1
SECURITY AGREEMENT AND ASSIGNMENT
THIS SECURITY AGREEMENT AND ASSIGNMENT (THE "AGREEMENT") is dated as of
July 7, 1999 and is entered into by and among SHARED TECHNOLOGIES CELLULAR,
INC., a corporation organized under the laws of the State of Delaware, with its
principal place of business at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (the "Debtor") and STATE STREET BANK AND TRUST COMPANY, a
Massachusetts trust company with its principal place of business located at ▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (the "Secured Party").
NOW THEREFORE, in consideration of the provisions herein contained, and
for other good and valuable consideration, the receipt and adequacy of which is
hereby acknowledged, the parties hereto agree as follows:
I. DEFINITIONS
1.1. "ACCOUNTS" shall mean "accounts" within the meaning of SECTION
9-106 of the Code and, to the extent not otherwise included therein, all
Contract Rights, accounts receivable, instruments, documents and chattel paper;
any other obligations or indebtedness owed to the Debtor from whatever sources
arising; all rights of the Debtor to receive any payments in money or kind; all
guarantees of Accounts and security therefor; all cash or non-cash Proceeds of
all of the foregoing; all of the right, title and interest of the Debtor in and
with respect to the goods, services or other property which gave rise to or
which secure any of the accounts and insurance policies and proceeds relating
thereto, and all of the rights of the Debtor as unpaid sellers of goods or
services, including, without limitation, the rights of stoppage in transit,
replevin, reclamation and resale; and all of the foregoing, whether now existing
or hereafter created or acquired.
1.2. "CODE" shall mean the Uniform Commercial Code as the same may be
in effect from time to time in the Commonwealth of Massachusetts.
1.3. "COLLATERAL" shall have the meaning assigned to it in SECTION 2.1
of this Agreement.
1.4. "CONTRACT RIGHTS", shall mean all rights to payment or performance
under a Contract not yet earned by performance and not evidenced by an
instrument or chattel paper, for which monies are due or to become due for
services rendered or goods sold.
1.5. "CONTRACT" OR "CONTRACTS" shall mean all contracts, agreements and
other undertakings of any nature whatsoever pursuant to which the Debtor has
entered into a sale or agreement to sell or provide goods or services now or in
the future, and for which monies are due or to become due.
2
1.6. "DEBTOR'S ADDRESS" shall mean any of ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇
▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ and Suite 1100, ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, and ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇.
1.7. "DOCUMENTS" shall mean "documents" within the meaning of SECTION
9-105(1)(f) of the Code.
1.8. "EQUIPMENT" shall include "equipment" within the meaning of
SECTION 9-109(2) of the Code and, to the extent not otherwise included therein,
all machinery, equipment, furniture, parts, tools and dies, of every kind and
description, of the Debtor now owned or hereafter acquired by the Debtor, and
used or acquired for use in the business(es) of the Debtor, together with all
accessions thereto and all substitutions and replacements thereof and parts
therefor; and all cash or non-cash Proceeds thereof.
1.9. "EVENT OF DEFAULT" shall mean an Event of Default set forth in
SECTION 7.1 hereof.
1.10. "FIXTURES" shall mean "fixtures" within the meaning of SECTION
9-313(1)(a) of the Code and, to the extent not otherwise included therein, all
goods which are so related to particular real estate that an interest in them
arises under real estate law and all accessions thereto, replacements thereof
and substitutions therefor, including, but not limited to, plumbing, heating and
lighting apparatus, mantels, floor coverings, furniture, furnishings, draperies,
screens, storm windows and doors, awnings, shrubbery, plants, boilers, tanks,
machinery, stoves, gas and electric ranges, wall cabinets, appliances, furnaces,
dynamos, motors, elevators and elevator machinery, radiators, blinds and all
laundry, refrigerating, gas, electric, ventilating, air-refrigerating,
air-conditioning, incinerating and sprinkling and other fire prevention or
extinguishing equipment of any kind and nature and any replacements, accessions
and additions thereto, Proceeds thereof and substitutions therefor.
