Exhibit 10.3
SECURITY AGREEMENT
SECURITY AGREEMENT, dated as of February 17, 1998, made by ADVANCED
COMMUNICATIONS SYSTEMS, INC., INTEGRATED SYSTEMS CONTROL, INC. and RF
MICROSYSTEMS, INC., (together with any other Person that has become a party
hereto as provided herein, collectively the "Borrowers" and individually, each a
"Borrower"), in favor of NATIONSBANK, N.A., as agent (in such capacity, the
"Agent"), for the benefit of the Lenders, as the holders of the Secured
Obligations and as parties to the Credit Agreement described below.
WITNESSETH:
WHEREAS, the Borrowers are parties to the Credit Agreement, dated as of
the date hereof (as amended, supplemented or otherwise modified from time to
time, the "Credit Agreement"), among the Borrowers, the banks and other
financial institutions from time to time parties thereto (the "Lenders") and the
Agent;
WHEREAS, pursuant to the Credit Agreement, the Lenders, have agreed to
make certain extensions of credit to the Borrowers upon the terms and subject to
the conditions set forth therein;
WHEREAS, it is a condition precedent to the obligation of the Lenders
to make their respective extensions of credit to the Borrowers under the Credit
Agreement that the Borrowers shall have executed and delivered this Security
Agreement to the Agent;
NOW, THEREFORE, in consideration of the premises and to induce the
Agent and the Lenders to enter into the Credit Agreement and to induce the
Lenders to make their respective extensions of credit under the Credit
Agreement, the Borrowers hereby agree with the Agent, for the benefit of the
Lenders as follows:
1. Defined Terms
1.1 Definitions. (a) Unless otherwise defined herein, terms
defined in the Credit Agreement and used herein shall have the meanings given to
them in the Credit Agreement, and the following terms which are defined in the
Uniform Commercial Code in effect in the Commonwealth of Virginia on the date
hereof are used herein as so defined: Accounts, Chattel Paper, Documents,
Equipment, Farm Products, Fixtures, General Intangibles, Instruments, Inventory
and Proceeds.
(b) The following terms shall have the following meanings:
"Agreement": this Security Agreement, as the same may be
amended, supplemented or otherwise modified from time to time.
"Code": the Uniform Commercial Code as from time to time in
effect in the Commonwealth of Virginia.
"Collateral": as defined in Section 2.
"Collateral Account": the Collateral Account as defined in
Section 3.
"Copyrights" means all of the following to the extent that
any Borrower now or hereafter has any right, title or interest therein: (i) all
United States copyrights in all Works, whether published or unpublished, now
existing or hereafter created or acquired, including, without limitation, the
copyrights in the Works listed in Schedule 2 hereto, all registrations and
recordings thereof, and all applications in connection therewith, including,
without limitation, registrations, recordings and applications in the United
States Copyright Office, and (ii) all renewals thereof.
"Copyright Licenses" means any written agreement, naming any
Borrower as licensor or licensee, granting any right under any Copyright,
including, without limitation, the agreements described in Schedule 2 hereto, as
the same may be amended, supplemented or otherwise modified from time to time,
including, without limitation, (i) all rights of any Borrower to receive moneys
due and to become due to it thereunder or in connection therewith, (ii) all
rights of any Borrower to damages arising out of or for breach or default in
respect thereof and (iii) all rights of any Borrower to exercise all remedies
thereunder.
"Government Contract" means all contracts of any Borrower or
any of its Subsidiaries with respect to which the United States or any
department, agency or instrumentality or agent thereof, or any state or local
government or any department, agency or instrumentality or agent thereof is a
debtor or obligor (including any guarantor) in any way in connection with any
Receivable or obligation to such Borrower or any of its Subsidiaries.
"Patents": means all of the following to the extent that any
Borrower now or hereafter has any right, title or interest therein (a) all
letters patent of the United States or any other country and all reissues and
extensions thereof, including, without limitation, any thereof referred to in
Schedule 3, and (b) all applications for letters patent of the United States or
any other country and all divisions, continuations and continuations-in-part
thereof, including, without limitation, any thereof referred to in Schedule 3.
"Patent Licenses": any written agreement providing for the
grant by or to any Borrower of any right to manufacture, use or sell any
invention covered by a Patent, including, without limitation, any thereof
referred to in Schedule 3.
"Receivable": any right to payment for goods sold or leased
or for services rendered, whether or not such right is evidenced by an
Instrument or Chattel Paper and whether or not it has been earned by
performance (including, without limitation, any Account).
"Secured Obligations": shall be the collective reference to
the unpaid principal of and interest on the Notes and all other obligations and
liabilities (including, without limitation, interest accruing at the then
applicable rate provided in the Credit Agreement after the maturity of the Loans
and interest accruing at the then applicable rate provided in the Credit
Agreement after the filing of any petition in bankruptcy, or the commencement of
any insolvency, reorganization or like proceeding, relating to any Borrower,
whether or not a claim for post-filing or post-petition interest is allowed in
such proceeding), of such Borrower to the Agent and the Lenders (including,
without limitation, any affiliate of a Lender with respect to any Letter of
Credit issued by such affiliate) whether direct or indirect, absolute or
contingent, due or to become due, or now existing or hereafter incurred, which
may arise under, out of, or in connection with, the Credit Agreement, this
Agreement, the Notes, the other Loan Documents or any other document made,
delivered or given in connection therewith, in each case whether on account of
principal, interest, reimbursement obligations, fees, indemnities, costs,
expenses or otherwise (including, without limitation, all reasonable fees and
disbursements of counsel to the Agent or to the Lenders as are required to be
paid by such Borrower pursuant to the terms of the Credit Agreement, this
Agreement or any other Loan Document);
"Termination Date": the date on which the Commitments and
the Credit Agreement have been terminated and the Secured Obligations have been
irrevocably paid in full other than indemnification obligations not then due and
payable, including, without limitation, in subsections 4.14, 4.15, 4.16, 4.17,
10.7 and 11.6 of the Credit Agreement.
