EXHIBIT 4.5
THE RIGHTS OF THE SECURED PARTY AND THE INVESTORS UNDER THIS SECURITY AGREEMENT
SHALL BE SUBORDINATED TO THE EXTENT AND IN THE MANNER PROVIDED IN THAT CERTAIN
SUBORDINATION AGREEMENT BETWEEN THE SECURED PARTY, THE INVESTORS AND ITS SENIOR
BANK LENDER AND AN INTERCREDITOR AGREEMENT WITH WINFIELD CAPITAL CORP. OR OTHER
SUBORDINATION AGREEMENT IN EFFECT WITH RESPECT TO ANY INDEBTEDNESS FOR BORROWED
MONEY (IN EACH CASE, A "SUBORDINATION AGREEMENT"). THE SECURED PARTY, THE
INVESTORS AND SUBSEQUENT HOLDERS OF THE NOTES (AS DEFINED BELOW), BY ACCEPTANCE
THEREOF, ACKNOWLEDGE AND AGREE TO BE BOUND BY THE SUBORDINATION AGREEMENT.
GENERAL SECURITY AGREEMENT
(Floating Lien)
SECURITY AGREEMENT, dated as of [ ], 2002, between Comdial Corporation, a
Delaware corporation with its principal executive office located at 000
Xxxxxxxxx Xxxx, Xxxxxxxx, Xxxxxxx 00000 (the "Debtor"), and Commonwealth
Associates L.P., a Delaware limited partnership with offices at 000 Xxxxx
Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, as agent (the "Agent") for the investors (the
"Investors") from time to time set forth on Annex I hereto (the Agent, acting in
such capacity, the "Secured Party");
W I T N E S S E T H :
WHEREAS, Debtor has issued to the investors a series of 7% senior
subordinated secured promissory notes in the aggregate principal amount of up to
$16,000,000 issued by Debtor from time to time in a private placement through
the Agent, as placement agent (herein collectively, as at any time amended,
extended, restated, renewed or modified, the "Notes");
WHEREAS, it is a condition to the willingness of the Investors to make the
loan evidenced by the Notes that Debtor enter into this Agreement and grant to
the Secured Party, for the ratable benefit of the Investors, the security
interest provided for herein;
WHEREAS, the term "Notes" shall be deemed to include any promissory notes
issued as payment of interest on the Notes; and
WHEREAS, the Investors have appointed the Agent pursuant to the Agency
Appointment Agreement attached as Exhibit 3 hereto.
NOW, THEREFORE, FOR VALUE RECEIVED, IT IS AGREED:
Section 1. Terms. Unless otherwise defined herein, capitalized terms used
in this Agreement shall have the meaning specified therefor in the Notes. As
used herein the following terms shall have the meanings specified and shall
include in the singular number the plural and in the plural number the singular:
"Assigned Agreements" shall mean all contracts and agreements of
Debtor (other than contracts or agreements which by their terms expressly
prohibit the granting of any Lien (as hereinafter defined) thereon).
"Bridge Notes" shall mean the 7% senior subordinated secured
promissory notes issued by the Company in June, July and August 2002.
"Collateral" means all of Debtor's right, title and interest in and
under or arising out of each and all of the following:
All personal property and fixtures of Debtor of any type or
description, wherever located and now existing or hereafter arising or
acquired, including but not limited to the following:
(i) all of Debtor's goods including, without limitation:
(a) all inventory, including without limitation, equipment held
for lease, whether raw materials, in process or finished, all
material or equipment usable in processing the same and all
documents of title covering any inventory (as such term is
defined in the Uniform Commercial Code, as in effect from time
to time in the State of New York (the "NYUCC")) (all of the
foregoing, "Inventory"), including without limitation that
located at the locations listed on Schedule 1-A annexed
hereto;
(b) Except for the equipment subject to liens set forth in
Schedule 1-B hereto (for so long as such lessors and/or
lenders set forth in Schedule 1-B hereto maintain a security
interest in such equipment), all equipment (the "Equipment")
employed in connection with Debtor's business, together with
all present and future additions, attachments and accessions
thereto and all substitutions therefor and replacements
thereof, including without limitation that located at the
locations listed on Schedule 1-A annexed hereto;
(ii) all of Debtor's present and future accounts, accounts receivable,
general intangibles, as such terms are defined in the NYUCC, and all
contracts and contract rights (herein sometimes referred to as
"Receivables"), including but not limited to Debtor's rights
(including rights to payment) under all Assigned Agreements, together
with
(a) all claims, rights, powers or privileges and remedies of
Debtor relating thereto or arising in connection therewith
including, without limitation, all rights of Debtor to make
determinations, to exercise any election (including, but not
limited to, election of remedies) or option or to give or
receive any notice, consent, waiver or approval, together with
full power and authority to demand, receive, enforce, collect
or receipt for any of the foregoing or any property which is
the subject of the Assigned Agreements, to enforce or execute
any checks, or other instruments or orders, to file any claims
and to take any action which (in the opinion of the Secured
Party) may be necessary or advisable in connection with any of
the foregoing,
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(b) all liens, security, guaranties, endorsements, warranties
and indemnities and all insurance and claims for insurance
relating thereto or arising in connection therewith,
(c) all rights to property forming the subject matter of the
Receivables including, without limitation, rights to stoppage
in transit and rights to returned or repossessed property,
(d) all writings relating thereto or arising in connection
therewith including without limitation, all notes, contracts,
security agreements, guaranties, chattel paper and other
evidence of indebtedness or security, all powers?of?attorney,
all books, records, ledger cards and invoices, all credit
information, reports or memoranda and all evidence of filings
or registrations relating thereto,
(e) all catalogs, computer and automatic machinery software and
programs, and the like pertaining to operations by Debtor in,
on or about any of its plants or warehouses, all sales data
and other information relating to sales or service of products
now or hereafter manufactured on or about any of its plants,
and all accounting information pertaining to operations in, on
or about any of its plants, and all media in which or on which
any of the information or knowledge or data is stored or
contained, and all computer programs used for the compilation
or printout of such information, knowledge, records or data,
and
(f) all accounts, contract rights, general intangibles and
other property rights of any nature whatsoever arising out of
or in connection with the foregoing, including without
limitation, payments due and to become due, whether as
repayments, reimbursements, contractual obligations,
indemnities, damages or otherwise;
(iii) all other personal property of Debtor of any nature whatsoever,
including, without limitation, all accounts, bank accounts, deposits,
credit balances, contract rights, inventory, general intangibles,
goods, equipment, instruments, chattel paper, machinery, furniture,
furnishings, fixtures, tools, supplies, appliances, plans and
drawings, together with all customer and supplier lists and records of
the business, and all property from time to time described in any
financing statement signed by Debtor naming the Agent as secured
party;
(iv) all of Debtor's right, title, and interest in and to any shares
of capital stock of the respective corporations identified on Schedule
1-C hereto (the "Issuers"), represented by the certificates identified
on Schedule 1-C, together with the certificates representing any such
shares, and all other shares of capital stock of whatever class of the
Issuers, now or hereafter owned by Debtor, in each case together with
the certificates evidencing the same (collectively, the "Stock
Collateral");
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(v) All shares, securities, money or property representing a
dividend on any of the Stock Collateral, or representing a
distribution of return of capital upon or in respect of the Stock
Collateral, or resulting from a split-up, revision, reclassification
and other like change of the Stock Collateral or otherwise received in
exchange therefor, and any subscription warrants, rights or options
issued to the holders of, or otherwise in respect of, the Stock
Collateral;
(vi) Without affecting the obligations of Debtor under any provision
prohibiting such action hereunder or under the Notes, in the event of
any consolidation or merger in which an Issuer is not the surviving
corporation, all shares of each class of the capital stock of the
successor corporation formed by or resulting from such consolidation
or merger;
(vii) any and all of Debtor's right, title and interest in its
intellectual property, including, without limitation, (a) each of the
Trademarks (as hereinafter defined) and the goodwill of the business
symbolized by each of the Trademarks, all customer lists and other
records of Debtor relating to the distribution of products bearing the
Trademarks (as hereinafter defined) and each of the registrations
described in Schedule 1-D hereto; (b) each of the Patents (as
hereinafter defined) and each of the registrations listed on Schedule
1-D hereto; (c) each of the tradenames listed on Schedule 1-D hereto
(the "Tradenames"); (d) each of the Copyrights (as hereinafter
defined) and each of the applications, registrations and recordings
thereof listed on Schedule 1-D hereto, and all derivative works,
extensions or renewals thereof ; (d) any and all proceeds of the
foregoing, including, without limitation, any claims by Debtor against
third parties for infringement of the Trademarks, the Patents and/or
the Copyrights (collectively, the "Intellectual Property");
(viii) all additions, accessions, replacements, substitutions or
improvements and all products and proceeds including, without
limitation, proceeds of insurance, of any and all of the Collateral
described in clauses (i) through (vii) above; and
(ix) any consideration received from the sale, exchange, lease or
other disposition of any asset or property which constitutes
Collateral, any other value received as a consequence of the
possession of any Collateral and any payment received from any insurer
or other person or entity as a result of the destruction, loss, theft
or other involuntary conversion of whatever nature of any asset or
property that constitutes Collateral.