1.11. "GENERAL INTANGIBLES" shall mean "general intangibles" within the
meaning of SECTION 9-106 of the Code and, to the extent they arise from the sale
of goods or services or are used in connection with the production of Inventory,
all tax refunds and other claims of the Debtor against any Governmental
Authority, and all choses in action, assignment of proofs of claim in bankruptcy
proceedings, web sites, domain names, insurance proceeds, goodwill, patents,
copyrights, trademarks, trade names, customer lists, formulae, trade secrets,
all general intangibles and documents and Investment Property, whether now owned
or hereafter acquired, service marks, other intellectual property rights,
permits, rights, franchises, contract rights and other intangible property,
licenses, designs, computer software, research and literary rights, all
instruments, securities, Investment Property, cash and property, owned by the
Debtor or in which the Debtor has an interest, which now or hereafter at any
time are in the possession and control of the Secured Party or are in transit by
mail or carrier to or from the Secured Party
-2-
3
or are in the possession of any third party acting on behalf of the Secured
Party, without regard to whether the Secured Party received the same in pledge,
for safekeeping, as agent for collection or transmission or otherwise or whether
the Secured Party had conditionally released the same.
1.12. "GOVERNMENTAL AUTHORITY" shall mean any instrumentality
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government, and any corporation or other entity
owned or controlled (through stock or capital ownership or otherwise) by any of
the foregoing.
1.13. "INVENTORY" shall mean "inventory" within the meaning of SECTION
9-109 (4) of the Code, and to the extent not otherwise included therein, all
goods, merchandise and other personal property now owned or hereafter acquired
by the Debtor which are held for sale or lease, or are furnished or to be
furnished under any contract of service or are raw materials, work-in-process,
supplies or materials used or consumed in the Debtor's business(es), and all
products thereof, and all substitutions, replacements, additions or accessions
therefor and thereto; and any cash or non-cash Proceeds of all of the foregoing,
including insurance proceeds.
1.14. "INVESTMENT PROPERTY" shall mean "investment property" within the
meaning of SECTION 9-116 of the Code.
1.15. "LIEN" shall mean any mortgage, pledge, hypothecation,
assignment, security interest, lien, charge or encumbrance, or preference,
priority or other security agreement or preferential arrangement of any kind or
nature whatsoever (including, without limitation, any conditional sale or other
title retention agreement, any financing lease having substantially the same
economic effect as any of the foregoing, and the filing of, or agreement to
give, any financing statement under the Uniform Commercial Code or comparable
law of any jurisdiction).
1.16. "LOAN AGREEMENT" shall mean that certain Loan Agreement of even
date herewith between the Debtor and the Secured Party, as the same may from
time to time be amended.
1.17. "OBLIGATIONS" means all indebtedness, obligations and liabilities
of the Debtor to the Secured Party of every kind and description, direct or
indirect, secured or unsecured, joint or several, absolute or contingent, due or
to become due, whether for payment or performance, now existing or hereafter
arising, regardless of how the same arise or by what instrument, agreement or
book account they may be evidenced, or whether or not evidenced by any
instrument, agreement or book account, including, without limitation, all
obligations of the Debtor under the Loan Agreement and the Note, all
undertakings to take or refrain from taking any action, all indebtedness,
liabilities or obligations owing from the Debtor to others which the Secured
Party may have obtained
-3-
4
by purchase, negotiation, discount, assignment or otherwise, and all interest,
taxes, fees, charges, expenses and attorneys' fees chargeable to the Debtor or
incurred by the Secured Party under this Agreement, or any other document or
instrument delivered in connection herewith.
1.18. "PERMITTED LIENS" means:
(a) Liens securing the payment of taxes, either (i) not yet
due or (ii) the validity of which is being contested in good faith by
appropriate proceedings, and as to which adequate reserves shall have been set
aside on the Debtor's books;
(b) Liens permitted by the Loan Agreement; and
(c) Liens securing the Debtor's payment and performance in
accordance with the terms of the Note and the Loan Agreement.
1.19. "PROCEEDS" shall mean "proceeds" as defined in the Code and, to
the extent not otherwise included therein, (a) any and all proceeds of any
insurance, indemnity, warranty, guaranty, or other agreement, instrument or
undertaking similar to any of the foregoing, payable to the Debtor or any of
them from time to time with respect to any of the Collateral, (b) any and all
payments (in any form whatsoever) made or due and payable to the Debtor from
time to time in connection with any requisition, confiscation, condemnation,
seizure or forfeiture of all or any part of the Collateral, (c) any and all
other amounts from time to time paid or payable under or in connection with any
of the Collateral, and (d) any products or rents of any of the Collateral.
