SECURITY AGREEMENT
THIS
SECURITY AGREEMENT, dated as of March 6, 2007 (this "Agreement"), is made by
Advanced Photonix, Inc.,
a
Delaware corporation (the "Borrower"), Silicon Sensors, Inc., a Delaware
corporation ("SSI"), and Picometrix, LLC, a Delaware limited liability company
("PI")(collectively, with
their respective successors and permitted assigns
the
"Debtors" and each a "Debtor" ),
in
favor of Fifth Third Bank (the "Bank").
RECITALS
A. The
Borrower has entered into a Business Loan Agreement dated of even date herewith
(as amended, supplemented, extended, restated or otherwise modified from time
to
time, including any agreement entered into in substitution therefor, the "Loan
Agreement"), with the Bank pursuant to which the Bank may make Loans (as defined
therein) to the Borrower. Each of SSI and PI have entered into a Guaranty dated
of even date herewith pursuant to which they guaranteed all of the obligations
and liabilities of the Borrower to the Bank.
B. Under
the
terms of the Loan Agreement, the Debtors are required to grant to the Bank,
a
first-priority security interest, subject only to security interests expressly
permitted by the Loan Agreement, in and to the Collateral hereinafter described.
Accordingly,
the parties hereto agree as follows:
ARTICLE
1
DEFINITIONS
1.1
Terms.
The
following terms herein used shall have the following meanings (such definitions
to be equally applicable to the singular and plural forms thereof):
"Bank"
is
defined in the recitals to this Agreement.
"Borrower"
is defined in the recitals to this Agreement.
"Capital
Stock" means (i) in the case of any corporation, all capital stock (whether
common, preferred or any other type) and any securities exchangeable for or
convertible into capital stock and any warrants, rights or other options to
purchase or otherwise acquire capital stock or such securities or any other
form
of equity securities,
(ii) in
the case of an association or business entity, any and all shares, interests,
participations, rights or other equivalents (however designated) of corporate
stock, (iii) in the case of a partnership or limited liability company,
partnership or membership interests (whether general or limited) and (iv) any
other interest or participation that confers on a Person the right to receive
a
share of the profits and losses of, or distribution of assets of, the issuing
Person.
“Collateral”
is defined in Section 2.1.
"Debtor"
and "Debtors" is defined in the preamble to this Agreement.
"Event
of
Default" means any failure to pay when due (whether at stated maturity, by
acceleration or otherwise) any Secured Liabilities or the occurrence of any
Event of Default under and as defined in the Loan Agreement.
"Loan
Agreement " is defined in the recitals to this Agreement.
"Lien"
means any pledge, assignment, hypothecation, mortgage, security interest,
deposit arrangement, option, conditional sale or title retaining contract,
sale
and leaseback transaction, financing statement filing, lessor's or lessee's
interest under any lease, subordination of any claim or right, or any other
type
of lien, charge, encumbrance, preferential arrangement or other claim or
right.
"Loan
Documents" means the Loan Agreement and all of the documents, agreements and
instruments among the Debtors, any of their Subsidiaries, the Bank, or any
of
them, at any time evidencing or securing the repayment of, or otherwise
pertaining to, the Secured Liabilities.
"Permitted
Liens" means Liens permitted by the Loan Agreement .
"Receivables"
means all accounts, payment intangibles, chattel paper and
instruments.
“Secured
Liabilities” means all loans, advances or other financial accommodations,
including any renewals or extensions thereof, from the Bank to Borrower or
any
Guarantor and any and all liabilities and obligations of any and every kind
and
nature heretofore, now or hereafter owing from Borrower or any Guarantor to
the
Bank or any affiliate of Fifth Third Bancorp (including, without limitation,
Fifth Third Securities, Inc.), however incurred or evidenced, whether primary,
secondary, contingent or otherwise, whether arising under the Loan Agreement,
under any other security agreement(s), promissory note(s), guaranty(s),
mortgage(s), lease(s), instrument(s), document(s), contract(s), letter(s) of
credit or similar agreement(s) heretofore, now or hereafter executed by Borrower
or any Guarantor and delivered to the Bank, or by oral agreement or by operation
of law plus all interest, costs, expenses and reasonable attorney fees which
may
be made or incurred by the Bank in the disbursement, administration or
collection of such liabilities and obligations and in the protection,
maintenance and liquidation of the Collateral.
