EXHIBIT 10.2
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SECURITY AGREEMENT
SECURITY AGREEMENT ("Security Agreement"), dated as of April 3, 2002, made by
Excelsior Radio Networks, Inc., a Delaware corporation ("Obligor"), Sunshine II,
LLC, a Colorado limited liability company ("Sunshine"), and Change Technology
Partners, Inc., a Delaware corporation ("Change", and together with Sunshine,
the "Lenders").
WITNESSETH:
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WHEREAS, the Obligor has executed a Promissory Note (the "Change
Note"), dated April 3, 2002, in favor of Change in the principal amount of
$4,708,200;
WHEREAS, the Obligor has executed a Promissory Note (the "Sunshine
Note, and together with the Change Note, the "Notes"), dated April 3, 2002, in
favor of Sunshine in the principal amount of $2,291,800;
WHEREAS, the parties have agreed to enter into this Security Agreement
in consideration for and in connection with the Notes.
NOW, THEREFORE, for value received, the receipt and sufficiency of
which is hereby acknowledged, the parties intending to be legally bound do
hereby agree as follows:
1. SECURITY INTEREST.
a. To secure the payment and performance of all of the
Obligations (as defined below), Obligor hereby grants to the
Lenders a continuing security interest in, and assigns and
pledges to the Lenders, all of the Collateral (as defined
below).
b. (i) "COLLATERAL" shall mean and include, except as and to
the extent specifically excluded in Schedule A
hereto, all personal property and fixtures of Obligor
or in which Obligor has an interest, wherever
located, of every kind, nature and description,
tangible or intangible, and whether or not subject to
Article 9 of the Uniform Commercial Code, including,
but not limited to, (A) all accounts receivable,
deposits and prepayments, and general intangibles
(including, but not limited to, in each case,
contract rights and, in the case of general
intangibles, tax refunds), instruments, investment
securities, chattel paper and documents, (B) all
inventory, (C) all equipment (including, but not
limited to, machinery, furniture and vehicles), (D)
all consumer goods, (E) all contracts with producers,
advertisers, employees and independent contractors,
(F)
program archives, interviews and related rights, (G)
trademarks (other than those related to Dial
Communications Group, Inc., a New York corporation
and Dial Communications Group LLC, a New York limited
liability company) and license agreements, (H) to the
extent not otherwise included, all claims, demands
and rights (including, but not limited to, claims to
insurance proceeds, tort claims, judgment claims,
rights of set-off, rights to payment under letters
and advices of credit and rights to any balance in
any deposit account maintained with any bank,
including Lenders, or similar organization), (I) to
the extent not otherwise included, all money, other
goods and other rights in personal property and
fixtures, and (J) the proceeds, products and
accessions of and to any of the foregoing.
(ii) "OBLIGATIONS" shall mean the indebtedness of Obligor
to Lenders incurred by Obligor pursuant to the terms
of the Notes.
(iii) Certain other terms used herein are defined in
Section 13 hereof.
2. RANK AND PERFECTION OF SECURITY INTEREST. As long as any of the
Obligations remain outstanding, the Obligor covenants and agrees with
the Lenders that:
a. Except for and pursuant to (i) the Promissory Note, dated
August 28, 2001, issued by the Obligor in favor of Change, in
the principal amount of $2,250,000 (the "August Note"), and
(ii) any receivable line of credit approved by the Board of
Directors of the Obligor, and any instrument that refinances
the August Note or such line of credit, each of which shall
rank senior to the Notes and the security interest created
herein and thereby, Obligor will not create or permit to
exist, nor shall there exist, any security interest in, lien,
attachment, levy or encumbrance upon, or assignment and pledge
as security of, any of the Collateral, except the security
interest of and assignment and pledge to Lenders hereunder and
Permitted Liens (defined below).
b. Upon the written request of either Lender, Obligor will take
all reasonably necessary action requested by such Lender to
perfect, continue, evidence, preserve, protect or validate the
security interest of and assignment and pledge to such Lender
hereunder or to enable such Lender to exercise and enforce its
rights hereunder, including, but not limited to, (i) executing
and delivering one or more notices, statements, agreements or
other writings, and (ii) delivering to such Lender, endorsed
or accompanied by such instruments of assignment as such
Lender may reasonably require, and stamping or otherwise
marking, in such manner as such Lender may reasonably require,
any and all chattel paper, instruments, letters and advices of
credit and documents.
c. Obligor hereby authorizes each Lender, at its option but
without any obligation so to do, to file financing and
continuation statements and amendments to financing
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statements, naming Obligor as debtor, with respect to any of
the Collateral, without the signature of Obligor.