"Trademarks": means all of the following to the extent that
any Borrower now or hereafter has any right, title or interest therein (a) all
trademarks, trade names, corporate names, company names, business names,
fictitious business names, trade styles, service marks, logos and other source
or business identifiers, and the goodwill associated therewith, now existing or
hereafter adopted or acquired, all registrations and recordings thereof, and all
applications in connection therewith, whether in the United States Patent and
Trademark Office or in any similar office or agency of the United States, any
State thereof or any other country or any political subdivision thereof, or
otherwise, including, without limitation, any thereof referred to in Schedule 4,
and (b) all renewals thereof.
"Trademark Licenses": means any written agreement providing
for the grant by or to any Borrower of any right to use any Trademark,
including, without limitation, any thereof referred to in Schedule 4.
"Works": any tangible expression of an idea of any Person.
1.2 Other Definitional Provisions.
(a) The words "hereof," "herein", "hereto" and "hereunder"
and words of similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this Agreement, and
Section, subsection and Schedule references are to this Agreement unless
otherwise specified.
(b) The meanings given to terms defined herein shall be
equally applicable to both the singular and plural forms of such terms.
2. Grant of Security Interest. As collateral security for the prompt
and complete payment and performance when due (whether at the stated maturity,
by acceleration or otherwise) of the Secured Obligations, each Borrower hereby
grants to the Agent, for the benefit of the Lenders, a security interest in all
of the following property now owned or at any time hereafter acquired by such
Borrower or in which such Borrower now has or at any time in the future may
acquire any right, title or interest (collectively, together with all amounts on
deposit in the Collateral Account from time to time, the "Collateral"):
(a) all Accounts;
(b) all Chattel Paper;
(c) all Copyrights;
(d) all Copyright Licenses;
(e) all Documents;
(f) all Equipment;
(g) all Fixtures;
(h) all General Intangibles;
(i) all Instruments;
(j) all Inventory;
(k) all Patents;
(l) all Patent Licenses;
(m) all Trademarks;
(n) all Trademark Licenses;
(o) all books and records pertaining to the Collateral;
and
(p) to the extent not otherwise included, all Proceeds and
products of any and all of the foregoing and all collateral security and
guarantees given by any Person with respect to any of the foregoing.
3. Collateral Account
3.1 Establishment of Collateral Accounts. At the request of the
Agent, there shall be established and at all times thereafter there shall be
maintained by the Borrowers, a non-interest bearing cash collateral account with
NationsBank, N.A., account number to be determined (the "Collateral Account"),
subject to the terms of this Agreement.
3.2 Rights, Title and Interest of Collateral Accounts. All right,
title and interest in and to the Collateral Account shall vest exclusively in
the Agent, for the benefit of the Lenders. The Borrowers shall have no rights
with respect to the Collateral Account and the Agent, shall have sole dominion
and control over the Collateral Account and the monies deposited therein. Monies
deposited in the Collateral Account shall constitute security for the Secured
Obligations. Each Borrower hereby pledges and assigns to the Agent, and hereby
grants to the Agent, for the benefit of the Lenders, a security interest in, all
right, title or interest (if any) which any Borrower now has or may hereafter
have or purport or claim to have in or to the Collateral Account and all monies
held therein, any investments made with such monies and any and all certificates
or instruments from time to time representing or evidencing such investments
(and all proceeds thereof).
3.3 Maintaining the Collateral Account. To the extent required by
Section 3.1, until the Termination Date of this Agreement:
(a) The Borrowers will maintain the Collateral Account with
NationsBank, N.A.
(b) All monies received by the Agent, while a Default or an
Event of Default has occurred and is continuing, all monies received pursuant to
subsection 4.5(a) and Section 9 of the Credit Agreement, and any monies received
as a result of investments made as contemplated by Section 4 hereof, shall be
deposited in the Collateral Account.
4. Investment of Monies. Pending the disbursement thereof pursuant to
the terms of this Agreement, all monies in the Collateral Account shall (to the
extent it is practical to do so) be invested by the Agent in Cash Equivalents
(as defined in the Credit Agreement). All such investments shall be evidenced
either (a) by negotiable certificates or instruments which are held by or for
the account of the Agent, or (b) by book entries maintained in a Commonwealth,
District or State in which the Agent may be granted by book entries a security
interest in the securities relating thereto. In the absence of its gross
negligence, or willful misconduct, the Agent shall not have any ability out of
or in connection with any investment made in accordance with the
provisions herein or for any loss or decline in value of any investment or from
any loss resulting directly or indirectly from any investment made pursuant to
and in accordance with the provisions hereof.
5. Representations and Warranties. Each Borrower hereby represents and
warrants that:
5.1 Title; No Other Liens. Except for the security interests
granted to the Agent pursuant to this Agreement and the other Liens permitted to
exist on the Collateral pursuant to the Credit Agreement, such Borrower owns
each item of the Collateral free and clear of any and all Liens or claims of
others. No financing statement or other public notice with respect to all or any
part of the Collateral is on file or of record in any public office, except such
as have been filed in favor of the Agent pursuant to this Agreement or as are
permitted pursuant to the Credit Agreement.
