-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Petnuu4qsb5VsE2BlCVPW/HVhlkeSLLzIllgjLY75i7BFy4VH27mYCrbASQMEF4t b8pJdBDtsSNGJFQqEaPhHw== 0000102198-96-000002.txt : 19960213 0000102198-96-000002.hdr.sgml : 19960213 ACCESSION NUMBER: 0000102198-96-000002 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19960131 ITEM INFORMATION: Acquisition or disposition of assets ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19960212 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: COMPETITIVE TECHNOLOGIES INC CENTRAL INDEX KEY: 0000102198 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-EDUCATIONAL SERVICES [8200] IRS NUMBER: 362664428 STATE OF INCORPORATION: DE FISCAL YEAR END: 0731 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-08696 FILM NUMBER: 96515690 BUSINESS ADDRESS: STREET 1: 1465 POST RD E STREET 2: PO BOX 901 CITY: WESTPORT STATE: CT ZIP: 06881-0901 BUSINESS PHONE: 2032556044 MAIL ADDRESS: STREET 1: 1465 POST ROAD EAST STREET 2: P O BOX 901 CITY: WESTPORT STATE: CT ZIP: 06881-0901 FORMER COMPANY: FORMER CONFORMED NAME: UNIVERSITY PATENTS INC DATE OF NAME CHANGE: 19920703 8-K 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K Current Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported) January 31, 1996 COMPETITIVE TECHNOLOGIES, INC. (Exact name of registrant as specified in its charter) Delaware 1-8696 36-2664428 (State or other (Commission file (IRS employer jurisdiction number) identification No. of incorporation) 1465 Post Road East, P.O. Box 901, Westport, Connecticut 06881 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (203) 255-6044 N/A (Former name or former address, if changed since last report) Item 2. Acquisition or disposition of assets On January 31, 1996, in an agreement resulting from arms' length bargaining, UPAT Services, Inc., a wholly-owned subsidiary of the Registrant, purchased the limited partnership interests of Texas Research and Technology Foundation and United Services Automobile Association in USET Acquisition Partners, L.P (the "Partnership"). The total purchase price was $1,835,000 with $500,000 paid in cash from the Registrant's working capital at the closing and the balance to be paid without interest on each succeeding January 31 in installments equal to 60% of University Science, Engineering and Technology, Inc.'s ("USET") earned revenues for the preceding calendar year or the remaining unpaid balance of the purchase price, whichever is less. However, if any annual 60% installment would be less than $400,000, that installment shall be equal to the lesser of $400,000 or 80% of USET's earned revenues. The Registrant has guaranteed the payment of these installments when due. After the purchase, UPAT Services, Inc. owns 100% of all partnership interests in USET Acquisition Partners, L.P. and as a result, the Partnership will be dissolved. The Partnership's principal asset is its investment in 100% of the equity of USET Holding Co. USET Holding Co.'s only asset is its investment in 100% of the equity of USET. The primary effect of the purchase will be that the balance sheet and operations of USET will be included in the Registrant's consolidated balance sheet and results of operations from January 31, 1996. Through January 31, 1996, the registrant accounted for its investment in USET on the equity method and recorded 20% of USET's net income. USET provides technical evaluation, patent and market assessment, patent application and prosecution, licensing, license management and royalty distribution services under agreements with former university clients of the Registrant and other research institutions. For further information about the technology management services of USET, see Part I, Item 1 - Business and Note 4 to Consolidated Financial Statements in the Registrant's Annual Report on Form 10-K for the year ended July 31, 1995. As permitted by Item 7 (a) (4) and 7 (b) (2), the Registrant undertakes to provide the audited financial statements and pro forma financial information required by Items 7 (a) and 7 (b) as soon as they are available on or before April 15, 1996. Item 7. Financial Statements and Exhibits A. Financial Statements of Businesses Acquired It is impractical for the Registrant to file the required audited financial statements of USET Acquisition Partners, L.P. and its consolidated operating entities, USET Holding Co. and University Science, Engineering and Technology, Inc., at this time. As permitted by Item 7(a)(4), those financial statements will be filed under cover of Form 8-K/A as soon as they are available on or before April 15, 1996. B. Pro Forma Financial Information It is impractical for the Registrant to file the required pro forma financial information at this time. As permitted by Item 7(b)(2), it will be filed under cover of Form 8-K/A as soon as it is available on or before April 15, 1996. C. Exhibits Page 2.1 Agreement for Purchase and Sale of 6-10 Partnership Interests in USET Acquisition Partners, L.P. effective January 31, 1996 by and between UPAT Services, Inc., Texas Research and Technology Foundation and United Services Automobile Association. 2.2 Promissory Note of UPAT Services, Inc. 11-13 dated January 31, 1996 in the principal amount of $983,684.21 payable to United Services Automobile Association ("USAA"). 2.3 Promissory Note of UPAT Services, Inc. 14-16 dated January 31, 1996 in the principal amount of $351,315.79 payable to Texas Research and Technology Foundation. 