SECURITY AGREEMENT
SECURITY AGREEMENT, dated September 19, 1996, made
by Midland USA, Inc., a Delaware corporation (the "Grantor")
and a wholly-owned subsidiary of Intek Diversified
Corporation, a Delaware corporation ("Intek"), in favor of
Securicor Communications Limited, a company incorporated under
the laws of England and Wales (the "Lender").
W I T N E S S E T H:
WHEREAS, pursuant to that certain Loan Agreement
dated as of September 19, 1996 between Borrower and Lender (as
the same may from time to time be amended, modified or
supplemented, the "Loan Agreement"), Lender has agreed to make
Revolving Credit Advances as defined in the Loan Agreement;
and
WHEREAS, Lender is willing to make the Revolving
Credit Advances but only upon the condition, among others,
that Grantor shall have executed and delivered to Lender this
Security Agreement.
NOW, THEREFORE, in consideration of the premises and
of the mutual covenants herein contained and for other good
and valuable consideration, the receipt of which is hereby
acknowledged, the parties hereto agree as follows:
1. DEFINED TERMS. As used in this Agreement, terms
defined in the Loan Agreement are used herein as therein
defined, and the following terms have the meanings specified
below (such meanings being equally applicable to both the
singular and plural forms of the terms defined):
"ACCOUNT" means any "account," as such term is
defined in Section 9-106 of the UCC, now owned or hereafter
acquired by the Grantor and, in any event, includes, without
limitation, (i) all accounts receivable, book debts and other
forms of obligations (other than forms of obligations
evidenced by Chattel Paper, Documents or Instruments) now
owned or hereafter received or acquired by or belonging or
owing to the Grantor (including, without limitation, under any
trade name, style or division thereof) whether arising out of
goods sold or services rendered by the Grantor or from any
other transaction, whether or not the same involves the sale
of goods or services by the Grantor (including, without
limitation, any such obligation which might be characterized
as an account or contract right under the UCC), (ii) all of
the Grantor's rights in, to and under all purchase orders or
receipts now owned or hereafter acquired by it for goods or
services, and all of the Grantor's rights to any goods
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represented by any of the foregoing (including, without
limitation, unpaid seller's rights of rescission, replevin,
reclamation and stoppage in transit and rights to returned,
reclaimed or repossessed goods), (iii) all moneys due or to
become due to the Grantor under all contracts for the sale of
goods or the performance of services or both by the Grantor
(whether or not yet earned by performance on the part of the
Grantor or in connection with any other transaction), now in
existence or hereafter occurring, including, without
limitation, the right to receive the proceeds of said purchase
orders and contracts, and (iv) all collateral security and
guarantees of any kind given by any Person with respect to any
of the foregoing.
"ACCOUNT DEBTOR" means any "account debtor," as
such term is defined in Section 9-105(1)(a) of the UCC.
"BLOCKED ACCOUNT #1" means account #
010161070176 at Xxxxxxx'x First National Bank of Kansas City,
00 Xxxx 00xx Xxxxxx, Xxxxxx Xxxx, XX 00000.
"BLOCKED ACCOUNT #2" means account #
010161070184 at Xxxxxxx'x First National Bank of Kansas City,
00 Xxxx 00xx Xxxxxx, Xxxxxx Xxxx, XX 00000.
"BLOCKED ACCOUNTS" means the blocked accounts
maintained by the Grantor with the Blocked Account Bank, all
monies, instruments and other property deposited therein and
all certificates and instruments, if any, representing or
evidencing such Blocked Accounts.
"BLOCKED ACCOUNT BANK" means a financial
institution selected or approved by the Lender and with
respect to which the Grantor has delivered to the Lender an
executed Blocked Account Letter.
"BLOCKED ACCOUNT LETTER" means a letter,
substantially in the form of Annex I hereto (with such changes
as may be agreed to by the Lender), executed by the Grantor
and the Lender and acknowledged and agreed to by a Blocked
Account Bank.
"CASH COLLATERAL ACCOUNT" has the meaning
specified in Section 5(s).
"CHATTEL PAPER" means any "chattel paper," as
such term is defined in Section 9-105(1)(b) of the UCC, now
owned or hereafter acquired by the Grantor.
"COLLATERAL" has the meaning assigned to it in
Section 2 of this Agreement.
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"CONTRACTS" means all contracts, undertakings
or other agreements (other than Chattel Paper, Documents or
Instruments) in or under which the Grantor may now or
hereafter have any right, title or interest, including,
without limitation, with respect to an Account, any agreement
relating to the terms of payment or the terms of performance
thereof.
"COPYRIGHTS" means copyrights, registrations
and applications therefor, and any and all (i) renewals and
extensions thereof, (ii) income, royalties, damages and
payments now and hereafter due or payable or both with respect
thereto, including, without limitation, damages and payments
for past or future infringements or misappropriations thereof,
(iii) rights to xxx for past, present and future infringements
or misappropriations thereof, and (iv) all other rights
corresponding thereto throughout the world.
"DOCUMENTS" means any "document," as such term
is defined in Section 9-105(1)(f) of the UCC, now owned or
hereafter acquired by the Grantor.
"EQUIPMENT" means any "equipment," as such term
is defined in Section 9-109(2) of the UCC, now owned or here
after acquired by the Grantor and, in any event, includes,
without limitation, all machinery, equipment, furnishings,
fixtures, vehicles, computers and other electronic
data-processing and office equipment now owned or hereafter
acquired by the Grantor and any and all additions,
substitutions and replacements of any of the foregoing,
wherever located, together with all attachments, components,
parts, equipment and accessories installed thereon or affixed
thereto.
"GENERAL INTANGIBLES" means any "general
intangibles," as such term is defined in Section 9-106 of the
UCC, now owned or hereafter acquired by the Grantor and, in
any event, includes, without limitation, all customer lists,
Trademarks, Patents, rights in Intellectual Property
Collateral, Licenses, permits, Copyrights, Trade Secrets,
proprietary or confidential information, inventions (whether
patented or patentable or not) and technical information,
procedures, designs, knowledge, know-how, software, data
bases, data, skill, expertise, experience, processes, models,
drawings, materials and records, goodwill, rights of
indemnification and all right, title and interest which the
Grantor may now or hereafter have in or under any Contract,
now owned or hereafter acquired by the Grantor.
"GOVERNMENTAL AUTHORITY" means any nation or
government, any state or other political subdivision thereof
and any entity exercising executive, legislative, judicial,
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regulatory or administrative functions of or pertaining to
government.
"INSTRUMENT" means any "instrument," as such
term is defined in Section 9-105(1)(i) of the UCC, now owned
or hereafter acquired by the Grantor, other than instruments
that constitute, or are a part of a group of writings that
constitute, Chattel Paper.
"INTELLECTUAL PROPERTY COLLATERAL" means:
(a) All Trademarks of the Grantor, including,
without limitation, the Trademarks listed on Schedule III
hereto;
(b) all Copyrights of the Grantor, including,
without limitation, the Copyrights listed on Schedule IV
hereto;
(c) all Licenses of the Grantor, including,
without limitation, the Licenses listed on Schedule V hereto;
(d) all Patents of the Grantor, including,
without limitation, the Patents listed on Schedule VI hereto;
(e) all Trade Secrets of the Grantor; and
(f) the entire goodwill of the Grantor's
business connected with the use of and symbolized by the
Trademarks.
"INVENTORY" means any "inventory," as such term
is defined in Section 9-109(4) of the UCC, now owned or here
after acquired by the Grantor, and wherever located, and, in
any event, includes, without limitation, all inventory,
merchandise, goods and other personal property now owned or
hereafter acquired by the Grantor which are held for sale or
lease or are furnished or are to be furnished under a contract
of service or which constitute raw materials, work in process
or materials used or consumed or to be used or consumed in the
Grantor's business, or the processing, packaging, delivery or
shipping of the same, and all finished goods.
"LENDER" has the meaning assigned to in the
recitals and in any event refers to Securicor Communications
Limited in its capacity as Lender.
"LICENSES" means license agreements in which
the Grantor grants or receives a grant of any interest in
Copyrights, Trademarks, Patents and Trade Secrets (all as
defined herein) and other intellectual property and any and
all (i) renewals, extensions, supplements, amendments and
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continuations thereof, (ii) income, royalties, damages and
payments now and hereafter due or payable to the Grantor with
respect thereto, including, without limitation, damages and
payments for past, present and future violations or
infringements or misappropriations thereof, and (iii) rights
to xxx for past, present and future violations or
infringements or misappropriations thereof.
"OBLIGOR" has the meaning assigned to it in
Section 5(s)(iii) of this Agreement.
"PATENTS" means patents and patent applications
along with any and all (i) inventions and improvements
described and claimed therein, (ii) reissues, divisions,
continuations, renewals, extensions and continuations-in-part
thereof, (iii) income, royalties, damages and payments now and
hereafter due and/or payable to the Grantor with respect
thereto, including, without limitation, damages and payments
for past or future infringements or misappropriations thereof,
(iv) rights to xxx for past, present and future infringements
or misappropriations thereof, and (v) all other rights
corresponding thereto throughout the world.