"Copyrights" mean all copyrights, copyrighted works or any item which
embodies such copyrighted work of the United States or any other country, all
applications therefor, all right, title and interest therein and thereto, and
all registrations and recordings thereof, including, without limitation,
applications, registrations and recordings in the United States Copyright Office
or in any similar office or agency of the United States, and State thereof or
any other country or any political subdivision thereof, and all derivative
works, extensions or renewals thereof.
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"Indebtedness for Borrowed Money" means all secured payment obligations of
Debtor (whether outstanding on the date hereof or hereinafter) to Bank of
America, N.A. ("BOA") or any other bank, insurance company, finance company or
other institutional lender or other entity regularly engaged in the business of
extending credit in the form of borrowed money, provided such entity is not an
affiliate of Debtor.
"Instrument" shall have the meaning specified in Article 3 of the NYUCC and
shall also include any other writing which evidences a right to the payment of
money and is not itself a security agreement or lease and is of a type which is
in the ordinary course of business transferred by delivery with any necessary
endorsement or assignment.
"Lien" means any mortgage, pledge, hypothecation, assignment, security
interest, deposit arrangement, encumbrance (including any easement, right of
way, zoning restriction and the like), lien (statutory or other) or preference,
priority or other security agreement or preferential arrangement of any kind or
nature whatsoever (including any conditional sale or other title retention
agreement, any financing lease involving substantially the same economic effect
as any of the foregoing and the filing of any financing statement under the
NYUCC or comparable law of any jurisdiction).
"Material Adverse Effect" means a material adverse effect on the financial
condition of the Company and its subsidiaries, taken as a whole.
"Patents" mean (i) all letters patent of the United States or any other
country, all right, title and interest therein and thereto, and all
applications, registrations and recordings thereof, including, without
limitation, applications, registrations and recordings in the United States
Patent and Trademark Office or in any similar office or agency of the United
States, any state or province thereof or any other country or any political
subdivision thereof, all whether now owned or hereafter acquired by Debtor,
including, but not limited to, those described in Schedule 1-D hereto, and (ii)
all reissues, continuations, continuations-in-part, extensions or divisionals
thereof and all licenses thereof.
"Permitted Liens" means:
(a) Liens for taxes, assessments or other governmental charges or
levies not at the time delinquent or thereafter payable
without penalty or being contested in good faith by
appropriate proceedings and for which adequate reserves in
accordance with generally accepted accounting principles shall
have been set aside on its books;
(b) Liens of carriers, warehousemen, mechanics, materialmen and
landlords incurred in the ordinary course of business for sums
not overdue or being contested in good faith by appropriate
proceedings and for which adequate reserves shall have been
set aside on its books;
(c) Liens (other than Liens arising under the Employee Retirement
Income Security Act of 1974, as amended, or Section 412(n) of
the Internal Revenue Code of 1986, as amended) incurred in the
ordinary course of business in connection with workers'
compensation, unemployment insurance or other forms of
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governmental insurance or benefits, or to secure performance
of tenders, statutory obligations, leases and contracts (other
than for borrowed money) entered into in the ordinary course
of business or to secure obligations on surety or appeal
bonds;
(d) Judgment Liens in existence less than 60 days after the entry
thereof or with respect to which execution has been stayed;
(e) Ground leases in respect of real property on which facilities
owned or leased by Debtor or any of its subsidiaries are
located;
(f) Easements, rights-of-way, restrictions, minor defects or
irregularities in title and other similar charges or
encumbrances not interfering in any material respect with the
business of Debtor and its subsidiaries taken as a whole;
(g) Any interest or title of a lessor secured by a lessor's
interest under any lease of real property on which facilities
owned or leased by Debtor or any of its subsidiaries are
located;
(h) Leases or subleases granted to others not interfering in any
material respect with the business of Debtor and its
subsidiaries taken as a whole;
(i) A Lien on any asset securing indebtedness (including
capitalized lease obligations) incurred or assumed for the
purpose of financing the purchase price (including capitalized
lease payments in the nature thereof) of such asset, provided
that such Lien attaches only to the asset acquired with the
proceeds of such indebtedness and attaches concurrently with
or within ten (10) days following the acquisition thereof;
(j) Liens existing on the date hereof as disclosed on Schedule
1-E hereto; and
(k) Liens with respect to the Senior Indebtedness.
"Person" means any natural person, corporation, firm, association,
partnership, joint venture, limited liability company, joint?stock company,
trust, unincorporated organization, government, governmental agency or
subdivision, or any other entity, whether acting in an individual, fiduciary or
other capacity.
"Receivables" has the meaning specified therefor in clause (ii) of the
definition of Collateral.
"Secured Obligations" means all obligations of Debtor, whether for fees,
expenses or otherwise, now existing or hereafter arising under this Agreement
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and the Notes, including, without limitation, full and prompt payment and
performance of (i) all principal and interest on the Notes when and as due,
whether at maturity, by acceleration, or otherwise and (ii) all obligations of
Debtor at any time and from time to time under this Agreement.
"Senior Indebtedness" means, collectively, (a) all Indebtedness for
Borrowed Money (and all renewals, deferrals, extensions, refundings, amendments,
modifications and replacements of any such Indebtedness for Borrowed Money), (b)
all payment obligations of Debtor pursuant to any capitalized lease with an
entity that is not an affiliate of Debtor, unless by the terms of the instrument
creating or evidencing any such indebtedness it is expressly provided that such
indebtedness is not superior in right of payment to the Notes and (c) all
secured payment obligations of the Company to Winfield Capital Corp. arising
from a loan in the aggregate principal amount of up to $2,000,000.