“UCC”
means
the Uniform Commercial Code as in effect from time to time in the State of
Michigan; provided, that if, with respect to any UCC financing statement or
by
reason of any provisions of law, the perfection or the effect of perfection
or
non-perfection of the security interests granted to the Bank is governed by
the
Uniform Commercial Code as in effect in a jurisdiction of the United States
other than Michigan, then “UCC” means the Uniform Commercial Code as in effect
from time to time in such other jurisdiction for purposes of any UCC financing
statement relating to such perfection or effect of perfection or
non-perfection.
1.2 Loan
Agreement Definitions.
Unless
otherwise defined herein or the context otherwise requires, terms used in this
Agreement, including its preamble and recitals, have the meanings provided
in
the Loan Agreement .
1.3 UCC
Definitions.
Unless
otherwise defined herein or in the Loan Agreement or the context otherwise
requires, and whether or not capitalized, terms for which meanings are provided
in Article 8 or Article 9 of the UCC are used in this Agreement, including
its
preamble and recitals, with such meanings. Without limiting the foregoing,
accounts,
chattel paper, commercial
tort claims,
certificated security, control, deposit accounts, documents, farm products,
fixtures, electronic chattel paper, equipment, general intangibles, goods,
instruments, inventory, investment property, letter-of-credit rights, negotiable
instruments, payment intangibles, securities and software, whether or not
capitalized, shall have the meanings ascribed thereto in the UCC.
ARTICLE
2
GRANT
OF SECURITY INTEREST
2.1
Grant
of Security Interest.
To
secure the prompt and complete payment of all Secured Liabilities, for value
received and pursuant to the Loan Agreement, each of the Debtors hereby grants,
assigns and transfers to the Bank a first-priority security interest, subject
only to Permitted Liens, in and to the following described assets whether now
owned or existing or hereafter acquired or arising and wherever located (all
of
which is herein collectively called the "Collateral"):
(a) All
of
each Debtor's accounts, documents, instruments, general intangibles (including
without limitation all tax refund claims, payment intangibles and software,
but
excluding any intellectual property owned, in-licensed or otherwise controlled
by any Debtor), deposit accounts, letter-of-credit rights and chattel paper,
further including, but without limitation, all supporting obligations and all
monies and claims for money due or to become due to any Debtor, all security
held or granted to any Debtor;
(b) All
of
each Debtor's investment property (including without limitation all Capital
Stock and other securities, securities entitlements, securities accounts,
commodity contracts and commodity accounts);
(c) All
of
each Debtor's equipment, inventory, farm products, fixtures and all other goods,
whether used by any Debtor or any other person, or leased by any Debtor to
any
person and whether the interest of Debtors is as owner, lessor, lessee or
otherwise;
(d) All
of
each Debtor's commercial tort claims (including without limitation as a
plaintiff); and
(e) All
other
present and future personal property of each Debtor (whether tangible or
intangible), including but not limited to all products and proceeds, accessions,
stock
rights, stock dividends, liquidating dividends, new securities, payments,
distributions and proceeds (including cash dividends and sale proceeds) of
or
relating to any of the property described in this Section 2.1, other property
to
which any Debtor may become entitled by reason of the ownership of any of the
property described in this Section 2.1,
all
books, records, databases, information and other property relating to,
evidencing, or embodying any
of
the property described in this Section 2.1, all payments under insurance
(whether or not the Bank is named as a loss payee thereof) and any other amount
payable with respect to any of the property described in this Section
2.1.