3. COVENANTS RELATING TO COLLATERAL. As long as any of the Obligations
remain outstanding, the Obligor covenants and agrees with the Lenders
that:
a. It shall: (i) be the sole owner of each and every item of
Collateral, (ii) defend the Collateral against the claims and
demands of all persons, (iii) in the case of tangible property
constituting part of the Collateral, (A) properly maintain and
keep in good order and repair such property and (B) keep such
property fully insured with responsible companies against such
risks as such Collateral may normally be subject to under
policies containing loss payable clauses naming both Lenders
as loss payee as its interest may appear, and providing that
all proceeds thereof shall be payable to the Lenders on a pro
rata basis in proportion to the amount of Obligations owed to
the Lenders. Such policy and loss payable clause may not be
cancelled or amended except upon ten days' prior written
notice to Lenders;
b. It will comply with the requirements of all leases, mortgages
and other instruments relating to premises where any
Collateral is located;
c. Except in the ordinary course of business, Obligor will not
sell or otherwise dispose of (i) any of its accounts, except
for purposes of collection, (ii) any of its inventory, or
(iii) any of its equipment, except equipment no longer useful
in the operation of Obligor's business; and
d. It will give each Lender prompt notice of (i) any change in
(A) its name, identity or corporate structure, (B) its state
of incorporation or the location of its chief executive office
or any other place of business, or (C) the location of its
books and records concerning any of the Collateral, (ii) the
location of each new place of business opened by Obligor,
(iii) each new location of any Collateral, and (iv) any
substantial loss or depreciation in the value of any of the
Collateral, and will provide each Lender with such other
information as to the Collateral as such Lender may request.
4. INTERCREDITOR ARRANGEMENTS.
a. SECURITY INTERESTS. Each Lender hereby agrees that: (i) the
liens granted pursuant to this Security Agreement shall be
treated, as between the Lenders, as having equal priority and
shall at all times be shared by both Lenders as provided
herein, and (ii) the liens granted pursuant to this Security
Agreement, shall be treated as being contractually junior to
the liens contemplated in Section 2.a. above.
b. ACTION BY LENDERS. Notwithstanding any rights each Lender may
have pursuant to this Security Agreement or any law, including
without limitation, the New
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York Uniform Commercial Code (the "UCC"), to act with respect
to the Collateral, each Lender hereby agrees that so long as
the August Note is outstanding it shall not take any such
action without the prior written consent of the other Lender;
provided, however, that if the August Note no longer is
outstanding, the foregoing consent requirement and any other
provision hereof which requires the consent of both of the
Lenders shall not apply and each Lender thereafter may
exercise its rights under this Security Agreement and the Note
issued to it by Obligor, subject to the other applicable terms
and conditions set forth herein and therein, without obtaining
the consent of the other Lender.
c. TURNOVER OF COLLATERAL AND CERTAIN PAYMENTS. If Change or
Sunshine, as the case may be, acquires custody, control or
possession of any Collateral or proceeds therefrom, then such
Lender shall be deemed to hold such Collateral, proceeds or
payments in trust for both Lenders entitled thereto hereunder
5. PRE-EVENT OF DEFAULT RIGHTS.
a. At any time and from time to time, and upon consent from both
Lenders, set forth in a written agreement between the Lenders,
such consent to be given by each Lender in its reasonable
discretion: (i) both Lenders may and hereby are authorized to
transfer into or register in the names of themselves or their
nominees any instruments or documents that constitute a part
of the Collateral without notice to Obligor; and (ii) Obligor
will: (A) permit representatives of each Lender during normal
business hours to inspect its premises and books and records
pertaining to the Collateral and make extracts from such books
and records; and (B) upon request, enter into warehousing,
lock box or other custodial arrangements satisfactory to both
Lenders.