5.2 Perfected First Priority Liens. The security interests granted
pursuant to this Agreement (a) constitute perfected security interests in the
Collateral in favor of the Agent for the benefit of the Lenders of the Secured
Obligations, as collateral security for the Secured Obligations and (b) are
prior to all other Liens on the Collateral in existence on the date hereof.
5.3 Inventory and Equipment. The Inventory and the Equipment
are kept at the locations listed on Schedule 5.
5.4 Chief Executive Office. On the date hereof, each Borrower's
chief executive office is located is as specified on Schedule 1.
5.5 Farm Products. None of the Collateral constitutes, or is the
Proceeds of, Farm Products.
6. Covenants. Each Borrower covenants and agrees with the Agent that,
from and after the date of this Agreement until the Termination Date:
6.1 Delivery of Instruments and Chattel Paper. If any amount
payable under or in connection with any of the Collateral shall be or become
evidenced by any Instrument or Chattel Paper, such Instrument or Chattel Paper
shall be immediately delivered to the Agent duly endorsed in a manner
satisfactory to the Agent to be held as Collateral pursuant to this Agreement.
6.2 Maintenance of Insurance. Each Borrower will maintain
insurance in accordance with subsection 7.5 of the Credit Agreement.
6.3 Maintenance of Perfected Security Interest; Further
Documentation.
(a) Each Borrower shall maintain the security interests
created by this Agreement as perfected security interests having at least the
priority described in subsection 5.2 and shall defend such security interests
against the claims and demands of all Persons whomsoever.
(b) At any time and from time to time, upon the written
request of the Agent and at the sole expense of each Borrower affected thereby,
each Borrower will promptly and duly execute and deliver such further
instruments and documents and take such further actions as the Agent may
reasonably request for the purpose of obtaining or preserving the full benefits
of this Agreement and of the rights and powers herein granted, including,
without limitation, the filing of any financing or continuation statements under
the Uniform Commercial Code in effect in any jurisdiction with respect to the
security interests created hereby.
6.4 Changes in Locations, Name, etc. Each Borrower will not unless
it shall have given the Agent at least thirty (30) days prior written notice of
such change (or, in the case of Inventory and Equipment, at least ten (10) days
prior written notice, to the extent that such Borrower has taken such action as
reasonably may be required of it to maintain the continuous perfection of the
Agent's security interests in such Inventory or Equipment, as the case may be):
(a) permit any of the Inventory (other than goods-in-transit
and immaterial amounts of goods in temporary locations in the ordinary course of
business) or Equipment to be kept at a location other than those listed on
Schedule 5; or
(b) change the location of their chief executive offices
from that specified in subsection 5.4; or
(c) change its name, identity or corporate structure to such
an extent that any financing statement filed by the Agent in connection with
this Agreement would become seriously misleading.
6.5 Further Identification of Collateral. Each Borrower will
furnish to the Agent from time to time statements and schedules further
identifying and describing the Collateral and such other reports in connection
with the Collateral as the Agent may reasonably request, all in reasonable
detail.
6.6 Notices. Each Borrower will advise the Agent promptly, in
reasonable detail of (a) any Lien (other than security interests created hereby
or Liens permitted under the Credit Agreement) on any of the Collateral and (b)
the occurrence of any other event which could reasonably be expected to have a
material adverse effect on the aggregate value of the Collateral or on the
security interests created hereby.
7. Provisions Relating to Receivables.
7.1 Borrowers Remain Liable under Receivables. Anything herein to
the contrary notwithstanding, each Borrower shall remain liable under each of
the Receivables to observe and perform all the conditions and obligations to be
observed and performed by it thereunder, all in accordance with the terms of any
agreement giving rise to each such Receivable. Neither the Agent nor any Lender
shall have any obligation or liability under any Receivable (or any agreement
giving rise thereto) by reason of or arising out of this Agreement or the
receipt by the Agent, or any Lender of any payment relating to such Receivable
pursuant hereto, nor shall the Agent or any Lender be obligated in any
manner to perform any of the obligations of any Borrower under or pursuant to
any Receivable (or any agreement giving rise thereto), to make any payment, to
make any inquiry as to the nature or the sufficiency of any payment received by
it or as to the sufficiency of any performance by any party under any Receivable
(or any agreement giving rise thereto), to present or file any claim, to take
any action to enforce any performance or to collect the payment of any amounts
which may have been assigned to it or to which it may be entitled at any time or
times.
7.2 Analysis of Receivables. The Agent shall have the right to
make test verifications of the Receivables in any manner and through any medium
that it reasonably considers advisable, and each Borrower shall furnish all such
assistance and information as the Agent, may reasonably require in connection
with such test verifications. The Agent in its own name or in the name of others
may during such time as a Default or an Event of Default shall have occurred and
be continuing communicate with the obligors on the Receivables to verify with
them to the Agent's satisfaction the existence, amount and terms of any
Receivables. Collections on Receivables.
7.3 Collections on Receivables.
(a) The Agent hereby authorizes each Borrower to collect the
Receivables subject to the Agent's direction and control, and the Agent may
curtail or terminate said authority at any time when an Event of Default has
occurred and is continuing and may then direct that payments on the Receivables
be made directly to the Agent, in accordance with the provisions of subsection
11.1. If any Borrower is required by the Agent, at any time when a Default or an
Event of Default has occurred and is continuing, any payments of Receivables,
when collected by such Borrower, (1) shall be forthwith (and, in any event,
within two Business Days) deposited by such Borrower in the exact form received,
duly endorsed by such Borrower to the Agent, if required, in a Collateral
Account maintained under the sole dominion and control of the Agent, subject to
withdrawal by the Agent only as provided in subsection 10.3, and (2) until so
turned over, shall be held by such Borrower in trust for the Agent, segregated
from other funds of such Borrower.
