., a Delaware corporation ("Debtor"), in favor of Atari
Corporation, a Nevada corporation ("Secured Party").


         A.      Debtor has executed a Subordinated Secured Convertible
Promissory Note (the "Note") in favor of Secured Party.  Terms not otherwise
defined herein shall have the meanings given to such terms in the Note.

         B.      In order to induce Secured Party to extend the credit
evidenced by the Note, Debtor has agreed to enter into this Security Agreement
and to grant Secured Party the security interest in the Collateral described


         NOW, THEREFORE, in consideration of the above recitals and for other
good and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, Debtor hereby agrees with Secured Party as follows:

         1.      Definitions and Interpretation.  When used in this Security
Agreement, the following terms shall have the following respective meanings:

                 "Account Debtor" shall have the meaning given to that term in
         Section 3 hereof.

                 "Collateral" shall have the meaning given to that term in
         Section 2 hereof.

                 "Equipment" shall have the meaning given to that term in
         Attachment 1 hereto.

                 "Inventory" shall have the meaning given to that term in
         Attachment 1 hereto.

                 "Obligations" shall mean and include all loans, advances,
         debts, liabilities and obligations, howsoever arising, owed by Debtor
         to the Secured Party of every kind and description (whether or not
         evidenced by any note or instrument and whether or not for the payment
         of money), now existing or hereafter arising under or pursuant to the
         terms of the Note and the other Transaction Documents, including, all
         interest, fees, charges, expenses, reasonable attorneys' fees and
         costs and accountants' fees and costs chargeable to and payable by
         Debtor hereunder and thereunder, in each case, whether direct or
         indirect, absolute or contingent, due or to become due, and whether or
         not arising after the commencement of a proceeding under Title 11 of
         the United States Code (11 U.S.C. Section 101 et seq.), as amended
         from time to time (including post-petition interest) and whether or
         not allowed or allowable as a claim in any such proceeding.

                 "Receivables" shall have the meaning given to that term in
         Attachment 1 hereto.

                 "UCC" shall mean the Uniform Commercial Code as in effect in
         the State of California from time to time.
<PAGE>   2
All capitalized terms not otherwise defined herein shall have the respective
meanings given in the Note.  Unless otherwise defined herein, all terms defined
in the UCC shall have the respective meanings given to those terms in the UCC.

         2.      Grant of Security Interest.  As security for the Obligations,
Debtor hereby pledges and assigns to Secured Party and grants to Secured Party
a security interest in all right, title and interests of Debtor in and to the
property described in Attachment 1 hereto (collectively and severally, the
"Collateral"), which Attachment 1 is incorporated herein by this reference.

         3.      Representations and Warranties.  Debtor represents and
warrants to Secured Party that (a) Debtor is the owner of the Collateral (or,
in the case of after-acquired Collateral, at the time Debtor acquires rights in
the Collateral, will be the owner thereof) and that no other Person has (or, in
the case of after-acquired Collateral, at the time Debtor acquires rights
therein, will have) any right, title, claim or interest (by way of Lien or
otherwise) in, against or to the Collateral, other than Permitted Liens; (b)
Secured Party has (or in the case of after-acquired Collateral, at the time
Debtor acquires rights therein, will have) a perfected security interest in the
Collateral to the extent that Lien can be perfected by the filing of a UCC-1
financing statement, except for Permitted Liens; (c) all Inventory has been
(or, in the case of hereafter produced Inventory, will be) produced in
compliance with applicable laws, including the Fair Labor Standards Act; (d)
each Receivable is genuine and enforceable against the party obligated to pay
the same (an "Account Debtor"); and (e) all information set forth in Attachment
2 hereto, when delivered, shall be true and correct.