b. Should either Lender at any time and for any reason deem
itself to be insecure or the risk of non-payment or
non-performance of any of the Obligations increased upon
consent from both Lenders, set forth in a written agreement
between the Lenders, such consent to be given by each Lender
in its reasonable discretion: (i) both Lenders may, after
receiving consent from the other Lender, such consent to be
given by Change or Sunshine, as applicable, in its reasonable
discretion, without notice to Obligor: (A) notify account
debtors and all other persons against whom Obligor has claims
or rights of the Lenders' rights hereunder, collect all
amounts payable with respect to such accounts, claims and
rights directly and apply such collections to the repayment of
the Obligations in such order as it may elect on a pro rata
basis in proportion to the amount of Obligations owed to each
of Change and Sunshine; (B) upon consent from both Lenders,
set forth in a written agreement between the Lenders, such
consent to be given by each Lender in its reasonable
discretion, in Change's or Sunshine's name, the names of both
Lenders, or Obligor's name, demand, xxx for, collect or
receive any money or property payable or receivable on account
of or in exchange for, make any compromise or settlement with
respect to, or modify any of the terms of any
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of, the Collateral; (C) receive and open mail addressed to
Obligor and change the address for delivery of Obligor's mail
to an address designated and reasonably agreed upon by both
Lenders and notify the postal authorities of any such change;
(D) in the name and on behalf of Obligor, endorse instruments
and other evidences of payment; (E) appropriate and hold, or
apply (directly or by way of set-off) to the payment of the
Obligations (whether or not then due), all money of Obligor
then or thereafter in possession of the Lenders, the balance
of every deposit account (demand or time, matured or
unmatured) of Obligor then or thereafter with the Lenders and
every other claim of Obligor then or thereafter against the
Lenders, all such monies in the possession of Change or
Sunshine, or both, as the case may be, to be applied to the
Obligations on a pro rata basis in proportion to the amount of
Obligations owed to each of the Lenders; and (F) with respect
to any securities constituting part of the Collateral, in
Change's or Sunshine's name, the names of both Lenders, or
Obligor's name, exercise any and all powers with respect
thereto with the same force and effect as could Obligor; and
(ii) Obligor will, upon request of both Lenders: (A) receive
and hold all proceeds of Collateral in trust for both Lenders
and not commingle any collections with any of its other funds;
(B) immediately deliver such collections in equal proportion
to each Lender in the identical form received; and (C) deliver
in equal proportion to each Lender additional property as
security for, or make one or more payments on account of, the
Obligations in an amount satisfactory to both Lenders.
c. Upon consent from both Lenders, set forth in a written
agreement between the Lenders, such consent to be given by
each Lender in its reasonable discretion, the Lenders may
obtain the appointment of a receiver of any or all of the
Collateral and Obligor consents to and waives any right to
notice of such appointment.
6. POST-EVENT OF DEFAULT RIGHTS. Upon the occurrence of an Event of
Default (as defined in the Notes) and at any time or from time to time
thereafter, upon consent from both Lenders, set forth in a written
agreement between the Lenders, such consent to be given by each Lender
in its reasonable discretion:
a. The Lenders may exercise all other rights to which they are
entitled hereunder, including but not limited to those
specified in Section 6 hereof; and
b. Obligor shall, upon request of both Lenders, assemble the
Collateral and maintain or deliver it into the possession of
Change and Sunshine on a pro rata basis in proportion to the
amount of Obligations owed to each of the Lenders at such
place or places as the Lenders may designate and as are
reasonably convenient to the Lenders and Obligor.
7. GENERAL REPRESENTATIONS, WARRANTIES AND AGREEMENTS. Obligor hereby
represents, warrants and agrees that:
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a. The execution, delivery and performance of this Security
Agreement are within its powers, corporate or otherwise, have
been duly authorized by all required action and do not and
will not contravene any law or any agreement or undertaking to
which it is a party or by which it may in any way be bound or
its certificate of incorporation or by-laws;
b. Except for any liens granted to the Lenders pursuant to this
Security Agreement and except for Permitted Liens (as defined
below), (i) the Obligor is the owner of the Collateral and
(ii) all such Collateral is owned free and clear of any and
all liens.
c. Appropriate financing statements have been or are concurrently
herewith being filed by the Lenders in the jurisdictions on
SCHEDULE B hereto, and upon such filings, the security
interests granted pursuant to this Security Agreement shall
constitute valid and continuing perfected security interests
in favor of the Lenders, in the Collateral for which
perfection is governed by the UCC. Such security interests
will be prior to all other liens on the Collateral except for
liens which have priority over the Lender's lien by operation
of law and any Permitted Liens.
d. On the date hereof, the Obligor's jurisdiction of organization
and the location of the Obligor's chief executive office or
sole place of business is specified on SCHEDULE C.
e. On the date hereof, the Collateral (other than Collateral in
transit) are kept at the locations listed on SCHEDULE D
hereto.
f. The exact legal name of the Obligor is as set forth on page
one hereof. Except as set forth on SCHEDULE E hereto, the
Obligor has no trade names, fictitious names or other names
except its legal name, and does not operate in any
jurisdiction under, and has not had or operated in any
jurisdiction within the five-year period preceding the date
hereof under, any trade name, fictitious name or other name
other than its legal name.
g. Obligor will furnish both Lenders with all reasonable
information concerning its business and financial condition as
one or both Lenders, may reasonably request.
h. SCHEDULE F accurately sets forth the Obligor's tax
identification number.