"Termination Date" means the date on which all the Notes have been paid in
full or converted into securities of Debtor.
"Trademarks" means (i) all trademarks, trade names, trade styles, service
marks, prints and labels on which said trademarks, trade names, trade styles and
service marks have appeared or appear, designs and general intangibles of like
nature, now existing or hereafter adopted or acquired, all right, title and
interest therein and thereto, and all applications, registrations and recordings
thereof, including, without limitation, applications, registrations and
recordings in the United States Patent and Trademark Office or in any similar
office or agency of the United States, any state or province thereof, or any
other country or any political subdivision thereof, all whether now owned or
hereafter acquired by Debtor, including, but not limited to, those described in
Schedule 1-D annexed hereto and made a part hereof, and (ii) all reissues,
extensions or renewals thereof and all licenses thereof.
Section 2. Security Interests; Subordination.
(a) As security for the payment and performance of all Secured
Obligations, and subject to the last sentence of this Xxxxxxx 0, Xxxxxx
does hereby create, grant and assign to the Secured Party, for its own benefit
and for the ratable benefit of the Investors, a continuing security interest in
all of the Collateral, whether now existing or hereafter arising or acquired and
wherever located, subject to the priority, if any, of Permitted Liens (the
"Security Interest"). Without limiting the foregoing, the Secured Party is
hereby authorized to file one or more financing statements, continuation
statements or such other documents, including, without limitation, the
Assignment of Security (Trademarks) attached hereto as Exhibit 1, for the
purpose of perfecting, confirming, continuing, enforcing or protecting the
Security Interest. With respect to the Security Interest created hereby the
Notes are pari passu with the Bridge Notes to the extent outstanding.
The Secured Party hereby acknowledges and agrees that the Security Interest
granted hereunder shall be subordinate and junior to any security interest
granted in connection with any Indebtedness for Borrowed Money, and any
refinancings or replacements thereof. Notwithstanding anything to the contrary
in this Security Agreement and in the Notes, the indebtedness evidenced by the
Notes, and all rights of the Secured Party hereunder, shall be subordinate to
the rights of the Senior Indebtedness. In addition, the Security Interest and
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any payment of the principal amount of, accrued interest on, fees and expenses
relating to, and any other indebtedness evidenced by the Notes shall be
subordinated to the extent and in the manner provided in a Subordination
Agreement.
Section 3. General Representations, Warranties and Covenants. Debtor
represents, warrants and covenants, which representations, warranties and
covenants shall survive execution and delivery of this Agreement, as follows:
(a) This Agreement is made with full recourse to Debtor and pursuant to and
upon all the warranties, representations, covenants, and agreements on the part
of Debtor contained herein, in the Notes and otherwise made in writing in
connection herewith or therewith.
(b) Except for the Security Interest of the Secured Party therein and
Permitted Liens, Debtor is, and as to Collateral acquired from time to time
after the date hereof Debtor will be, the owner of all the Collateral free from
any lien, security interest, encumbrance or other right, title or interest of
any Person (other than Permitted Liens) and Debtor shall defend the Collateral
against all claims and demands of all Persons at any time claiming the same or
any interest therein adverse to the Secured Party (other than Permitted Liens).
(c) To the Company's knowledge, there is no financing statement, assignment
of trademark, or assignment of patent (or similar statement or instrument of
registration under the law of any jurisdiction) now on file or registered in any
public office covering any interest of any kind in the Collateral, or intended
to cover any such interest, which has not been terminated or released by the
secured party named therein and so long as the Notes remain outstanding or any
of the Secured Obligations of Debtor remain unpaid, Debtor will not execute and
there will not be on file in any public office any financing statement,
assignment of trademark, or assignment of patent (or similar statement or
instrument of registration under the law of any jurisdiction) or statements
relating to the Collateral, except (i) financing statements, assignment of
trademark, or assignment of patent filed or to be filed in respect of and
covering the Security Interest of the Secured Party hereby granted and provided
for and (ii) with respect to Permitted Liens.
(d) The chief executive office and chief place of business of Debtor is
located at the address of Debtor listed on the signature page hereof, and Debtor
will not move its chief executive office and chief place of business except to
such new location as Debtor may establish in accordance with the last sentence
of this Section 3(d). The originals of all Assigned Agreements and all documents
(as well as all duplicates thereof) evidencing all Receivables and all other
contract rights or accounts and other property of Debtor and the only original
books of account and records of Debtor relating thereto are, and will continue
to be, kept at such chief executive office or at such new location as Debtor may
establish in accordance with the last sentence of this Section 3(d). Debtor
shall establish no such new location until (i) it shall have given to the
Secured Party not less than 30 days' prior written notice of its intention to do
so, clearly describing such new location and providing such other information in
connection therewith as the Secured Party may reasonably request, and (ii) with
respect to such new location, it shall have taken such action, satisfactory to
the Secured Party (including, without limitation, all action required by Section
7 hereof), to maintain the Security Interest of the Secured Party in the
Receivables intended to be granted at all times fully perfected and in full
force and effect.
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(e) Debtor has no Collateral located outside of the states identified on
Schedule 1-A or other states in which inventory may be held on consignment.
(f) The name of Debtor is as set forth on the signature page hereto and
Debtor shall not change such name, conduct its business in any other name or
take title to the Collateral in any other name while this Agreement remains in
effect. Debtor has never had any name, or conducted business under any name in
any jurisdiction, other than its name set forth on the signature page hereto,
during the past six years other than as set forth in Schedule 3(f) annexed
hereto.
(g) At Debtor's own expense, Debtor will: (i) without limiting the
provisions of the Notes, keep the Collateral fully insured at all times with
financially sound and responsible insurance carriers against loss or damage by
fire and other risks, casualties and contingencies and in such manner and to the
same extent that like properties are customarily so insured by other entities
engaged in the same or similar businesses similarly situated and keep adequate
insurance at all times against liability on account of damage to persons and
properties and under all applicable workers' compensation laws, by financially
sound and reputable insurers and in amounts usually carried by similar
businesses, for the benefit of Debtor and the Secured Party, (ii) upon request
by the Secured Party, promptly deliver the insurance policies or certificates
thereof to the Secured Party, and (iii) keep the Collateral necessary for its
business in good condition at all times (normal wear and tear excepted) and
maintain the same in accordance with all material manufacturer's specifications
and requirements. Upon any failure of Debtor to comply with its obligations
pursuant to this Section 3(g), the Secured Party may at its option and after 20
days' prior notice to Debtor, and without affecting any of its other rights or
remedies provided herein or as a secured party under the NYUCC, procure the
insurance protection it deems necessary and/or cause repairs or modifications to
be made to the Collateral and the cost of either or both of which shall be a
lien against the Collateral added to the amount of the indebtedness secured
hereby and payable on demand with interest at a rate per annum equal to 7%.
(h) Subject to the Senior Indebtedness, Debtor hereby assigns to the
Secured Party all of Debtor's right, title and interest in and to any and all
moneys which may become due and payable with respect to the Collateral under any
policy insuring the Collateral (except proceeds relating to tangible personal
property which are applied to restoration or replacement), including return of
unearned premium, and, upon the occurrence and continuance of an Event of
Default (as defined in the Notes) and subject to the terms of the Senior
Indebtedness, shall cause any such insurance company to make payment directly to
the Secured Party for application to amounts outstanding under the Notes in
accordance with the terms of the Notes and, to the extent not provided therein,
in such order as the Secured Party shall determine.