         4.      Covenants Relating to Collateral.  Debtor hereby agrees from
time to time (a) to perform all acts that may be necessary to maintain,
preserve, protect and perfect the Collateral, the Lien granted to Secured Party
therein and the first priority of such Lien, except for Permitted Liens; (b)
not to use or permit any Collateral to be used (i) in violation of any
provision of any Transaction Document, (ii) in violation of any applicable law,
rule or regulation, or (iii) in violation of any policy of insurance covering
the Collateral; (c) to pay promptly when due all taxes and other governmental
charges, all Liens and all other charges now or hereafter imposed upon or
affecting any Collateral except for the Permitted Liens; (d) without prior
written notice to Secured Party, (i) not to change Debtor's name or place of
business (or, if Debtor has more than one place of business, its chief
executive office), or the office in which Debtor's records relating to
Receivables are kept, (ii) not to keep Collateral consisting of chattel paper
at any location other than its chief executive office set forth in item 1 of
Attachment 2 hereto, and (iii) not to keep Collateral consisting of Equipment
or Inventory at any location other than the locations set forth in item 6 of
Attachment 2 hereto, (e) to deposit, or cause to be deposited, all remittances
and checks received with respect to Receivables to an account of Debtor at a
bank or other depository institution which has been given notice of Secured
Party's security interest in such account in substantially the form of the
Notice of Security Interest which is attached hereto as Attachment 3, and in
which account Secured Party has a perfected security interest; (f) to procure,
execute and deliver from time to time any endorsements, assignments, financing
statements and other writings reasonably deemed necessary or appropriate by
Secured Party to perfect, maintain and protect its Lien hereunder and the
priority thereof and, at Secured Party's request, to deliver promptly to
Secured Party all originals of Collateral consisting of instruments other than
negotiable instruments received in the ordinary course of business; (g) to
appear in and defend any action or proceeding which may affect its title to or
Secured Party's interest in the Collateral; (h) if Secured Party gives value to
enable Debtor to acquire rights in or the use of any Collateral, to use such
value for such purpose; (i) to keep separate, accurate and complete records of
the Collateral and to provide Secured Party with such records and such other
reports and information relating to the Collateral as Secured Party may
reasonably request from time to time; (j) except as permitted under the terms
of the Note, not to surrender or lose possession of (other than to Secured
Party), sell, encumber, lease, rent, or otherwise dispose of or transfer any
Collateral or right or interest therein, and to keep the Collateral free of all
Liens except Permitted Liens; (k) upon request by Secured Party, to type, print
or stamp conspicuously on

<PAGE>   3
the face of all original copies of all Collateral consisting of chattel paper a
legend satisfactory to Secured Party indicating that such chattel paper is
subject to the security interest granted hereby; (m) to collect, enforce and
receive delivery of the Receivables in accordance with past practice until
otherwise notified by Secured Party; (n) to comply with all material
requirements of law relating to the production, possession, operation,
maintenance and control of the Collateral (including the Fair Labor Standards
Act); and (o) to complete and deliver Attachment 2 to Secured Party as promptly
as practicable after the date hereof, and in any event within ten (10) days
following the date hereof.

         5.      Authorized Action by Agent.  Debtor hereby irrevocably
appoints Secured Party as its attorney-in-fact and agrees that Secured Party
may perform (but Secured Party shall not be obligated to and shall incur no
liability to Debtor or any third party for failure so to do) any act which
Debtor is obligated by this Security Agreement to perform, and to exercise such
rights and powers as Debtor might exercise with respect to the Collateral,
including the right to (a) collect by legal proceedings or otherwise and
endorse, receive and receipt for all dividends, interest, payments, proceeds
and other sums and property now or hereafter payable on or on account of the
Collateral; (b) enter into any extension, reorganization, deposit, merger,
consolidation or other agreement pertaining to, or deposit, surrender, accept,
hold or apply other property in exchange for the Collateral; (c) insure,
process and preserve the Collateral; (d) make any compromise or settlement, and
take any action it deems advisable, with respect to the Collateral; (e) pay any
Indebtedness of Debtor relating to the Collateral; and (f) execute UCC
financing statements and other documents, instruments and agreements required
hereunder; provided, however, that Secured Party shall not exercise any such
powers prior to the occurrence of an Event of Default and shall only exercise
such powers during the continuance of an Event of Default.  Debtor agrees to
reimburse Secured Party upon demand for any reasonable costs and expenses,
including reasonable attorneys' fees, Secured Party may incur while acting as
Debtor's attorney-in-fact hereunder, all of which costs and expenses are
included in the Obligations.  It is further agreed and understood between the
parties hereto that such care as Secured Party gives to the safekeeping of its
own property of like kind shall constitute reasonable care of the Collateral
when in Secured Party's possession; provided, however, that Secured Party shall
not be required to make any presentment, demand or protest, or give any notice
and need not take any action to preserve any rights against any prior party or
any other person in connection with the Obligations or with respect to the