ARTICLE
3
REPRESENTATIONS
AND COVENANTS
The
Debtors further represent, warrant, covenant, and agree with the Bank as
follows:
3.1 Ownership
of Collateral; Security Interest Priority. At
the time any Collateral becomes subject to a security interest of the Bank
hereunder, unless the Bank shall otherwise consent, the Debtors shall be deemed
to have represented and warranted that (a) a Debtor is the lawful owner of
such
Collateral or has the power to transfer the Collateral and have the right and
authority to subject the same to the security interest of the Bank; and (b)
other than Permitted Liens, none of the Collateral is subject to any Lien other
than that in favor of the Bank and there is no effective financing statement
or
other filing covering any of the Collateral on file in any public office, other
than in favor of the Bank. Upon filing of financing statements in the
appropriate jurisdictions, this Agreement creates in favor of the Bank a valid
first-priority perfected security interest, subject only to Permitted Liens,
in
the Collateral in which a security interest may be perfected by the filing
of a
financing statement, enforceable against each Debtor and all third parties
and
securing the payment of the Secured Liabilities. The Debtors authorize the
Bank
to file financing statements describing the Collateral as determined by the
Bank
and if requested will execute and deliver to the Bank all documents and take
such other actions as may from time to time be requested by the Bank in order
to
maintain a first perfected security interest in, and if applicable, possession
and control of, the Collateral. The Debtors further ratify and consent to the
filing of any financing statement by the Bank which may have been filed prior
to
the date hereof. The Debtors will keep the Collateral free at all times from
any
and all Liens other than Permitted Liens. The Debtors will not, without the
prior written consent of the Bank, sell, lease, license, transfer, assign or
otherwise dispose, or permit or suffer to be sold, leased, licensed,
transferred, assigned or otherwise disposed, any of the Collateral, except
for,
prior to an Event of Default only (notwithstanding any other agreement), any
assets permitted to be sold, leased, licensed, transferred, assigned or
otherwise disposed under the Loan Agreement. The Bank or its attorneys may
at
any and all reasonable times inspect the Collateral and for such purpose upon
reasonable notice to the Debtors may enter upon any and all premises where
the
Collateral is or might be kept or located, subject to any limitations, if any,
in the Loan Agreement.
3.2 Names;
Locations.
Each
Debtor represents and warrants that Schedule 2 sets forth the following for
each
Debtor: (a) the jurisdiction in which each Debtor is located for purposes of
Sections 9-301 and 9-307 of the UCC; (b) the address of each Debtor's chief
executive office; (c) each location a secured party would have filed a UCC
financing statement to perfect a security interest in equipment, inventory
and
general intangibles owned by each Debtor in the past five years; (d) each trade
name or other name (other than its name set forth on the signature page hereto)
used by each Debtor; and (e) each Debtor’s federal taxpayer identification
number (and, during the four months preceding the date hereof, such Debtor
has
not had any other federal taxpayer identification number) and state
organizational number. During the past four months preceding the date hereof,
no
Debtor has been known by any legal name different from the one set forth on
the
signature page hereto, nor has such Debtor been the subject of any merger or
other corporate reorganization during the past five years. The name set forth
on
the signature page is the true and correct name of such Debtor. No
Debtor
will change its name or place of incorporation or organization or federal
taxpayer identification number except upon 30 days’ prior written notice to the
Bank.
3.3 Insurance. The
Debtors shall keep the tangible Collateral insured at all times against loss
by
theft, fire and other casualties. Said insurance shall be issued by a company
rated A or better by Best and shall be in amounts sufficient to protect the
Bank
against any and all loss or damage to the Collateral. The policy or policies
which evidence said insurance shall be delivered to the Bank upon request,
shall
contain a lender loss payable clause in favor of the Bank, shall name the Bank
as an additional insured, as its interest may appear, shall not permit
amendment, cancellation or termination without giving the Bank at least 30
days
prior written notice thereof, and shall otherwise be in form and substance
satisfactory to the Bank. Reimbursement under any liability insurance maintained
by the Debtors pursuant to this Section 3.3 may be paid directly to the person
who shall have incurred liability covered by such insurance. In the case of
any
loss to tangible Collateral, the proceeds shall be paid and used as follows:
(a) if
there
is any Event of Default (whether before or after any event which caused any
reimbursement under any insurance) has occurred and is continuing, such
reimbursement shall be paid to the Bank for application to the Secured
Liabilities.
(b) if
no
Event of Default (whether before or after any event which caused any
reimbursement under any insurance) has occurred and is continuing and such
reimbursement is less than $250,000, the Debtors may use the proceeds of such
insurance solely to repair or replace the property damaged, provided that if
such repair or replacement cannot be accomplished within 180 days after such
reimbursement amount is received or if the reimbursement amount is greater
than
$250,000, the proceeds of such insurance shall be paid to the Bank for
application to the Secured Liabilities; and, provided, further, if the amount
of
such reimbursement is greater than $100,000, upon the request of the Bank,
such
insurance proceeds that are allowed to be used to repair or replace hereunder
may be held by the Bank in a cash collateral account, and disbursed by the
Bank
as and when needed to pay for such allowed replacements and repairs (or applied
to the Secured Obligations if Event of Default occurs).