1.20. "NOTE" shall mean that certain Revolving Credit Note of the
Debtor payable to the order of the Secured Party of even date herewith in the
principal amount of $10,000,000.
1.21. "SECURED PARTY'S ADDRESS" shall mean ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇▇▇ ▇. St. ▇▇▇▇, Vice President.
II. GRANT OF SECURITY INTEREST
-4-
5
2.1. COLLATERAL AND GRANT OF SECURITY INTEREST. As collateral security
for the payment and performance of all of the Obligations, the Debtor hereby
grants, assigns, conveys, pledges and transfers to the Secured Party a
continuing security interest in the following assets and properties of the
Debtor, any and all substitutions therefor and replacements thereof, and any and
all additions and accessions thereto whether now owned or hereafter acquired by
the Debtor or in which the Debtor may now have or hereafter acquire an interest,
wherever located (all of which are hereinafter collectively referred to as the
"Collateral"):
(a) All Accounts now existing or arising in the future,
whether in the ordinary course of the Debtor's business(es), in connection with
the sale of Inventory or otherwise (including, without limitation, (i) all
monies due and to become due under any Contract or Account, (ii) any damages
arising out of or for a breach or default with respect to any such Contract or
Account, (iii) all other amounts from time to time paid or payable under or in
connection with any such Contract or Account and (iv) the right of the Debtor to
terminate any Contract or to perform and to exercise all remedies thereunder);
and
(b) All Inventory, whether now owned or hereafter acquired;
(c) All Equipment and Fixtures of the Debtor, and all other
tangible property of the Debtor, whether now owned or hereafter acquired, and
wherever located, and all accessions and additions thereto;
(d) All General Intangibles, Documents and Investment
Property, whether now owned or hereafter acquired;
(e) All ledger sheets, files, records, documents and
instruments (including, without limitation, computer programs, tapes and related
data processing software) evidencing an interest in or relating to the foregoing
Collateral; and
(f) All Proceeds of any and all of the foregoing.
2.2. POSSESSION OF THE COLLATERAL. Until the occurrence of an Event of
Default and the expiration of any applicable cure period, the Debtor may have
possession of the Collateral and use the same in any lawful manner not
inconsistent with this Agreement or with the terms or conditions of any policy
of insurance thereon.
III. REPRESENTATIONS AND WARRANTIES
The Debtor hereby represents and warrants to the Secured Party, and
such representations and warranties shall be continuing representations and
warranties so long as any Obligations shall remain outstanding, as follows:
-5-
6
3.1. TITLE TO COLLATERAL. Except for the security interest granted
hereby and the Permitted Liens, the Debtor has, or in the case of after-acquired
Collateral will have, good and marketable title to the Collateral, free from any
adverse lien, security interest or encumbrance; and the Debtor will defend the
Collateral against all claims and demands of all persons claiming the same or
any interest therein.
3.2. ACCURACY OF STATEMENTS. All warranties, representations,
statements and other information furnished to the Secured Party by or on behalf
of the Debtor are, or will be when the same are made or furnished, accurate and
complete in all material respects.
3.3. LOCATION OF COLLATERAL. The Collateral, to the extent possible, is
or will be kept at the Debtor's business location at the Debtor's Address and
the Debtor will give the Secured Party ten (10) days prior written notice of any
change in, addition to or discontinuance of the location where the Collateral is
kept, and, unless otherwise provided herein, the Debtor will not remove any
Collateral from such locations without the prior written consent of the Secured
Party.
3.4. LANDLORD WAIVERS. If the Collateral or any part thereof has been
attached to real estate prior to the perfection of the security interest granted
hereby, the Debtor will, upon demand of the Secured Party, use their best
efforts to furnish to the Secured Party a disclaimer or disclaimers satisfactory
to the Secured Party and signed by all persons having an interest in such real
estate.