(b) Each such deposit of Proceeds of Receivables shall be
accompanied by a report (in the form customarily prepared by such Borrower for
its internal purposes) identifying in reasonable detail the nature and source of
the payments included in the deposit.
(c) At the Agent's request at any time when a Default or an
Event of Default has occurred and is continuing any or all Borrowers shall
deliver to the Agent, all original and other documents evidencing, and relating
to, the agreements and transactions which gave rise to the Receivables,
including, without limitation, all original orders, invoices and shipping
receipts.
7.4 Government Contracts.
(a) The Borrower represents and warrants that each
Government Contract set forth on Schedule 6 (i) does not and will not contain
any provision prohibiting assignment thereof as provided herein, and (ii)
contains a "no set-off" clause or does not permit any set-off against or
reduction of the obligation to make payments thereunder for liability of such
Borrower to the government because of renegotiation, fine, penalty (other than
as specifically permitted by the Federal Assignment of Claims Act with respect
to Government Contracts with the Federal government), taxes, social security
contributions, or withholding or failing to withhold taxes, social security
contributions or similar amounts, whether arising from or independent of the
Contract except as indicated on Schedule 6. Each Borrower shall promptly notify
the Agent of any material claimed set-off or reduction or the disallowance of
progress payment requests. Without limiting the foregoing, with respect to each
Government Contract (including, if required by applicable law, each purchase
order or delivery order), each Borrower shall, except as otherwise consented to
by the Agent concurrently with the execution of this Agreement with respect to
existing Government Contracts (or purchase orders or delivery orders, if
applicable) and within five (5) Business Days after entering into any new
Government Contract (or purchase order or delivery order, if applicable)
complete, execute and deliver to or as directed by the Agent with respect to
such contract, at such Borrower's expense, a Notice of Assignment substantially
in the form of Exhibit A hereto and an Instrument of Assignment substantially in
the form of Exhibit B hereto, or in such other forms as the Agent may specify
from time to time, each in form and substance satisfactory to the Agent;
provided, however, that the Borrower shall not be required to execute and
deliver any assignments and/or notices of assignment and letters of
representation with respect to Receivables identified in subsection 7.9 of the
Credit Agreement. The provisions of this Section shall not limit or supersede
any other provisions of this Agreement.
(b) All Government Contracts have been, or if arising
hereafter will be, legally awarded and binding on the parties thereto; no
payment has been or will be made by any Borrower or any of its respective
affiliates, or any Person acting on its behalf, to any Person that was, is or
will be contingent upon the award of any Government Contract in violation of
applicable procurement law or that would otherwise be in violation of applicable
procurement law (including, but not limited to, the Federal Acquisition
Regulation, the Defense Acquisition Regulations, the Federal Procurement
Regulations and the Armed Services Procurement Regulations); there is no claim
that has been asserted by any government agency or authority concerning the
award or performance of any Government Contract and each Borrower shall promptly
notify the Agent upon becoming aware of the assertion of any such claim or the
existence of any basis therefor; none of the Borrowers or any of its respective
directors, employees or affiliates have been debarred or suspended from
participation in the award of contracts with the Federal government or any state
or local government, or any agency or instrumentality thereof, or is a party to
or the subject of any pending or to any Borrower's knowledge threatened
proceeding or investigation relating to debarment or suspension or of any
complaint issued by or before any such Person relating thereto, and each
Borrower shall promptly notify the Agent upon becoming aware of the occurrence
of any of the foregoing or the existence of any basis therefore; and none of the
Borrowers or any of its respective affiliates, or any of its officers, directors
or employees is permanently or temporarily enjoined or barred from engaging in
or continuing any conduct or practice relating to the conduct of their business,
or enjoining or requiring any of them to take any action of any kind relating
thereto, and each Borrower shall promptly notify the Agent upon becoming aware
of the occurrence of any of the foregoing or the existence of any basis
therefor.
(c) Each Borrower's cost accounting and procurement systems
are and at all times have been, and will continue to be, in compliance with all
requirements relating or applicable to the Government Contracts.
(d) No Borrower has assigned any of the Government Contracts
or any rights or proceeds thereunder to any other Person.
7.5 Additional Representations and Warranties.
(a) No amount payable to any Borrower under or in connection
with any Receivable is evidenced by any Instrument or Chattel Paper which has
not been delivered to the Agent.
(b) The amounts represented by each Borrower to the Agent
from time to time as owing to such Borrower in respect of the Receivables will
at such times be accurate in all material respects.
7.6 Covenants.
(a) Other than in the ordinary course of business, no
Borrower will (i) grant any extension of the time of payment of any Receivable,
(ii) compromise or settle any Receivable for less than the full amount thereof,
(iii) release, wholly or partially, any Person liable for the payment of any
Receivable, (iv) allow any credit or discount whatsoever on any Receivable, (v)
amend, supplement or modify any Receivable in any manner that could adversely
affect the value thereof or (vi) fail to exercise promptly and diligently each
and every material right which it may have under each agreement giving rise to a
Receivable (other than any right of termination).
(b)Each Borrower will deliver to the Agent a copy of each
material demand, notice or document received by it that questions the validity
or enforceability of more than 5% of the aggregate amount of the then
outstanding Receivables.