The
Debtors hereby appoint the Bank or any employee or agent of the Bank as Debtors'
attorney-in-fact, which appointment is coupled with an interest and irrevocable,
and, if such insurance claims or proceeds are required to be paid to the Bank,
authorize the Bank or any employee or agent of the Bank, on behalf of the
Debtors, to adjust and compromise any loss under said insurance and to endorse
any check or draft payable to the Debtors in connection with returned or
unearned premiums on said insurance or the proceeds of said insurance, and
any
amount so collected may be applied toward satisfaction of the Secured
Liabilities, provided, however, that the Bank shall not be required hereunder
so
to act.
3.4 Taxes,
Etc. The
Debtors will pay promptly, and within the time that they can be paid without
interest or penalty, any taxes, assessments and similar imposts and charges,
not
being contested in good faith, which are now or hereafter may become a Lien
upon
any of the Collateral. If the Debtors fail to pay any such taxes, assessments
or
other imposts or charges in accordance with this Section, the Bank shall have
the option to do so and the Debtors agree to repay forthwith all amounts so
expended by the Bank with interest at the prime-based rate set forth in the
Loan
Agreement .
3.5 Maintenance
of Collateral. The
Debtors will cause the tangible Collateral material to the conduct of its
business to be maintained and preserved in the same condition, repair and
working order as when new, ordinary wear and tear excepted, and in accordance
with any manufacturer's manual, and shall forthwith, or, in the case of any
loss
or damage to any of the tangible Collateral as quickly as practicable after
the
occurrence thereof, make or cause to be made all repairs, replacements, and
other improvements which are necessary or desirable to such end. The Debtors
shall promptly furnish to the Bank a statement respecting any material loss
or
damage to any of the tangible Collateral. The Debtors shall preserve and
maintain all rights of the Debtors and the Bank in all material intangible
Collateral, and will not subordinate, supplement
or otherwise modify any claim or right of the Debtors with respect to any
Collateral, or permit, consent or suffer to occur any of the foregoing, if
the
effect thereof is to impair, or is in any manner adverse to, the rights or
interests of the Bank without the prior written consent of the
Bank.
3.6
Tangible
Property Location.
Each
Debtor agrees that it will maintain exclusive possession of its equipment and
inventory, other than (a) inventory in transit in the ordinary course of
business and (b) inventory and equipment which is in the possession or control
of a warehouseman, bailee or other Person that has been notified of the security
interest hereunder, consented to such security interest, waived any Lien it
may
have on such inventory and equipment and signed an agreement satisfactory to
the
Bank. Additionally,
each Debtor will use commercially reasonable efforts
to cause each lessor of real property to any Debtor to execute and deliver
to
the Bank an estoppel, waiver and consent agreement in form and substance
acceptable to the Bank. All fixtures of any Debtor are located on the legal
descriptions listed on Schedule 3.
3.7
Chattel
Paper, Instruments, Investment Property,
Letters of Credit and
Negotiable Documents.
Schedule 4 lists all chattel paper (whether tangible or electronic),
instruments, investment property (including without limitation all certificated
securities and other Capital Stock),
letters
of credit issued for the benefit of any Debtor
and
negotiable documents owned or held by any Debtor as of the date hereof. Each
Debtor has delivered to the Bank possession of all originals of all negotiable
documents, certificated securities, instruments and tangible chattel paper
owned
or held by such Debtor as of the date hereof, and will promptly deliver to
the
Bank possession of all originals of all negotiable documents, certificated
securities, instruments and tangible chattel paper acquired or held by such
Debtor after the date hereof, in each case duly endorsed in blank and/or
accompanied by such transfer powers in form satisfactory to, and as required
by,
the Bank. The
Debtors will cause each issuer of a letter of credit issued for the benefit
of
any Debtor at any time to consent to the assignment of proceeds of the letter
of
credit or otherwise give the Bank control of the related letter-of-credit right.
With respect to any investment property (other than certificated securities)
of
any Debtor, such Debtor shall cause a control agreement satisfactory to the
Bank
relating to such investment property to be executed and delivered in favor
of
the Bank or otherwise take such actions to give the Bank control thereof. With
respect to any electronic chattel paper of any Debtor, such Debtor shall cause
take all actions required under Section 9-105 of the UCC to give the Bank
control thereof.
3.8 Deposit
Accounts.
Schedule 5 lists all deposit accounts of each Debtor.
3.9 Commercial
Tort Claims.
