Document:

Security Agreement dated as of November 27, 2002

Exhibit 10.13 
 
SECURITY AGREEMENT 
 
This Agreement (this “Agreement”) is made and entered into as of the 27th day of November, 2002, by and between Varitek Industries, Inc., a Texas corporation (“Borrower”), and SMH
Varitek LLC, a Delaware limited liability company (the “Secured Party”). 
 
RECITALS 
 
Borrower has borrowed $1,500,000 from Secured Party, as evidenced by a promissory note of even date herewith from Borrower, in the stated principal amount of $1,500,000, payable to the order of Secured Party (the
“Note”). As partial consideration for the Promissory Note, Borrower agrees to provide the Secured Party with a security interest in Borrower’s Intellectual Property Rights (defined below) in accordance with this Agreement.

 
AGREEMENT 
 
NOW, THEREFORE, in consideration of the premises and
the mutual covenants and conditions contained herein, the receipt and sufficiency of which are hereby acknowledged, Borrower agrees with Secured Party as follows: 
 
ARTICLE 1 
Rules of Construction; Definitions 
 
Section 1.1 Rules of Construction. For purposes of this Agreement, except as otherwise expressly provided or unless the context otherwise requires: 
 
(a) Words of masculine, feminine or neuter
gender include the correlative words of other genders. Singular terms include the plural as well as the singular, and vice versa. 
 
(b) All references herein to designated Articles, Sections and other subdivisions or to lettered Exhibits are to the
designated Articles, Sections and subdivisions hereof and the Exhibits annexed hereto unless expressly otherwise designated in context. All Article, Section, other subdivision and Exhibit captions herein are used for reference only and do not limit
or describe the scope or intent of, or in any way affect, this Agreement. 
 
(c) The terms “include,” “including,” and similar terms shall be construed as if followed by the phrase “without being limited to.” 
 
(d) The terms “herein,”
“hereof” and “hereunder” and other words of similar import refer to this Agreement as a whole and not to any particular Article, Section, other subdivision or Exhibit. All Recitals set forth in, and all Exhibits to, this
Agreement are hereby incorporated in this Agreement by reference. 
 
(e) No inference in favor of or against any party shall be drawn from the fact that such party or such party’s counsel has drafted any portion hereof. 
 
(f) All references in this Agreement to a
separate instrument are to such separate instrument as the same may be amended, restated, modified or supplemented from time to time pursuant to the applicable provisions thereof. 

 
Section 1.2
Definitions. As used in this Agreement, capitalized terms that are not otherwise defined herein shall have the respective meanings defined for them in the Note and the following terms are defined as follows: 
 
(a) “Default Rate” means a
rate of interest equal to 8% per annum or the maximum rate per annum permitted by law, whichever is less. 
 
(b) “Event of Default” is defined in Section 4.1. An Event of Default “exists” if the same has
occurred and is continuing. 
 
(c)
“Governmental Authority” means any national, state, county, municipal or other government, domestic or foreign, and any agency, authority, department, commission, bureau, board, court or other instrumentality thereof. 
 
(d) “Intellectual Property
Rights” shall mean all rights of Borrower now or hereafter existing in and to any intellectual property, including without limitation the intellectual property listed on Exhibit A attached hereto and incorporated herein and
all of the following: 
 
(i)
Letters patent, utility models, design patents, industrial designs, patent applications, including continuations, continuations-in-part, divisionals (collectively “continuing applications”), re-examined patents and reissued patents that
are owned or controlled by the Borrower during the term of this Agreement, all United States patent applications, foreign counterparts thereof, continuing applications, re-issues and re-examined applications and patents issuing therefrom;

 
(ii) Trade secrets, know how,
and similar proprietary technical and business information including algorithms, ideas, processes, procedures and techniques that have been treated as confidential information, including those that that relate to Borrower’s tracking product
(VariLinkTM); 
 
(iii) Copyrights, works of authorship and similar rights, including rights in computer program code that relate to
Borrower’s tracking product (VariLinkTM); 
 
(iv) Mask work rights or similar protection, including rights that relate to Borrower’s
tracking product (VariLinkTM); and 
 
(v) Copyrights, trademarks, tradenames and service marks, and licenses to use, applications
for, and other rights to, patents, copyrights, trademarks, tradenames and service marks. 
 
(e) “Loan Documents” means, collectively, the Note, this Agreement, the Stock Pledge Agreement and the
Stockholders’ Agreement. 
 
(f) “Person” (whether or not capitalized) includes natural persons, sole proprietorships, corporations, trusts, unincorporated organizations, associations, companies, institutions, entities, joint ventures,
partnerships, limited liability companies and Governmental Authorities. 
 