2.4 Security Agreement of UPAT Services, 17-23 Inc. dated January 31, 1996 to USAA and Texas Research and Technology Foundation as collateral for the related Promissory notes dated January 31, 1996. 2.5 USET Acquisition Partners, L.P. 24 Assignment of Partnership Interests to UPAT Services, Inc. by Texas Research and Technology Foundation. 2.6 USET Acquisition Partners, L.P. 25 Assignment of Partnership Interests to UPAT Services, Inc. by USAA. Signatures Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. COMPETITIVE TECHNOLOGIES, INC. Registrant Date: February 12, 1996 Frank R. McPike, Jr. By: Frank R. McPike, Jr. Vice President, Finance Principal Financial Officer and Authorized Signer EX-2.1 2 Exhibit 2.1 AGREEMENT FOR PURCHASE AND SALE OF PARTNERSHIP INTERESTS IN USET ACQUISITION PARTNERS, L.P. THIS AGREEMENT is made and entered into this 31st day of January, 1996, by and between UPAT SERVICES, INC., a Delaware corporation ("UPAT"), TEXAS RESEARCH AND TECHNOLOGY FOUNDATION., a Texas non-profit corporation ("TRTF") and UNITED SERVICES AUTOMOBILE ASSOCIATION, a reciprocal interinsurance exchange ("USAA"). BACKGROUND UPAT, TRTF and USAA are all of the partners of USET ACQUISITION PARTNERS, L.P., a Texas limited partnership (the "Partnership") formed pursuant to an Agreement of Limited Partnership dated as of June 28, 1990, as amended as of July 30, 1990, April 19, 1991 and March 24, 1993 (the "Partnership Agreement"). TRTF and USAA are each a limited partner in the Partnership with a Percentage Interest (as defined in the Partnership Agreement) of 5/24 of 80% and 7/12 of 80%, respectively, and UPAT is both a general partner and a limited partner in the Partnership with Percentage Interests in those capacities of 20% and 5/24 of 80%, respectively. TRTF and USAA each desire to sell their entire interest in the Partnership (the "Partnership Interests"), and UPAT desires to purchase the Partnership Interests, all upon the terms and conditions set forth below. AGREEMENT The parties hereby agree as follows: (1) Purchase and Sale of Partnership Interests. On the Closing Date (as defined below), TRTF and USAA shall each sell to UPAT, and UPAT shall purchase from TRTF and USAA, the Partnership Interests. (2) Purchase Price. The purchase price to be paid by UPAT to TRTF and USAA for the Partnership Interests shall be (i) $500,000, payable 5/19 to TRTF and 14/19 to USAA (the Base Price"), plus (ii) up to an additional $1,335,000 in the aggregate, without interest, payable to TRTF and USAA in the same ratios as the Base Price (the "Additional Price"). (a) The Base Price shall be paid to TRTF and USAA on the Closing Date. (b)(i) The Additional Price shall be paid to each TRTF and USAA as their interests may arise, as described in the Partnership Agreement, on January 31 of each year (the "Annual Payment"), beginning on January 31, 1997, and shall equal at least 60% of USET Annual Revenues (as defined below)for the preceding calendar year, until the total of such Annual Payments equals $1,335,000. Should any such Annual Payment to USAA and TRTF be less than a combined total of $400,000, USET will pay USAA and TRTF in such proportion as described in Section 2 of this Agreement an additional 20% of USET Annual Revenues up to a total of $400,000 or the remaining unpaid balance of the Additional Price, whichever is lesser. (ii) As used in the agreement, "Annual Revenue" of USET shall mean, for any year, the revenues earned during such year by University Science, Engineering and Technology, Inc., a Delaware corporation ("USET"), determined in accordance with generally accepted accounting principles applied on a basis consistent with USET's past audited financial statement, excluding payments to USET as agent for other persons sharing in rights to royalties or other payments in respect of options, licenses or assignments of technology rights. If at any time UPAT and its Affiliates pursuant to a transaction that resulted in the reduction of equity ownership shall be included in the Net Revenues of USET, and thereafter, Net Revenues of USET shall mean the amount determined in accordance with the preceding sentence multiplied by the new percentage of equity ownership of USET owned by UPAT and its Affiliates. Legal fees and expenses attributable to activities of the partnership for which USAA or TRTF receive no benefit shall not be deducted in the computation of Annual Revenues. Furthermore, the parties agree that the annual $400,000 partnership management fee ordinarily due to USET will be discontinued until the $1,335,000 amount referred to above has been distributed to USAA and TRTF. (3) Termination of Partnership. The parties recognize that upon the purchase of the Partnership Interests of TRTF and USAA by UPAT, UPAT will be the only partner of the Partnership and, as a result, the Partnership will be dissolved and UPAT will become the owner of all of the assets of the Partnership, including 100% of the outstanding shares of USET, subject to all of the liabilities of the Partnership. Thereafter, UPAT shall cause a certificate of cancellation to be filed with the Secretary of State of the State of Texas as provided by Section 2.03 of the Texas Revised Limited Partnership Act. (4) Representations and Warranties of TRTF and USAA. TRTF and USAA each represent