All
commercial tort claims of any Debtor are listed on Schedule 6 attached hereto.
Each Debtor shall promptly notify the Bank in writing if such Debtor reasonably
believes it may be entitled to recover a commercial tort claim at any time
and
such Debtor shall take all such action requested by the Bank to grant to the
Bank and perfect a security interest in such commercial tort claim.
3.10 Other
Collateral.
None of
the Collateral is covered by any certificate of title, consists of aircraft,
aircraft engines, ships or railcars or is otherwise of a type for which security
interests or liens may be perfected by filing under any federal statute (except
for certain Intellectual Property) other than as set forth on Schedule 8. Each
Debtor agrees to promptly notify the Bank in writing if it acquires any
Collateral covered by a certificate of title, any aircraft, aircraft engine,
ship or railcar or any other asset of a type for which security interests or
liens may be perfected by filing under any federal statute. The Debtors will
take all further action and execute such other documents, if any, required
by
the Bank to grant the Bank a security interest all such Collateral.
3.11 Special
Rights Regarding Receivables.
The
Bank or any of its agents may, at any time and from time to time in its sole
discretion following an Event of Default, verify, directly with each person
(collectively, the "Obligors") which owes any Receivables to any Debtor, the
Receivables in any reasonable manner. The Bank or any of its agents may, at
any
time from time to time after and during the continuance of an Event of Default,
notify the Obligors of the security interest of the Bank in the Collateral
and/or direct such Obligors that all payments in connection with such
obligations and the Collateral be made directly to the Bank in the Bank's name.
If the Bank or any of its agents shall collect such obligations directly from
the Obligors, the Bank or any of its agents shall have the right to resolve
any
disputes relating to returned goods directly with the Obligors in such manner
and on such terms as the Bank or any of its agents shall deem appropriate.
The
Debtors direct and authorize any and all of its present and future Obligors
to
comply with requests for information from the Bank, the Bank's designees and
agents and/or auditors issued pursuant to this Section, relating to any and
all
business transactions between the Debtors and the Obligors. The Debtors further
direct and authorize all of its Obligors upon receiving a notice or request
sent
by the Bank or the Bank's agents or designees pursuant to this Section to pay
directly to the Bank any and all sums of money or proceeds now or hereafter
owing by the Obligors to the Debtors, and any such payment shall act as a
discharge of any debt of such Obligor to the Debtors in the same manner as
if
such payment had been made directly to the Debtors. The Debtors agree to take
any and all action as the Bank may reasonably request to assist the Bank in
exercising the rights described in this Section.
ARTICLE
4
REMEDIES
4.1
General
Remedies.
Upon
the occurrence of any Event of Default, the Bank shall have and may exercise
any
one or more of the rights and remedies provided to it under this Agreement
or
any of the other Loan Documents or provided by law, including but not limited
to
all of the rights and remedies of a secured party under the UCC, and the Debtors
hereby agree to assemble the Collateral and make it available to the Bank at
a
place to be designated by the Bank which is reasonably convenient to both
parties, authorize the Bank to take possession of the Collateral with or without
demand and in accordance with applicable law and to sell and dispose of the
same
at public or private sale and to apply the proceeds of such sale to the costs
and expenses thereof (including reasonable attorneys' fees and disbursements,
incurred by the Bank) and then to the payment and satisfaction of the Secured
Liabilities. Any requirement of reasonable notice shall be met if the Bank
sends
such notice to the Debtors, by registered or certified mail, at least 10 days
prior to the date of sale, disposition or other event giving rise to a required
notice. The Bank may be the purchaser at any such sale. The Debtors expressly
authorize such sale or sales of the Collateral in advance of and to the
exclusion of any sale or sales of or other realization upon any other collateral
securing the Secured Liabilities. The Bank shall have no obligation to preserve
rights against prior parties, and the Bank shall have no obligation to clean-up
or otherwise prepare the Collateral for sale. The Debtors hereby waive as to
the
Bank any right of subrogation or marshaling of such Collateral and any other
collateral for the Secured Liabilities. To this end, the Debtors hereby
expressly agree that any such collateral or other security of the Debtors or
any
other party which the Bank may hold, or which may come to the Bank or its,
may
be dealt with in all respects and particulars as though this Agreement were
not
in existence. The parties hereto further agree that public sale of the
Collateral by auction conducted in any county in which any Collateral is located
or in which the Bank or the Debtors does business after advertisement of the
time and place thereof shall, among other manners of public and private sale,
be
deemed to be a commercially reasonable disposition of the Collateral. The
Debtors shall be liable for any deficiency remaining after disposition of the
Collateral. The Bank may comply with any applicable state or federal law
requirements in connection with a disposition of the Collateral and compliance
will not be considered to adversely affect the commercial reasonableness of
any
sale of the Collateral. The Bank may specifically disclaim any warranties of
title or the like. If the Bank sells any of the Collateral upon credit, the
Debtors will be credited only with payments actually made by the purchaser,
received by the Bank and applied to the indebtedness of such purchaser. In
the
event any such purchaser fails to pay for the Collateral, the Bank may resell
the collateral and the Debtors shall be credited with the proceeds of
sale.