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(g) “Secured Obligations” means, collectively, (i) all indebtedness evidenced by the Note, (ii) all obligations of Company now or hereafter created under the Stock Pledge Agreement, (iii) all other obligations, if
any, described or referred to in any other place in this Agreement, and (iv) any and all sums and the interest which accrues on them as provided in this Agreement which Secured Party may advance or which Borrower may owe Secured Party pursuant to
this Agreement on account of Borrower’s failure to keep, observe or perform any of Borrower’s covenants under this Agreement. 
 
(h) “Stock Pledge Agreement” means the Stock Pledge Agreement dated concurrently herewith among Randy S.
Bayne, Harry L. Bayne, BACO International and Secured Party. 
 
(i) “Stockholders’ Agreement” means the Stockholders’ Agreement dated concurrently herewith among Randy S. Bayne, Harry L. Bayne, BACO International, Borrower and Secured
Party. 
 
ARTICLE 2 
 
Security Agreement 
 
Section 2.1 Grant of Security Interest. To secure the
complete and timely satisfaction of all of the Secured Obligations, Borrower hereby grants the Secured Party a security interest in Borrower’s Intellectual Property Rights and any proceeds thereof. 
 
ARTICLE 3 
 
Representations, Warranties and Covenants

 
Section 3.1 Warranties and
Representations. Borrower represents, warrants and covenants to Secured Party that: 
 
(a) Borrower has the right and authority to enter into this Agreement and to grant the rights and securities provided
herein and to perform and comply with all covenants and obligations contained herein; 
 
(b) Borrower will take reasonable steps to maintain and protect Borrower’s Intellectual Property Rights;

 
(c) (i) as of the date hereof,
Borrower’s Intellectual Property Rights are free of any adverse claim and free of any security interest or encumbrance except only for the security interest granted hereby; and (ii) Borrower will not, during the term of this Agreement, incur,
create, assume or permit to exist any liens, mortgages, pledges, security interests, licenses, encumbrances, or claims of any nature, whatsoever, on Borrower’s Intellectual Property Rights created by or through Borrower, or permit any of the
foregoing to occur or arise, except (A) liens in favor of Secured Party and (B) liens of favor of Lockheed Martin encumbering that portion of Borrower’s Intellectual Property Rights consisting of technology developed by Lockheed Martin pursuant
to its agreement with Borrower, to the extent that such liens are created by the agreement between Borrower and Lockheed Martin or are mechanics, materialmen, or other similar statutory liens securing obligations that are not yet due and payable;

 
(d) Borrower will perform all
acts and execute any documents, including, without limitation, the filing of documents in the United States Patent and Trademark 

 

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Office, the United States Copyright Office and the Uniform Commercial Code Financing Statements in the Secretary of State’s Office, that
are reasonably requested by the Secured Party at any time to evidence, perfect and maintain the rights of the Secured Party in the Borrower’s Intellectual Property Rights under this Agreement; 
 
(e) No consent, authorization or other action
by, and no notice to or filing with, any other person is required for (i) the execution and delivery of this Agreement by the Borrower, or (ii) the granting to Secured Party of the liens on the Borrower’s Intellectual Property Rights under this
Agreement; 
 
(f) This Agreement
has been duly executed and delivered by Borrower and constitutes the legal, valid and binding obligations of Borrower, enforceable against Borrower in accordance with its terms, subject to bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect relating to creditors’ rights generally; and 
 
(g) Neither the execution and delivery of this Agreement by Borrower, nor the performance by Borrower of its obligations
hereunder, will (i) with or without the giving of notice or the lapse of time or both, conflict with or result in a breach of any terms or provisions of, or result in the creation or imposition of any lien, claim, charge or encumbrance upon any of
Borrower’s Intellectual Property Rights under any material agreements or other instrument, or (ii) violate any applicable law, rule, regulation, judgment, decree or order of any court or governmental instrumentality; and 
 
(h) All of Borrower’s Intellectual
Property Rights consisting of patents, trademarks or applications for patents or trademarks existing as of the date of this Agreement are set forth on Exhibit A hereto. 
 
Section 3.2 Dispositions. Borrower shall not sell, transfer or dispose of any of Borrower’s
Intellectual Property Rights. 
 
Section 3.3
Taxes and Assessments. Borrower shall pay when due all taxes, assessments and other charges levied or assessed against any of Borrower’s Intellectual Property Rights, and all other claims that are or may become liens against any of the
Borrower’s Intellectual Property Rights. 
 