8. Provisions Relating to Patents and Trademarks.
8.1 Representations and Warranties.
(a) Schedule 3 refers to all Patents and material Patent
Licenses owned by each Borrower in its own name on the date hereof.
(b) Schedule 4 refers to all Trademarks registered with
Governmental Authorities and material Trademark Licenses owned by each Borrower
in its own name on the date hereof.
(c) To the best of each Borrower's knowledge, each Patent
and Trademark is on the date hereof valid, subsisting, unexpired, enforceable
and has not been abandoned, except where such abandonment would not reasonably
be expected to have a Material Adverse Effect.
(d) Except as set forth in either Schedule 3 or Schedule 4,
none of such Patents and Trademarks is on the date hereof the subject of any
exclusive licensing or franchise agreement.
(e) No holding, decision or judgment has been rendered by
any Governmental Authority which would limit, cancel or question the validity or
enforceability of any Patent or Trademark in any respect that could reasonably
be expected to have a Material Adverse Effect.
(f) No action or proceeding is pending on the date hereof
seeking to limit, cancel or question the validity of any Patent or Trademark,
which, if adversely determined, would have a Material Adverse Effect.
8.2 Covenants.
(a) Each Borrower (either itself or through licensees) will
(1) maintain each Trademark which is material to its business (as reasonably
determined by such Borrower) in full force free from any claim of abandonment
for non-use, (2) maintain as in the past the quality of products and services
offered under such Trademark, (3) employ such Trademark with the appropriate
notice of registration (if deemed advisable by management in its reasonable
discretion) and (4) not (and not permit any licensee or sublicensee thereof to)
do any act or knowingly omit to do any act whereby such Trademark may become
invalidated.
(b) No Borrower will knowingly do any act, or omit to do any
act, whereby any Patent which is material to such Borrower's business (as
reasonably determined by such Borrower) may become abandoned or dedicated to the
public.
(c) Each Borrower will notify the Agent promptly if it knows
that any application or registration relating to any material Patent or
Trademark may become abandoned or dedicated to the public, or of any adverse
determination or development (including, without limitation, the institution of,
or any such determination or development in, any proceeding in the United States
Patent and Trademark Office or any court or tribunal in any country) regarding
such Borrower's ownership of any material Patent or Trademark or its right to
register the same or to keep and maintain the same.
(d) Whenever any Borrower, either by itself or through any
agent, employee, licensee or designee, shall file an application for the
registration of any Patent or Trademark with the United States Patent and
Trademark Office or any similar office or agency in any other country or any
political subdivision thereof, such Borrower shall report such filing to the
Agent within five (5) Business Days after the last day of the fiscal quarter in
which such filing occurs. Upon request of the Agent, such Borrower shall execute
and deliver any and all additional agreements, instruments, documents, and
papers as the Agent may reasonably request to evidence the Agent's security
interest in any such Patent or Trademark and the goodwill and general
intangibles of such Borrower relating thereto or represented thereby.
(e) Each Borrower will take all reasonable and necessary
steps, including, without limitation, in any proceeding before the United States
Patent and Trademark Office, or any similar office or agency in any other
country or any political subdivision thereof, to maintain and pursue each
material application (and to obtain the relevant registration) and to maintain
each registration of the material Patents and Trademarks, including, without
limitation, filing of applications for renewal, affidavits of use and affidavits
of incontestability.
(f) In the event that any Borrower becomes aware that any
Patent or Trademark is infringed, misappropriated or diluted by a third party,
each Borrower affected thereby shall (i) take such actions as such Borrower
shall deem appropriate under the circumstances to protect such Patent or
Trademark and (ii) if such Patent or Trademark is of economic value, promptly
notify the Agent after it learns thereof and where appropriate in accordance
with its business judgment, xxx for infringement, misappropriation or dilution,
to seek injunctive relief, and to recover any and all damages for such
infringement, misappropriation or dilution.
9. Copyrights.
9.1 Representations and Warranties.
(a) Schedule 2 refers to all material Copyrights registered
with or for which an application has been filed with a Governmental Authority
and Copyright Licenses owned by each Borrower in its own name on the date
hereof.
(b) To the best of each Borrower's knowledge, each Copyright
is on the date hereof valid, subsisting, unexpired, enforceable and has not been
abandoned.
(c) Except as set forth in Schedule 2, none of such
Copyrights is on the date hereof the subject of any exclusive licensing or
franchise agreement.
(d) No holding, decision or judgment has been rendered by
any Governmental Authority which would limit, cancel or question the validity of
any Copyright in any respect that could reasonably be expected to have a
Material Adverse Effect.
(e) No action or proceeding is pending on the date hereof
seeking to cancel or question the validity of any Copyright which, if adversely
determined, would have a Material Adverse Effect.
9.2 Covenants.
(a) Each Borrower (either itself or through licensees) will
(i) employ the appropriate notice of copyright for each work subject to
copyright protection to the extent necessary to protect any registered Copyright
relating to such work and (ii) not (and not permit any licensee or sublicensee
thereof to) do any act or knowingly omit to do any act whereby any Copyright may
become invalidated.
(b) No Borrower will knowingly (either itself or through
licensees) do any act, or omit to do any act, whereby any Copyright may become
injected into the public domain; unless in its business judgment, such Copyright
is no longer used or useful in the business of such Borrower and such Borrower
decides to do so.
(c) Each Borrower will notify the Agent promptly if it
knows, or has reason to know, that any Copyright may become injected into the
public domain or of any adverse determination or development (including, without
limitation, the institution of, or any such determination or development in, any
court or tribunal in the United States or any political subdivision thereof)
regarding such Borrower's ownership of any such Copyright or its validity.