"PERMITTED LIENS" means Liens permitted by
Section 7.8 of the Loan Agreement existing as of the date
hereof or to be created hereafter.
"PROCEEDS" means "proceeds," as such term is
defined in Section 9-306(1) of the UCC, and, in any event,
shall include, without limitation, (i) any and all proceeds of
any insurance, indemnity, warranty or guaranty payable to the
Grantor from time to time with respect to any of the
Collateral, (ii) any and all payments (in any form whatsoever)
made or due and payable to the Grantor from time to time in
connection with any requisition, confiscation, condemnation,
seizure or forfeiture of all or any part of the Collateral by
any Governmental Authority (or any Person acting under color
of Governmental Authority), and (iii) any and all other
amounts from time to time paid or payable under or in
connection with any of the Collateral.
"SECURED OBLIGATIONS" means (i) all of the
unpaid principal amount of, and accrued interest on, the Note,
(ii) the Extension Fee, and all other fees owing by the
Grantor under the Loan Agreement to the Lender and (iii) all
other Indebtedness, liabilities and obligations of the Grantor
to the Lender, whether now existing or hereafter incurred, and
whether created under, arising out of or in connection with
the Loan Agreement, this Security Agreement, any of the other
Loan Documents or otherwise.
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"TRADE SECRETS" means trade secrets, along with
any and all (i) income, royalties, damages and payments now
and hereafter due and/or payable to the Grantor with respect
thereto, including, without limitation, damages and payments
for past, present and future infringements or
misappropriations thereof, (ii) rights to xxx for past,
present and future infringements or misappropriations thereof,
and (iii) all other rights corresponding thereto throughout
the world.
"TRADEMARKS" means trademarks including service
marks and trade names, whether registered or at common law,
registrations and applications therefor, and the entire
product lines and goodwill of Grantor's business connected
therewith and symbolized thereby, together with any and all
(i) renewals thereof, (ii) income, royalties, damages and
payments now and hereafter due or payable or both with respect
thereto, including, without limitation, damages and payments
for past, present and future infringements or
misappropriations thereof, (iii) rights to xxx for past,
present and future infringements or misappropriations thereof,
and (iv) all other rights corresponding thereto throughout the
world.
"UCC" means the Uniform Commercial Code as the
same may, from time to time, be in effect in the State of New
York; PROVIDED, HOWEVER, in the event that, by reason of
mandatory provisions of law, any or all of the attachment,
perfection or priority of the Lender's security interest in
any Collateral is governed by the Uniform Commercial Code as
in effect in a jurisdiction other than the State of New York,
the term "UCC" shall mean the Uniform Commercial Code as in
effect in such other jurisdiction for purposes of the
provisions hereof relating to such attachment, perfection or
priority and for purposes of definitions related to such
provisions.
2. GRANT OF SECURITY INTEREST.
(a) As collateral security for the full and prompt
payment when due (whether at stated maturity, by acceleration
or otherwise) of, and the performance of, all the Secured
Obligations and to induce the Lender to make the Revolving
Credit Advances available pursuant to the Loan Agreement, the
Grantor hereby assigns, conveys, mortgages, pledges,
hypothecates and transfers to the Lender, and hereby grants to
the Lender, a security interest in, all of the Grantor's
right, title and interest in, to and under the following (all
of which being hereinafter collectively called the
"Collateral"):
(i) all Accounts;
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(ii) all Chattel Paper;
(iii) all Contracts and any and all claims
of the Grantor for damages arising out of or for breach of or
a default under any Contract and the right of the Grantor to
perform or to compel performance under any Contract and to
exercise all remedies thereunder;
(iv) all Documents;
(v) all Equipment;
(vi) all General Intangibles;
(vii) all Instruments;
(viii) all Inventory;
(ix) all present and future Blocked
Accounts and all funds, certificates and instruments, if any,
from time to time held in or representing or evidencing such
Blocked Accounts PROVIDED, HOWEVER, the foregoing grant with
respect to Blocked Account #1 shall not be effective until the
30th day following the date hereof;
(x) all other goods and personal property
of the Grantor whether tangible or intangible or whether now
owned or hereafter acquired by the Grantor and wherever
located; and
(xi) to the extent not otherwise included,
all Proceeds of each of the foregoing and all accessions to,
substitutions and replacements for, and rents, profits and
products of, each of the foregoing.
(b) In addition, as collateral security for the
prompt and complete payment when due of the Secured Obliga
tions, the Lender is hereby granted a lien and security
interest in all property of the Grantor held by the Lender
including, without limitation, all property of every
description, now or hereafter in the possession or custody of
or in transit to the Lender for any purpose, including
safekeeping, collection or pledge, for the account of the
Grantor, or as to which the Grantor may have any right or
power.
3. RIGHTS OF THE LENDER; LIMITATIONS ON LENDER'S
OBLIGATIONS.
(a) It is expressly agreed by the Grantor that,
anything herein to the contrary notwithstanding, the Grantor
shall remain liable under each of the Contracts and Licenses
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to observe and perform all the conditions and obligations to
be observed and performed by it thereunder and the Grantor
shall perform all of its duties and obligations thereunder,
all in accordance with and pursuant to the terms and
provisions of each such Contract and License. The Lender
shall not have any obligation or liability under any Contract
or License by reason of or arising out of this Agreement or
the granting of a security interest in any contract to the
Lender or by reason of the receipt by the Lender of any
payment relating to any Contract or License pursuant hereto,
nor shall the Lender be required or obligated in any manner to
perform or fulfill any of the obligations of the Grantor under
or pursuant to any Contract or License, or to make any
payment, or to make any inquiry as to the nature or the
sufficiency of any payment received by it or the sufficiency
of any performance by any party under any Contract or License,
or to present or file any claim, or to take any action to
collect or enforce any performance or the payment of any
amounts which may have been assigned to it or to which it may
be entitled at any time or times.
(b) The Lender authorizes the Grantor to collect
its Accounts, Chattel Paper and Instruments, provided that
such collection is performed in a prudent and businesslike
manner, and the Lender may, upon the occurrence and during the
continuance of any Event of Default and without notice, limit
or terminate said authority at any time. If required by the
Lender at any time during the continuance of any Event of
Default, any Proceeds, when first collected by the Grantor,
received in payment of any such Account or in payment for any
of its Inventory or on account of any of its Contracts, shall
be promptly deposited by the Grantor in precisely the form
received (with all necessary indorsements) in a special bank
account maintained by the Lender and subject to withdrawal
only by the Lender, as hereinafter provided, and until so
turned over shall be deemed to be held in trust by the Grantor
for and as the Lender's property and shall not be commingled
with the Grantor's other funds or properties. Such Proceeds,
when deposited, shall continue to be collateral security for
all of the Secured Obligations and shall not constitute
payment thereof until applied as hereinafter provided. The
Lender shall apply all or a part of the funds on deposit in
said special account to the principal of or interest on or
both in respect of any of the Secured Obligations in
accordance with the provisions of Section 8(d) hereof and any
part of such funds which the Lender elects not so to apply and
deem not required as collateral security for the Secured
Obligations shall be paid over from time to time by the Lender
to the Grantor. If an Event of Default has occurred and is
continuing, at the request of the Lender the Grantor shall
deliver to the Lender all original and other documents
evidencing, and relating to, the sale and delivery of such
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Inventory or the performance of labor or service which created
such Accounts, including, without limitation, all original
orders, invoices and shipping receipts; and, prior to the
occurrence of an Event of Default the Grantor shall deliver
photocopies thereof to the Lender at its request.
(c) The Lender may at any time, upon the occurrence
and during the continuance of any Default or Event of Default,
after first notifying the Grantor of its intention to do so,
notify Account Debtors of the Grantor, parties to Contracts of
the Grantor, obligors of Instruments of the Grantor and
obligors in respect of Chattel Paper of the Grantor that the
Accounts and the right, title and interest of the Grantor in
and under such Contracts, such Instruments and such Chattel
Paper have been assigned to the Lender and that payments shall
be made directly to the Lender. Upon the request of the
Lender, the Grantor will so notify such Account Debtors,
parties to such Contracts, obligors of such Instruments and
obligors in respect of such Chattel Paper. Upon the
occurrence and during the continuance of an Event of Default,
the Lender may in its own name or in the name of others
communicate with such Account Debtors, parties to such
Contracts, obligors of such Instruments and obligors in
respect of such Chattel Paper to verify with such Persons to
the Lender's satisfaction the existence, amount and terms of
any such Accounts, Contracts, Instruments or Chattel Paper.
(d) Upon reasonable prior notice to the Grantor
(unless a Default or Event of Default has occurred and is
continuing, in which case no notice is necessary), the Lender
shall have the right to make test verifications of the
Accounts and physical verifications of the Inventory in any
manner and through any medium that it considers advisable, and
the Grantor agrees to furnish all such assistance and
information as the Lender may require in connection therewith.