Section 3.4 Further Assurances. At the Borrower’s cost and expense, upon request of Secured Party, Borrower shall (i) duly execute and deliver, or cause to be duly executed and delivered, to Secured Party such further
instruments and do and cause to be done such further acts as may be reasonably necessary or proper in the opinion of Secured Party or its counsel to perfect, preserve and protect the validity of the liens of Secured Party in the Borrower’s
Intellectual Property Rights and to carry out more effectively the provisions and purposes of this Agreement, and (ii) promptly correct any defect, error or omission which may be discovered in the contents of this Agreement or in any other
instrument executed in connection herewith or in the execution or acknowledgment thereof. 
 
Section 3.5 Performance of Borrower’s Obligations. If Borrower should fail to comply with any of its agreements, covenants or obligations under this Agreement or any other Loan Document,
then Secured Party (in Borrower’s name or in Secured Party’s own name) may perform them or cause them to be performed for Borrower’s account and at Borrower’s expense, but shall have no obligation to perform any of them or cause
them to be performed. Any and all 

 

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expenses thus incurred or paid by Secured Party shall be Borrower’s obligations to Secured Party due and payable on demand, and each
shall bear interest from the date Secured Party pays it until the date Borrower repays it to Secured Party at the Default Rate. 
 
ARTICLE 4 
 
Events of Default 
 
Section 4.1 Events of Default. The occurrence of any of the following events shall constitute an event of default (an
“Event of Default”) under this Agreement (whatever the reason for such event and whether or not it shall be voluntary or involuntary or be effected by operation of law or pursuant to any governmental requirement): 
 
(a) any representation or warranty made in
this Agreement or any other Loan Document shall prove to be false or misleading in any material respect as of the time made; or 
 
(b) Borrower fails to perform, observe or comply with-or defaults under-any of the terms, covenants, conditions or
provisions of this Agreement unless the failure or default is fully cured within 10 calendar days after Secured Party has given Borrower written notice thereof (provided, however, that in no event shall Secured Party be required to provide notice
with respect to any violation of Sections 3.1 or 3.2 hereof and such violation shall immediately constitute an Event of Default hereunder); or 
 
(c) Borrower shall claim—or any court shall find or rule—that Secured Party does not have a valid lien on the
Borrower’s Intellectual Property Rights or any other security which may have been provided by Borrower; or 
 
(d) any default, event of default or similar event (however denominated) shall occur under any of the other Loan Documents
and shall continue beyond any applicable cure periods. 
 
ARTICLE 5 
 
Remedies 
 
Section
5.1 Remedies. During the existence of an Event of Default: 
 
(a) Secured Party shall have the option of declaring, without notice to any person, all Secured Obligations to be immediately due and payable. 
 
(b) Secured Party is authorized, in any legal
manner and without breach of the peace, to take exercise without interference from Borrower any and all rights which Borrower has with respect to the management, possession, operation, protection or preservation of the Intellectual Property Rights,
including the right to sell or rent the same for the account of Borrower and to deduct from such sale proceeds or such rents all costs, expenses and liabilities of every character incurred by Secured Party in collecting such sale proceeds or such
rents and in managing, operating, maintaining, protecting or preserving the Intellectual Property Rights and to apply the remainder of such sales proceeds or such rents on the Secured Obligations in such manner as Secured Party may elect. Before any
sale, Secured Party may, at its option, complete the processing of any of the Intellectual Property Rights and any sums expended therefor by Secured Party shall be reimbursed by Borrower. All costs, expenses, and liabilities incurred by Secured

 

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Party in collecting such sales proceeds or such rents, or in managing, operating, maintaining, protecting or preserving such properties, or
in processing the Intellectual Property Rights if not paid out of such sales proceeds or such rents as hereinabove provided, shall constitute a demand obligation owing by Borrower and shall bear interest from the date of expenditure until paid at
the Default Rate, all of which shall constitute a portion of the Secured Obligations. In connection with any action taken by Secured Party pursuant to this paragraph, Secured Party shall not be liable for any loss sustained by Borrower resulting
from any failure to sell the Intellectual Property Rights, or any part thereof, or from other act or omission of Secured Party with respect to the Intellectual Property Rights unless such loss is caused by the willful misconduct and bad faith of
Secured Party, nor shall Secured Party be obligated to perform or discharge any obligation, duty, or liability under any sale or lease agreement covering the Intellectual Property Rights or any part thereof or under or by reason of this instrument
or the exercise of rights or remedies hereunder. 
 