         6.      Default and Remedies.  Debtor shall be deemed in default under
this Security Agreement upon the occurrence and during the continuance of an
Event of Default (as defined in the Note).  Upon the occurrence and during the
continuance of any such Event of Default, Secured Party shall have the rights
of a secured creditor under the UCC, all rights granted by this Security
Agreement and by law, including the right to:  (a) require Debtor to assemble
the Collateral and make it available to Secured Party at a place to be
designated by Secured Party; and (b) prior to the disposition of the
Collateral, store, process, repair or recondition it or otherwise prepare it
for disposition in any manner and to the extent Secured Party deems appropriate
and in connection with such preparation and disposition, without charge, use
any trademark, trade name, copyright, patent or technical process used by
Debtor.  Debtor hereby agrees that ten (10) days' notice of any intended sale
or disposition of any Collateral is reasonable.  In furtherance of Secured
Party's rights hereunder, Debtor hereby grants to Secured Party an irrevocable,
non-exclusive license (exercisable without royalty or other payment by Secured
Party, but only in connection with the exercise of remedies hereunder) to use,
license or sublicense any patent, trademark, trade name, copyright or other
intellectual property in which Debtor now or hereafter has any right, title or
interest together with the right of access to all media in which any of the
foregoing may be recorded or stored.

         7.      Miscellaneous.

                 (a)      Notices.  Except as otherwise provided herein, all
notices, requests, demands, consents, instructions or other communications to
or upon Debtor or Secured Party under this Security Agreement shall be

<PAGE>   4
by telecopy or in writing and telecopied, mailed or delivered to each party at
telecopier number or its address set forth below (or to such other telecopy
number or address as the recipient of any notice shall have notified the other
in writing).  All such notices and communications shall be effective (a) when
sent by Federal Express or other overnight service of recognized standing, on
the Business Day following the deposit with such service; (b) when mailed, by
registered or certified mail, first class postage prepaid and addressed as
aforesaid through the United States Postal Service, upon receipt; (c) when
delivered by hand, upon delivery; and (d) when telecopied, upon confirmation of

                          Secured Party:   Atari Corporation
                                           1196 Borregas Avenue
                                           Sunnyvale, CA  94089-1302
                                           Attn:  Jack Tramiel
                                           Telephone No.:  (408) 745-2000
                                           Telecopier No.:  (408) 745-8800

                          Debtor:          JT Storage, Inc.
                                           166 Baypointe Parkway
                                           San Jose, CA  95134
                                           Attn:  David T. Mitchell
                                           Telephone No.:  (408) 468-1800
                                           Telecopier No.:  (408) 468-1619

                 (b)      Nonwaiver.  No failure or delay on Secured Party's
part in exercising any right hereunder shall operate as a waiver thereof or of
any other right nor shall any single or partial exercise of any such right
preclude any other further exercise thereof or of any other right.

                 (c)      Amendments and Waivers.  This Security Agreement may
not be amended or modified, nor may any of its terms be waived, except by
written instruments signed by Debtor and Secured Party.  Each waiver or consent
under any provision hereof shall be effective only in the specific instances
for the purpose for which given.

                 (d)      Assignments.  This Security Agreement shall be
binding upon and inure to the benefit of Secured Party and Debtor and their
respective successors and assigns; provided, however, that Debtor may not sell,
assign or delegate its rights and obligations hereunder without the prior
written consent of Secured Party, and prior to the termination of the Merger
Agreement, Secured Party may not sell, assign, or delegate its rights and
obligations hereunder without the written consent of Debtor.