The Grantor, at its own cost and expense, will cause certified
independent public accountants satisfactory to the Lender to
prepare and deliver to the Lender, at any time and from time
to time promptly upon the Lender's request, the following
reports: (i) a reconciliation of all its Accounts, (ii) an
aging of all its Accounts, (iii) trial balances, and (iv) a
test verification of such Accounts as the Lender may request.
The Grantor at its expense will cause certified independent
public accountants satisfactory to the Lender to prepare and
deliver to the Lender the results of the annual physical
verification of its Inventory made or observed by such
accountants.
(e) Notwithstanding anything to the contrary con
tained herein, unless an Event of Default has occurred and is
continuing, the Grantor may continue to exploit, license,
franchise, use, enjoy and protect (whether in the United
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States of America or any foreign jurisdiction) the
Intellectual Property Collateral in the ordinary course of
business and the Lender shall from time to time execute and
deliver, upon written request of Grantor and at Grantor's sole
cost and expense, any and all instruments, certificates or
other documents, in the form so requested, necessary or
appropriate in the judgment of Grantor to enable Grantor to do
so.
(f) In order to more fully protect the Intellectual
Property Collateral in respect of which security interests
have been granted to the Lender by the Grantor hereunder, the
Grantor shall hereafter transfer to the Lender such additional
rights, privileges, marks and licenses as Lender or Grantor
may in its discretion determine to be necessary and
appropriate to the continuing exploitation, licensing, use,
enjoyment and protection (whether in the United States of
America or any foreign jurisdiction) of the Intellectual
Property Collateral.
(g) The Grantor shall have the duty to preserve and
maintain all rights in the Intellectual Property Collateral in
respect of which a failure to be able to continue to use the
same would have a Material Adverse Effect in a manner
substantially consistent with its present practices. The
Grantor shall take all action reasonably requested by the
Lender to register, record and/or perfect the Lender's rights
hereunder. Such duties shall include, but not be limited to,
the following:
(i) The Grantor shall take appropriate action
at its expense to halt the infringement of any of the
Intellectual Property Collateral if such infringement would
have a Material Adverse Effect on the value of the
Intellectual Property Collateral or the Grantor's ability to
use the Intellectual Property Collateral;
(ii) The Grantor shall not amend, modify,
terminate or waive any provisions of any other contract to
which the Grantor is a party in any manner which might have a
Material Adverse Effect upon the Intellectual Property
Collateral.
4. REPRESENTATIONS AND WARRANTIES. The Grantor
hereby represents and warrants to the Secured Parties as
follows:
(a) The Grantor is a corporation duly incorporated,
validly existing and in good standing under the laws of
Delaware.
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(b) The execution, delivery and performance by the
Grantor of this Agreement are within the Grantor's corporate
powers, have been duly authorized by all necessary corporate
action, do not contravene the Grantor's certificate of
incorporation or by-laws, any requirement of law or any order
or decree of any court, or any contractual obligation of the
Grantor, and do not result in or require the creation of any
Lien (other than pursuant to the Loan Agreement) upon or with
respect to any of its properties.
(c) No consent, authorization, approval or other
action by, and no notice to or filing with, any Governmental
Authority is required for the due execution, delivery and
performance by the Grantor of this Agreement.
(d) This Agreement has been duly executed and
delivered by the Grantor and is the legal, valid and binding
obligation of the Grantor, enforceable against the Grantor in
accordance with its terms except that enforceability hereof
may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium and other similar laws affecting
the enforcement of creditors' rights generally and except that
the availability of the equitable remedy of specific
performance or injunctive relief is subject to the discretion
of the court before which any proceedings may be brought.
(e) There are no pending or threatened actions,
investigations or proceeding affecting the Grantor before any
court, Governmental Authority or arbitrator other than those
that in the aggregate, if adversely determined, would have no
Material Adverse Effect.
(f) The Grantor is the sole owner of each item of
the Collateral in which it purports to grant a security
interest hereunder, having good title thereto, free and clear
of any and all Liens, except for the security interest granted
pursuant to this Agreement and other Permitted Liens. No
material amounts payable under or in connection with any of
its Accounts or Contracts are evidenced by Instruments which
have not been delivered to the Lender.
(g) No effective security agreement, financing
statement, equivalent security or lien instrument or
continuation statement covering all or any part of the
Collateral is on file or of record in any public office,
except such as may have been filed by the Grantor in favor of
the Lender pursuant to this Agreement or such as relate to
other Permitted Liens.
(h) Appropriate financing statements having been
filed in the jurisdictions listed on Schedule I hereto, this
Agreement is effective to create a valid and continuing first
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priority Lien on the Collateral, prior to all other Liens
except Permitted Liens. All action necessary or desirable to
protect and perfect such security interest in each item of the
Collateral has been duly taken.
(i) The Grantor's principal place of business and
the place where its records concerning the Collateral are kept
and the location of its Inventory and Equipment are set forth
on Schedule II hereto.
(j) The amount represented by the Grantor to the
Lender from time to time as owing by each Account Debtor or by
all Account Debtors in respect of the Accounts of the Grantor
will at such time be the correct amount actually and
unconditionally owing by such Account Debtors thereunder.
(k) With respect to the Intellectual Property
Collateral:
(i) The Trademarks and the Copyrights,
Licenses, Patents and Trade Secrets are subsisting and have
not been adjudged invalid or unenforceable, in whole or in
part;
(ii) The Grantor has the full right, power
and authority to grant all of the right, title and interest
herein granted;
(iii) The Grantor has not previously
assigned, transferred, conveyed or otherwise encumbered such
right, title and interest;
(iv) The Grantor is the sole and exclusive
owner of the Intellectual Property Collateral, all of which is
free and clear of any Liens, charges and encumbrances, and no
other person or entity has any claim with respect to the
Intellectual Property Collateral whatsoever;
(v) The Intellectual Property Collateral
is sufficient for the purpose of producing goods, performing
services and otherwise carrying on the business of the
Grantor;
(vi) Schedules III, IV, V and VI attached
hereto list all Trademarks, Copyrights and Licenses and
Patents related to the Intellectual Property Collateral;
(vii) To the best of the Grantor's
knowledge, the Intellectual Property Collateral does not
infringe any rights owned or possessed by any third party
except such infringements as could not have a Material Adverse
Effect;
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(viii) There are no claims, judgments or
settlements to be paid by the Grantor or pending claims or
litigation relating to the Intellectual Property Collateral;
(ix) No effective security agreement,
financing statement, equivalent security or lien instrument or
continuation statement covering all or any part of the
Intellectual Property Collateral is on file or of record in
any public office, except such as may have been filed by the
Grantor in favor of the Lender pursuant to this Agreement or
such as relate to other Permitted Liens; and
(x) All appropriate filings have been
made with the United States Patent and Trademark Office and
the United States Copyright Office and any appropriate filing
offices located in foreign countries, and this Agreement is
effective to create a valid and continuing first priority lien
on and first priority security interest in the Intellectual
Property Collateral in favor of the Lender. All action
necessary or desirable to protect and create such security
interest in each item of the Intellectual Property Collateral
has been duly taken.
(l) The Grantor has no trade names, fictitious
names or other names except its legal name, and does not
operate in any jurisdiction under, and, except as set forth on
Schedule II hereto, has not had or operated in any
jurisdiction within the five-year period preceding the date
hereof under, any trade name, fictitious name or other name
other than its legal name.
5. COVENANTS AND BLOCKED ACCOUNTS. The Grantor
covenants and agrees with the Lender that from and after the
date of this Agreement and so long as the Loan Agreement is
in effect or any Secured Obligations are outstanding:
(a) FURTHER DOCUMENTATION; PLEDGE OF INSTRUMENTS.
At any time and from time to time, upon the written request of
the Lender, and at the sole expense of the Grantor, the
Grantor will promptly and duly execute and deliver any and all
such further instruments and documents and take such further
action as the Lender may reasonably deem desirable to obtain
the full benefits of this Agreement and of the rights and
powers herein granted, including, without limitation, using
its best efforts to secure all consents and approvals neces
sary or appropriate for the assignment to the Lender of any
Contract held by the Grantor or in which the Grantor has any
rights not heretofore assigned, the filing of any financing or
continuation statements under the UCC with respect to the
Liens and security interests granted hereby, transferring
Collateral to the Lender's possession (if a security interest
in such Collateral can be perfected by possession) and placing
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the interest of the Lender as lienholder on the certificate of
title of any vehicle. The Grantor also hereby authorizes the
Lender to file any such financing or continuation statement
without the signature of the Grantor to the extent permitted
by applicable law. If any of the Collateral shall be or
become evidenced by any Instrument, the Grantor agrees to
pledge such Instrument to the Lender and shall duly endorse
such Instrument in a manner satisfactory to the Lender and
deliver the same to the Lender.
(b) MAINTENANCE OF RECORDS. The Grantor will keep
and maintain at its own cost and expense satisfactory and
complete records of the Collateral, including, without
limitation, a record of all payments received and all credits
granted with respect to the Collateral and all other dealings
with the Collateral. The Grantor will xxxx its books and
records pertaining to the Collateral to evidence this
Agreement and the Lien and security interests granted hereby.