(c) Secured Party may, without notice except as hereinafter provided, sell the Intellectual Property Rights or any part thereof at public or private sale (with or without appraisal or having the Intellectual Property Rights
at the place of sale) for cash, upon credit, or for future delivery, and at such price or prices as Secured Party may deem best, and Secured Party may be the purchaser of any and all of the Intellectual Property Rights so sold and may apply upon the
purchase price therefor any of the Secured Obligations and thereafter hold the same absolutely free from any right or claim of whatsoever kind. Secured Party is authorized at any such sale, if Secured Party deems it advisable or is required by
applicable law so to do, to disclaim and to refuse to give any warranty, and to impose such other limitations or conditions in connection with any such sale as Secured Party deems necessary or advisable in order to comply with applicable law. Upon
any such sale Secured Party shall have the right to deliver, assign and transfer to the purchaser thereof the Intellectual Property Rights so sold. Each purchaser at any such sale shall hold the property sold absolutely free from any claim or right
of whatsoever kind, including any equity or right of redemption, stay or appraisal which Borrower has or may have under any rule of law or statute now existing or hereafter adopted. To the extent notice is required by applicable law, Secured Party
shall give Borrower written notice at the address set forth herein (which shall satisfy any requirement of notice or reasonable notice in any applicable statute) of Secured Party’s intention to make any such public or private sale. Such notice
(if any is required by applicable law), in case of public sale, shall state the time and place fixed for such sale or, in case of private sale or other disposition other than a public sale, the time after which the private sale or other such
disposition is to be made. Any public sale shall be held at such time or times, within the ordinary business hours and at such place or places, as Secured Party may fix in the notice of such sale. At any sale the Intellectual Property Rights may be
sold in one lot as an entirety or in separate parcels as Secured Party may determine. Secured Party shall not be obligated to make any sale pursuant to any such notice. Secured Party may, without notice or publication, adjourn any public or private
sale or cause the same to be adjourned from time to time by announcement at any time and place fixed for the sale, and such sale may be made at any time or place to which the same may be so adjourned. In case of any sale of all or any part of the
Intellectual Property Rights on credit or for future delivery, the Intellectual Property Rights so sold may be retained by Secured Party until the selling price is paid by the purchaser thereof, but Secured Party shall incur no liability in case of
the failure of such purchaser to take up and pay for the Intellectual Property Rights so sold, and in case of any such failure, such Intellectual Property Rights may again be sold upon like notice. Each and every 

 

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method of disposition described in this Section shall constitute disposition in a commercially reasonable manner. Borrower, to the extent
applicable, shall remain liable for any deficiency. 
 
(d) Secured Party shall have all the rights of a secured party after default under the Uniform Commercial Code of Texas. 
 
Section 5.2 Additional Security, etc. Without notice to or consent of the Borrower, and without impairment of the liens and rights
created by this Agreement, Secured Party may accept from the Borrower, any other Person, additional security for the Secured Obligations. Neither the giving of this Agreement nor the acceptance of any such additional security shall prevent Secured
Party from resorting first to any such additional security, or first to the liens created by this Agreement, without affecting the liens and rights of Secured Party under this Agreement. 
 
Section 5.3 Remedies Cumulative. The rights and remedies of Secured Party under this Agreement are
cumulative and not exclusive of any other rights or remedies now or hereafter existing at law or in equity. 
 
Section 5.4 Waiver by Borrower. To the full extent Borrower may do so, Borrower agrees that Borrower will not at any time insist
upon, plead, claim or take the benefit or advantage of any law now or hereafter in force providing for any appraisement, valuation, stay, extension or redemption, and Borrower, for Borrower, Borrower’s heirs, devisees, executors,
administrators, personal representatives, successors, receivers, trustees and assigns, and for any and all persons ever claiming any interest in the Intellectual Property Rights, to the extent permitted by law, hereby WAIVES and releases all rights
of redemption, valuation, appraisement, stay of execution, notice of intention to mature or to declare due the whole of the Secured Obligations, notice of election to mature or to declare due the whole of the Secured Obligations and all rights to a
marshaling of the assets of Borrower, including the Intellectual Property Rights, or to a sale in inverse order of alienation in the event of foreclosure of the security interest hereby created. 
 
Section 5.5 Lifting of Stay. In the event that Borrower
or any other obligor under the Loan Documents is the subject of any insolvency, bankruptcy, receivership, dissolution, reorganization or similar proceeding, federal or state, voluntary or involuntary, under any present or future law or act, Secured
Party is entitled to the automatic and absolute lifting of any automatic stay as to the enforcement of its remedies under the Loan Documents against the security for the Secured Obligations, including specifically the stay imposed by Section 362 of
the United States Federal Bankruptcy Code, as amended. Borrower hereby consents to the immediate lifting of any such automatic stay, and will not contest any motion by Secured Party to lift such stay. Borrower expressly acknowledges that the
security for the Secured Obligations is not now and will never be necessary to any plan of reorganization of any type. 
 