4.2 Additional
Remedies; Irrevocable Proxy.
(a)
Upon the occurrence and during the continuance of any Event of Default, the
Bank
shall have also the right to vote all investment property on all questions
after
giving notice to the applicable Debtor of its election to exercise such rights.
In the absence of any such Event of Default, the applicable Debtor shall have
the right to vote all investment property on all questions, provided
that
voting by the applicable Debtor of all investment property shall be in
conformity with performance of the obligations of the applicable Debtor under
the Loan Documents.
(b) Whenever
an Event of Default has occurred and is continuing, the Bank may transfer into
its name, or into the name of its nominee or nominees, any or all of the
investment property and, as provided above, may vote any or all of the
investment property (whether or not so transferred) and may otherwise act with
respect thereto as though it were the outright owner thereof, the Debtors hereby
irrevocably constituting and appointing the Bank as the proxy and
attorney-in-fact of the Debtors, with full power of substitution, to do so.
The
Bank
agrees that unless an Event of Default shall have occurred and be continuing,
such Debtor shall have the exclusive voting power with respect to any securities
constituting Collateral, provided that no vote shall be cast, or consent,
waiver, or ratification given, or action taken by such Debtor that would violate
any provision of the Loan Agreement or any other Loan Document.
(c) Whenever
an Event of Default has occurred and is continuing,
all
proceeds, stock
rights, stock dividends, liquidating dividends, new securities, payments,
distributions and proceeds (including cash dividends and sale proceeds) and
other property to which any Debtor may become entitled by reason of the
ownership of any investment property and other Collateral shall be delivered
(properly endorsed where required hereby or requested by the Bank) to the Bank.
(d) The
Debtors agree that the proxy granted in this Section 5.2 is irrevocable and
coupled with an interest and is and shall be both valid and irrevocable so
long
as the investment property is subject to this Agreement. The Debtors further
acknowledge that the term of said proxy may exceed three years from the date
hereof.
4.3 Special
Remedies Concerning Certain Collateral.
(a) Upon
the
occurrence of any Event of Default, the Debtors shall, if requested to do so
in
writing, and to the extent so requested promptly collect and enforce payment
of
all amounts due the Debtors on account of, in payment of, or in connection
with,
any of the Collateral, hold all payments in the form received by the Debtors
as
trustee for the Bank, without commingling with any funds belonging to the
Debtors, and forthwith deliver all such payments to the Bank with endorsement
to
the Bank's order of any checks or similar instruments.
(b) Upon
the
occurrence of any Event of Default, the Debtors shall, if requested to do so,
and to the extent so requested, notify all Obligors and other persons with
obligations to the Debtors on account of or in connection with any of the
Collateral of the security interest of the Bank in the Collateral and direct
such account debtors and other persons that all payments in connection with
such
obligations and the Collateral be made directly to the Bank. The Bank itself
may, upon the occurrence of an Event of Default, so notify and direct any such
account debtor or other person that such payments are to be made directly to
the
Bank.