(d) If any Borrower owns any Copyrights, such Borrower
either itself or through any agent, employee, licensee or designee, shall
provide to the Agent, a document confirming the Agent's security interest in
each registered Copyright with respect to which such Borrower acquires an
interest during the two preceding calendar quarters, duly executed and in proper
form for filing in the United States Copyright Office or other applicable United
States Governmental Authority. Upon request of the Agent, each Borrower shall
execute and deliver any and all additional agreements, instruments, documents,
and papers as the Agent may reasonably request to confirm the Agent's security
interest in such Copyright, and each Borrower hereby constitutes the Agent as
its attorney-in-fact to file all such writings for the foregoing purposes, all
lawful acts of such attorney being hereby ratified and confirmed; such power
being coupled with an interest is irrevocable until the Termination Date (as
defined herein).
(e) Each Borrower will take all necessary steps, as it shall
deem appropriate under the circumstances, in accordance with its business
judgment, to maintain and pursue each application filed (and to obtain the
relevant registration) and to maintain to the extent permitted by law each
registration of each Copyright owned by such Borrower including, without
limitation, filing of applications for renewal, where necessary.
(f) Each Borrower will promptly notify the Agent of any
material infringement of any Copyright owned by it of which it becomes aware and
will take such actions as it shall deem appropriate under the circumstances to
protect such Copyright, including, where appropriate in accordance with its
business judgment, the bringing of suit or the settling of actual or potential
suits for infringement, seeking injunctive relief and seeking to recover any and
all damages for such infringement.
10. Remedies.
10.1 Notice to Obligors. Upon the request of the Agent at any time
when a Default or an Event of Default has occurred and is continuing each
Borrower shall notify obligors on the Receivables that the Receivables have been
assigned to the Agent and that payments in respect thereof shall be made
directly to the Agent.
10.2 Proceeds to be Turned Over To The Agent. In addition to the
rights of the Agent specified in subsection 7.3 with respect to payments of
Receivables, when a Default or an Event
of Default has occurred and is continuing all Proceeds received by any Borrower
consisting of cash, checks and other near-cash items shall be held by such
Borrower in trust for the Agent, segregated from other funds of such Borrower,
and shall, forthwith upon receipt by such Borrower, be turned over to the Agent,
in the exact form received by such Borrower (duly endorsed by such Borrower to
the Agent, if required) and held by the Agent in the Collateral Account. All
Proceeds while held by the Agent in the Collateral Account (or by such Borrower
in trust for the Agent) shall continue to be held as collateral security for all
the Secured Obligations and shall not constitute payment thereof until applied
as provided in subsection 10.3.
10.3 Application of Proceeds. At such intervals as may be agreed
upon by any Borrower and the Agent or, if an Event of Default has occurred and
is continuing at any time at the Agent's election, the Agent may apply all or
any part of Proceeds held in any Collateral Account in payment of the Secured
Obligations in such order as the Agent may elect, and any part of such funds
which the Agent elects not so to apply and deems not required as collateral
security for the Secured Obligations shall be paid over from time to time by the
Agent to each Borrower or to whomsoever may be lawfully entitled to receive the
same. Any balance of such Proceeds when no Default or Event of Default is
continuing shall be paid over to each Borrower or to whomsoever may be lawfully
entitled to receive the same. Any balance of such Proceeds remaining after the
Secured Obligations shall have been paid in full and the Commitments under (and
as defined in) the Credit Agreement shall have expired or otherwise been
terminated shall be paid over to the Borrowers or to whomsoever may be lawfully
entitled to receive the same.
10.4 Code Remedies. If an Event of Default has occurred and is
continuing, the Agent on behalf of the Lenders may exercise, in addition to all
other rights and remedies granted to it in this Agreement and in any other
instrument or agreement securing, evidencing or relating to the Secured
Obligations, all rights and remedies of a secured party under the Code. Without
limiting the generality of the foregoing, if an Event of Default has occurred
and is continuing, the Agent, without demand of performance or other demand,
presentment, protest, advertisement or notice of any kind (except any notice
required by law referred to below) to or upon any Borrower or any other Person
(all and each of which demands, defenses, advertisements and notices are hereby
waived), may in such circumstances forthwith collect, receive, appropriate and
realize upon the Collateral, or any part thereof, and/or may forthwith sell,
lease, assign, give option or options to purchase, or otherwise dispose of and
deliver the Collateral or any part thereof (or contract to do any of the
foregoing), in one or more parcels at public or private sale or sales, at any
exchange, broker's board or office of the Agent or any Lender or elsewhere upon
such terms and conditions as it may deem advisable and at such prices as it may
deem best, for cash or on credit or for future delivery without assumption of
any credit risk. The Agent shall have the right upon any such public sale or
sales, and, to the extent permitted by law, upon any such private sale or sales,
to purchase the whole or any part of the Collateral so sold, free of any right
or equity of redemption in any Borrower, which right or equity is hereby waived
or released. Each Borrower further agrees, if an Event of Default has occurred
and is continuing at the Agent's request, to assemble the Collateral and make it
available to the Agent, at places which the Agent shall reasonably select,
whether at each Borrower's premises or elsewhere. To the extent permitted by
applicable law, each Borrower waives all claims, damages and demands it may
acquire against the Agent or any Lender arising out of the exercise by them of
any rights hereunder. If any notice of a
proposed sale or other disposition of Collateral shall be required by law, such
notice shall be deemed reasonable and proper if given at least ten (10) days
before such sale or other disposition.