ARTICLE 6 
 
Miscellaneous 
 
Section 6.1 Notices. All notices, statements, requests and demands given to or made upon any of the parties under this Agreement shall be made in the manner described and in accordance with
Note. 
 

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Section 6.2
Expenses. Borrower shall pay, promptly on demand, all costs and expenses, including the fees and disbursements of counsel to Secured Party, incurred by Secured Party in connection with (a) the enforcement of this Agreement, (b) the
preservation of the Intellectual Property Rights, (c) the protection or perfection of Secured Party’s rights and interests under this Agreement in the Intellectual Property Rights, (d) the exercise by or on behalf of Secured Party of any of its
rights, powers or remedies under this Agreement, and (e) the prosecution or defense of any action or proceeding by or against Secured Party, Borrower, or any one or more of them, concerning any matter related to this Agreement, any of the
Intellectual Property Rights or the Note. All such amounts shall be included in the obligations secured hereby. The obligations under this Section 6.2 shall survive the payment in full of the Note and the termination of this Agreement. 
 
Section 6.3 Successors and Assigns. Whenever in this
Agreement any party hereto is referred to, such reference shall be deemed to include the heirs, successors and assigns of such party, except that Borrower may not assign or transfer this Agreement without the prior written consent of Secured Party
and Secured Party only may assign this Agreement in connection with the sale or other transfer of the Note; and all covenants and agreements of Borrower contained in this Agreement shall bind Borrower’s successors and assigns and shall inure to
the benefit of the successors and assigns of Secured Party. 
 
Section 6.4 Independent Obligations. Borrower agrees that each of the obligations of Borrower to Secured Party under this Agreement may be enforced against Borrower without the necessity of joining any other holders of liens
in any Intellectual Property Rights or any other person, as a party. 
 
Section 6.5 Governing Law. This Agreement shall be deemed to be a contract governed by and construed under the laws of the State of Texas and the execution and delivery of this Agreement and the terms and provisions
of this Agreement shall be governed by and construed in accordance with the laws of the State of Texas and to the extent applicable or governing, the laws of the United States of America. 
 
Section 6.6 Separability Clause. The provisions of this Agreement are intended to be severable. If any
provision of this Agreement shall for any reason be held invalid or unenforceable in whole or in part in any jurisdiction, such provision shall, as to such jurisdiction, be ineffective to extent of such invalidity or unenforceability and shall not
affect the validity or enforceability of such provision in any other jurisdiction or any other provision of this Agreement in any jurisdiction. 
 
Section 6.7 Counterparts. This Agreement may be executed in any number of counterparts, each of which so executed shall be deemed
an original, but all such counterparts shall together constitute but one and the same agreement. 
 
Section 6.8 No Oral Agreements. The terms and conditions of this Agreement constitute the entire agreement of the parties and shall supersede all previous agreements, either oral or written,
with respect to the subject matter hereof. This Agreement may only be modified by a written agreement signed by a duly authorized representative of each of the parties. 
 
Section 6.9 Waiver and Election. The exercise by Secured Party of any option given under this
Agreement shall not constitute a waiver of the right to exercise any other option. No failure or delay on the part of Secured Party in exercising any right, power or remedy 

 

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under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, power or remedy preclude
any further exercise thereof or the exercise of any other right, power or remedy. No modification, termination or waiver of any provisions of the Note, nor consent to any departure by the Borrower therefrom, shall be effective unless in writing and
signed by an authorized officer of Secured Party, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. No notice to or demand on the Borrower in any case shall entitle the
Borrower to any other or further notice or demand in similar or other circumstances. 
 
Section 6.10 No Obligations of Secured Party; Indemnification. Secured Party does not by virtue of this Agreement or any of the transactions contemplated by the Note assume any duties,
liabilities or obligations with respect to any of the Intellectual Property Rights unless expressly assumed by Secured Party under a separate agreement in writing, and this Agreement shall not be deemed to confer on Secured Party any duties or
obligations that would make Secured Party directly or derivatively liable for any person’s negligent, reckless or willful conduct. The Borrower agrees to indemnify and hold Secured Party harmless against and with respect to any damage, claim,
action, loss, cost, expense, liability, penalty or interest (including attorney’s fees) and all costs and expenses of all actions, suits, proceedings, demands, assessments, claims and judgments directly or indirectly resulting from, occurring
in connection with, or arising out of: (a) any inaccurate representation made by the Borrower in this Agreement; (b) any breach of any of the warranties or obligations of the Borrower under this Agreement; and (c) the Intellectual Property Rights,
or the liens of Secured Party thereon. The provisions of this Section 6.10 shall survive the payment of the Note in full and the termination, satisfaction, release (in whole or in part) and foreclosure of this Agreement. 
 