(c) Upon
the
occurrence of an Event of Default, for purposes of assisting the Bank in
exercising its rights and remedies provided to it under this Agreement, the
Debtors (i) hereby irrevocably constitute and appoint the Bank its true and
lawful attorney, for and in each Debtor's name, place and stead, to collect,
demand, receive, xxx for, compromise, and give good and sufficient releases
for,
any monies due or to become due on account of, in payment of, or in connection
with the Collateral, (ii) hereby irrevocably authorize the Bank to endorse
the
name of the Debtors, upon any checks, drafts, or similar items which are
received in payment of, or in connection with, any of the Collateral, and to
do
all things necessary in order to reduce the same to money, (iii) with respect
to
any Collateral, hereby irrevocably assent to all extensions or postponements
of
the time of payment thereof or any other indulgence in connection therewith,
to
each substitution, exchange or release of Collateral, to the addition or release
of any party primarily or secondarily liable, to the acceptance of partial
payments thereon and the settlement, compromise or adjustment (including
adjustment of insurance payments) thereof, all in such manner and at such time
or times as the Bank shall deem advisable and (iv) hereby irrevocably authorize
the Bank to notify the post office authorities to change the address for
delivery of the Debtors' mail to an address designated by the Bank, and the
Bank
may receive, open and dispose of all mail addressed to the Debtors.
Notwithstanding any other provisions of this Agreement, it is expressly
understood and agreed that the Bank shall have no duty, and shall not be
obligated in any manner, to make any demand or to make any inquiry as to the
nature or sufficiency of any payments received by it or to present or file
any
claim or take any other action to collect or enforce the payment of any amounts
due or to become due on account of or in connection with any of the
Collateral.
ARTICLE
5
MISCELLANEOUS
5.1 Remedies
Cumulative. No
right or remedy conferred
upon or
reserved to the Bank under any Loan Document is intended to be exclusive of
any
other right or remedy, and every right and remedy shall be cumulative in
addition to every other right or remedy given hereunder or now or hereafter
existing under any applicable law. Every right and remedy of the Bank under
any
Loan Document or under applicable law may be exercised from time to time and
as
often as may be deemed expedient by the Bank. To the extent that it lawfully
may, each Debtor agrees that it will not at any time insist upon, plead, or
in
any manner whatever claim or take any benefit or advantage of any applicable
present or future stay, extension or moratorium law, which may affect observance
or performance of any provisions of any Loan Document; nor will it claim, take
or insist upon any benefit or advantage of any present or future law providing
for the valuation or appraisal of any security for its obligations under any
Loan Document prior to any sale or sales thereof which may be made under or
by
virtue of any instrument governing the same; nor will the Debtors, after any
such sale or sales, claim or exercise any right, under any applicable law to
redeem any portion of such security so sold.
5.2 Conduct
No Waiver. No
waiver of default shall be effective unless in writing executed by the Bank
and
waiver of any default or forbearance on the part of the Bank in enforcing any
of
its rights under this Agreement shall not operate as a waiver of any other
default or of the same default on a future occasion or of such right.
5.3 Governing
Law; Consent to Jurisdiction. This
Security Agreement is a contract made under, and shall be governed by and
construed in accordance with, the law of the State of Michigan applicable to
contracts made and to be performed entirely within such State and without giving
effect to choice of law principles of such State. The Debtors agree that any
legal action or proceeding with respect to this Agreement or the transactions
contemplated hereby may be brought in any court of the State of Michigan, or
in
any court of the United States of America sitting in Michigan, and the Debtors
hereby submit to and accept generally and unconditionally the jurisdiction
of
those courts with respect to their person and property, and irrevocably appoint
its president, at each Debtor's address set forth in the Loan Agreement, as
their agent for service of process and irrevocably consent to the service of
process in connection with any such action or proceeding by personal delivery
to
such agent or to the Debtors or by the mailing thereof by registered or
certified mail, postage prepaid to the Debtors at their address set forth in
the
Loan Agreement. Nothing in this paragraph shall affect the right of the Bank
to
serve process in any other manner permitted by law or limit the right of the
Bank to bring any such action or proceeding against the Debtors or their
property in the courts of any other jurisdiction. The Debtors hereby irrevocably
waive any objection to the laying of venue of any such suit or proceeding in
the
above described courts. The headings of the various subdivisions hereof are
for
convenience of reference only and shall in no way modify any of the terms or
provisions hereof.
5.4 Notices.
All
notices, demands, requests, consents and other communications hereunder shall
be
delivered in the manner described in the Loan Agreement .
5.5 Rights
Not Construed as Duties. The
Bank neither assumes nor shall it have any duty of performance or other
responsibility under any contracts in which the Bank has or obtains a security
interest hereunder. If the Debtors fail to perform any agreement contained
herein, the Bank may but is in no way obligated to itself perform, or cause
performance of, such agreement, and the reasonable expenses of the Bank incurred
in connection therewith shall be payable by the Debtors under Section 6.8.