and warrant to UPAT that: (a) It has the right, power and authority to enter into and perform this agreement, and this agreement constitutes a valid and legally binding obligation, enforceable against it in accordance with its terms; (b) It owns its Partnership Interest, free and clear of all liens, claims, encumbrances or security interests; and (C) It has obtained sufficient information and has such knowledge and experience in matters of this sort that is capable of evaluating the business and prospects of the Partnership and USET and the fairness of the purchase price being paid to it for its Partnership Interest and the terms of such payment. (5) Representations and Warranties of UPAT. UPAT represents and warrants to TRTF and USAA that it has the right, power and authority to enter into this agreement, and this agreement constitutes a valid and legally binding obligation, enforceable against it in accordance with its terms. (6) Continuation and Survival of Representations and Warranties. All of the representations and warranties by the parties shall continue to be true and correct up to and as of the Closing Date and shall survive the consummation of the purchase and sale of the Partnership Interests provided for herein. (7) Closing. The closing of the purchase and sale of the Partnership Interest shall take place at such time and place as agreed to by the parties hereto. At the closing: (a) TRTF and USAA shall each deliver to UPAT an assignment in form and substance reasonably satisfactory to UPAT, assigning its Partnership Interest to UPAT free and clear of all liens. (b) UPAT shall deliver certified checks (or wire transfer) to TRTF and USAA in the amount of the Base Price. (8) Notices. Any notice or other communication to any party shall be in writing and shall be deemed to have been given or delivered when hand-delivered or mailed by registered or certified mail, postage prepaid, and addressed to the party for whom intended as follows: If to TRTF, at: c/o Texas Research and Technology Foundation 14815 Omicron Drive San Antonio, Texas 78288 If to USAA, at: c/o USAA Investment Management Company USAA Building San Antonio, Texas 78288 Attn: David Peebles If to UPAT, at: 1465 Post Road East P.O. Box 901 Westport, CT 06881 or to such other address as any party may designate for itself by written notice to the other parties in the above manner, except that any notice of a change of address shall not be effective until received. (9) Entire Agreement. This agreement supersedes all prior negotiations and agreements, if any, between the parties with respect to the purchase and sale of the Partnership Interests, and there are no representations, warranties or agreements with respect to such transaction other than as expressly set forth herein. (10) Successors and Assigns. This agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective heirs, personal representatives, successors and assigns. (11) Miscellaneous. The invalidity of any part of this agreement shall not impair or affect in any manner the enforceability of the remainder of this agreement. If any provision of this agreement is so broad as to be unenforceable, such provision shall be interpreted to be only so broad as is enforceable. Headings are used in this agreement for convenience only and shall not affect the meaning of any provision hereof. This agreement shall be construed and enforced in accordance with the internal laws of the State of Connecticut. IN WITNESS WHEREOF, the parties hereto have caused this agreement to be duly executed, all on this day and year first above written. UPAT SERVICES, INC. By: Frank R. McPike, Jr. Vice President TEXAS RESEARCH AND TECHNOLOGY FOUNDATION By: George H. Ensley George H. Ensley, President UNITED SERVICES AUTOMOBILE ASSOCIATION By: David Peebles Vice President GUARANTY COMPETITIVE TECHNOLOGIES, INC., the owner of all of the outstanding stock of UPAT SERVICES, INC., ("UPAT"), in order to induce TEXAS RESEARCH AND TECHNOLOGY FOUNDATION and UNITED SERVICES AUTOMOBILE ASSOCIATION to enter into the foregoing agreement, hereby guarantees the payment when due of all amounts owed to each of them by UPAT. February 1 , 1996. COMPETITIVE TECHNOLOGIES, INC. By: Frank R. McPike, Jr. Vice President EX-2.2 3 Exhibit 2.2 PROMISSORY NOTE $983,684.21 January 31, 1996 FRM Note Amount Date To Be Initialed by Authorized Officer FOR VALUE RECEIVED, the undersigned ("the Maker") hereby unconditionally promises to pay to the order of United Services Automobile Association a reciprocal interinsurance exchange, with its offices located in San Antonio, Texas (USAA) (together with its successors and assigns, the "Payee"), as their interests may appear the amount of $983,684.21 (the "Note Amount"), at the offices of the Payee, or at such other place as the Payee may designate in writing to the Maker. This amount shall be payable in installments as follows: Annual payments of 14/19 of 60% of USET annual revenues until a total of $983,684.21 is received by USAA (should such annual payments to USAA be less than a total of $294,736.84, USET will pay USAA an additional 14/19 of 20% of USET annual revenues up to a total of $294,736.84). Such annual payments shall commence on January 31, 1997 and shall continue to be paid on January 31st of each year thereafter based upon the preceding calendar year's annual revenues, until the entire balance of