All Chattel Paper will be marked with the following legend:
"This writing and the obligations evidenced or secured hereby
are subject to the security interest of Securicor
Communications Limited, as the Lender". If requested by the
Lender, the security interest of the Lender shall be noted on
the certificate of title of each vehicle. For the Lender's
further security, the Grantor agrees that the Lender shall
have a special property interest in all of the Grantor's books
and records pertaining to the Collateral and, upon the
occurrence and during the continuance of any Event of Default,
the Grantor shall deliver and turn over any such books and
records to the Lender or to its representatives at any time on
demand of the Lender. Prior to the occurrence of an Event of
Default and upon reasonable notice from the Lender, the
Grantor shall permit any representative of the Lender to
inspect such books and records and will provide photocopies
thereof to the Lender.
(c) INDEMNIFICATION. In any suit, proceeding or
action brought by the Lender relating to any Account, Chattel
Paper, Contract, General Intangible or Instrument for any sum
owing thereunder, or to enforce any provision of any Account,
Chattel Paper, Contract, General Intangible or Instrument, the
Grantor will save, indemnify and keep the Lender harmless from
and against all expense, loss or damage suffered by reason of
any defense, set-off, counterclaim, recoupment or reduction of
liability whatsoever of the obligor thereunder, arising out of
a breach by the Grantor of any obligation thereunder or
arising out of any other agreement, Indebtedness or liability
at any time owing to, or in favor of, such obligor or its
successors from the Grantor, and all such obligations of the
Grantor shall be and remain enforceable against and only
against the Grantor and shall not be enforceable against the
Lender.
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(d) COMPLIANCE WITH LAWS, ETC. The Grantor will
comply, in all material respects, with all acts, rules,
regulations, orders, decrees and directions of any
Governmental Authority, applicable to the Collateral or any
part thereof or to the operation of the Grantor's business;
PROVIDED, HOWEVER, that the Grantor may contest any act,
regulation, order, decree or direction in any reasonable
manner which shall not, in the sole opinion of the Lender,
adversely affect the Lender's rights hereunder or adversely
affect the first priority of its Lien on and security interest
in the Collateral.
(e) PAYMENT OF OBLIGATIONS. The Grantor will pay
promptly when due all taxes, assessments and governmental
charges or levies imposed upon the Collateral or in respect of
its income or profits therefrom and all claims of any kind
(including, without limitation, claims for labor, materials
and supplies), except that no such charge need be paid if (i)
such non-payment does not involve any danger of the sale,
forfeiture or loss of any of the Collateral or any interest
therein, and (ii) such charge is adequately reserved against
in accordance with and to the extent required by GAAP.
(f) COMPLIANCE WITH TERMS OF ACCOUNTS, ETC. In all
material respects, the Grantor will comply with and perform
all obligations, covenants, conditions and agreements with
respect to any Account, Chattel Paper, Contract, License and
all other agreements to which it is a party or by which it is
bound.
(g) LIMITATION ON LIENS ON COLLATERAL. The Grantor
will not create, permit or suffer to exist, and will defend
the Collateral against and take such other action as is
necessary to remove, any Lien on the Collateral except
Permitted Liens, and will defend the right, title and interest
of the Lender in and to any of the Grantor's rights under the
Chattel Paper, Contracts, Documents, General Intangibles and
Instruments and to the Equipment and Inventory and in and to
the Proceeds thereof against the claims and demands of all
Persons whomsoever.
(h) LIMITATIONS ON MODIFICATIONS OF ACCOUNTS. Upon
the occurrence and during the continuance of any Default or
Event of Default, the Grantor will not, without the Lender's
prior written consent, grant any extension of the time of
payment of any of the Accounts, Chattel Paper or Instruments,
or compromise, compound or settle the same for less than the
full amount thereof, or release, wholly or partly, any Person
liable for the payment thereof, or allow any credit or
discount whatsoever thereon.
15
(i) MAINTENANCE OF INSURANCE. The Grantor will
maintain, with financially sound and reputable companies,
insurance policies (i) insuring its Inventory and Equipment
against loss by fire, explosion, theft and such other casu
alties as are usually insured against by companies engaged in
the same or similar businesses and (ii) insuring the Grantor
and the Lender against liability for personal injury and
property damage relating to such Inventory and Equipment, such
policies to be in such amounts and against at least such
risks as are usually insured against in the same general area
by companies engaged in the same or a similar business, naming
the Lender as an additional insured with a lender loss payable
clause in favor of the Lender. All insurance with respect to
the Inventory and Equipment shall (i) contain a clause which
provides that the Lender's interest under the policy will not
be invalidated by any act or omission of, or any breach of
warranty by, the insured, or by any change in the title,
ownership or possession of the insured property, or by the use
of the property for purposes more hazardous than is permitted
in the policy, and (ii) provide that no cancellation,
reduction in amount or change in coverage thereof shall be
effective until at least ten days after receipt by the Lender
of written notice thereof.
(j) LIMITATIONS ON DISPOSITION. The Grantor will
not sell, lease, transfer or otherwise dispose of any of the
Collateral, or attempt or contract to do so, except as
permitted by the Loan Agreement.
(k) FURTHER IDENTIFICATION OF COLLATERAL. The
Grantor will, if so requested by the Lender, furnish to the
Lender, as often as the Lender reasonably requests, statements
and schedules further identifying and describing the
Collateral and such other reports in connection with the
Collateral as the Lender may reasonably request, all in
reasonable detail.
(l) NOTICES. The Grantor will advise the Lender
promptly, in reasonable detail, (i) of any material Lien or
claim made or asserted against any of the Collateral, (ii) of
any material change in the composition of the Collateral, and
(iii) of the occurrence of any other event which would have a
Material Adverse Effect on the aggregate value of the
Collateral or in the security interests created hereunder.
(m) RIGHT OF INSPECTION. Upon reasonable notice to
the Grantor (unless a Default or an Event of Default has
occurred and is continuing, in which case no notice is
necessary), the Lender shall at all times have full and free
access during normal business hours to all the books and
records and correspondence of the Grantor, and the Lender or
its representatives may examine the same, take extracts
16
therefrom and make photocopies thereof, and the Grantor agrees
to render to the Lender, at the Grantor's cost and expense,
such clerical and other assistance as may be reasonably
requested with regard thereto. Upon reasonable notice to the
Grantor (unless a Default or an Event of Default has occurred
and is continuing, in which case no notice is necessary), the
Lender and its representatives shall also have the right to
enter into and upon any premises where any of the Equipment or
Inventory is located for the purpose of inspecting the same,
observing its use or otherwise protecting its interests
therein.
(n) MAINTENANCE OF EQUIPMENT. The Grantor will
keep and maintain the Equipment in good operating condition
sufficient for the continuation of the business conducted by
the Grantor on a basis consistent with past practices, and the
Grantor will provide all maintenance and service and all
repairs necessary for such purpose.
(o) CONTINUOUS PERFECTION. The Grantor will not
change its name, identity or corporate structure in any manner
which might make any financing or continuation statement filed
in connection herewith seriously misleading within the meaning
of Section 9-402(7) of the UCC (or any other then applicable
provision of the UCC) unless the Grantor shall have given the
Lender at least 30 days' prior written notice thereof and
shall have taken all action (or made arrangements to take such
action substantially simultaneously with such change if it is
impossible to take such action in advance) necessary or
reasonably requested by the Lender to amend such financing
statement or continuation statement so that it is not
seriously misleading. The Grantor will not change its
principal place of business or remove its records or change
the location of its Inventory and Equipment, each as set forth
on Schedule II hereto, unless it gives the Lender at least 30
days' prior written notice thereof and has taken such action
as is necessary to cause the security interest of the Lender
in the Collateral to continue to be perfected.
(p) TAXES. The Grantor will pay promptly when due
all taxes, assessments and governmental charges or levies
imposed upon the Intellectual Property Collateral or in
respect of its income or profits therefrom and all claims of
any kind, except that no such charge need be paid if (i) such
non-payment does not involve any danger of forfeiture or loss
of any of the Intellectual Property Collateral or any interest
therein and (ii) such charge is adequately reserved against in
accordance with and to the extent required by GAAP.
(q) MAINTENANCE OF RECORDS. The Grantor will keep
and maintain at its own cost and expense satisfactory and
complete records of the Intellectual Property Collateral,
17
including, without limitation, a record of all payments
received and all credits granted with respect to the
Intellectual Property Collateral and all other dealings with
the Intellectual Property Collateral. The Grantor will xxxx
its books and records pertaining to the Intellectual Property
Collateral to evidence this Agreement and the security
interests granted hereby. For the Lender's further security,
the Grantor agrees that the Lender shall have a special
property interest in all of the Grantor's books and records
pertaining to the Intellectual Property Collateral and, upon
the occurrence and during the continuation of any Event of
Default, the Grantor shall deliver and turn over any such
books and records to the Lender or its representatives at any
time on demand of the Lender. Prior to the occurrence of an
Event of Default and upon reasonable notice from the Lender,
the Grantor shall permit any representative of the Lender to
inspect such books and records as set forth in Section 12.