(i) Debtor will not use the Collateral in material violation of any statute
or ordinance of which it has knowledge or applicable insurance policy and will
promptly pay all material taxes and assessments levied against the Collateral;
provided that Debtor shall not be required to pay any such tax or assessment
that is being contested in good faith and by proper proceedings and as to which
appropriate reserves are being maintained.
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(j) Debtor will not sell, transfer, change the registration, if any,
dispose of, attempt to dispose of all or substantially all of the Collateral
unless the proceeds from the sale are allocated to repay the Notes.
(k) Debtor will not assert against the Secured Party any claim or defense
which Debtor may have against any seller of the Collateral or any part thereof
or against any other Person with respect to the Collateral or any part thereof.
(l) Debtor will indemnify and hold the Secured Party harmless from and
against any loss, liability, damage, costs and expenses whatsoever arising from
Debtor's use, operation, ownership or possession of the Collateral or any part
thereof.
(m) Debtor will maintain the confidentiality of all customer lists and not
sell or otherwise dispose of such lists except that Debtor shall deliver copies
thereof to the Secured Party upon its request, which may be made at any time and
from time to time after an Event of Default (as such term is defined in the
Notes).
(n) In addition to, and not in limitation of, the foregoing, with respect
to the Intellectual Property, Debtor hereby represents and warrants:
(i) Subject to Permitted Liens and except as set forth in Schedule 1-D
hereto, Debtor has the sole, full and clear title to the Trademarks
shown on Schedule 1-D hereto for the goods and services covered by the
registrations thereof and, to Debtor's knowledge, such registrations
are valid and subsisting.
(ii) Debtor will perform all acts and execute all documents, to the
extent reasonable, including, without limitation, assignments for
security in form suitable for filing with the United States Patent and
Trademark Office, substantially in the form of Exhibit 1 hereof,
requested by the Secured Party at any time to evidence, perfect,
maintain, record and enforce the Secured Party's interest in the
Patents and Trademarks or otherwise in furtherance of the provisions
of this Agreement, and Debtor hereby authorizes the Secured Party to
execute and file one or more financing statements (and similar
documents) or copies thereof or of this Agreement with respect to the
Intellectual Property signed only by the Secured Party.
(iii) Except as set forth on Schedule 1-D, to Debtor's knowledge, none
of the Trademarks used in the business of Debtor have been abandoned
or invalidated, and, except to the extent that the Secured Party, upon
10 days' prior written notice by Debtors, shall consent, and except to
the extent such Debtor has a valid business purpose for doing
otherwise (so long as any action on the part of any such Debtor would
not have a Material Adverse Effect on Debtor's business), Debtor
(either itself or through licensees) will continue to use the
Trademarks on each and every trademark class of goods in order to
maintain the Trademarks in full force free from any claim of
abandonment for nonuse and Debtor will not (nor will it permit any
licensee thereof to) do any act or knowingly omit to do any act
whereby any Trademark may become abandoned or invalidated, and Debtor
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shall notify the Secured Party immediately if it knows of any reason
or has reason to know that any pending application or issued Trademark
may become abandoned or invalidated.
(iv) Subject to Permitted Liens and except as set forth on Schedule
1-D, Debtor has the sole, full and clear title to each of the Patents
shown on Schedule 1-D hereto and the issued Patents are subsisting.
Except as set forth in Schedule 1-D, to Debtor's knowledge, none of
the Patents used in the business of Debtor has been abandoned or
dedicated, and, except to the extent that the Secured Party, upon 10
days' prior written notice by Debtor, shall consent, and except to the
extent Debtor has a valid business purpose for doing otherwise (so
long as any action on the part of Debtor would not have a Material
Adverse Effect on Debtor's business), Debtor will not do any act, or
omit to do any act, whereby the Patents may become abandoned or
dedicated and shall notify the Secured Party immediately if it knows
of any reason or has reason to know that any pending application or
issued Patent may become abandoned or dedicated.
(v) Subject to Permitted Liens and except as set forth on Schedule
1-D, Debtor has the sole, full and clear title to each of the
Copyrights shown on Schedule 1-D hereto and the issued Copyrights are
subsisting. Except as set forth in Schedule 1-D, to Debtor's
knowledge, none of the Copyrights used in the business of Debtor has
been abandoned or dedicated, and, except to the extent that the
Secured Party, upon 10 days' prior written notice by Debtor, shall
consent, and except to the extent Debtor has a valid business purpose
for doing otherwise (so long as any action on the part of Debtor would
not have a Material Adverse Effect on Debtor's business), Debtor will
not do any act, or omit to do any act, whereby the Copyrights may
become abandoned or dedicated and shall notify the Secured Party
immediately if it knows of any reason or has reason to know that any
pending application or issued Copyright may become abandoned or
dedicated.
(vi) In no event shall Debtor, either itself or through any agent,
employee, licensee or designee, (A) file an application for the
registration of any Patent or Trademark with the United States Patent
and Trademark Office, and/or an application for the registration of
any Copyright with the United States Copyright Office, or any similar
office or agency of the United States, any state or province thereof,
any other country or any political subdivision thereof, (B) file any
assignment of any patent, trademark, or copyright which Debtor may
acquire from a third party, with the United States Patent and
Trademark Office and/or the United States Copyright Office, any
similar office or agency of the United States, any state or province
thereof, any other country or any political subdivision thereof,
unless Debtor shall promptly notify the Secured Party thereof, and,
upon request of the Secured Party, execute and deliver any and all
assignments, agreements, instruments, documents and papers as the
Secured Party may reasonably request to evidence the Secured Party's
interest in such Patent, Trademark and/or Copyright and the goodwill
and general intangibles of Debtor relating thereto or represented
thereby, and Debtor hereby constitutes the Secured Party its
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attorney-in-fact to execute and file all such writings for the
foregoing purposes, all acts of such attorney being hereby ratified
and confirmed, such power being coupled with an interest is
irrevocable until the Secured Obligations are paid in full.
(vii) Except to the extent that the Secured Party, upon prior written
notice from Debtor, shall consent (which consent shall not be
unreasonably withheld), Debtor will not assign, sell, mortgage, lease,
transfer, pledge, hypothecate, grant a security interest in or lien
upon, encumber, grant an exclusive or non-exclusive license (except in
the ordinary course of business), or otherwise dispose of any of the
Intellectual Property, and nothing in this Agreement shall be deemed a
consent by the Secured Party to any such action except as expressly
permitted herein.
(viii) As of the date hereof neither Debtor nor any affiliate or
subsidiary thereof owns any Patents, Trademarks or Copyrights
registered in, or the subject of pending applications in, the United
States Patent and Trademark Office and/or the United States Copyright
Office or any similar office or agency of the United States, any state
or province thereof, any other country or any political subdivision
thereof, other than those described in Schedule 1-D hereto.
(ix) Except to the extent Debtor has a valid business purpose for
doing otherwise (so long as any action on the part of Debtor would not
have a Material Adverse Effect on Debtor's business), Debtor will take
all reasonable and necessary steps in any proceeding before the United
States Patent and Trademark Office and/or the United States Copyright
Office, or any similar office or agency of the United States, any
state or province thereof, any other country or any political
subdivision thereof, to maintain each application and registration of
the Trademarks, Patents and Copyrights, including, without limitation,
filing of renewals, affidavits of use, affidavits of incontestability
and opposition, interference and cancellation proceedings (except to
the extent that dedication, abandonment or invalidation is permitted
under paragraphs (ii) and (iii) hereof); provided, however, that
Debtor shall not be required to take any such actions with respect to
the Patents, Trademarks or Copyrights identified on Schedule 3(n)(ix).