this Note is paid. This Note is secured by the Maker and may be negotiated, endorsed, assigned, transferred, pledged, or hypothecated by the Payee to secure any indebtedness of the Payee and shall constitute a negotiable instrument. In the event that this Note is negotiated, endorsed, assigned, transferred, hypothecated and/or pledged, all references to the Payee shall apply to the holder, pledgee or transferee as if named as original Payee under this Note. If any installment hereunder is not paid when due, of if any installment due under any other note held by the holder hereof and given by Maker to the Payee (whether now existing or hereinafter entered into) is not paid when due, and such default continues for a period of fifteen (15) days, of if any "Event of Default," as defined in the Security Agreement, occurs, then at the election of the holder hereof without further notice, all principal and interest hereunder and under any such other note held by the holder of this Note shall be due and payable forthwith. No delay or omission of the Payee to exercise its rights hereunder shall impair any such right or power or shall be construed to be a waiver of any such default or any acquiescence therein. Any acceptance by the holder hereof of a partial or late payment made hereunder shall not establish a custom, waiver, or acquiescence. No waiver of any default shall be construed, taken, or held to be a waiver of any other default. Maker waives demand, presentment for payment, notice of dishonor, and protest and any defense by reason of extension of time for payment or other indulgence granted by the holder hereof. Interest shall accrue on any overdue installment of principal, and on the unpaid balance of the principal sum, from the date such amount is due and payable until the date paid, at the lesser of eighteen percent (18%) per annum or the maximum rate permitted by law. The obligation to make payments to the Payee hereunder is absolute and unconditional and the rights of said Payee shall not be subject to any defense, set-off, counterclaim or recoupment which the Maker may have against the Payee or by reason of any indebtedness or liability at any time owing by the Payee to the Maker. If this Note is held by a commercial bank, or a lending or financing institution, such holder, its successors, assigns and endorsees, shall in all respects be deemed a holder in due course, and the Maker expressly waives any rights it may have to assert that such holder or subsequent holder is not a holder in due course. If any installment of this Note becomes due and payable on a Saturday, a Sunday, or a banking holiday the maturity thereof shall be extended to the next business day. Should this Note, or any part of the indebtedness evidenced hereby, be collected by law or through an attorney-at-law, the Payee shall be entitled to collect all costs of collection, including, but not limited to, reasonable attorneys' fees. Any notice to Maker may be made by certified or registered mail addressed to Maker at the address shown below or such other address as Maker may designate by written notice to the holder of this Note. This Note shall be governed and controlled as to interpretation, validity, enforcement and in all other material respects in accordance with the internal laws of the State of Texas. WITNESS the execution hereof under seal this 1st day of February, 1996. Maker: UPAT SERVICES, INC. By: Frank R. McPike, Jr. Signature of Authorized Party Frank R. McPike, Jr., Vice President Name and Title of Authorized Party ADDRESS: 1465 Post Road East P.O. Box 901 Westport, CT 06881 EX-2.3 4 Exhibit 2.3 PROMISSORY NOTE $351,315.79 January 31, 1996 FRM Note Amount Date To Be Initialed by Authorized Officer FOR VALUE RECEIVED, the undersigned ("the Maker") hereby unconditionally promises to pay to the order of TEXAS RESEARCH AND TECHNOLOGY FOUNDATION, with its offices located in San Antonio, Texas (TRTF) (together with its successors and assigns, the "Payee"), as their interests may appear the amount of $351,315.79 (the "Note Amount"), at the offices of the Payee, or at such other place as the Payee may designate in writing to the Maker. This amount shall be payable in installments as follows: Annual payments of 5/19 of 60% of USET annual revenues until a total of $351,315.79 is received by TRTF (should such annual payments to TRTF be less than a total of $105,263.16, USET will pay TRTF an additional 5/19 of 20% of USET annual revenues up to a total of $105,263.16). Such annual payments shall commence on January 31, 1997 and shall continue to be paid on January 31st of each year thereafter based upon the preceding calendar year's annual revenues, until the entire balance of this Note is paid. This Note is secured by the Maker and may be negotiated, endorsed, assigned, transferred, pledged, or hypothecated by the Payee to secure any indebtedness of the Payee and shall constitute a negotiable instrument. In the event that this Note is negotiated, endorsed, assigned, transferred, hypothecated and/or pledged, all references to the Payee shall apply to the holder, pledgee or transferee as if named as original Payee under this Note. If any installment hereunder is not paid when due, of if any installment due under any other note held by the holder hereof and given by Maker to the Payee (whether now existing or hereinafter entered into) is not