Section 6.11 Rights, Liens and Obligations Absolute.
All rights of Secured Party hereunder, all Liens granted to Secured Party hereunder, and all obligations of the Borrower hereunder, shall be absolute and unconditional and shall not be affected by (a) any lack of validity or enforceability as to any
other person of the Note, (b) any change in the time, manner or place of payment of, or any other term of the Note, (c) any amendment or waiver of any of the provisions of the Note as to any other person, and (d) any exchange, release or
non-perfection of any other collateral or any release, termination or waiver of any guaranty, for the Note. 
 
Section 6.12 Termination. This Agreement and Secured Party’s Liens in the Intellectual Property Rights hereunder shall
terminate upon the repayment in full of the Note or the conversion of the Note in accordance with its terms. 
 
Section 6.13 Reinstatement. This Agreement, the obligations of the Borrower hereunder, and the Liens, rights, powers and remedies
of Secured Party hereunder, shall continue to be effective, or be automatically reinstated, as the case may be, if at any time any amount applied to the payment of any of the obligations under the Note is rescinded or must otherwise be restored or
returned to the Borrower or any other person (or paid to the creditors of any of them, or to any custodian, receiver, trustee or other officer with similar powers with respect to any of them, or with respect to any part of their property) upon the
insolvency, bankruptcy, dissolution, liquidation or reorganization of the Borrower or any such person, or upon or as a result of the appointment of a custodian, receiver, trustee or other officer with respect to any of them, or with respect to any
part of their property, or otherwise, all as though such payment had not been made. 
 
Section 6.14 Submission to Jurisdiction. The Borrower irrevocably (a) acknowledges that this Agreement will be accepted by Secured Party and performed by the Borrower in the State of Texas; (b)
submits to the jurisdiction of each state or federal court sitting 

 

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in Harris County, Texas (collectively, the “Courts”) over any suit, action or proceeding arising out of or relating to this
Agreement to enforce the arbitration provisions hereof or, if the arbitration provisions are found to be unenforceable, to determine any issues arising out of or relating to this Agreement (individually, an “Agreement Action”); (c)
waives, to the fullest extent permitted by law, any objection or defense that the Borrower may now or hereafter have based on improper venue, lack of personal jurisdiction, inconvenience of forum or any similar matter in any Agreement Action brought
in any of the Courts; (d) agrees that final judgment in any Agreement Action brought in any of the Courts shall be conclusive and binding upon the Borrower and may be enforced in any other court to the jurisdiction of which the Borrower is subject,
by a suit upon such judgment; (e) consents to the service of process on the Borrower in any Agreement Action by the mailing of a copy thereof by registered or certified mail, postage prepaid, to the Borrower at the Borrower’s address designated
in or pursuant to Section 6.1; and (f) agrees that service in accordance with Section 6.14(e) shall in every respect be effective and binding on the Borrower to the same extent as though served on the Borrower in person by a person duly authorized
to serve such process. Nothing in this Section 6.14 shall limit or restrict Secured Party’s right to serve process or bring Agreement Actions in manners and in courts otherwise than as herein provided. 
 
IN WITNESS WHEREOF, and intending to be legally bound hereby,
the parties have executed this Agreement from the date set forth above. 
 

	 BORROWER:
	 	 SECURED PARTY:

	
	 VARITEK INDUSTRIES, INC.
	 	 SMH VARITEK LLC

	
	 By:
	 	 /s/    RANDY S.
BAYNE        

	 	 By:
	 	 /s/    DONALD V.
WEIR        

	 Printed Name:
	 	 Randy S. Bayne
	 	 Printed Name:
	 	 Donald V. Weir

	 Title:
	 	 President and CEO
	 	 Title:
	 	 President

	 Date:
	 	 11/27/02
	 	 Date:
	 	 11/27/02

 

10 

 
Exhibit A

 
1. Patent applications: 
 
Serial Number 09/835,893
                        Filed: 4/16/01 
 
“Data Communications Synchronization Using GPS Receivers” 
 
US Patent No. 60/200,573 
 
Remote Video and Two-Way Audio Transmission
System 
 
Serial Number 60/206,343
                        Filed: 5/23/00 
 
“GPS Antenna Array” 
 
US Patent No. 60/209,547 
 
Lead Acid Platinum Battery 
 
Serial Number 60/236,682
                        Filed: 9/29/00 
 
“Communication System” 
 

A-1Form of Promissory Note dated January 31, 2003

Exhibit 10.14 
 

	 US $XXXXX
	  	 Due on March 31, 2004

 
PROMISSORY NOTE 
(Non-Negotiable) 
 
FOR VALUE RECEIVED, the undersigned, Varitek Industries, Inc., a Texas corporation
(“Maker”), promises to pay to the order of XXXXXXXXXXXXXXXXX, or any successor holder of this Note (“Holder(s)”), at the address of XXXXXXXXXXXXXXXXXXXXXX or such other place as Holder may designate, the collective
principal amount of XXXXXX thousand and 00/100’s dollars ($XXX,000.00), together with interest thereon as provided below. 
 