                 (e)      Cumulative Rights, etc.  The rights, powers and
remedies of Secured Party under this Security Agreement shall be in addition to
all rights, powers and remedies given to Secured Party by virtue of any
applicable law, rule or regulation of any Governmental Authority, any
Transaction Document or any other agreement, all of which rights, powers, and
remedies shall be cumulative and may be exercised successively or concurrently
without impairing Secured Party's rights hereunder.  Debtor waives any right to
require Secured Party to proceed against any Person or to exhaust any
Collateral or to pursue any remedy in Secured Party's power.

                 (f)      Payments Free of Taxes, Etc.  All payments made by
Debtor under this Security Agreement shall be made by Debtor free and clear of
and without deduction for any and all present and future taxes, levies,
charges, deductions and withholdings.  In addition, Debtor shall pay upon
demand any stamp or

<PAGE>   5
other taxes, levies or charges of any jurisdiction with respect to the
execution, delivery, registration, performance and enforcement of this Security
Agreement.  Upon request by Secured Party, Debtor shall furnish evidence
satisfactory to Secured Party that all requisite authorizations and approvals
by, and notices to and filings with, governmental authorities and regulatory
bodies have been obtained and made and that all requisite taxes, levies and
charges have been paid.

                 (g)      Partial Invalidity.  If at any time any provision of
this Security Agreement is or becomes illegal, invalid or unenforceable in any
respect under the law or any jurisdiction, neither the legality, validity or
enforceability of the remaining provisions of this Security Agreement nor the
legality, validity or enforceability of such provision under the law of any
other jurisdiction shall in any way be affected or impaired thereby.

                 (h)      Expenses.  Debtor shall pay on demand all reasonable
fees and expenses, including reasonable attorneys' fees and expenses, incurred
by Secured Party in connection with custody, preservation or sale of, or other
realization on, any of the Collateral or the enforcement or attempt to enforce
any of the Obligations which is not performed as and when required by this
Security Agreement.

                 (i)      Headings.  Headings in this Security Agreement and
each of the other Transaction Documents are for convenience of reference only
and are not part of the substance hereof or thereof.

                 (j)      Plural Terms.  All terms defined in this Security
Agreement or any other Transaction Document in the singular form shall have
comparable meanings when used in the plural form and vice versa.

                 (k)      Construction.  Each of this Security Agreement and
the other Transaction Documents is the result of negotiations among, and has
been reviewed by, Debtor, Secured Party and their respective counsel.
Accordingly, this Security Agreement and the other Transaction Documents shall
be deemed to be the product of all parties hereto, and no ambiguity shall be
construed in favor of or against Debtor or Secured Party.

                 (l)      Entire Agreement.  This Security Agreement and each
of the other Transaction Documents, taken together, constitute and contain the
entire agreement of Debtor and Secured Party and supersede any and all prior
agreements, negotiations, correspondence, understandings and communications
among the parties, whether written or oral, respecting the subject matter

                 (m)      Other Interpretive Provisions.   References in this
Security Agreement and each of the other Transaction Documents to any document,
instrument or agreement (a) shall include all exhibits, schedules and other
attachments thereto, (b) shall include all documents, instruments or agreements
issued or executed in replacement thereof, and (c) shall mean such document,
instrument or agreement, or replacement or predecessor thereto, as amended,
modified and supplemented from time to time and in effect at any given time.
The words "hereof," "herein" and "hereunder" and words of similar import when
used in this Security Agreement or any other Transaction Document shall refer
to this Security Agreement or such other Transaction Document, as the case may
be, as a whole and not to any particular provision of this Security Agreement
or such other Transaction Document, as the case may be.  The words "include"
and "including" and words of similar import when used in this Security
Agreement or any other Transaction Document shall not be construed to be
limiting or exclusive.

                 (n)      Governing Law.  This Security Agreement shall be
governed by and construed in accordance with the laws of the State of
California without reference to conflicts of law rules (except to the extent
governed by the UCC).

<PAGE>   6
                 (o)      Jury Trial.  EACH OF DEBTOR AND SECURED PARTY, TO THE

                 IN WITNESS WHEREOF, Debtor has caused this Security Agreement
to be executed as of the day and year first above written.