paid when due, and such default continues for a period of fifteen (15) days, of if any "Event of Default," as defined in the Security Agreement, occurs, then at the election of the holder hereof without further notice, all principal and interest hereunder and under any such other note held by the holder of this Note shall be due and payable forthwith. No delay or omission of the Payee to exercise its rights hereunder shall impair any such right or power or shall be construed to be a waiver of any such default or any acquiescence therein. Any acceptance by the holder hereof of a partial or late payment made hereunder shall not establish a custom, waiver, or acquiescence. No waiver of any default shall be construed, taken, or held to be a waiver of any other default. Maker waives demand, presentment for payment, notice of dishonor, and protest and any defense by reason of extension of time for payment or other indulgence granted by the holder hereof. Interest shall accrue on any overdue installment of principal, and on the unpaid balance of the principal sum, from the date such amount is due and payable until the date paid, at the lesser of eighteen percent (18%) per annum or the maximum rate permitted by law. The obligation to make payments to the Payee hereunder is absolute and unconditional and the rights of said Payee shall not be subject to any defense, set-off, counterclaim or recoupment which the Maker may have against the Payee or by reason of any indebtedness or liability at any time owing by the Payee to the Maker. If this Note is held by a commercial bank, or a lending or financing institution, such holder, its successors, assigns and endorsees, shall in all respects be deemed a holder in due course, and the Maker expressly waives any rights it may have to assert that such holder or subsequent holder is not a holder in due course. If any installment of this Note becomes due and payable on a Saturday, a Sunday, or a banking holiday the maturity thereof shall be extended to the next business day. Should this Note, or any part of the indebtedness evidenced hereby, be collected by law or through an attorney-at-law, the Payee shall be entitled to collect all costs of collection, including, but not limited to, reasonable attorneys' fees. Any notice to Maker may be made by certified or registered mail addressed to Maker at the address shown below or such other address as Maker may designate by written notice to the holder of this Note. This Note shall be governed and controlled as to interpretation, validity, enforcement and in all other material respects in accordance with the internal laws of the State of Texas. WITNESS the execution hereof under seal this 1st day of February, 1996. Maker: UPAT SERVICES, INC. By: Frank R. McPike, Jr. Signature of Authorized Party Frank R. McPike, Jr., Vice President Name and Title of Authorized Party ADDRESS: 1465 Post Road East P.O. Box 901 Westport, CT 06881 EX-2.4 5 Exhibit 2.4 SECURITY AGREEMENT UPAT Services, Inc. is the maker of a Promissory Note ("Maker") in the principal amount of $983,684.21, dated January 31, 1996, (the "Note") payable to USAA (together with its successors and assignees, and a Promissory Note in the principal amount of $351,315.79, dated January 31, 1996 (hereinafter collectively referred to as the "Notes"), payable to TEXAS RESEARCH AND TECHNOLOGY FOUNDATION (hereinafter cumulatively referred to as the "Sellers"). As partial consideration and collateral for the loan evidenced by the Notes, the Maker has agreed to grant, assign and set over to the Sellers a security interest in certain property of the Maker and its successors and assigns and hereby agrees as follows: 1. Grant of Security Interest. All indebtedness evidenced by and any obligations arising under the Notes (or under such other promissory notes as may be issued by the Maker to the Sellers or an assignee thereof as replacement or substitute notes) or this Agreement, including any extensions, renewals, refinancing or changes in form thereof, now existing or hereafter arising, are hereinafter referred to as the "Obligations." As security for the Obligations, the Maker hereby assigns, grants, and sets over to the Sellers, and agrees that the Sellers shall have a security interest in the following collateral (the "Collateral"): All of the shares of stock of University Science Engineering and Technology, Inc. ("USET"), which has been authorized by the Board of Directors of USET. 2. Execution of Financing and Other Statements. At any time and from time to time, upon request of the Sellers, or any successor, assignee, transferee or subsequent holder of the Notes (collectively the "Successor"), the Maker will give and execute, any notice, financing statement, continuation statement, instrument, document or agreement that the Sellers or their Successors may consider necessary or desirable to create, preserve, continue, perfect or validate the security interest granted hereunder or which the Sellers or their Successors may consider necessary or desirable to exercise or enforce their rights hereunder with respect to such security interest. Without limiting the generality of the foregoing, the Sellers or their Successors are authorized to file with respect to the Collateral one or more financing statements, continuation statements or other documents without the signature of the Maker and to name