(x) Debtor agrees that the Secured Party does not assume, and shall
have no responsibility for, the payment of any sums due or to become
due under any agreement or contract included in the Intellectual
Property or the performance of any obligations to be performed under
or with respect to any such agreement or contract by Debtor, and
Debtor hereby agrees to indemnify and hold the Secured Party harmless
with respect to any and all claims by any person relating thereto
other than such that are caused by Secured Party's gross negligence or
willful misconduct.
(xi) Debtor agrees that if it, or any affiliate or subsidiary thereof,
learns of any use by any person of any term or design likely to cause
confusion with any material Trademark, it shall promptly notify the
12
Secured Party of such use and, if requested by the Secured Party,
shall join with the Secured Party, at its expense, in such action as
the Secured Party, in its reasonable discretion may deem advisable for
the protection of the Secured Party's interest in and to such
Trademarks.
(xii) All licenses of Trademarks and Patents which Debtor has granted
to third parties are set forth in Schedule 3(n)(xii) hereto.
(xiii) Subject to Permitted Liens, if Debtor shall acquire title to
any new registered Trademarks, Patents and/or Copyrights, the
provisions of this Agreement shall automatically apply thereto. Debtor
shall promptly notify the Secured Party in writing of any rights to
any new registered Trademarks, Patents and/or Copyrights acquired by
Debtor after the date hereof and of any registrations issued or
applications for registration made after the date hereof. Concurrently
with the filing of an application for registration for any Trademarks,
Patents and/or Copyrights, Debtor shall execute, deliver and record in
all places where this Agreement is recorded an appropriate agreement,
substantially in the form hereof, with appropriate insertions, or an
amendment to this Agreement, in form and substance reasonably
satisfactory to the Secured Party, pursuant to which Debtor shall
grant a security interest to the extent of its interest in such
registration as provided herein to the Secured Party.
Section 4. Special Provisions Concerning Assigned Agreements. Debtor
represents, warrants and agrees as follows:
(a) The Assigned Agreements constitute the legal, valid and binding
obligations of Debtor and, to the best of its knowledge, the other parties
thereto, enforceable in accordance with their respective terms, subject to
applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent
transfer, fraudulent conveyance and other similar laws affecting the enforcement
of creditors' rights and remedies generally.
(b) Debtor will perform and discharge each and every material obligation,
covenant and agreement to be performed or discharged by Debtor under the
Assigned Agreements, except for any such nonperformance resulting from a default
by any other party thereto.
(c) At the request of the Secured Party, and at the sole cost and expense
of Debtor, Debtor will use its reasonable best efforts to enforce or secure the
performance of each and every material obligation, covenant, condition and
agreement contained in the material Assigned Agreements to be performed by the
other parties thereto.
(d) Debtor will not modify, amend or agree to vary any of the material
Assigned Agreements in any respect likely to have a Material Adverse Effect
other than in the ordinary course of business, or otherwise act or fail to act
in a manner likely (directly or indirectly) to entitle any party thereto to
claim that Debtor is in default under the terms thereof, except for any such
action or failure to act resulting from a default by any other party thereto.
(e) Debtor will not terminate or permit the termination of any material
Assigned Agreement, except in accordance with its terms, other than in the
ordinary course of business.
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(f) Without the prior written consent of the Secured Party, Debtor will
not, other than in the ordinary course of business, waive or in any manner
release or discharge any party to any material Assigned Agreement from any of
the material obligations, covenants, conditions and agreements to be performed
by it under such Assigned Agreement including, without limitation, the
obligation to make all payments in the manner and at the time and places
specified.
(g) After the occurrence and during the continuance of an Event of Default
prior to the Maturity Date (as such term is defined in the Notes) and
acceleration of the Notes pursuant to the terms of the Notes ("Acceleration"),
subject to the terms of the Senior Indebtedness, Debtor will hold any payments
received by it which are assigned and set over to the Secured Party by this
Agreement for and on behalf of the Secured Party and turn them promptly over to
the Secured Party forthwith in the same form in which they are received
(together with any necessary endorsement) for application to amounts outstanding
under the Notes in accordance with the terms of the Notes and, to the extent not
provided therein, in such order as the Secured Party shall determine.
(h) Debtor will appear in and defend every action or proceeding arising
under, growing out of or in any manner connected with the Assigned Agreements or
the obligations, duties or liabilities of Debtor and any assignee thereunder.
(i) Should Debtor fail to make any payment or to do any act as herein
provided after 30 days' notice by the Secured Party, the Secured Party may (but
without obligation on the Secured Party's part to do so and without notice to or
demand on Debtor and without releasing Debtor from any obligation hereunder)
make or do the same in such manner and to such extent as the Secured Party may
deem necessary to protect the Security Interests provided hereby, including
specifically, without limiting the general powers, the right to appear in and
defend any action or proceeding purporting to affect the Security Interests
provided hereby and Debtor, and the Secured Party may also perform and discharge
each and every obligation, covenant and agreement of Debtor contained in any
Assigned Agreement and, in exercising any such powers, pay necessary costs and
expenses, employ counsel and incur and pay reasonable attorneys' fees.
(j) Upon the request of the Secured Party, Debtor will send to the Secured
Party copies of all material notices, documents and other papers furnished or
received by it with respect to any of the material Assigned Agreements.
Section 5. Special Provisions Concerning Receivables.
(a) As of the time when each Receivable arises, Debtor shall be deemed to
have warranted as to each such Receivable that such Receivable and all papers
and documents relating thereto are genuine and in all respects what they purport
to be, and that all papers and documents relating thereto:
(ii) will be signed by the account debtor named therein (or such
account debtor's duly authorized agent) or otherwise be binding on the
account debtor;
(iii) will represent the genuine, legal, valid and binding obligation
of the account debtor evidencing indebtedness unpaid and owed by such
account debtor
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arising out of the performance of labor or services or
the sale and delivery of merchandise or both;(iv) to the extent
evidenced by writings, will be the only original writings evidencing
and embodying such obligation of the account debtor named therein; and
(b) Debtor will keep and maintain at Debtor's own cost and expense
satisfactory and complete records of the Receivables, including, but not limited
to, records of all payments received, all credits granted thereon, all
merchandise returned and all other dealings therewith, and Debtor will make the
same available to the Secured Party, at Debtor's own cost and expense, at any
and all reasonable times during the existence of an Event of Default upon demand
of the Secured Party. Subject to the terms of the Senior Indebtedness, Debtor
shall, at Debtor's own cost and expense, deliver the Receivables (including,
without limitation, all documents evidencing the Receivables) and such books and
records to the Secured Party or to its representatives upon its demand at any
time during the existence of an Event of Default and, if prior to the Maturity
Date, Acceleration. If the Secured Party shall so request during the existence
of an Event of Default, Debtor shall legend, in form and manner satisfactory to
the Secured Party, the Receivables and other books, records and documents of
Debtor evidencing or pertaining to the Receivables with an appropriate reference
to the fact that the Receivables have been assigned to the Secured Party and
that the Secured Party has a security interest therein, subject to the Senior
Indebtedness.