(r) NEW INTELLECTUAL PROPERTY. In the event, prior
to the time the Secured Obligations have been indefeasibly
paid in full, the Grantor shall (i) obtain any rights to or
interests in any new inventions whether or not patentable,
patents, patent applications or any reissue, divisions,
continuations, renewals, extensions, or continuations-in-part
of any patent or improvement of any patent, trademarks, trade
names, service marks, and registrations or applications
therefor, copyrights and registrations or applications
therefor, or licenses, or (ii) become entitled to the benefit
of any patent, copyright or trademark, or any registrations or
applications therefor, license, license renewal, trade secret
or copyright renewal, the provisions of this Agreement shall
automatically apply thereto and anything enumerated in clause
(i) or (ii) of this Section 5 shall constitute Intellectual
Property Collateral. The Grantor agrees, promptly following
the written request by the Lender, to amend this Agreement by
amending any or all of Schedules III, IV, V and VI, as
applicable, to include any such future trademarks, trademark
registrations, trademark applications, trade names, service
marks, copyrights and licenses which would be Intellectual
Property Collateral, and to immediately prepare, execute and
record with all appropriate foreign country, Federal, state
and/or local offices and authorities a Security Agreement for
any such new Intellectual Property Collateral, in form and
substance similar to this Agreement, and to deliver to the
Lender reasonable proof of such recordation.
(s) THE BLOCKED ACCOUNTS.
(i) The Grantor hereby transfers to the
Lender the exclusive dominion and control of Blocked Account
#2 effective the date hereof and Blocked Account #1 effective
on the 30th day following the date hereof.
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(ii) The Grantor agrees and covenants that
all Proceeds of Accounts shall be deposited into Blocked
Account #1 in accordance with the provisions of Section 3.5 of
the Asset and Trademark Agreement (and thereafter all or a
portion of such proceeds shall be transferred into Blocked
Account #2 in accordance with the terms thereof) and all other
cash and Proceeds of all other Collateral shall be deposited
directly into Blocked Account #2.
(iii) The Grantor shall cause each Person
obliged to make payments to the Grantor for any reason (each
such Person being an "Obligor" of the Grantor) to make all
payments, or to continue to make all payments, as the case may
be, with respect to all Collateral, to Blocked Account #1 and,
in any event the Borrower shall cause any payments received by
the Borrower or any other Person from any Obligor to be
deposited immediately upon receipt into such Blocked Account
#1.
(iv) In the event the Grantor or any
Blocked Account Bank shall, after the date hereof, terminate
the agreement with respect to the maintenance of a Blocked
Account for any reason, or if the Lender shall demand such
termination as a result of the failure of the Blocked Account
Bank to comply with any of the terms of the Blocked Account
Letter, or there shall occur and be continuing an Event of
Default or if the Lender determines in its sole discretion
that the financial condition of the Blocked Account Bank has
materially deteriorated, at the Lender's request, the Grantor
agrees to notify all of its Obligors that were making payments
to such terminated Blocked Account or Blocked Account Bank to
make all future payments to another Blocked Account Bank with
respect to which the Grantor has delivered to the Lender an
executed Blocked Account Letter, and which has not been
terminated.
(v) The Grantor hereby agrees that it
shall not make or maintain any deposits in any account with,
or maintain any investment account with, any financial
institution other than a Blocked Account Bank.
(vi) So long as no Event of Default shall
have occurred and be continuing, the Grantor is hereby
authorized by the Lender to direct the disposition of such
funds then on deposit with the Blocked Account Bank (but in
the case of Blocked Account #1, in and only in a manner
consistent with Section 3.5 of the Asset and Trademark
Agreement), which direction shall not be exercised by the
Lender unless and until an Event of Default shall have
occurred and be continuing. Lender agrees that in the event
it gives directions with respect to Blocked Account #1
pursuant hereto, it shall do so in and only in a manner
19
consistent with Section 3.5 of the Asset and Trademark
Agreement.
(vii) If any Event of Default shall have
occurred and be continuing, upon notification by the Lender to
the Grantor and the Blocked Account Bank the authorization of
the Grantor under clause (vi) above shall be revoked and all
deposits contained therein (other than any to which Grantor
shall be obligated to turn over to Xxxxxxxx or Midland
pursuant to Section 3.5 of the Asset and Trademark Agreement,
which shall be so turned over) shall be transferred to an
account established by the Lender, in the name of the Lender
and under the sole dominion and control of the Lender (the
"Cash Collateral Account"), to be held by the Lender as
Collateral for the Secured Obligations or applied to the
Secured Obligations in accordance with this Agreement (all
such deposits in any such Cash Collateral Account shall
constitute "Collateral" for all purposes of this Agreement).
6. THE LENDER'S APPOINTMENT AS ATTORNEY-IN-FACT.
(a) The Grantor hereby irrevocably constitutes and
appoints the Lender 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 the Grantor and in the name of the
Grantor or in its own name, from time to time in the Lender's
discretion, for the purpose of carrying out the terms of this
Agreement, to take any and all appropriate action and to
execute and deliver any and all documents and instruments
which the Lender may deem necessary or desirable to accomplish
the purposes of this Agreement and, without limiting the
generality of the foregoing, hereby gives the Lender the power
and right, on behalf of the Grantor, without notice to or
assent by the Grantor to do the following:
(i) to ask, demand, collect, receive and
give acquittances and receipts for any and all moneys due and
to become due under any Collateral and, in the name of the
Grantor or in its own name or otherwise, to take possession of
and endorse and collect any checks, drafts, notes, acceptances
or other Instruments for the payment of moneys due under any
Collateral and to file any claim or to take any other action
or proceeding in any court of law or equity or otherwise
deemed appropriate by the Lender for the purpose of collecting
any and all such moneys due under any Collateral whenever
payable and to file any claim or to take any other action or
proceeding in any court of law or equity or otherwise deemed
appropriate by the Lender for the purpose of collecting any
and all such moneys due under any Collateral whenever payable;
20
(ii) to pay or discharge taxes, Liens,
security interests or other encumbrances levied or placed on
or threatened against the Collateral, to effect any repairs or
any insurance called for by the terms of this Agreement and to
pay all or any part of the premiums therefor and the costs
thereof; and
(iii) (A) to direct any party liable for
any payment under any of the Collateral to make payment of any
and all moneys due, and to become due thereunder, directly to
the Lender or as the Lender shall direct; (B) to receive
payment of and receipt for any and all moneys, claims and
other amounts due, and to become due at any time, in respect
of or arising out of any Collateral; (C) to sign and indorse
any invoices, freight or express bills, bills of lading,
storage or warehouse receipts, drafts against debtors,
assignments, verifications and notices in connection with
Accounts and other Documents constituting or relating to the
Collateral; (D) to 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 part thereof and
to enforce any other right in respect of any Collateral; (E)
to defend any suit, action or proceeding brought against the
Grantor with respect to any Collateral; (F) to settle,
compromise or adjust any suit, action or proceeding described
above and, in connection therewith, to give such discharges or
releases as the Lender may deem appropriate; (G) to license
or, to the extent permitted by an applicable license,
sublicense, whether general, special or otherwise, and whether
on an exclusive or non-exclusive basis, any patent or
trademark, throughout the world for such term or terms, on
such conditions, and in such manner, as the Lender shall in
its sole discretion determine; and (H) generally to sell,
transfer, pledge, make any agreement with respect to or
otherwise deal with any of the Collateral as fully and
completely as though the Lender were the absolute owner
thereof for all purposes, and to do, at the Lender's option
and the Grantor's expense, at any time, or from time to time,
all acts and things which the Lender reasonably deems
necessary to protect, preserve or realize upon the Collateral
and the Lender's and the Banks' Lien therein, in order to
effect the intent of this Agreement, all as fully and
effectively as the Grantor might do.
(b) The Lender agrees that, except upon the
occurrence and during the continuance of any Default or Event
of Default, it will forbear from exercising the power of
attorney or any rights granted to the Lender pursuant to this
Section 6. The Grantor hereby ratifies, to the extent
permitted by law, all that any said attorney shall lawfully do
or cause to be done by virtue hereof. The power of attorney
granted pursuant to this Section 6, being coupled with an
21
interest, shall be irrevocable until the Secured Obligations
are indefeasibly paid in full.
(c) The powers conferred on the Lender hereunder
are solely to protect the Lender's interests in the Collateral
and shall not impose any duty upon it to exercise any such
powers. The Lender shall be accountable only for amounts that
it actually receives as a result of the exercise of such
powers and neither it nor any of its officers, directors,
employees or agents shall be responsible to the Grantor for
any act or failure to act, except for its own negligence or
willful misconduct.