therein the Maker as debtor and the Sellers or their Successors as secured parties or to correct or complete, or cause to be corrected or completed, any financing statements, continuation statements or other such documents as have been signed by the Maker, provided, however, that upon final discharge of the Obligations by the Maker, the Sellers or their Successors shall promptly file such termination statements and other documents as are necessary to evidence the termination of the security interest granted hereunder. In addition to the foregoing, the Maker hereby constitutes and appoints the Sellers and their officers, acting singly, with full power of substitution, its true and lawful attorney-in-fact in its name, place and stead to carry out fully the provisions of this Security Agreement and take any action which such parties may deem necessary or appropriate in that connection after an Event of Default has occurred and so long as such Event of Default remains uncured. The power of attorney hereby granted shall be deemed to be coupled with an interest, shall be irrevocable and shall survive and shall not be affected by the subsequent disability, incapacity, bankruptcy, dissolution or termination of the Maker or any delivery by the Maker of an assignment of the whole or any portion of the Collateral. 3. Default. Each of the following shall constitute an event of default ("Event of Default") hereunder, (i) if the Maker shall fail to make payment of any of the Obligations within ten (10) days of the date when such payment is due; (ii) if the Maker has made any material misrepresentation in or with respect to, or has breached or does breach any provision of, this Security Agreement, or any other agreement entered into between the Maker and the Sellers; (iii) if an event of default occurs under the Note; (iv) if the Maker shall become insolvent or if any proceeding shall be instituted by the Maker seeking relief on its behalf as debtor, or to adjudicate it a bankrupt, or insolvent, or seeking reorganization, arrangement, adjustment or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking appointment of a receiver, trustee, custodian or other similar official for it or for any substantial part of its property or the Maker shall consent by answer or otherwise to the institution of any such proceeding against it; (v) if any proceeding shall be instituted against the Maker seeking to have an order for relief entered against it as debtor or to adjudicate it a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment or composition of it or its debts under any law relating to bankruptcy, insolvency, or reorganization or relief to debtors, or seeking appointment of a receiver, trustee, custodian or other similar official for it or for any substantial part of its property which either (a) results in any such entry of an order for relief, adjudication or bankruptcy or insolvency or issuance or entry of any other order having a similar effect or (b) remains undismissed for a period of 60 days; (vi) if a receiver, trustee or other custodian is appointed for any substantial part of the Maker's assets; (vii) if any assignment for the benefit of the Maker's creditors shall be made; or (viii) if any of the Collateral shall be attached or distrained at any time pursuant to any court order or other legal process. If an Event of Default shall occur and if such default shall remain uncured for a period of ten days after notice by Sellers to the Maker then, at the option of the Sellers or their Successors, all Obligations shall become immediately due and payable and the Sellers may avail themselves of all rights and remedies granted hereunder or pursuant to the Partnership Agreement of the Partnership or available to a secured party under the Uniform Commercial Code as in force in the State of Texas or available to a secured party under the Uniform Commercial Code as in force in the state in which secured party is incorporated or maintains its principal place of business in the United States. Such rights shall include without limiting the generality of the foregoing, the right to vote the Collateral in any manner it may see fit, or to sell, assign and deliver the Collateral or any part thereof, at public or private sale wherever the Sellers or their Successors may determine in good faith and at such prices as the Sellers or their Successors may deem best. At any such sale the Sellers or their Successors shall have the right to purchase the Collateral, or any part thereof. The Maker consents to private sales so made even though such sales may be at prices and upon other terms less favorable than if the Collateral were sold at public sale. The Maker agrees that the Sellers or their Successors shall have no obligation to delay sale of the Collateral for the period of time necessary to permit the offering and sale of the Collateral to be registered for public sale under the Securities Act of 1933, as amended (the "Act") and applicable state or local securities or blue sky laws. The Maker consents that private sales made under the foregoing circumstances will be deemed to have been made in a commercially reasonable manner. The parties agree that written notice mailed to the Maker ten (10) business days prior to the date after which private sale or any other disposition of the Collateral will be made shall constitute reasonable notice (all