1. Interest. Prior to any default, no interest shall accrue on the outstanding principal balance of this Note. Following any
default, interest shall accrue on the outstanding principal balance hereof at the fixed rate of ten percent (10%) per annum. 
 
2. Term. All outstanding principal and interest shall be payable on or before March 31, 2004 (the “Maturity
Date”). 
 
3. Payments in Lieu of
Interest. 
 
(a) In lieu of
interest, Maker has agreed to pay the Holders for a period of two (2) years, on a quarterly basis, a sum equal to .XXXXX% of the Gross Revenues received by the Maker during each quarterly period from sales of VariLink units and related monthly
monitoring revenue received from subscribers as a result of the VariLink unit sales. All payments shall be due the thirtieth (30th) day after the end of each calendar quarter during the term of this Note, with payments commencing the period ending
June 30, 2003, and ending with the quarter ending March 31, 2005 (“Final Payment Date”). All payments to the Holders will be accompanied by an accounting which will include an adjustment for any returns, shipping charges, warranty claims
or credits. If the Maker determines it overpaid or underpaid any payment, the Maker reserves the right to adjust the payment at a later date and to provide an accounting to the Holders of such adjustment. 
 
(b) “Gross Revenues” shall be
determined in accordance with generally accepted accounting principles (“GAAP”) and shall be confirmed by the Maker’s independent auditor’s quarterly. 
 
(c) Notwithstanding anything to the contrary herein set forth, should the total amounts paid
pursuant to paragraph 3(a) above, over the period of two (2) years, not equal or exceed an annual yield of ten percent (10%) of the principal amount loaned to the Holders, the Maker shall be responsible to pay to the Holders within thirty (30) days
of the Final Payment Date, an amount equal to the difference of the total payments made in lieu of interest and an amount equal to twenty percent (20%) of the principal amount of the loan, which final payment shall be made to the Holders in
accordance with Schedule A attached hereto. 
 
4.
Prepayment. Maker may pay all or any part of the principal owing on this Note at any time or times prior to maturity without payment of any premium or penalty. 
 

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5. Grant of
Warrants. In consideration for Holder making a loan to Maker, Maker has issued to Holder a five (5) year warrant to purchase XXXXX shares of Maker’s common stock at a price of $1.00 per share (the “Warrant Shares”). The
warrants to be issued are based on the principal amount of the loan being $1 million and the number of warrants actually issued collectively to the Holders will be proportionately increased or reduced should proceeds of the loan to the Maker be more
or less than this amount. 
 
6. Conversion into
Stock/ Resale Registration Rights. If at any time before the Maturity Date, Maker closes an underwritten public offering of Securities pursuant to an effective registration statement under the Securities Act of 1933, as amended, or a managed
private offering (“New Offering”) which results in proceeds received by Maker, net of underwriting or agent discounts and commissions, of at least $3,500,000 then, upon the closing of such New Offering, the principal amount
remaining outstanding under this Note as of such date shall be converted into a number of the same type of Maker’s Securities issued in the New Offering based on a conversion price equal to the per unit price at which the Maker’s
Securities were offered and sold in the New Offering (the “Conversion Securities”). 
 
Maker agrees to register on behalf of Holder the resale of all of the Conversion Securities by Holder or any of its affiliates, or if the
Conversion Securities are not in the form of common stock, all of the common stock underlying the Conversion Securities (if they are convertible into common stock) and the Warrant Shares (the “Registerable Securities”), in either
(i) any registration statement filed by Maker with respect to any Securities of Maker sold pursuant to the terms of the Placement Agent Agreement dated on or about March 20, 2002, between Maker and Sanders Morris Harris, Inc. or (ii) upon written
request by Holder, as part of any other appropriate registration statement necessary to effectuate resales of the Registerable Securities by Holder, if any Registerable Securities have not been registered under the preceding clause (i). Maker
further agrees to maintain the effectiveness of said resale registration statement(s) until the earlier of the sale, transfer or assignment of all of the Registerable Securities or the availability of the resale of all of the Registerable Securities
in reliance on Rule 144(k). Maker shall bear all of the expenses of the registration statement(s) and the maintenance of its effectiveness (including, without limitation, filing fees, printing costs, attorneys’ fees, accountants’ fees,
including the fees relating to any comfort letters, and similar expenses), except that Holder shall be responsible for any brokers’ fees or commissions related to the actual transfer or assignment of the Registerable Securities. Maker shall
provide Holder with a reasonable number of copies of the current prospectus necessary to effectuate resales pursuant to said registration statement(s) during the term of its effectiveness. 
 