(d) The Grantor also authorizes the Lender, at any
time and from time to time upon the occurrence and during the
continuance of a Default or Event of Default, (i) to
communicate in its own name with any party to any Contract
with regard to the assignment of the right, title and interest
of the Grantor in and under the Contracts hereunder and other
matters relating thereto and (ii) to execute, in connection
with the sale provided for in Section 8 hereof, any
indorsements, assignments or other instruments of conveyance
or transfer with respect to the Collateral.
7. PERFORMANCE BY THE LENDER OF THE GRANTOR'S
OBLIGATIONS. If the Grantor fails to perform or comply with
any of its agreements contained herein and the Lender, as
provided for by the terms of this Agreement, shall itself
perform or comply, or otherwise cause performance or
compliance, with such agreement, the reasonable expenses of
the Lender incurred in connection with such performance or
compliance, together with interest thereon at the highest rate
then in effect in respect of the Revolving Credit Advances,
shall be payable by the Grantor to the Lender on demand and
shall constitute Secured Obligations secured hereby.
8. REMEDIES, RIGHTS UPON AN EVENT OF DEFAULT.
(a) If any Default or Event of Default shall occur
and be continuing, the Lender shall have the right to 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 UCC.
Without limiting the generality of the foregoing, the Grantor
expressly agrees that in any such event the Lender, without
demand of performance or other demand, advertisement or notice
of any kind (except the notice specified below of time and
place of public or private sale) to or upon the Grantor or any
other Person (all and each of which demands, advertisements
and/or notices are hereby expressly waived to the maximum
extent permitted by the UCC and other applicable law), may
22
forthwith collect, receive, appropriate and realize upon the
Collateral, or any part thereof, and/or may forthwith sell,
lease, assign, give an option or options to purchase, or sell
or otherwise dispose of and deliver said Collateral (or
contract to do so), or any part thereof, in one or more
parcels at public or private sale or sales, at any exchange or
broker's board or any of the Lender's offices or elsewhere at
such prices as it may deem best, for cash or on credit or for
future delivery without assumption of any credit risk. The
Lender 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
said Collateral so sold, free of any right or equity of
redemption, which equity of redemption the Grantor hereby
releases. The Grantor further agrees, at the Lender's request
to assemble the Collateral and make it available to the Lender
at places which the Lender shall reasonably select, whether at
the Grantor's premises or elsewhere. The Lender shall apply
the net proceeds of any such collection, recovery receipt,
appropriation, realization or sale, as provided in Section
8(d) hereof, the Grantor remaining liable for any deficiency
remaining unpaid after such application, and only after so
paying over such net proceeds and after the payment by the
Lender of any other amount required by any provision of law,
including Section 9-504(1)(c) of the UCC, need the Lender
account for the surplus, if any, to the Grantor. To the
maximum extent permitted by applicable law, the Grantor waives
all claims, damages, and demands against the Lender arising
out of the repossession, retention or sale of the Collateral.
The Grantor agrees that the Lender need not give more than ten
days' notice of the time and place of any public sale or of
the time after which a private sale may take place and that
such notice is reasonable notification of such matters. The
Grantor shall remain liable for any deficiency if the proceeds
of any sale or disposition of the Collateral are insufficient
to pay all amounts to which the Lender is entitled, the
Grantor also being liable for the fees and expenses of any
attorneys employed by the Lender to collect such deficiency.
(b) The Grantor also agrees to pay all costs of the
Lender, including, without limitation, attorneys' fees,
incurred in connection with the enforcement of any of its
rights and remedies hereunder.
(c) The Grantor hereby waives presentment, demand,
protest or any notice (to the maximum extent permitted by
applicable law) of any kind in connection with this Agreement
or any Collateral.
(d) Without limitation of the foregoing, upon the
occurrence and during the continuation of a Default or an
Event of Default, the Lender may to the fullest extent
23
permitted by applicable law, without prior notice to the
Grantor, and without advertisement, hearing or process of law
in any kind, (i) exercise any and all rights as beneficial and
legal owner of the Intellectual Property Collateral,
including, without limitation, any and all consensual rights
and powers with respect to the Intellectual Property Col
lateral, and (ii) sell or assign or grant a license or xxxx
xxxxx to use, or cause to be sold or assigned or granted a
license or franchise to use, any or all of the Intellectual
Property Collateral, in each case, free of all rights and
claims of the Grantor therein and thereto. Upon the occur
rence and during the continuation of an Event of Default, the
Lender may (i) sell or assign the Intellectual Property
Collateral, or any part thereof, for cash upon credit as the
Lender may deem appropriate or (ii) grant licenses or
franchises or both to use the Intellectual Property Collateral
on such terms and conditions as the Lender shall determine.
In connection therewith, the Lender shall have the right to
impose such limitations and restrictions on the sale or
assignment of the Intellectual Property Collateral as the
Lender may deem to be necessary or appropriate to comply with
any law, rule or regulation (Federal, state, local or that of
a foreign country) having applicability to any such sale and
requirements for any necessary governmental approvals.
(e) Notwithstanding any provisions of this
Agreement to the contrary, if, after giving effect to any
sale, transfer, assignment or other disposition of any or all
of the Collateral pursuant hereto and after the application of
the proceeds hereunder to Secured Obligations, any Secured
Obligations remain unpaid or unsatisfied, the Grantor shall
remain liable for the unpaid and unsatisfied amount of such
Secured Obligations.
(f) Upon the declaration of an Event of Default,
the Grantor agrees that it will promptly (and in any event
within three Business Days) deliver to the Lender or its
designee an assignment of the Intellectual Property
Collateral, duly executed by the Grantor, in substantially the
form of Annex II annexed hereto. The Grantor agrees that the
Lender may duly execute such an assignment as Grantor's true
and lawful attorney-in-fact pursuant to Section 6 hereof.
(g) Whenever an Event of Default shall have
occurred and be continuing, the Lender shall have the right,
but shall in no way be obligated, to bring suit in its own
name to protect or enforce the Trademarks, Copyrights, Li
censes, Patents and Trade Secrets, and, if the Lender shall
commence any such suit, the Grantor shall, at the request of
the Lender, do any and all lawful acts and execute any and all
proper documents required by the Lender in aid of such
protection or enforcement.
24
(h) The Proceeds of any sale, disposition or other
realization upon all or any part of the Collateral shall be
distributed by the Lender in the following order of
priorities:
FIRST, to the Lender in an amount sufficient to pay
in full the expenses of Lender in connection with such
sale, disposition or other realization, including all
expenses, liabilities and advances incurred or made by
Lender in connection therewith, including, without
limitation, attorney's fees;
SECOND, to the Lender in an amount equal to the then
unpaid principal of and accrued interest and prepayment
premiums, if any, on the Secured Obligations;
THIRD, to the Lender in an amount equal to any other
Secured Obligations which are then unpaid; and
FINALLY, upon payment in full of all of the Secured
Obligations, to pay to the Grantor or as a court of
competent jurisdiction may direct, any surplus then
remaining from such Proceeds.
9. LIMITATION ON THE LENDER'S DUTY IN RESPECT OF
COLLATERAL. The Lender shall have no duty as to any
Collateral in its possession or control or in the possession
or control of any agent or nominee of it or any income thereon
or as to the preservation of rights against prior parties or
any other rights pertaining thereto, except that the Lender
shall use reasonable care with respect to the Collateral in
its possession or under its control. Upon request of the
Grantor, the Lender shall account for any moneys received by
it in respect of any foreclosure on or disposition of the
Collateral.
10. REINSTATEMENT. This Agreement shall remain in
full force and effect and continue to be effective should any
petition be filed by or against the Grantor for liquidation or
reorganization, should the Grantor become insolvent or make an
assignment for the benefit of creditors or should a receiver
or trustee be appointed for all or any significant part of the
Grantor's assets, and shall continue to be effective or be
reinstated, as the case may be, if at any time payment and
performance of the Secured Obligations, or any part thereof,
is, pursuant to applicable law, rescinded or reduced in
amount, or must otherwise be restored or returned by any
obligee of the Secured Obligations, whether as a "voidable
preference", "fraudulent conveyance", or otherwise, all as
though such payment or performance had not been made. In the
event that any payment, or any part thereof, is rescinded,
reduced, restored or returned, the Secured Obligations shall
25
be reinstated and deemed reduced only by such amount paid and
not so rescinded, reduced, restored or returned.