other notices, demands, or advertisement of any kind being hereby expressly waived), but notice given in any other reasonable manner or at any other reasonable time shall be sufficient. The Maker shall be liable for reasonable attorney's fees and legal expenses incurred by the Seller or their Successors in enforcing any of its rights or remedies hereunder, and without limiting the rights of the Sellers or their Successors, the proceeds of disposition of the Collateral may be applied in the Sellers' or their Successors' discretion to payment of such reasonable attorney's fees and legal expenses. To the extent permissible by law, the Maker waives the right to trial by jury in any action or proceeding instituted against the Maker in respect of the Note and other Obligations or the enforcement of any rights granted to the Sellers or their Successors hereunder. In addition, the Maker hereby acknowledges that the remedies provided herein in favor of the Sellers or their Successors shall not be deemed exclusive, but shall be cumulative and shall be in addition to all other remedies in favor of the Sellers or their Successors now or hereafter existing by statute, at law or in equity including, without limitation, all rights reserved to the Sellers. The Maker recognizes that for the reasons as set forth herein, a sale, public or private, of the Collateral, may not be able to be effected and the Sellers or their Successors is herewith expressly authorized at its sole election, without any obligation to do so, to retain the Collateral until a purchase can be effected. Until such sale, Sellers, or their Assignees, may elect to hold said Collateral and be treated as the owner thereof. Upon the happening of the sale, the Sellers, upon receipt of its pro rata portion of any proceeds realized as a result of such dissolution, termination or sale, after deducting all costs, loss, damage and expense attributable to the default, shall apply the residue of the proceeds so realized to pay in whole or in part, as the case may be, the principal and interest then due upon the Note or the Obligations and shall return the surplus, if any, to the Maker and the Maker shall remain liable to the Sellers for any deficiency arising as a result thereof. The Sellers shall have no obligation to resort to the Collateral or any other security which is or may become available to it. 4. Consent to Jurisdiction. The Maker consents that all actions or proceedings arising directly, indirectly or otherwise in connection with, out of, related to or from the Note or this Security Agreement shall, at the Sellers' discretion, be litigated only in courts located in the State of Texas or in the state where the Sellers or their successors maintain their principal place of business, and the Maker (i) consents and submits to the personal jurisdiction of any state or federal court located within said state(s), and (ii) waives any right to transfer or change the venue of litigation brought against the Maker. 5. Assignability. The Maker acknowledges that the security interest granted hereby, as well as its Note, may be pledged, transferred or assigned by the Sellers, and hereby consents to any such pledge, transfer or assignment. The Maker acknowledges and agrees that, even if the Sellers sell, assign or otherwise transfer the Obligations to a third party, the security interest in the Collateral will be conveyed to such third party and will survive until the Obligations are paid in full. The Maker also acknowledges that the recipient of such pledge, transfer or assignment may rely on the representations made in this Security Agreement. In addition, the Maker understands that such Successor may be a "holder in due course" under applicable commercial law and hence certain defenses to non-payment may be unavailable against such Successor, and the Maker shall have no rights of set off, counterclaims or defenses to non-payment against the Sellers or such Successor based upon the conduct of the Sellers. 6. Certain Additional Warranties and Representations. The Maker also makes each of the following warranties and representations: (a) The Maker has the corporate power and authority to carry on the business in which it is engaged and to purchase the Partnership interest and execute the Note. (b) The execution and delivery of this Security Agreement and the Note has been duly authorized by all necessary action and constitutes the legal, valid and binding obligations of the Maker enforceable in accordance with their terms. (C) The execution and delivery of this Security Agreement and the Note do not, and the performance of the terms thereof will not, contravene any provision of existing law or regulations, or of the Partnership Agreement, and will not conflict with or result in any breach of the terms, conditions or provisions of, or constitute a default under, or result in or permit the creation or imposition of any lien, charge or encumbrance upon any of the properties of the Maker pursuant to, any indenture, mortgage, or other agreement or instrument or any judgment, decree, order or decision to which the Maker is a party or by which it is bound. (d) Under existing law, no approval, authorization, license, permit or other action by or filing with, any Federal, state, municipal or other governmental commission, board or agency is required in connection with the execution and