(c) Except in the ordinary course of business prior to an Event of Default
and, if prior to the Maturity Date, Acceleration, Debtor will not rescind or
cancel any indebtedness evidenced by any Receivable or modify any term thereof
or make any adjustment with respect thereto, or extend or renew the same, or
compromise or settle any dispute, claim, suit or legal proceeding relating
thereto, or sell any Receivable or interest therein, without the prior written
consent of the Secured Party, except that, subject to the prior approval of a
majority of the independent directors of Debtor's Board of Directors, Debtor may
grant discounts in connection with the prepayment of any Receivable in an amount
which is customary in the line of business in which Debtor is engaged and
consistent with Debtor's past practices.
(d) Debtor will duly fulfill all material obligations on its part to be
fulfilled under or in connection with the Receivables and, subject to the terms
of the Senior Indebtedness, will do nothing to impair the rights of the Secured
Party in the Receivables.
(e) Debtor shall endeavor to collect or cause to be collected from the
account debtor named in each Receivable, as and when due (including, without
limitation, Receivables which are delinquent, such Receivables to be collected
in accordance with generally accepted lawful collection procedures) any and all
amounts owing under or on account of such Receivable, and credit forthwith upon
receipt thereof all such amounts as are so collected to the outstanding balance
of such Receivable. The costs and expenses (including attorney's fees) of such
collection shall be borne by Debtor.
(f) If any of the Receivables becomes evidenced by an Instrument (other
than a check received in payment of a Receivable and deposited in the ordinary
15
course of business), Debtor will notify the Secured Party thereof, and, upon
request by the Secured Party, promptly deliver such Instrument to the Secured
Party appropriately endorsed to the order of the Secured Party as further
security for the satisfaction in full of the Secured Obligations.
(g) Subject to the terms of the Senior Indebtedness, upon request of the
Secured Party, at any time when an Event of Default and, if prior to the
Maturity Date, Acceleration shall exist, Debtor shall promptly notify (in
manner, form and substance reasonably satisfactory to the Secured Party) all
Persons who are at any time obligated under any Receivable that the Secured
Party possesses a Security Interest in such Receivable and that all payments in
respect thereof are to be made to such account as the Secured Party directs.
Section 6. Special Provisions Concerning Equipment. Subject to the terms of
the Senior Indebtedness, Debtor will do nothing to impair the rights of the
Secured Party in the Equipment. Debtor shall cause the Equipment to at all times
constitute and remain personal property. Debtor retains all liability and
responsibility in connection with the Equipment and the liability of Debtor to
pay the Secured Obligations shall in no way be affected or diminished by reason
of the fact that such Equipment may be lost, destroyed, stolen, damaged or for
any reason whatsoever unavailable to Debtor.
Section 7. Financing Statements; Documentary Stamp Taxes.
(a) Debtor will, at its own expense, make, execute, endorse, acknowledge,
file and/or deliver to the Secured Party from time to time such lists,
descriptions and designations of Inventory, warehouse receipts, bills of lading,
documents of title, vouchers, invoices, schedules, confirmatory assignments,
conveyances, financing statements, transfer endorsements, powers of attorney,
certificates, reports and other assurances or instruments and take such further
steps relating to the Collateral and other property or rights covered by the
Security Interest hereby granted, which the Secured Party reasonably deems
appropriate or advisable to perfect, preserve or protect its Security Interest
in the Collateral. Debtor hereby constitutes the Secured Party its
attorney?in?fact to execute and file in the name and on behalf of Debtor such
additional financing statements as the Secured Party may reasonably request,
such acts of such attorney being hereby ratified and confirmed; such power,
being coupled with an interest, is irrevocable until the Secured Obligations are
paid in full. Further, to the extent permitted by applicable law, Debtor
authorizes the Secured Party to file any such financing statements without the
signature of Debtor. Debtor will pay all applicable filing fees and related
expenses in connection with any such financing statements.
(b) Debtor agrees to procure, pay for, affix to any and all documents and
cancel any documentary tax stamps required by and in accordance with, applicable
law and Debtor will indemnify and hold the Secured Party harmless against any
liability (including interest and penalties) in respect of such documentary
stamp taxes.
Section 8. Termination of this Agreement. This Agreement shall terminate
upon the Termination Date and the Agent, at the request and expense of Debtor,
will promptly execute and deliver to Debtor a proper instrument or instruments
(including Uniform Commercial Code termination statements on Form UCC-3)
acknowledging the satisfaction and termination of this Agreement, and will duly
assign, transfer and deliver to Debtor (without recourse and without
16
representation and warranty) such of the collateral as may be in the possession
of the Agent and as has not thereto been sold or otherwise applied or released
pursuant to this Agreement.
Section 9. Special Provisions Concerning Remedies and Sale. Subject to the
terms of the Senior Indebtedness, in addition to any rights and remedies now or
hereafter granted under applicable law and not by way of limitation of any such
rights and remedies, during the existence of an Event of Default and, if prior
to the Maturity Date, Acceleration, the Secured Party shall have all of the
rights and remedies of a secured party under the NYUCC as enacted in any
applicable jurisdiction in addition to the rights and remedies provided herein,
in the Notes and in any other agreement executed in connection with the Notes
whereby Debtor has granted any Lien to the Secured Party. Subject to the terms
of the Senior Indebtedness, without in any way limiting the foregoing, during
the existence of an Event of Default and, if prior to the Maturity Date,
Acceleration, upon the giving of notice to Debtor of Secured Party's intent to
pursue any one or all of the following or any other remedies the Secured Party
shall have the right, in the name of Debtor or in the name of the Secured Party
or otherwise:
(i) to ask for, demand, collect, receive, compound and give
acquittance for the Receivables or any part thereof;
(ii) to extend the time of payment of, compromise or settle for cash,
credit or otherwise, and upon any terms and conditions, any of the
Receivables;
(iii) to endorse the name of Debtor on any checks, drafts or other
orders or instruments for the payment of moneys payable to Debtor
which shall be issued in respect of any Receivable;
(iv) to file any claims, commence, maintain or discontinue any
actions, suits or other proceedings deemed by the Secured Party
necessary or advisable for the purpose of collecting or enforcing
payment of any Receivable;
(v) to make test verifications of the Receivables or any portion
thereof;
(vi) to notify any or all account debtors under any or all of the
Receivables to make payment thereof directly to the Secured Party for
the account of the Secured Party and to require Debtor to forthwith
give similar notice to the account debtors;
(vii) to require Debtor forthwith to account for and transmit to the
Secured Party in the same form as received all proceeds (other than
physical property) of collection of Receivables received by Debtor
and, until so transmitted, to hold the same in trust for the Secured
Party and not commingle such proceeds with any other funds of Debtor;
(viii) to take possession of any or all of the Collateral and, for
that purpose, to enter, with the aid and assistance of any Person or
Persons and with or without legal process, any premises where the
Collateral, or any part thereof, are, or may be, placed or assembled,
and to remove any of such Collateral;
17
(ix) to execute any instrument and do all other things necessary and
proper to protect and preserve and realize upon the Collateral and the
other rights contemplated hereby;
(x) upon notice to such effect, to require Debtor to deliver, at
Debtor's expense, any or all Collateral to the Secured Party at a
place designated by the Secured Party;
(xi) without obligation to resort to other security, at any time and
from time to time, to sell, re-sell, assign and deliver all or any of
the Collateral, in one or more parcels at the same or different times,