11. NOTICES. All notices and other communications
provided for hereunder shall be in writing (including tele
graphic, telex, telecopy, or cable communication) and mailed,
telegraphed, telexed, telecopied, cabled or delivered by hand,
if to the Grantor, addressed to it at 0000 Xxxxx Xxxxxxx
Xxxxxx, Xxxxxx Xxxx, Xxxxxxxx 00000, Attention: Xxxxxx
Xxxxxxxxx, Telecopy No: 000 000 0000 with copies to Manatt
Xxxxxx & Xxxxxxxx LLP, 00000 Xxxx Xxxxxxx Xxxxxxxxx, Xxx
Xxxxxxx, Xxxxxxxxxx 00000, Attention: Xxxxx Xxxxxx, Telecopy
No: 000 000 0000 and Intek Diversified Corporation, 000 Xxxx
000xx Xxxxxx, Xxxxx 000, Xxxxxxxx, Xxxxxxxxxx 00000,
Attention: Xxxxx Xxxxxxx, Telecopy No: 310 366 7712 and if to
the Lender, addressed to it at the address of the Lender
specified in the Loan Agreement, or, as to each party, at such
other address as shall be designated by such party in a
written notice to each other party complying as to delivery
with the terms of this Section. All such notices and other
communications shall, when mailed, telegraphed, telexed,
telecopied, cabled or delivered, be effective seven days after
being deposited in the mail (i) in the United States in the
case of notice being given by any Person located in the United
States or (ii) in the United Kingdom in the case of notice
being given by any Person located in the United Kingdom, or
when delivered to the telegraph company, confirmed by telex
answerback, telecopied with confirmation or receipt, delivered
to the cable company, or delivered by hand to the addressee or
its agent, respectively.
12. AMENDMENTS, ETC. No amendment or waiver of any
provision of this Agreement nor consent to any departure by
the Grantor therefrom shall in any event be effective unless
the same shall be in writing, approved and signed by the
Lender and then any such waiver or consent shall only be
effective in the specific instance and for the specific
purpose for which given.
13. NO WAIVER; REMEDIES. (a) No failure on the
part of the Lender to exercise, and no delay in exercising any
right hereunder shall operate as a waiver thereof; nor shall
any single or partial exercise of any right hereunder preclude
any other or further exercise thereof or the exercise of any
other right. The remedies herein provided are cumulative, may
be exercised singly or concurrently, and are not exclusive of
any remedies provided by law or any of the other Loan
Documents.
(b) Failure by the Lender at any time or times
hereafter to require strict performance by the Grantor or any
other Person of any of the provisions, warranties, terms or
26
conditions contained in any of the Loan Documents now or at
any time or times hereafter executed by the Grantor or any
such other Person and delivered to the Lender shall not waive,
affect or diminish any right of any of the Lender at any time
or times hereafter to demand strict performance thereof, and
such right shall not be deemed to have been modified or waived
by any course of conduct or knowledge of the Lender, or any
agent, officer or employee of the Lender.
14. SUCCESSORS AND ASSIGNS. This Agreement and all
obligations of the Grantor hereunder shall be binding upon the
successors and assigns of the Grantor, and shall, together
with the rights and remedies of the Lender hereunder, inure to
the benefit of the Lender, and its successors and assigns.
15. GOVERNING LAW. THIS AGREEMENT SHALL BE
GOVERNED BY, AND BE CONSTRUED AND INTERPRETED IN ACCORDANCE
WITH, THE LAW OF THE STATE OF NEW YORK. WHEREVER POSSIBLE,
EACH PROVISION OF THIS AGREEMENT SHALL BE INTERPRETED IN SUCH
MANNER AS TO BE EFFECTIVE AND VALID UNDER APPLICABLE LAW, BUT
IF ANY PROVISION OF THIS AGREEMENT SHALL BE PROHIBITED BY OR
INVALID UNDER APPLICABLE LAW, SUCH PROVISION SHALL BE
INEFFECTIVE ONLY TO THE EXTENT OF SUCH PROHIBITION OR
INVALIDITY AND WITHOUT INVALIDATING THE REMAINING PROVISIONS
OF THIS AGREEMENT.
16. WAIVER OF JURY TRIAL. THE GRANTOR WAIVES ANY
RIGHT IT MAY HAVE TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING
TO ENFORCE OR DEFEND ANY RIGHTS OR REMEDIES HEREUNDER, UNDER
THE LOAN AGREEMENT OR UNDER ANY OF THE OTHER LOAN DOCUMENTS OR
ANY OTHER DOCUMENT RELATING TO ANY OF THE FOREGOING.
17. FURTHER INDEMNIFICATION. The Grantor agrees to
pay, and to save the Lender harmless from, any and all
liabilities with respect to, or resulting from any delay in
paying, any and all excise, sales or other similar taxes which
may be payable or determined to be payable with respect to any
of the Collateral or in connection with any of the
transactions contemplated by this Agreement.
27
18. SECTION TITLES. The Section titles contained in
this Agreement are and shall be without substantive meaning or
content of any kind whatsoever and are not a part of this
Agreement.
IN WITNESS WHEREOF, The Grantor has caused this
Agreement to be executed and delivered by its duly authorized
officer on the date first above written.
MIDLAND USA, INC.
By: /s/ Xxxxx Xxxxxxx
Name: Xxxxx Xxxxxxx
Title: President
Accepted and acknowledged by:
SECURICOR COMMUNICATIONS LIMITED, as Lender
By: /s/ X.X. Xxxxxxxxx
Name: X.X. Xxxxxxxxx
Title: Director
28
SCHEDULE I
FILINGS
JURISDICTION FILING OFFICE
------------ ---------------------
California Secretary of State
County of Los Angeles
Missouri Secretary of State
County of Xxxxxxx
SCHEDULE II
LOCATION OF RECORDS AND CERTAIN COLLATERAL; FICTITIOUS NAMES
Principal Place
of Business
-------------------------
Midland USA, Inc.
0000 Xxxxx Xxxxxxx Xxxxxx
Xxxxxx Xxxx, XX 00000
Location of Books
and Records, Inventory
and Equipment
-------------------------
Midland USA, Inc.
0000 Xxxxx Xxxxxxx Xxxxxx
Xxxxxx Xxxx, XX 00000
Fictitious Names
----------------
Borrower operates under the name Intek-Midland USA, Inc. in
California
SCHEDULE III
TRADEMARKS
Xxxx Registered Number Serial Number Date of Registration
-------- ----------------- ------------- --------------------
"Midland" 927193 72-277,496 January 18, 1972
renewed December 13,
1991
"Midland" 895483 72-156,089 July 28, 1970
renewed December 18,
1990
SCHEDULE IV
COPYRIGHTS
None
SCHEDULE V
LICENSES
1) Midland USA - Midland International Corp. Trademark
License Agreement dated September 19, 1996.
2) Midland International Corp. - Midland Consumer Int'l.
Exclusive License Agreement dated June 30, 1995.
3) Midland International Corp. - LETT Electronics Private
Label Agreement dated March 1, 1995.
4) Midland International Corp. - American Digital
Communications, Inc. Asset Purchase Agreement dated
December 29, 1995.
SCHEDULE VI
PATENTS
US Patent Number 4,718,586 (Swivel Fastening Device)
ANNEX I
BLOCKED ACCOUNT LETTER
Xxxxxxx'x First National _______________, 19__
Bank of Kansas City
00 Xxxx 00xx Xxxxxx
Xxxxxx Xxxx, XX 00000
Gentlemen:
We refer to the following account maintained with
you by Midland USA, Inc., a Delaware corporation (the
"Company"), into which certain monies, instruments and other
property are deposited from time to time (collectively, the
"Blocked Account"): _______________. The Company has granted
to Securicor Communications Limited (a company incorporated
under the laws of England and Wales, the "Lender") under the
Loan Agreement, dated as of September 19, 1996, among the
Company and the Lender, a security interest in all assets and
properties of the Company, including, among other things, the
Blocked Account, all monies, instruments and other property
deposited therein and all certificates and instruments, if
any, representing or evidencing the Blocked Account. It is a
condition to the continued maintenance of the Blocked Account
with you that you agree to this Letter Agreement.
By signing this Letter Agreement, you agree that
from the date hereof1. the Blocked Account shall be under the
exclusive dominion and control of the Lender, that you will
act as its bailee and that all monies, instruments or other
property of the Company received in connection therewith
whether or not deposited in the Blocked Account shall be held
solely for the benefit of the Lender. You agree to:
__________________
1. [or such other date as may be provided in the Loan
Agreement]
(a) follow your usual operating procedures for the
handling of any remittance received in the Blocked Account
that is drawn in foreign currency or that contains restrictive
endorsements or irregularities, such as a variance between the
written and numerical amounts, undated or postdated items,
missing signature, incorrect payee, etc;
(b) indorse and process all checks and other
remittance items not covered by paragraph (a) above on which
the payee or endorsee is the Company or, in your sole discre
tion, a reasonable variation of the Company (an "Acceptable
I-1
Payee"), and deposit such checks and other remittance items in
the Blocked Account; and
(c) maintain a record of all checks and other
remittance items received in the Blocked Account and, in
addition to providing the Company with photostats, vouchers,
enclosures, etc. of checks and other remittance items received
on a daily basis, as well as a monthly statement, furnish to
the Lender at its request, free of any service charge payable
by the Lender, your regular bank statement with respect to the
Blocked Account, with the words "Securicor Communications
Limited, as Lender Re: Midland USA, Inc." included thereon so
that there is no confusion as to ownership of the Blocked
Account and so that the Lender is able to properly identify
the Blocked Account.
The Company shall hold in trust for the Lender until
remitted to you for deposit in the Blocked Account any and all
cash and cash equivalents received under the above paragraph.