The
powers conferred on the Bank hereunder are solely to protect its interests
in
the Collateral and shall not impose any duty upon it to exercise any such
powers. Except for the safe custody of any Collateral in its possession and
accounting for monies actually received by it hereunder, the Bank shall have
no
duty as to any Collateral or as to the taking of any necessary steps to preserve
rights against prior parties or any other rights pertaining to any Collateral.
SECURITY
AGREEMENT
-9-
5.6 Amendments. None
of the terms and provisions of this Agreement may be modified or amended in
any
way except by an instrument in writing executed by each of the parties hereto.
5.7 Severability. If
any one or more provisions of this Agreement should be invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of
the
remaining provisions contained herein shall not in any way be affected, impaired
or prejudiced thereby.
5.8
Expenses. (a) The
Debtors will, upon demand, pay to the Bank an amount of any and all reasonable
expenses, including the reasonable fees and disbursements of its counsel and
of
any experts and agents, which the Bank may incur in connection with (i) the
administration of this Agreement, (ii) the custody, preservation, use or
operation of, or the sale of, collection from or other realization upon, any
of
the Collateral, (iii) the exercise or enforcement of any of the rights of the
Bank hereunder or under the other Loan Documents, or (iv) the failure of the
Debtors to perform or observe any of the provisions hereof.
(b)
The
Debtors agree to hold harmless and indemnify the Bank from and against any
and
all claims, losses and liabilities growing out of or resulting from this
Agreement (including, without limitation, enforcement of this Agreement), except
claims, losses or liabilities resulting from the Bank's gross negligence, breach
of this Agreement, or willful misconduct.
5.9 Successors
and Assigns; Termination. This
Security Agreement shall create a continuing, absolute, unconditional and
irrevocable security interest in the Collateral and shall be binding upon the
Debtors, their successors and assigns (including all persons who become bound
as
a Debtor to this Agreement), and inure, together with the rights and remedies
of
the Bank hereunder, to the benefit of the Bank and its successors, transferees
and assigns. Upon the irrevocable payment in full in immediately available
funds
of all of the Secured Liabilities and the termination of all commitments to
lend
and letters of credit outstanding under the Loan Documents, the security
interest granted hereunder shall terminate and all rights to the Collateral
shall revert to the Debtors. Upon a termination of the security interest granted
hereunder, Debtors shall be authorized to file termination statements, including
without limitation UCC-3 termination statements with respect to any and all
filings securing Bank’s interest hereunder.
5.10 Evidence
of Secured Liabilities.
The
Bank's books and records showing the Secured Liabilities shall be admissible
in
any action or proceeding, shall be binding upon each Debtor for the purpose
of
establishing the Secured Liabilities due from the Borrower and shall constitute
prima facie proof, absent manifest error, of the Secured Liabilities of the
Borrower to the Bank.
SECURITY
AGREEMENT
-10-
6.11 Waiver
of Jury Trial. The
Bank, in accepting this Agreement, and the Debtors, after consulting or having
had the opportunity to consult with counsel, knowingly, voluntarily and
intentionally waive any right any of them may have to a trial by jury in any
litigation based upon or arising out of this Agreement or any related instrument
or agreement or any of the transactions contemplated by this Agreement or any
course of conduct, dealing, statements (whether oral or written) or actions
of
any of them. Neither the Bank nor the Debtors shall seek to consolidate, by
counterclaim or otherwise, any such action in which a jury trial has been waived
with any other action in which a jury trial cannot be or has not been waived.
These provisions shall not be deemed to have been modified in any respect or
relinquished by either the Bank or the Debtors except by a written instrument
executed by all of them.
[This
remainder of this page is left blank intentionally.]
SECURITY
AGREEMENT
-11-
IN
WITNESS WHEREOF, the Debtors have caused this Agreement to be duly executed
as
of the day and year first set forth above.
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ADVANCED
PHOTONIX, INC.
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By:
/s/ Xxxxxxx Xxxxx
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Title: CEO
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SILICON
SENSORS, INC.
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By:
/s/ Xxxxxxx Xxxxx
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Title:
CEO
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PICOMETRIX,
LLC
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By:
/s/ Xxxxxxx Xxxxx
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Title:
President
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Accepted
and Agreed:
FIFTH
THIRD BANK, as Bank
By:
/s/Xxxxx
X. Xxxxxxx
Title:
Vice President
SECURITY
AGREEMENT
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