and all right, title and interest, claim and demand therein and right
of redemption thereof, at public or private sale, for cash, upon
credit or for future delivery, and at such price or prices and on such
terms as the Secured Party may determine, with the amounts realized
from any such sale to be applied to the Secured Obligations in the
manner determined by the Secured Party;
(xii) to cause Debtor not to make any further use of the Trademarks or
Patents or any xxxx similar thereto and/or Copyrights for any purpose;
(xiii) upon 10 days' prior notice to Debtor, to license, whether
general, special or otherwise, and whether on an exclusive or
nonexclusive basis, any of the Patents or Trademarks, throughout the
world for such term or terms, on such conditions, and in such manner,
as the Secured Party shall in its sole discretion determine;
(xiv) to enforce, at any time (without assuming any liability or
obligation thereunder), against any licensee or sublicensee, all
rights and remedies of Debtor in, to and under any one or more license
agreements with respect to the Intellectual Property, and take or
refrain from taking any action under any thereof, and Debtor hereby
releases the Secured Party from, and agrees to hold the Secured Party
free and harmless from and against any claims arising out of, any
action taken or omitted to be taken with respect to any such license
agreement;
(xv) upon 10 days' prior notice to Debtor, to assign, sell, or
otherwise dispose of, the Intellectual Property or any part thereof,
either with or without special or other conditions or stipulations,
with power to buy the Intellectual Property or any part of it, and
with power also to execute assurances, and do all other acts and
things for completing the assignment, sale or disposition which the
Secured party shall, in its sole discretion, deem appropriate or
proper; and
(xvi) in addition to the foregoing, in order to implement the
assignment, sale or other disposal of any of the Intellectual Property
pursuant to this Agreement, the Secured Party may, at any time,
pursuant to the authority granted in the Power of Attorney described
herein (such authority becoming effective on the occurrence or
continuation as hereinabove provided of an Event of Default), execute
and deliver on behalf of the applicable Debtor, one or more
instruments of assignment of the Patents or Trademarks (or any
18
application or registration thereof), in form suitable for filing,
recording or registration in any country. Debtor agrees to pay when
due all reasonable costs incurred in any such transfer of the Patents
or Trademarks, including any taxes, fees and reasonable attorneys'
fees, and all such costs shall be added to the Secured Obligations.
In the event of any license, assignment, sale or other disposition of the
Intellectual Property, or any of it, after the occurrence or continuation as
hereinabove provided of an Event of Default, Debtor shall supply its know-how
and expertise relating to the manufacture and sale of the products bearing or in
connection with the Trademarks or Patents, and its customer lists and other
records relating to the Trademarks or Patents and to the distribution of said
products, to the Secured Party or its designee.
The Secured Party shall not be obligated to do any of the acts hereinabove
authorized, but in the event that the Secured Party elects to do any such act,
the Secured Party shall not be responsible to Debtor except for its gross
negligence or willful misconduct.
(a) The Secured Party may take legal proceedings for the appointment of a
receiver or receivers (to which the Secured Party shall be entitled as a matter
of right) to take possession of the Collateral pending the sale thereof pursuant
either to the powers of sale granted by this Agreement or to a judgment, order
or decree made in any judicial proceeding for the foreclosure or involving the
enforcement of this Agreement. If, after the exercise of any or all of such
rights and remedies, any of the Secured Obligations shall remain unpaid, Debtor
shall remain liable for any deficiency. After the indefeasible payment in full
of the Secured Obligations, any proceeds of the Collateral received or held by
the Secured Party shall be turned over to Debtor and the Collateral shall be
reassigned to Debtor by the Secured Party without recourse to the Secured Party
and without any representations, warranties or agreements of any kind.
(b) Upon any sale of any of the Collateral, whether made under the power of
sale hereby given or under judgment, order or decree in any judicial proceeding
for the foreclosure or involving the enforcement of this Agreement:
(i) the Secured Party may, to the extent permitted by law, bid for and
purchase the property being sold, and upon compliance with the terms
of sale may hold, retain and possess and dispose of such property in
its own absolute right without further accountability, and may, in
paying the purchase money therefor, deliver any Notes or claims for
interest thereon and any other instruments evidencing the Secured
Obligations or agree to the satisfaction of all or a portion of the
Secured Obligations in lieu of cash in payment of the amount which
shall be payable thereon, and the Notes and such instruments, in case
the amounts so payable thereon shall be less than the amount due
thereon, shall be returned to the Secured Party after being
appropriately stamped to show partial payment;
(ii) the Secured Party may make and deliver to the purchaser or
purchasers a good and sufficient deed, xxxx of sale and instrument of
assignment and transfer of the property sold;
19
(iii) the Secured Party is hereby irrevocably appointed the true and
lawful attorney?in?fact of Debtor in its name and stead, to make all
necessary deeds, bills of sale and instruments of assignment and
transfer of the property thus sold and for such other purposes as are
necessary or desirable to effectuate the provisions (including,
without limitation, this Section 9) of this Agreement, and for that
purpose it may execute and deliver all necessary deeds, bills of sale
and instruments of assignment and transfer, and may substitute one or
more Persons with like power, Debtor hereby ratifying and confirming
all that its said attorney, or such substitute or substitutes, shall
lawfully do by virtue hereof; but if so requested by the Secured Party
or by any purchaser, Debtor shall ratify and confirm any such sale or
transfer by executing and delivering to the Secured Party or to such
purchaser all property, deeds, bills of sale, instruments or
assignment and transfer and releases as may be designated in any such
request;
(iv) all right, title, interest, claim and demand whatsoever, either
at law or in equity or otherwise, of Debtor of, in and to the property
so sold shall be divested; such sale shall be a perpetual bar both at
law and in equity against Debtor, its successors and assigns, and
against any and all Persons claiming or who may claim the property
sold or any part thereof from, through or under Debtor, its successors
or assigns;
(v) the receipt of the Secured Party or of the officer thereof making
such sale shall be a sufficient discharge to the purchaser or
purchasers at such sale for his or their purchase money, and such
purchaser or purchasers, and his or their assigns or personal
representatives, shall not, after paying such purchase money and
receiving such receipt of the Secured Party or of such officer
therefor, be obliged to see to the application of such purchase money
or be in any way answerable for any loss, misapplication or
non-application thereof; and
(vi) to the extent that it may lawfully do so, and subject to any
legal requirement that the Secured Party act in a commercially
reasonable manner, Debtor agrees that it will not at any time insist
upon, or plead, or in any manner whatsoever claim or take the benefit
or advantage of, any appraisement, valuation, stay, extension or
redemption laws, or any law permitting it to direct the order in which
the Collateral or any part thereof shall be sold, now or at any time
hereafter in force, which may delay, prevent or otherwise affect the
performance or enforcement of this Agreement, the Notes or any other
agreement executed in connection with the Notes whereby Debtor has
granted any Lien to the Secured Party, and Debtor hereby expressly
waives all benefit or advantage of any such laws and covenants that it
will not hinder, delay or impede the execution of any power granted or
delegated to the Secured Party in this Agreement, but will suffer and
permit the execution of every such power as though no such laws were
in force. In the event of any sale of Collateral pursuant to this
Section, the Secured Party shall, at least 10 days before such sale,
give Debtor written, telecopied or telex notice of its intention to
sell.