3.5. FINANCING STATEMENTS. Except as disclosed in the schedules to the
Loan Agreement, no financing statement covering any of the Collateral or any of
the proceeds thereof is on file in any public office, except financing
statements in favor of the Secured Party; and, at the request of the Secured
Party, the Debtor will join with the Secured Party in executing one or more
financing statements pursuant to the Code or comparable law of any jurisdiction,
the form and substance of which will be satisfactory to the Secured Party, and
will pay the cost of filing the same in all public offices wherever filing is
deemed by the Secured Party to be necessary or desirable.
3.6. TRADE NAMES. Except as set forth on Schedule 3.6 hereto, the
Debtor: (a) does not utilize any trade names in connection with the operation of
its businesses; and (b) has not changed its name, been the surviving entity in a
merger or acquired any businesses.
3.7. LEGALLY ENFORCEABLE AGREEMENT. To the knowledge of the Debtor,
after the exercise of reasonable due diligence, this Agreement and any document
or instrument delivered in connection herewith, and the transactions
contemplated hereby or thereby, have been duly authorized, executed and
delivered; and this Agreement and such other documents and instruments
constitute valid and legally binding obligations of the Debtor and are
enforceable against the Debtor in accordance with their respective terms, except
-6-
7
to the extent that such enforcement may be limited by applicable bankruptcy,
insolvency and similar laws affecting creditors' rights generally and except as
certain remedies thereunder may be subject to equitable principles.
IV. GENERAL COVENANTS
The Debtor hereby covenants and agrees that so long as any of the
Obligations remain outstanding:
4.1. SALE OF COLLATERAL. Except as provided in SECTION 5.1.1 hereof,
the Debtor will not sell or offer to sell or otherwise transfer the Collateral
or any interest therein without the prior written consent of the Secured Party.
Notwithstanding the foregoing, and without limitation thereto, the Debtor shall
be entitled to receive any dividends, distributions or other payments to Debtor
pursuant to the SmarTalk Claims (defined in SECTION 6.4 hereof) so long as
Debtor is not in default hereunder and so long as Debtor retains all of such
dividends, distributions or payments for use as working capital in the Debtor's
business.
4.2. INSURANCE. The Debtor shall possess and maintain insurance at all
times as set forth in Section 5.13 of the Loan Agreement.
4.3. TAXES AND ASSESSMENTS. The Debtor will pay promptly when due all
taxes, assessments and governmental charges or levies imposed upon the
Collateral or with respect to its income or the profits therefrom, as well as
all claims thereon of any kind (including claims for labor, materials and
supplies), except that the Debtor shall not be required to pay such charge when
due if:
(a) the validity thereof is being contested in good faith by
appropriate proceedings;
(b) such proceedings do not permit any sale, forfeiture or
loss of any of the Collateral or any interest therein; and
(c) such charge is adequately reserved against in accordance
with generally accepted accounting principles consistently applied.
4.4. DEFENSE OF COLLATERAL. The Debtor 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, claim or right on or to the
Collateral, other than the Lien created hereunder and the Permitted Liens, and
will defend the right, title and interest of the Secured Party in and to any of
the Collateral against the Liens, claims and demands of all other parties.
-7-
8
4.5. ACCESS. The Secured Party shall, at reasonable times and upon
reasonable notice, have complete access, during normal business hours, to all of
the books, correspondence and records of the Debtor relating to the Collateral.
The Secured Party or its representatives may examine such books, correspondence
and records, take extracts therefrom and make photocopies thereof, and the
Debtor hereby agrees to render to the Secured Party, at the Debtor's cost and
expense, such clerical and other assistance as may be reasonably requested with
regard thereto. The Secured Party and its representatives shall, at reasonable
times and upon reasonable notice, have the right to enter into and upon any
premises where any of the Collateral is located for the purpose of inspecting
the same, observing its use, or otherwise protecting the Secured Party's
interest therein. So long as Debtor is not in default hereunder, such access and
inspections to be conducted quarterly, at Debtor's expense.