                                            JT STORAGE, INC.,
                                            a Delaware corporation
                                            By: /s/David T. Mitchell         
                                            Name:  David T. Mitchell
                                            Title: President
a Nevada corporation

By: /s/Sam Tramiel                                
Name:  Sam Tramiel
Title: President

<PAGE>   7
                                  ATTACHMENT 1
                             TO SECURITY AGREEMENT

                 All right, title and interest of Debtor now owned or hereafter
acquired in and to the following:

         (a)     All equipment and fixtures (including, without limitation,
furniture, vehicles and other machinery and office equipment), together with
all additions and accessions thereto and replacements therefor (collectively,
the "Equipment");

         (b)     All inventory (including, without limitation, (i) all raw
materials, work in process and finished goods and (ii) all such goods which are
returned to or repossessed by Debtor), together with all additions and
accessions thereto, replacements therefor, products thereof and documents
therefor (collectively, the "Inventory");

         (c)     All accounts, chattel paper, contract rights and rights to the
payment of money (collectively, the "Receivables");

         (d)     All general intangibles, including, without limitation, (i)
customer and supplier lists and contracts, books and records, insurance
policies, tax refunds, contracts for the purchase of real or personal property;
(ii) all patents, copyrights, trademarks, trade names, service marks and other
intellectual property rights, (iii) all licenses to use, applications for, and
other rights to, such patents, copyrights, trademarks, trade names and service
marks, and (iv) all goodwill of Debtor;

         (e)     All deposit accounts, money, certificated securities (but
excluding securities of foreign Subsidiaries), uncertificated securities,
instruments and documents; and

         (f)     All proceeds of the foregoing (including, without limitation,
whatever is receivable or received when Collateral or proceeds is sold,
collected, exchanged, returned, substituted or otherwise disposed of, whether
such disposition is voluntary or involuntary, including rights to payment and
return premiums and insurance proceeds under insurance with respect to any
Collateral, and all rights to payment with respect to any cause of action
affecting or relating to the Collateral).
<PAGE>   8

                                ATTACHMENT 2
                            TO SECURITY AGREEMENT

                               DEBTOR PROFILE

1.       The legal name of Debtor is and its the address of its chief executive
         office is:  JT Storage, Inc..

2.       Debtor was incorporated on _____________, 19__ in the state of
         Delaware.  Since its incorporation Debtor has had the following legal
         names (other than its current legal name):

                                                   Date Debtor's Name
         Prior Name                                Was Changed From Such Name
         ----------                                --------------------------
         <S>                                       <C>

3.       Debtor does business under the following trade names:

         Trade Name               Is This Name Registered?      Registration No.      Registration Date
         ----------               ------------------------      ----------------      -----------------
         <S>                       <C>                          <C>                   <C>


4.       Since Debtor's incorporation the following companies have been merged
         into Debtor (provide names, dates and brief description of

5.       The following assets of Debtor were acquired in a bulk sale or another
         transaction not in the ordinary course of business of the seller
         (provide description of collateral, date and description of
         transaction, and name of seller):
<PAGE>   9
6.       Debtor has the following places of business:

                                                                    Brief Description
         Address                     Owner of Location              of Assets and Value
         -------                     -----------------              -------------------
         <S>                       <C>                             <C>                  


7.       Debtor has assets at the following other locations that are not places
         of business of Debtor:

                                                                    Brief Description
         Address                     Owner of Location              of Assets and Value
         -------                     -----------------              -------------------
         <S>                       <C>                          <C>                  


8.       The following locations listed in items 6 and 7 are public warehouses
         issuing warehouse receipts:

                                                                    Brief Description
         Address                     Owner of Location              of Assets and Value
         -------                     -----------------              -------------------
         <S>                       <C>                          <C>                  


9.       Debtor had the following other locations within the past four months:

                                                                    Brief Description
         Address                     Owner of Location              of Assets and Value
         -------                     -----------------              -------------------
         <S>                       <C>                          <C>                  

<PAGE>   10
10.      Debtor imports assets from outside the United States through the
         following ports of entry (list location by state and county):

11.      The following Persons have possession of inventory of Debtor for the
         purpose of processing or finishing it:

         Name and Address                  Processing Services             Description of Inventory
         ----------------                  -------------------             ------------------------
         <S>                              <C>                          <C>                  


12.      Debtor is qualified to do business in the following states:

13.      Does Debtor regularly receive letters of credit from customers to
         secure payments of sums owed to Debtor?  Yes ____.  No____.