8. EXPENSES OF OBLIGOR'S DUTIES; LENDERS' RIGHT TO PERFORM ON OBLIGOR'S
BEHALF; LENDERS' EXPENSES AND INDEMNIFICATION.
a. Obligor's agreements and duties hereunder shall be performed
by it at its sole cost and expense.
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b. If Obligor shall fail to do any act or thing which it has
covenanted to do hereunder, the Lenders, after having received
reasonable consent from the other Lender, may (but shall not
be obligated to) do the same or cause it to be done, either in
the name of Change or Sunshine or both, as reasonably agreed
to by the Lenders or in the name and on behalf of Obligor and
Obligor hereby irrevocably authorizes the Lenders so to act.
c. Obligor agrees to reimburse the Lenders for all reasonable
costs and expenses, including reasonable attorney's fees and
disbursements, incurred, and to indemnify and hold the Lenders
harmless from and against all losses suffered by them in
connection with (i) the exercise of any right or remedy
granted to the Lenders hereunder, (ii) any claim and the
prosecution or defense thereof arising out of or in any way
connected with this Security Agreement, and (iii) the
collection or enforcement of the Obligations.
d. Amounts payable by Obligor under this Section 8 shall
constitute Obligations which shall be payable on demand.
9. NO WAIVERS OF RIGHTS HEREUNDER; RIGHTS CUMULATIVE.
a. No delay by either Lender in exercising any right hereunder,
or under any of the other Obligations, shall operate as a
waiver thereof, nor shall any single or partial exercise of
any right preclude other or further exercises thereof or the
exercise of any other right. No waiver or amendment of any
provision of this Security Agreement or of any of the other
Obligations shall be enforceable against either Lender unless
in writing and signed by an officer of such Lender, and unless
it expressly refers to the provision affected; any such waiver
shall be limited solely to the specific event waived.
b. All rights granted to the Lenders hereunder shall be
cumulative and shall be supplementary of and in addition to
those granted or available to the Lenders with respect to the
other Obligations or under applicable law and nothing herein
shall be construed as limiting any such other right.
10. ASSIGNMENT; PARTICIPATIONS. Neither Lender may assign any or all of the
Obligations or transfer therewith any or all of the Collateral therefor
without the prior written consent of the Obligor, which consent shall
not be unreasonably withheld. Upon such transfer, such Lender shall be
released from all responsibility for the Collateral so transferred. The
Obligor may not assign or transfer any of its rights or obligations
under this Security Agreement without the prior written consent of both
Lenders, which consent shall not be unreasonably withheld.
11. CONTINUING AGREEMENT; TERMINATION.
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a. This Security Agreement shall be a continuing agreement and
shall apply to all future Obligations, notwithstanding that at
any particular time all of the Obligations then outstanding
shall have been paid in full.
b. This Security Agreement shall continue in full force and
effect until written notice of termination shall have been
received by each Lender at its address stated below, but,
notwithstanding any such notice, this Security Agreement shall
continue in full force and effect until all Obligations then
outstanding (whether absolute or contingent) shall have been
paid in full and all rights of the Lenders hereunder shall
have been satisfied or other arrangements for the securing of
such rights satisfactory to the Lenders shall have been made.
Upon receipt of any such notice, no Lender shall have any
obligation to make further loans, extensions of credit or
other financial accommodations to or on behalf of Obligor,
anything in any other agreement to the contrary
notwithstanding. Upon the irrevocable payment in full in cash
of the Obligations, the security interest granted hereby shall
terminate as to all Collateral and all such Collateral shall
revert to Obligor. Upon any such termination, each Lender
shall return to the Obligor such of the Collateral in its
possession as shall not have been sold or otherwise applied
pursuant to the terms hereof and execute and deliver to
Obligor such documents as it shall reasonably request to
evidence such termination, including without limitation one or
more releases of the security interest granted hereby (which
releases shall be in proper form for filing by Obligor in all
necessary locations).