4.6. NOTICE OF LOSS OR DEFAULT. The Debtor will immediately notify the
Secured Party of any event causing a substantial loss or diminution in the value
of all or any material part of the Collateral and the amount or an estimate of
the amount of such loss or diminution. The Debtor shall promptly notify the
Secured Party of any condition or event which constitutes, or would constitute
with the passage of time or provision of notice or both, an Event of Default
under this Agreement, and shall promptly inform the Secured Party of any events
or changes in the financial condition of the Debtor occurring since the date of
the last financial statements of the Debtor delivered to the Secured Party,
which, individually or cumulatively when viewed in light of prior financial
statements, may result in a material adverse change in the financial condition
of the Debtor.
4.7. ADDITIONAL INSTRUMENTS. At any time and from time to time upon
request of the Secured Party, the Debtor shall execute and deliver to the
Secured Party, in form and substance satisfactory to the Secured Party, such
documents and chattel paper as the Secured Party shall deem necessary or
desirable to perfect or maintain perfected the security interest of the Secured
Party in the Collateral or which may be necessary to comply with the provisions
of the law of the Commonwealth of Massachusetts or the law of any other
jurisdiction in which the Debtor may then be conducting business or in which any
of the Collateral may be located.
-8-
9
V. SPECIFIC REPRESENTATIONS, WARRANTIES AND
COVENANTS WITH RESPECT TO THE COLLATERAL
With respect to the Collateral, the Debtor hereby represents, warrants
and covenants with the Secured Party, as follows:
5.1. INVENTORY. As to the Inventory:
5.1.1. The Debtor shall not sell, lease or otherwise transfer any
interest in the Inventory, provided that the Debtor may, until an Event of
Default occurs and any applicable cure period expires, hold, process, sell, use
or consume the Inventory in the ordinary course of its business, provided,
however, that any sale or transfer made in partial or total satisfaction of a
debt shall not be considered in the ordinary course of business.
5.1.2. The Debtor shall keep current stock, cost and sales records of
the Inventory, accurately itemizing and describing the types and quantities of
the Inventory and the cost and selling price thereof; and all books, records and
documents relating to the Inventory are and will be genuine, complete and
correct.
5.1.3. None of the Inventory is or at any time or times hereafter will
be, stored with a bailee or consignee without the prior written consent of the
Secured Party.
5.1.4. The Debtor shall, at the Secured Party's request, deliver to the
Secured Party any and all evidence of ownership of, certificates of title to or
other documents evidencing any interest in, any and all of the Inventory.
5.2. ACCOUNTS. As to the Accounts:
5.2.1. Accounts constituting a portion of the Collateral and all papers
and Documents relating thereto are genuine and in all respects what they purport
to be; the same are valid and subsisting and arise out of bona fide sales of
goods, or out of or for services heretofore rendered by the Debtor to the
account debtors and each of them; and the amount of the Accounts represented by
the Debtor's records as owing by each such account debtor, except for normal
cash discounts, is not disputed, and except for such normal cash discounts, is
not subject to any set-offs, credits, deductions or counter charges. Similar
representations and warranties will be assumed to exist as to Accounts hereafter
arising, except with regard to set-offs, credits, deductions, counter charges
and disputes as to which the Debtor gives prompt written notice to the Secured
Party.
5.2.2. Following the occurrence and during the continuance of an Event
of Default, and following the expiration of any applicable cure period, the
Secured Party shall have the right, in its own name or in the name of the
Debtor, to demand, collect, receive, ▇▇▇ for, compromise and give acquittance
for any and all amounts due or to become due on the
-9-
10
Accounts constituting a portion of the Collateral and to endorse the name of the
Debtor on all commercial paper given in payment or partial payment thereof, and
in its discretion, to file any claim or take any other action which the Secured
Party may deem necessary or appropriate to protect, preserve and realize upon
its security interest in the Accounts and the Proceeds thereof.