You hereby agree to follow the instructions of the
Company with respect to the disposition of any and all money
deposited in the Blocked Account as directed by the Company
unless and until you have received written instructions to the
contrary from the Lender, in which case you agree to follow
such instructions from the Lender.
The Company hereby agrees to pay, indemnify and hold
you harmless from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind or nature
whatsoever (including, without limitation, legal fees) with
respect to the performance by you or any of your directors,
officers, agents or employees of this Letter Agreement, except
for your (or such director's, officer's, agent's or
employee's) gross negligence or willful misconduct.
In addition, the Company hereby indemnifies and
holds you harmless from and against all actions, proceedings,
claims, dismissals, losses, outlays, damages or expenses,
including legal fees, of every nature and character as may
arise or be made against you arising out of or in connection
with its depositing checks payable to or endorsed in favor of
an Acceptable Payee if such Acceptable Payee is incorrect,
except for your gross negligence or willful misconduct.
The Company hereby agrees to pay to you such fees
and charges with respect to the Blocked Account in accordance
with your standard charges or as shall from time to time be
mutually agreed upon by the Company and you. If such fees and
expenses have not been paid when due, you shall be entitled to
charge the Blocked Account for any such fees and expenses.
I-2
You undertake to perform only such duties as are
expressly set forth herein. Notwithstanding any other pro
vision of this Letter Agreement, it is agreed by the parties
hereto that you shall not be liable for any action taken by
you or any of your directors, officers, agents or employees in
accordance with this Letter Agreement, except for your (or
such director's, officer's, agent's or employee's) gross
negligence or willful misconduct.
The Company acknowledges that the agreements made by
it and the authorizations granted by it herein are irrevocable
unless otherwise agreed to in writing by the Lender and that
the authorizations granted herein to you and the Lender are
powers coupled with an interest.
You waive and agree not to assert, claim or endeavor
to exercise, and by executing this Letter Agreement bar and
estop yourself from asserting, claiming or exercising, and you
acknowledge that you have not heretofore received a notice
from any other party asserting, claiming or exercising, any
right of setoff, banker's lien or other purported form of
claim with respect to the Blocked Account and funds from time
to time therein. You shall have no rights in the Blocked
Account or the funds therein. To the extent you may ever have
any such rights, you hereby expressly subordinate all such
rights to all rights of the Lender.
This Letter Agreement shall be effective as of the
day first above written. To the extent inconsistent with this
Letter Agreement, this Letter Agreement shall supersede any
other agreement relating to the matters referred to herein,
including any other account agreement between the Company and
you relating to the collection of receivables. This Letter
Agreement constitutes the entire agreement with respect to the
Blocked Account and is binding upon the parties hereto and
their respective successors and assigns and shall inure to
their benefit. Neither this Letter Agreement nor any
provision hereof may be changed, amended, modified or waived
orally, but only by an instrument in writing signed by the
parties hereto. Any provision of this Letter Agreement which
may prove unenforceable under any law or regulation shall not
affect the validity of any other provision hereof.
You may terminate this Letter Agreement only upon
thirty days' prior written notice to that effect to the
Company and the Lender, by cancelling the Blocked Account
maintained with you and transferring all funds, if any, in
such Blocked Account as directed by the Lender. After any
such termination, you shall nonetheless remain obligated
promptly to transfer to an account designated by the Lender
anything from time to time received in the Blocked Account
from obligors of the Company.
I-3
All notices, requests and demands to or upon the
respective parties hereto to be effective shall be in writing
(including by telegraph, telecopy, telex or nationally
recognized courier service), and shall be deemed to have been
duly given or made when delivered by hand, or seven days after
being deposited (i) in the United States mail in the case of
notice being given by a party located in the United States or
(ii) in the United Kingdom in the case of a party located in
the United Kingdom, in each case with postage prepaid, or, in
the case of telegraphic notice, when delivered to the
telegraph company, or, in the case of telex notice, when sent,
answer back received, or, in the case of telecopy notice, when
sent, or, in the case of an internationally recognized courier
service, one business day after delivery to such courier
service, addressed as follows, or to such other address as may
be hereafter notified by the respective parties hereto:
Midland USA, Inc.
0000 Xxxxx Xxxxxxx Xxxxxx
Xxxxxx Xxxx, Xxxxxxxx 00000
XXX
Attention: Xxxxxx Xxxxxxxxx
Telecopy Number: 000 000 0000
With copies to:
Intek Diversified Corporation
000 Xxxx 000xx Xxxxxx, Xxxxx 000
Xxxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxx Xxxxxxx
Telecopy Number: 310 366 7712
Manatt, Xxxxxx & Xxxxxxxx LLP
00000 Xxxx Xxxxxxx Xxxxxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxx Xxxxxx
Telecopy Number: 000 000 0000
Securicor Communications Limited
00 Xxxxxxxxxx Xxxx
Xxxxxx, Xxxxxx XX0 0XX
Xxxxxxx
Attention: Xx Xxxxx
Telecopy No. (0000) 000-0000
I-4
With copies to:
Weil, Gotshal & Xxxxxx
00 Xxxxxxxxxxx
Xxxxxx, XX0X 0XX
Xxxxxxx
Attention: Xxxxx Xxxxxxxxx, Esq.
Telecopy No. 0171 426 0990
Blocked
Account Bank:
Xxxxxxx'x First National
Bank of Kansas City
00 Xxxx 00xx Xxxxxx
Xxxxxx Xxxx, XX 00000
Attention: Xxxxxxx Xxxxxx
Telecopy No: 000 000-0000
You are hereby notified, pursuant to New York
Uniform Commercial Code Section 9-302 (1)(g), that the Company
has granted a security interest in favor of the Lender in the
Blocked Account identified above.
This Letter Agreement shall be governed by, and
construed in accordance with, the laws of the State of New
York.
I-5
This Letter Agreement may be executed in any number
of counterparts which together shall constitute one
and the same instrument.
Very truly yours,
MIDLAND USA, INC.
By:__________________________
Name:
Title:
SECURICOR COMMUNICATIONS LIMITED
By:__________________________
Name:
Title:
Acknowledged and agreed to as of
the date first above written.
XXXXXXX'X FIRST NATIONAL
BANK OF KANSAS CITY
By:___________________________
Name:
Title:
I-6
ANNEX II
ASSIGNMENT OF INTELLECTUAL PROPERTY COLLATERAL
AGREEMENT made this ___ day of ____________, 19__,
by and between Midland USA, Inc., a Delaware corporation (the
"Assignor") and Securicor Communications Limited, a company
incorporated under the laws of England and Wales (the
"Lender").
W I T N E S S E T H:
WHEREAS, Assignor and the Lender are parties to the
Loan Agreement dated as of September 19, 1996 (said Agreement,
as it hereafter may be amended or otherwise modified from time
to time, being referred to as the "Loan Agreement") and the
Security Agreement dated as of September 19, 1996 (the
"Security Agreement") which provides that upon the occurrence
of certain events specified therein Assignor and the Lender
shall execute this Assignment; and
WHEREAS, the aforementioned events have occurred;
NOW, THEREFORE, in consideration of the mutual
covenants and agreements hereinafter set forth, the parties
agree as follows:
(i) INCORPORATION. This Assignment is made
pursuant to and subject to the terms of the Loan Agreement and
the Security Agreement, each of which is deemed incorporated
herein by this reference and shall constitute part of this
Assignment as if fully set forth herein.
(ii) ASSIGNMENT. Assignor hereby conveys, sells,
assigns, transfers and sets over to the Lender all of
Assignor's right, title interest in and to the Intellectual
Property Collateral (as defined in the Security Agreement).
(iii) NOTICES. All notices hereunder to the
parties hereto shall be made in the manner and to the
addresses specified in the Security Agreement.
(iv) FURTHER INSTRUMENTS. The parties agree to
promptly execute and deliver all further instruments necessary
or desirable to carry out the purposes of this Agreement.
II-1
(v) SCHEDULES. The terms and conditions of the
Schedules referred to herein are incorporated herein by this
reference and shall constitute part of this Assignment as if
fully set forth herein.
(vi) HEADINGS. The headings in this Assignment are
for purposes of reference only and shall not in any way limit
or otherwise affect the meaning or interpretation of any of
the terms hereof.
IN WITNESS WHEREOF, the parties have executed this
Assignment as of the date first written above.
MIDLAND USA, INC.
By:________________________
Name:
Title:
SECURICOR COMMUNICATIONS LIMITED
By:________________________
Name:
Title:
II-2
STATE OF )
ss.:
COUNTY OF )
On this ___ day of ___________, 19__, before me came
__________________________, to me known to be an officer of
Midland USA, Inc., the company described in and which executed
the above instrument, and duly acknowledged that he executed
the same.
____________________________
NOTARY PUBLIC
STATE OF )
ss.:
COUNTY OF )
On this ___ day of ___________, 19__, before me came
Midland USA, Inc., to me known to be an officer of Securicor
Communications Limited, the company described in and which
executed the above instrument, and duly acknowledged that he
executed the same.
_____________________________
NOTARY PUBLIC
II-3
