Form Of Collateral Fee And Security Agreement

EXHIBIT 10.14


COLLATERAL FEE AND SECURITY AGREEMENT


This Collateral Fee and Security Agreement (this "Agreement") is made and entered into this 17th day of March, 2003, by CATALYST INTERNATIONAL, INC., a Delaware corporation (the "Company") and the individuals listed as security holders on the signature page hereof (individually, a "Securityholder" and collectively, the "Securityholders").


BACKGROUND:
The Company has received a revolving facility in the principal amount of One Million Dollars ($1,000,000.00) (the "Credit Facility") from the First National Bank of Muscatine, Muscatine, Iowa (the "Bank"). In connection with the Credit Facility, the Company granted to the Bank a security interest in certain of the Company's assets, including the Company's Accounts (as defined below), as security for the Credit Facility. The Securityholders are shareholders in the Company and have agreed to pledge securities owned by them in favor of the Bank in order to provide additional security for the Company's obligation under the Credit Facility. The Company has agreed to pay to the Securityholders a fee for pledging such securities and also to grant the Securityholders a security interest in the Company's Accounts, which security interest shall be subordinate to the security interest of the Bank. The Bank has also agreed to assign its security interest in the Company's assets upon termination of the Credit Facility as described below. The parties desire to set forth their agreements in this Agreement.


NOW, THEREFORE, in consideration for the mutual covenants and agreements set forth herein, the parties hereby agree as follows:


Pledge of Securities and Collateral Fee. Each of the Securityholders has agreed to pledge to the Bank securities (collectively, the "Pledged Securities") having a fair market value as of the date hereof approximating the amount set forth opposite such Securityholder's name on Exhibit A attached hereto. In consideration for the Securityholders' agreement to provide such pledge to the Bank, the Company agrees to pay in cash to each of the Securityholders a fee, calculated annually, equal to the product of (i) three and one-half percent (3 1/2 %) and (ii) the amount set forth opposite such Securityholder's name on Exhibit A attached hereto. Such fee shall be paid monthly and shall be prorated for each partial month that the pledge of the Pledged Securities by the Securityholders is in effect with the Bank. The Company shall have the right at any time and from time to time to request that the Bank release the pledge of the Pledged Securities of any of the Securityholders and, if the Bank agrees to said release, then effective upon such release, the fee payable by the Company to any Securityholder whose Pledged Securities has been released by the Bank, shall terminate. The Company and the Securityholders each acknowledge and agree that the fee payable by the Company under this Section 1 is fair and reasonable compensation for the agreement of the Securityholders to provide the pledge of Pledged Securities to the Bank, and are less than the fees that the Company would pay for similar collateral provided by third parties. Any Securityholder may waive his right to the fee upon notice to the Company.


Grant of Security Interest. As additional security for the agreement of the Securityholders to pledge the Pledged Securities under Section 1, above, the Company hereby grants to the Securityholders a security interest in all of the Company's Accounts, and all additions and accessions thereto and all Proceeds (as defined below) and products of any of the foregoing, wherever located (for purposes hereof, the foregoing assets of the Company are referred to herein collectively as the "Collateral"). For purposes hereof, "Accounts" shall have the meaning assigned thereto by the Uniform Commercial Code as adopted by and in effect in the State of Wisconsin, as the same may be amended or enacted from time to time (the "UCC") and shall additionally include, but not be limited to, all books and records, data processing cards, tapes, tabulating runs, programs and similar material evidencing, securing or relating thereto and in each case whether now owned or hereafter acquired or wherever located. For purposes hereof, "Proceeds" shall have the meaning assigned thereto by the UCC and, in any event, shall include, but not be limited to, (i) any and all proceeds of any insurance policy, indemnity, warranty or guaranty payable to any Securityholder from time to time with respect to any of the Collateral and (ii) any and all payments in any form whatsoever, made or payable to a Securityholder from time to time in connection with any of the Collateral. The Secur ...