5.2.3. Following the occurrence and during the continuance of an Event
of Default, and following the expiration of any applicable cure period: (i) the
Secured Party shall have the right to notify any and all account debtors to make
payment thereof directly to the Secured Party; but to the extent the Secured
Party does not elect to so notify said account debtors, the Debtor shall
continue to collect the Accounts; and (ii) all proceeds of the Accounts, in
whatever form received by the Debtor, shall be immediately delivered by the
Debtor to the Secured Party in the form received by the Debtor, and until so
delivered, the Debtor agrees that all sums so collected shall be the property of
the Secured Party, held in trust by the Debtor for the Secured Party, and shall
not be commingled with the Debtor's other funds; provided, however, that the
Secured Party, in its discretion and to such extent and for such periods, if
any, as it sees fit, may authorize the Debtor to use or retain some or all of
the sums so collected from such Accounts for other purposes. Proceeds
transmitted to the Secured Party may be handled and administered by the Secured
Party in and through a remittance account or similar mechanism; but the Debtor
hereby acknowledges that the maintenance of such an account is solely for the
convenience of the Secured Party in facilitating its own operations, and that
the Debtor has not and shall not have any right, title or interest in said
account or in the amounts at any time appearing to the credit thereof. Except to
the extent the Secured Party may from time to time in its discretion release
proceeds to the Debtor for use in their respective businesses, all proceeds
received by the Secured Party shall be applied to the due and payable
indebtedness secured hereby, but the Secured Party need not apply nor give
credit for any item included in such proceeds until the Secured Party has
received final payment thereof at its office in cash or solvent credit accepted
by the Secured Party as such.
5.2.4. If any Account arises out of a purchase order or other Contract
with the United States or any other Governmental Authority, which purchase order
or Contract provides for aggregate payments to the Debtor of One Thousand
Dollars ($1,000) or more, the Debtor shall immediately notify the Secured Party
thereof in writing and shall execute any instruments furnished by the Secured
Party and reasonably necessary to provide that: (a) all monies due or to become
due under such purchase order or other Contract shall be assigned to the Secured
Party; and (b) notice of such assignment shall be given to such Governmental
Authority under the Federal Assignment of Claims Act or other applicable law or
regulation.
5.2.5. The Debtor shall provide to the Secured Party, at its request,
from time to time: (a) confirmatory assignment schedules, (b) copies of all
invoices relating to the Accounts, (c) evidence of the shipment or delivery of
the Inventory, and (d) such further
-10-
11
information and/or schedules as the Secured Party may reasonably require, all in
a form satisfactory to the Secured Party.
5.3. EQUIPMENT. As to the Equipment:
5.3.1. The Debtor shall keep and maintain all Equipment in good
operating condition and repair, shall make all necessary repairs thereto and
replacement of parts thereof so that the value and operating efficiency of such
Equipment shall at all times be maintained and preserved; and the Debtor shall
keep complete and accurate books and records with respect to the Equipment,
including maintenance records.
5.3.2. The Debtor shall deliver to the Secured Party any and all
certificates of title (and any other regulatory evidence of title) to, any and
all of the Equipment.
5.3.3. The Debtor shall not, without the prior written consent of the
Secured Party, sell, offer to sell, lease or in any other manner dispose of any
of the Equipment, other than the sale of obsolete Equipment in the ordinary
course of business.
VI. SECURED PARTY'S APPOINTMENT AS
ATTORNEY-IN-FACT
6.1. APPOINTMENT AND POWERS. The Debtor hereby irrevocably constitutes
and appoints the Secured Party, and any officer or agent thereof, with full
power of substitution, effective upon the occurrence of an Event of Default and
thereafter only so long as the same continues, as its true and lawful
attorney-in-fact with full irrevocable power and authority in the name and stead
of the Debtor or in its own name, from time to time in the Secured Party's
discretion, for the purpose of carrying out the terms of this Agreement, to take
any and all appropriate action and to execute any and all documents and
instruments which may be necessary or desirable to accomplish the purposes of
this Agreement and, without limiting the generality of the foregoing, hereby
gives the Secured Party the power and right, on behalf of the Debtor, after an
Event of Default and acceleration of the obligations under the Loan Agreement
has occurred and, if required under the terms of the Loan Agreement, notice
thereof has been given to the Debtor, to do the following:
(a) To communicate with any party to any Contract or any account
debtor with regard to any aspect of any Contract or Account and to ask, demand,
collect, receive or give acquittances and receipt for any and all monies due or
to become due under any Account or Contract and, in the name of the Debtor or