11. Agent, Appointment as Attorney-in-Fact; Agent, Performance of
Borrowers' Obligations.
11.1 Powers. Each Borrower hereby irrevocably constitutes and
appoints the Agent and any officer or agent, thereof, with full power of
substitution, as its true and lawful attorney-in-fact with full irrevocable
power and authority in the place and stead of such Borrower and in the name of
such Borrower or in its own name, for the purpose of carrying out the terms of
this Agreement, to take any and all appropriate action and to execute any and
all documents and instruments which may be necessary or desirable to accomplish
the purposes of this Agreement, and, without limiting the generality of the
foregoing, such Borrower hereby gives the Agent, the power and right, on behalf
of such Borrower, without notice to or assent by such Borrower, to do any or all
of the following:
(a) at any time when a Default or an Event of Default has
occurred and is continuing in the name of any Borrower or its own name, or
otherwise, take possession of and endorse and collect any checks, drafts, notes,
acceptances or other instruments for the payment of moneys due under any
Receivable or with respect to any other Collateral and file any claim or take
any other action or proceeding in any court of law or equity or otherwise deemed
appropriate by the Agent for the purpose of collecting any and all such moneys
due under any Receivable or with respect to any other Collateral whenever
payable;
(b) in the case of any Copyright, Patent or Trademark,
execute and deliver any and all agreements, instruments, documents and papers as
the Agent may request to evidence the Agent's security interests in such
Copyright, Patent or Trademark and the goodwill and general intangibles of any
Borrower relating thereto or represented thereby;
(c) pay or discharge taxes and Liens levied or placed on or
threatened against the Collateral, effect any repairs or any insurance called
for by the terms of this Agreement and pay all or any part of the premiums
therefor and the costs thereof;
(d) execute, in connection with any sale provided for in
subsection 10.4, any endorsements, assignments or other instruments of
conveyance or transfer with respect to the Collateral; and
(e) at any time when a Default or an Event of Default has
occurred and is continuing (1) direct any party liable for any payment under any
of the Collateral to make payment of any and all moneys due or to become due
thereunder directly to the Agent or as the Agent shall direct; (2) ask or demand
for, collect, receive payment of and receipt for, any and all moneys, claims and
other amounts due or to become due at any time in respect of or arising out of
any Collateral; (3) sign and endorse any invoices, freight or express bills,
bills of lading, storage or warehouse receipts, drafts against debtors,
assignments, verifications, notices and other documents in connection with any
of the Collateral; (4) commence and prosecute any suits,
actions or proceedings at law or in equity in any court of competent
jurisdiction to collect the Collateral or any thereof and to enforce any other
right in respect of any Collateral; (5) defend any suit, action or proceeding
brought against any Borrower with respect to any Collateral; (6) settle,
compromise or adjust any such suit, action or proceeding and, in connection
therewith, to give such discharges or releases as the Agent may deem
appropriate; (7) assign any Copyright, Patent or Trademark (along with the
goodwill of the business to which any such Copyright, Patent or Trademark
pertains), throughout the world for such term or terms, on such conditions, and
in such manner, as the Agent, shall in its sole discretion determine; and (8)
generally, sell, transfer, pledge and make any agreement with respect to or
otherwise deal with any of the Collateral as fully and completely as though the
Agent were the absolute owner thereof for all purposes, and do, at the Agent's
option and at the expense of each Borrower affected thereby , at any time, or
from time to time, all acts and things which the Agent deems necessary to
protect, preserve or realize upon the Collateral and the Agent's security
interest therein and to effect the intent of this Agreement, all as fully and
effectively as any Borrower might do.
11.2 Performance by Agent of Borrowers' Obligations. If any
Borrower fails to perform or comply with any of its agreements contained herein,
the Agent, at its option, but without any obligation so to do, may perform or
comply, or otherwise cause performance or compliance, with such agreement.
11.3 Borrowers' Reimbursement Obligation. The expenses of the
Agent incurred in connection with actions undertaken as provided in this
Section, together with interest thereon at a rate equal to the rate per annum at
which interest would then be payable on past due Prime Rate Loans under the
Credit Agreement, from the date of payment by the Agent, to the date reimbursed
by each Borrower, shall be payable by such Borrower to the Agent on demand.
11.4 Ratification; Power Coupled With An Interest. Each Borrower
hereby ratifies all that said attorneys shall lawfully do or cause to be done by
virtue hereof in accordance with the terms of this Agreement. All powers,
authorizations and agencies contained in this Agreement are coupled with an
interest and are irrevocable until this Agreement is terminated and the security
interests created hereby are released.
12. Duty of the Agent. The Agent's sole duty with respect to the
custody, safekeeping and physical preservation of the Collateral in its
possession, under Section 9-207 of the Code or otherwise, shall be to deal with
it in the same manner as the Agent, deals with similar property for its own
account. Neither the Agent, nor any Lender nor any of their respective officers,
directors, employees or agents shall be liable for failure to demand, collect or
realize upon any of the Collateral or for any delay in doing so or shall be
under any obligation to sell or otherwise dispose of any Collateral upon the
request of any Borrower or any other Person or to take any other action
whatsoever with regard to the Collateral or any part thereof. The powers
conferred on the Agent and the Lenders hereunder are solely to protect the
Agent's and such Lenders' interests in the Collateral and shall not impose any
duty upon the Agent to exercise any such powers. The Agent, and the Lenders,
shall be accountable only for amounts that they actually receive as a result of
the exercise of such powers, and neither they nor any of their officers,
directors,
employees or agents shall be responsible to any Borrower for any act or failure
to act hereunder, except for their own gross negligence or willful misconduct.