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Section 10. Application of Moneys.
(a) Except as otherwise provided herein or in the Notes, all moneys which
the Secured Party shall receive, in accordance with the provisions hereof, shall
be applied (to the extent thereof) in the following manner: First, to the
payment of all costs and expenses reasonably incurred in connection with the
administration and enforcement of, or the preservation of any rights under, this
Agreement or any of the reasonable expenses and disbursements of the Secured
Party (including, without limitation, the reasonable fees and disbursements of
its counsel and agents); Second, to the payment of all Secured Obligations
arising out of the Notes in accordance with the terms of the Notes and, if not
therein provided, in such order as the Secured Party may determine; and Third,
to the payment of all other Secured Obligations in such order as the Secured
Party may determine.
(b) If after applying any amounts which the Secured Party has received in
respect of the Collateral any of the Secured Obligations remain unpaid, Debtor
shall continue to be liable for any deficiency, together with interest.
(c) If after applying any amounts which the Secured Party has received in
respect of the Collateral, there is a surplus, any such surplus shall be paid to
Debtor, its successors or assigns.
Section 11. Fees and Expenses, etc. Any and all fees, costs and expenses of
whatever kind or nature, including but not limited to the reasonable attorneys'
fees and legal expenses incurred by the Secured Party in connection with
enforcement of its rights under this Agreement, the filing or recording of any
documents (including all taxes in connection therewith) in public offices, the
payment or discharge of any taxes, counsel fees, maintenance fees, fees and
other costs relating to the encumbrances or otherwise protecting, maintaining,
preserving the Collateral, or in defending or prosecuting any actions or
proceedings arising out of or related to the Collateral, shall be borne and paid
by Debtor on written demand by the Secured Party setting forth in reasonable
detail the nature of such expenses and until so paid shall be added to the
principal amount of the Secured Obligations and shall bear interest at the rate
accruing thereon. In addition, Debtor will pay, and indemnify and hold the
Secured Party 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 with respect to the Collateral,
including (without limitation) claims of patent or trademark infringement and
any claim of unfair competition or anti?trust violation, other than liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements arising as a result of Secured Party's gross
negligence or willful misconduct.
Section 12. Power of Attorney.
Concurrently with the execution and delivery hereof, Debtor is executing
and delivering to the Secured Party, in the form of Exhibit 2 hereto, three
originals of a Power of Attorney for the implementation of the assignment, sale
or other disposal of the Collateral, including the Trademarks and Patents
pursuant to this Agreement and Debtor hereby releases the Secured Party from any
claims, causes of action and demands at any time arising out of or with respect
to any actions taken or omitted to be taken by the Secured Party under the
powers of attorney granted herein, other than actions taken or omitted to be
taken through the gross negligence or willful misconduct of the Secured Party.
21
Section 13. Miscellaneous.
(a) All notices, communications and distributions hereunder shall be in
writing (including telecopied communication) and mailed by certified mail,
telecopied, personally delivered or delivered by Federal Express or other
reputable overnight courier service, if to Debtor addressed to it at its address
set forth opposite its signature below, if to the Secured Party, addressed to it
at its address set forth opposite its signature below, or as to either party at
such other address as shall be designated by such party in a written notice to
such other party complying as to delivery with the terms of this Section. All
such notices and other communications shall be effective (i) if mailed by
certified mail, three days after the date of deposit thereof with the U.S.
Postal Service, properly addressed with postage prepaid, (ii) if telecopied,
upon receipt by the addressee, (iii) if personally delivered, upon such delivery
and (iv) if delivered by overnight courier service, on the business day
following delivery thereof to such courier service in time for next-business-day
delivery.
(b) No delay on the part of the Secured Party in exercising any of its
rights, remedies, powers and privileges hereunder or partial or single exercise
thereof, shall constitute a waiver thereof. None of the terms and conditions of
this Agreement may be changed, waived, modified or varied in any manner
whatsoever unless in writing duly signed by Debtor and the Secured Party. No
notice to or demand on Debtor in any case shall entitle Debtor to any other or
further notice or demand in similar or other circumstances or constitute a
waiver of any of the rights of the Secured Party to any other or further action
in any circumstances without notice or demand.
(c) The obligations of Debtor hereunder shall remain in full force and
effect without regard to, and shall not be impaired by, (i) any exercise or
non?exercise, or any waiver of, any right, remedy, power or privilege under or
in respect of the Notes, this Agreement or any other agreement executed in
connection with the Notes whereby Debtor has granted any Lien to the Secured
Party or any other agreement executed in connection with any of the foregoing,
the Secured Obligations or any security for any of the Secured Obligations; or
(ii) any amendment to or modification of any of the foregoing; whether or not
Debtor shall have notice or knowledge of any of the foregoing. The rights and
remedies of the Secured Party herein provided are cumulative and not exclusive
of any rights or remedies which the Secured Party would otherwise have under all
applicable law.
(d) This Agreement shall be binding upon Debtor and its successors and
assigns and shall inure to the benefit of the Secured Party and its successors
and assigns, except that Debtor may not transfer or assign any of its
obligations, rights or interest hereunder without the prior written consent of
the Secured Party and any such purported assignment by Debtor shall be void. All
agreements, representations and warranties made herein shall survive the
execution and delivery of this Agreement.
(e) The descriptive headings of the several sections of this Agreement are
inserted for convenience only and shall not in any way affect the meaning or
construction of any provision of this Agreement.
(f) Any provision of this Agreement which is prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or non-enforceability without invalidating the remaining
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provisions hereof, and any such prohibition or non-enforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
(g) All rights, remedies and powers provided by this Agreement may be
exercised only to the extent that the exercise thereof does not violate any
applicable provision of law, and the provisions hereof are intended to be
subject to all applicable mandatory provisions of law that may be controlling
and to be limited to the extent necessary so that they will not render this
Agreement invalid, unenforceable in whole or in part or not entitled to be
recorded, registered or filed under the provisions of any applicable law.
(h) This Agreement and the rights and obligations of the parties hereunder
shall be construed in accordance with and be governed by the laws of the State
of New York except to the extent that matters of title, or creation, perfection
and priority of the Security Interests created hereby, or procedural issues of
foreclosure are required to be governed by the laws of the state in which the
Collateral, or part thereof, is located.
(i) It is expressly agreed, anything herein, in the Notes or in any other
agreement or instrument executed in connection with the Notes to the contrary
notwithstanding, that Debtor shall remain liable to perform all of the
obligations, if any, assumed by it with respect to the Collateral and the
Secured Party shall not have any obligations or liabilities with respect to any
Collateral by reason of or arising out of this Agreement, nor shall the Secured
Party be required or obligated in any manner to perform or fulfill any of the
obligations of Debtor under or pursuant to any or in respect of any Collateral.
(j) This Agreement may be executed in any number of counterparts and by the
different parties hereto on separate counterparts, each of which when so
executed and delivered shall be an original, but all of which counterparts taken
together shall be deemed to constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered by their duly authorized officers as of the date first
above written.
COMDIAL COPORATION, as Debtor
By: ______________________________________
Name: Xxxx X. Xxxxx
Title: Chief Financial Officer
COMMONWEALTH ASSOCIATES, L.P.
Agent, as Secured Party
By: Commonwealth Associates Management
Company, Inc., its general partner
By: ______________________________________
Name: Xxxxxx Xxxxx
Title: Secretary and CFO
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