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
monies due under any Account or Contract and to file any claim or to take any
other action or proceeding in any court of law or equity or otherwise
-11-
12
deemed appropriate by the Secured Party for the purpose of collecting any and
all such monies due under any Account or Contract whenever payable;
(b) To pay or discharge taxes, Liens, security interests or
other encumbrances levied or placed on or threatened against the Collateral;
(c) To effect any required repairs to the Collateral;
(d) To obtain any insurance required pursuant to this Agreement
and to pay all or any part of the premiums therefor;
(e) To receive payment of and receipt for any and all monies,
claims and other amounts due or to become due at any time with respect to or
arising out of any Collateral;
(f) To sign and endorse 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 relating to the Collateral;
(g) 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 with respect to
any of the Collateral;
(h) To defend any suit, action or proceeding brought against the
Debtor with respect to any Collateral;
(i) To settle, compromise or adjust any suit, action or
proceeding described in clause (h) above and, in connection therewith, to give
such discharges or releases as the Secured Party may deem appropriate;
(j) 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 Secured Party was the absolute owner thereof for all
purposes, including, without limitation, the execution of assignments, bills of
sale or other instruments of conveyance or transfer with respect to the
Collateral; and
(k) To do, at the Secured Party's option and at the Debtor's
expense, at any time or from time to time, all acts or things which the Secured
Party deems necessary to protect, preserve or realize upon the Collateral and
the security interest granted by this Agreement, all as fully and effectively as
the Debtor might do.
-12-
13
6.2. IRREVOCABLE POWER OF ATTORNEY. The power of attorney granted under
SECTION 6.1 hereof is a power coupled with an interest and shall be irrevocable
until all Obligations are paid and performed in full.
6.3. THE SECURED PARTY'S LACK OF DUTY. The Debtor hereby agrees that the
powers conferred on the Secured Party hereunder are solely to protect the
Secured Party's interests in the Collateral and shall not impose any duty upon
the Secured Party to exercise any such powers.
6.4. SMARTALK CLAIM. Notwithstanding anything to the contrary in this
Agreement or any other Loan Document (as defined in the Loan Agreement), the
Debtor is expressly authorized hereby, so long as Debtor is not in default under
this Security Agreement, to retain full and complete control over the assertion,
prosecution, negotiation, settlement, compromise, release or other disposition,
whether or not in exchange for consideration, of any and all claims that it now
holds or hereafter may hold against SmarTalk TeleService, Inc. or any of the
other debtors in the jointly administered cases presently pending in the
Bankruptcy Court for the District of Delaware, captioned "In re WorldWide
Direct, Inc., et al.," Case Nos. 99-108 to 99-127, whether or not any such claim
is evidenced by one or more proofs of claim filed with the Bankruptcy Court at
any time, (collectively referred to herein as the "SmarTalk Claim"), and
including without limitation the right to retain and pay reasonable compensation
to counsel and to incur such other reasonable expenses in connection with the
foregoing as may be necessary. Upon request of Debtor in connection with any
disposition of the claim or claims referred to in the preceding sentence, or of
any portion of such claims, so long as Debtor is not in default under this
Security Agreement, Secured Party shall execute such documents and instruments
as may be reasonably be required to evidence its consent thereto, all without
the payment of any other consideration to Secured Party therefor. Debtor
acknowledges and agrees that all of the rights and authority conferred upon in
the preceding sentences are subject to Secured Party's security interest in and
lien upon all such claims and proceeds, if any, therefrom.
VII. EVENTS OF DEFAULT AND ACCELERATION
7.1. EVENTS OF DEFAULT. The occurrence of any Event of Default (as
defined in the Loan Agreement) or the breach of any terms hereunder shall
constitute an Event of Default hereunder.
7.2. ACCELERATION. If any Event of Default shall occur, then or at any
time thereafter while such Event of Default shall continue, the Secured Party
may declare all Obligations to be immediately due and payable, without notice,
protest, presentment or demand, all of which are hereby expressly waived by the
Debtor.
-13-
14
VIII. REMEDIES
8.1. IN GENERAL. If an Event of Default shall occur and be continuing
and any applicable cure period shall have lapsed and the Secured Party shall
have accelerated the Debtor's obligations under the Loan Agreement:
8.1.1. All payments received by the Debtor under or in connection with
any of the Collateral shall be held by the Debtor in trust for the Secured
Party, shall be segregated from other funds of the Debtor, and shall forthwith,
upon receipt by the Debtor, be turned over to the Secured Party in the same form
as received by the Debtor (duly endorsed by the Debtor to the Secured Party, if
required).