14.      Debtor holds notes payable from the following persons:

         Name of Obligor                                   Amount
         ---------------                                   ------
         <S>                                               <C>     


15.      Does Debtor regularly have accounts receivable due from, or contracts
         with, the United States government or any agency or department
         thereof?  Yes ______.  No _______.

<PAGE>   11
         If yes, indicate the percentage of Debtor's total outstanding accounts
         receivable that are due from the United States government or such
         agency or department:  __________%

16.      Does Debtor regularly receive advance deposits from customers for
         goods not yet delivered to such customers?  Yes ____.  No ____.

17.      Debtor's federal employer identification number is:__________________

18.      Debtor's assets are subject to the following security interest of
         Persons other than the Secured Party:

         Assets                                            Name of Secured Party
         ------                                            ---------------------
         <S>                                              <C>                  


19.      The following tax assessments are currently outstanding and unpaid:

         Assessing                                         Amount and Description
         ---------                                         ----------------------
         <S>                                               <C>


20.      Debtor has directly or indirectly guaranteed the following obligations
         of third parties:

         Secured Party                           Amount                 Debtor
         -------------                           ------                      
         <S>                                    <C>                     <C>                  


21.      Debtor owns the following material intellectual property rights
         (including patents, trademarks and copyrights, whether or not

<PAGE>   12
22.      The following is a list of all software or other copyrighted material
         which is licensed to third parties and generates accounts receivable:

23.      Debtor has the following subsidiaries (list jurisdiction and date of
         incorporation, federal employer identification number, type and value
         of assets):

<PAGE>   13
                                  ATTACHMENT 3
                             TO SECURITY AGREEMENT

                          NOTICE OF SECURITY INTEREST
                                DEPOSIT ACCOUNT     

                               February __, 1996

[Name of Depositary Bank]
[Address of Depositary Bank]

         JT Storage, Inc. ("Debtor") and Atari Corporation ("Secured Party"),
under that certain Security Agreement dated as of February __, 1996, executed
by Debtor in favor of Secured Party, hereby notify you that Debtor has granted
to Secured Party a security interest in all deposit accounts maintained by
Debtor with you including, without limitation, the deposit accounts described

          Account Number                   Depositor's Name               Account Type
       --------------------------   --------------------------   -----------------------------
         <S>                         <C>                          <C>                  


Debtor and Secured Party authorize you to continue to allow Debtor to make
deposits to, draw checks upon and otherwise withdraw funds from such deposit
accounts (the "Deposit Accounts") without the consent of Secured Party until
Secured Party shall instruct you otherwise.

         Debtor has authorized Secured Party to inform you when an Event of
Default has occurred and is continuing and at such time instruct you to cease
to permit any further payments or withdrawals from the Deposit Accounts by
Debtor and/or to pay any or all amounts in the Deposit Accounts to Secured
Party.  Debtor authorizes
<PAGE>   14
and directs you to comply with all such instructions received by you from
Secured Party without further inquiry on your part and hereby agrees to
indemnify and hold harmless you and your officers, directors and employees from
and for any compliance by you with such instructions.

                                          JT STORAGE, INC.
                                          ATARI CORPORATION

<PAGE>   15
                          ACKNOWLEDGMENT AND AGREEMENT
                              OF DEPOSITARY BANK     

         The undersigned depositary bank hereby acknowledges receipt of the
above notice and agrees with Debtor and Secured Party to comply with any
instruction it may receive from Secured Party in accordance therewith.  The
undersigned confirms to Secured Party that the information set forth above
regarding the Deposit Accounts is accurate, that such Deposit Accounts are
currently open and that the undersigned has no prior notice of any other
security interest, lien or interest in such Deposit Accounts.