7. Default. Each of the following events shall constitute an event of default (“Event of
Default”) and Holder, in addition to any remedies available to it at law or in equity, shall thereupon have the option to declare Maker in default under this Note and declare due all obligations of Maker to Holder (it also being understood
that the occurrence of any of the Events of Default set forth in subsections (c) or (d) automatically shall constitute an Event of Default and cause an immediate acceleration of Maker’s indebtedness to Holder): 
 
(a) the failure of Maker to make any principal payment
required hereunder when due; 
 

2 

 
(b) the default by Maker in the performance or observance of any other term, covenant, condition or obligation contained in this Note, which default is not cured within thirty (30) days after Maker’s written notice thereof;

 
(c) the filing of any petition
by Maker under any provision of the Federal Bankruptcy Code or any state law relating to insolvency; or the filing of any such petition against Maker, unless such petition and all proceedings thereunder are dismissed within sixty (60) days from such
filing; or the appointment of a trustee or receiver for all or any assets of Maker, unless such appointment is vacated or dismissed within sixty (60) days from the date of such appointment; 
 
(d) an adjudication that Maker is bankrupt;

 
8. Collection Costs. Upon the occurrence
of any Event of Default, Maker agrees to pay Holder, upon demand, any and all costs, expenses and fees, including without limitation, reasonable attorneys’ fees incurred before or after suit is commenced in order to enforce payment hereof, and
in the event suit is brought to enforce payment hereof, that such costs, expenses and fees shall be determined by a court proceeding without a jury. 
 
9. Waiver. Maker hereby acknowledges and agrees that the failure by Holder to insist upon Maker’s strict performance of this
Note or the failure by Holder to exercise its remedies hereunder shall not be deemed a waiver of such default, and shall not be a waiver by Holder of any of Holder’s rights or remedies hereunder or at law or in equity. 
 
10. Usury. No provision of this Note shall require the
payment or permit the collection of interest in excess of the maximum permitted by law. If any excess interest is herein provided for, or shall be adjudicated to be so, the provisions of this Section shall govern, and neither Maker nor its
successors or assigns shall be obligated to pay the amount of such interest to the extent that it is in excess of the amount permitted by law, and any such amount paid, at the option of Holder, shall either be applied against the principal balance
of this Note due at maturity or rebated to Maker within thirty (30) days after such determination. 
 
All sums contracted for, charged or received by Holder for the use, forbearance or detention of the indebtedness evidenced by this Note
shall, to the extent required to avoid or minimize usury and to the extent permitted by applicable law, be amortized, prorated, allocated and spread throughout the full sated term of this Note so that the interest rate does not exceed the maximum
nonusurious rate of interest permitted for that day by whichever applicable federal or Texas laws permits the higher interest rate, stated as a rate per annum. The provisions of this Section shall control all agreements, whether now or hereafter
existing and whether written or oral, between Maker and Holder. 
 
11. Transfer. This Note is not transferable by the Holders without the express written permission of Maker. 
 
12. Governing Law. All amounts payable hereunder are payable in lawful money of the United States of America. This Note shall be
governed by and construed in accordance with the laws of the State of Texas, without regard to its conflicts of laws principles. 
 

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13.
Representations and Warranties of Maker. Maker hereby represent and warrants to Holder as follows: 
 
(a) (a) Maker has full power, authority and capacity to issue this Note and to perform and comply with all covenants and
obligations contained herein. 
 
(b) This Note has been duly executed and delivered by Maker and constitutes the legal, valid and binding obligations of Maker, enforceable against Maker in accordance with its terms, subject to bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect relating to creditors’ rights generally. 
 
(c) Neither the execution and delivery of this Note, nor the performance by Maker of its obligations hereunder, will (i)
require the consent of any other party to any agreement or commitment by which Maker is bound, (ii) with or without the giving of notice or the lapse of time or both, conflict with or result in a breach of any terms or provisions of, or result in
the creation or imposition of any lien, claim, charge or encumbrance upon Maker’s assets under any material agreements or other instrument, or (iii) violate any applicable law, rule, regulation, judgment, decree or order of any court or
governmental instrumentality. 
 
IN WITNESS
WHEREOF, this Note has been duly executed to be effective as of January 31, 2003. 
 

	 VARITEK INDUSTRIES, INC.,
a Texas Corporation

	
	 By:
	 	  

	 Name:
	 	 Randy S. Bayne

	 Title:
	 	 President and CEO

 

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