13. Execution of Financing Statements. Pursuant to Section 9-402 of the
Code, each Borrower authorizes the Agent to file financing statements with
respect to the Collateral without the signature of each Borrower affected
thereby in such form and in such filing offices as the Agent, reasonably
determines appropriate to perfect the security interests of the Agent, under
this Agreement. A carbon, photographic or other reproduction of this Agreement
shall be sufficient as a financing statement for filing in any jurisdiction.
14. Authority of Agent. Each Borrower acknowledges that the rights and
responsibilities of the Agent under this Agreement with respect to any action
taken by the Agent, or the exercise or non-exercise by the Agent of any option,
voting right, request, judgment or other right or remedy provided for herein or
resulting or arising out of this Agreement shall, as between the Agent, and the
Lenders, be governed by the Credit Agreement and by such other agreements with
respect thereto as may exist from time to time among them, but, as between the
Agent and such Borrower, the Agent shall be conclusively presumed to be acting
as agent, for the Agent, with full and valid authority so to act or refrain from
acting, and neither such Borrower nor any Issuer shall be under any obligation
or entitlement, to make any inquiry respecting such authority.
15. Notices. All notices, requests and demands to or upon the Agent or
any Borrower hereunder shall be effected in the manner provided for in
subsection 11.3 of the Credit Agreement.
16. Severability. Any provision of this 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, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
17. Amendments in Writing; No Waiver; Cumulative Remedies.
17.1 Amendments in Writing. None of the terms or provisions of
this Agreement may be waived, amended, supplemented or otherwise modified except
by a written instrument executed by each Borrower and the Agent, provided that
any provision of this Agreement imposing obligations on any Borrower may be
waived by the Agent in a written instrument executed by the Agent.
17.2 No Waiver by Course of Conduct. Neither the Agent nor any
Lender shall by any act (except by a written instrument pursuant to subsection
17.1) delay, indulgence, omission or otherwise be deemed to have waived any
right or remedy hereunder or to have acquiesced in any Default or in any breach
of any of the terms and conditions hereof. No failure to exercise, nor any delay
in exercising, on the part of the Agent or any Lender, any right, power or
privilege hereunder shall operate as a waiver thereof. No single or partial
exercise of any right, power or privilege hereunder shall preclude any other or
further exercise thereof or the exercise of any
other right, power or privilege. A waiver by the Agent or any Lender of any
right or remedy hereunder on any one occasion shall not be construed as a bar to
any right or remedy which the Agent or such Lender would otherwise have on any
future occasion.
17.3 Remedies Cumulative. The rights and remedies herein provided
are cumulative, may be exercised singly or concurrently and are not exclusive of
any other rights or remedies provided by law.
18. Additional Borrowers. Each Subsidiary of the Borrowers required to
become a party to this Agreement pursuant to subsection 7.12 of the Credit
Agreement, shall become a Borrower for all purposes of this Agreement upon
execution and delivery by such Subsidiary of a Joinder Agreement in the form of
Exhibit D to the Credit Agreement.
19. Joint and Several Liability. WHETHER OR NOT EXPRESSLY STATED HEREIN
OR IN ANY OTHER LOAN DOCUMENT, ALL OBLIGATIONS OF THE BORROWERS (OR OF ANY
BORROWER) HEREUNDER AND UNDER EACH OTHER LOAN DOCUMENT (WHETHER IN CONNECTION
WITH LOANS, LETTERS OF CREDIT OR OTHER OBLIGATIONS) ARE JOINT AND SEVERAL
OBLIGATIONS OF ALL BORROWERS.
20. Maximum Amount of Joint and Several Liability. To the extent that
applicable Law otherwise would render the full amount of the joint and several
obligations of any Subsidiary of ACS Inc. hereunder and under the other Loan
Documents invalid or unenforceable, such Subsidiary's obligations hereunder and
under the Loan Documents shall be limited to the maximum amount which does not
result in such invalidity or unenforceability, provided, however, that each
Borrower's obligations hereunder and under the other Loan Documents shall be
presumptively valid and enforceable to their fullest extent in accordance with
the terms hereof or thereof, as if this Section 20 were not a part of this
Agreement.
21. Counterparts. This Agreement may be executed by one or more of the
parties to this Agreement on any number of separate counterparts (including by
facsimile transmission), and all of said counterparts taken together shall be
deemed to constitute one and the same instrument. A set of the copies of this
Agreement signed by all the parties shall be lodged with ACS Inc. and the Agent.
22. Section Headings. The Section and subsection headings used in this
Agreement are for convenience of reference only and are not to affect the
construction hereof or be taken into consideration in the interpretation hereof.
23. Successors and Assigns. This Agreement shall be binding upon the
successors and assigns of each Borrower and shall inure to the benefit of the
Agent and its successors and assigns.
24. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED
AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE COMMONWEALTH OF VIRGINIA.
25. Release of Collateral and Termination. The Agent shall release the
Collateral from the Lien created hereby, and this Agreement and all obligations
of the Agent and each Borrower hereunder shall terminate on the Termination
Date.
IN WITNESS WHEREOF, the undersigned has caused this Security Agreement
to be duly executed and delivered as of the date first above written.
ADVANCED COMMUNICATION SYSTEMS, INC.
INTEGRATED SYSTEMS CONTROL, INC.
RF MICROSYSTEMS, INC.
By: /s/ Dev Ganesan
Dev Ganesan
Chief Financial Officer
DC1DOCS1.68408