delivery by the Maker of this Security Agreement or the Note. (e) The officer executing and delivering this Security Agreement on behalf of the Maker is duly authorized by the Maker and has full power and authority to execute these agreements and instruments and to make the warranties and representations contained therein. (f) The Maker represents that it owns all of the Collateral free and clear of any lien or encumbrance (other than the security interest granted hereby) and agrees that it will not encumber or grant any security interest in or file a financing statement other than in favor of the Sellers or their Successors as Secured Party with respect to the Collateral, or permit any of the foregoing, without the prior written consent of the Sellers or their Successors; and hereby represents that (except as aforesaid) it has not heretofore done so. (g) The Maker represents that its present principal place of business is as set forth on the signature page of this Security Agreement. If the Maker should relocate its principal place of business at any time prior to the satisfaction in full of the debt as represented by the Note for which this Security Agreement is executed as collateral, the Maker shall, within thirty (30) days of the date of said relocation, inform the Sellers of the new location. (h) The Maker agrees that it will make available to the Sellers such financial statements as the Maker may prepare in the normal course of its business, which the Sellers may reasonably request. (i) The Maker hereby specifically warrants and represents that should the Board of Directors of USET authorize additional amounts or shares of stock of USET, such additional shares of stock shall become subject to the terms of this Security Agreement as Additional Collateral. 7. Notices. Any notice, demand or other communication which any party hereto may elect or be required to give to anyone interested hereunder shall be sufficiently given if (I) deposited, postage prepaid, in a United States mail box, stamped, registered or certified mail, return receipt requested, addressed to the address for that person in the Seller's books and records or (ii) delivered personally at such address. 8. Severability. Each provision of this Security Agreement is intended to be severable from each other provision, and the validity or illegality of any portion hereof shall not affect the validity or legality of the remainder hereof. 9. Applicable Law. This Security Agreement shall be governed by and construed in accordance with the laws of the State of Texas applicable to contracts to be performed wholly therein, without giving effect to any conflicts of law principles or cases. IN WITNESS WHEREOF, the Maker executes, accepts, adopts and agrees to be bound by all of the terms hereof by executing this Security Agreement on the date indicated below. IN WITNESS WHEREOF, the undersigned has executed this Security Agreement under seal on this 31st day of January, 1996. UPAT SERVICES, INC. By: Frank R. McPike, Jr. Name: Frank R. McPike, Jr. Title: Vice President CORPORATE ACKNOWLEDGMENT: STATE OF CONNECTICUT ) ) COUNTY OF FAIRFIELD ) On the 1st day of February, 1996, before me came Frank R. McPike, Jr., to me known, who being by me duly sworn, did depose and say that he is the Vice President of UPAT Services, Inc., the corporation described in and which executed the foregoing instrument; that he knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by authority of the Board of Directors of said corporation; that he signed his name thereto by like order. WITNESS my hand and official seal. Donna Szybist Notary Public Donna Szybist NOTARY PUBLIC My Commission Expires July 31, 1998 EX-2.5 6 Exhibit 2.5 STATE OF TEXAS COUNTY OF BEXAR USET ACQUISITION PARTNERS, L.P. ASSIGNMENT OF PARTNERSHIP INTERESTS For value received, as more specifically described in the AGREEMENT FOR PURCHASE AND SALE OF PARTNERSHIP INTERESTS IN USET ACQUISITION PARTNERS, L.P., all of even date herewith, TEXAS RESEARCH AND TECHNOLOGY FOUNDATION of San Antonio, Bexar County, Texas, a limited partner in the Texas limited partnership of USET Acquisition Partners, L.P., does hereby assign, sell, transfer and convey all its right, title and interest IN USET ACQUISITION PARTNERS, L.P. to UPAT SERVICES, INC., a Delaware corporation, free and clear of all liens, claims, encumbrances or security interests. Date: TEXAS RESEARCH AND TECHNOLOGY FOUNDATION By: George H. Ensley George H. Ensley President EX-2.6 7 Exhibit 2.6 STATE OF TEXAS COUNTY OF BEXAR USET ACQUISITION PARTNERS, L.P. ASSIGNMENT OF PARTNERSHIP INTERESTS For value received, as more specifically described in the AGREEMENT FOR PURCHASE AND SALE OF PARTNERSHIP INTERESTS IN USET ACQUISITION PARTNERS, L.P., all of even date herewith, UNITED SERVICES AUTOMOBILE ASSOCIATION, a reciprocal interinsurance exchange of San Antonio, Bexar County, Texas, a limited partner in the Texas limited partnership of USET Acquisition Partners, L.P., does hereby assign, sell, transfer and convey all its right, title and interest IN USET ACQUISITION PARTNERS, L.P. to UPAT SERVICES, INC., a Delaware corporation, free and clear of all liens, claims, encumbrances or security interests. Date: UNITED SERVICES AUTOMOBILE ASSOCIATION, a reciprocal interinsurance exchange By: David G. Peebles David G. Peebles Vice President -----END PRIVACY-ENHANCED MESSAGE-----