12. GOVERNING LAW; JURISDICTION; CERTAIN WAIVERS.
a. This Security Agreement shall be governed by and interpreted
and enforced in accordance with the laws of the State of New
York, and each Lender shall have the rights and remedies of a
secured party under applicable law, including but not limited
to the UCC.
b. Obligor agrees that all actions and proceedings relating
directly or indirectly to this Security Agreement or any other
Obligations shall be litigated in courts located in the State
of New York or elsewhere as such Lender may select and that
such courts are convenient forums and submits to the personal
jurisdiction of such courts.
c. Obligor waives personal service of process and consents that
service of process upon it may be made by certified or
registered mail, return receipt requested, directed to Obligor
at its address last specified for notices hereunder, and
service so made shall be deemed completed two days after the
same shall have been so mailed.
d. Obligor waives the right to a trial by jury in any action or
proceeding between it and any Lender and waives the right to
assert in any action or proceeding with
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regard to this Security Agreement or any of the Obligations
any offsets or counterclaims which it may have.
e. No Lender shall be required to take any steps necessary to
preserve rights against prior parties.
13. DEFINITIONS. As used herein:
a. All terms defined in Article 1 or 9 of the UCC as in effect on
the date of this Security Agreement (other than the term
"Collateral") are used herein with the meanings therein given;
such terms include but are not limited to "account," "chattel
paper," "deposit account," "document," "equipment," "general
intangibles," "goods," "instrument," "inventory," "money" and
"security interest."
b. "PERMITTED LIENS" shall mean (i) the lien of any real estate
mortgage in effect on the date of this Security Agreement to
the extent that it is at any time a lien on any Collateral
that constitutes a "fixture"; (ii) liens for taxes not yet
due; (iii) other liens incurred in the ordinary course of
business that do not (A) arise under the Employee Retirement
Income Security Act of 1974 or (B) secure obligations which
are due and payable or obligations for borrowed money; (iv)
easements, rights-of-way and other similar encumbrances on
real property which do not interfere with the ordinary conduct
of the business of the Obligor; (v) a first priority lien in
accounts receivable to secure an accounts receivable line of
credit in an amount not to exceed 50% of the accounts
receivable eligible to be financed thereunder; (vi) liens
arising under the August Note (or any instrument that
refinances the August Note) and the Security Agreement dated
as of August 28, 2001, as amended, between the Obligor and
Change; and (vii) liens consented to by both Lenders in
writing.
c. The words "it" or "its" as used herein shall be deemed to
refer to individuals and to business entities.
14. NOTICES.
Any notice or request hereunder may be given to Obligor or to both
Lenders at their respective addresses set forth in the Change Note or
the Sunshine Note, as applicable, or at such other address as may
hereafter be specified in a notice designated as a notice of change of
address under this Section. Any notice or request hereunder may be
given by, in the case of notices or requests to Obligor, mail or
telecopy, or by telephone subsequently confirmed by mail, telecopy,
and, in the case of notices to Lenders, registered mail, return receipt
requested, or by telecopy, subsequently confirmed by such registered
mail. Notices and requests to Obligor shall, in the case of those by
mail or telecopy, be deemed to have been given when deposited in the
mail, first-class postage prepaid, or confirmed receipt in the case of
telecopy, and in the case of those by
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telephone, when so communicated to Obligor; notices to Lenders shall be
deemed to have been given only when actually received by such Lender at
its address determined as provided in this Section. Any requirement
under applicable law of reasonable notice by any Lender to Obligor of
any event shall be met if notice is given to Obligor in the manner
prescribed above at least seven days before (a) the date of such event
or (b) the date after which such event will occur.
15. GENERAL.
a. This Security Agreement shall be binding upon the assigns or
successors of the undersigned Obligor and shall inure to the
benefit of and be enforceable by Lenders, and their respective
successors, transferees and assigns.
b. Any provision of this Security Agreement which is prohibited
or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition
or unenforceability without invalidating the remaining
provisions hereof in that jurisdiction or affecting the
validity or enforceability of such provision in any other
jurisdiction.
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IN WITNESS WHEREOF, the parties hereto have executed this
Security Agreement as of the day and year first above written.
Excelsior Radio Networks, Inc.
/s/ Xxxxxxx X. Xxxxx
--------------------------------
By: Xxxxxxx X. Xxxxx
Title: President
Change Technology Partners, Inc.
/s/ Xxxxxxx Xxxxx
--------------------------------
By: Xxxxxxx Xxxxx
Title: President and Chief Executive Officer
Sunshine II, LLC
/s/ Xxx X. Xxxxx
--------------------------------
By: Xxx X. Xxxxx
Title: Member
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