8.1.2. Any and all such payments so received by the Secured Party
(whether from the Debtor or otherwise) may, in the sole discretion of the
Secured Party, be held by the Secured Party as collateral security for, and/or
then or at any time thereafter, applied in whole or in part by the Secured Party
against all or any part of the Obligations, in such order as the Secured Party
shall elect. Any balance of such payments held by the Secured Party and
remaining after payment in full of all of the Obligations shall be paid over to
the Debtor or to whomsoever may be lawfully entitled to receive the same.
8.2. THE SECURED PARTY'S RIGHTS AND REMEDIES UPON ACCELERATION. The
Debtor hereby agrees that if an Event of Default shall occur and be continuing
and the Secured Party shall have accelerated the Debtor's obligations under the
Loan Agreement:
8.2.1. The Secured Party may exercise, in addition to all other rights
and remedies granted to it pursuant to this Agreement and in any other
instrument or agreement securing, evidencing or relating to the Obligations, all
rights and remedies of a Secured Party under the Code or under the applicable
law of any other jurisdiction, including, without limitation, any jurisdiction
where the Collateral may be located.
8.2.2. Without limiting the generality of the foregoing, the Secured
Party, without (to the fullest extent permitted by law) demand of performance or
other demand, advertisement or notice of any kind (except the notice specified
below of the time and place of a public or private sale) to or upon the Debtor
or any other party (all of which demands, advertisements and/or notices are
hereby expressly waived by the debtor, except the notice specified below of the
time and place of a public or private sale), may 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 a public or private sale or sales, at
any exchange or broker's board or at any of the Secured Party'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.
-14-
15
8.2.3. The Secured Party 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 of the Debtor, which right or equity is hereby
expressly waived and released by the Debtor.
8.2.4. At the Secured Party's request, the Debtor shall assemble the
Collateral and make it available to the Secured Party at a place or places which
the Secured Party shall reasonably select, whether at the Debtor's premises or
elsewhere.
8.2.5. The Secured Party shall retain the net proceeds of the Collateral
arising from any collection, sale, recovery, receipt or appropriation, after the
payment of all expenses of every kind incurred with regard thereto or incidental
to the care, safekeeping or maintenance of any or all of the Collateral or in
any way relating to the rights of the Secured Party hereunder, including
reasonable attorneys' fees and legal expenses, for application by it to the
payment of the Obligations in such order as the Secured Party shall elect and
the Debtor shall remain liable for any deficiency remaining unpaid after such
application. After applying such net proceeds in the manner set forth above, and
after the payment by the Secured Party of any other amount otherwise required to
be paid, the Secured Party shall account for the surplus, if any, to the Debtor.
8.2.6. Unless the Collateral is perishable or threatens to decline
speedily in value or is of the type customarily sold on a recognized market, the
Secured Party must give at least ten (10) days' notice of the time and place of
any public or private sale may take place; the Debtor hereby agrees that such
notice is reasonable notification of such matters and that no notification need
be given by the Secured Party to the Debtor if the Debtor has executed, after
the occurrence of an Event of Default, a statement renouncing or modifying any
right to notification of such sale or other intended disposition.
8.2.7. The Debtor shall pay to the Secured Party, on demand, any and all
expenses, including all reasonable attorneys' fees and legal expenses, incurred
or paid by the Secured Party in protecting or enforcing its rights, powers and
remedies hereunder or under any other agreement between the parties.
-15-
16
IX. SET-OFF
The Secured Party shall, at all times after the occurrence and during
the continuance of an Event of Default, have the right to set-off, without
notice to the Debtor, any and all deposits or other sums at any time or times
credited by or due from the Secured Party to the Debtor, regardless of whether
the same are held in a special account or other account or represented by a
certificate of deposit (regardless of whether such certificate of deposit is
matured or not). Such deposits and other sums shall at all times constitute
additional security for the Obligations and may be set-off against all or any
part of the Obligations at any time.
X. LIMITATION ON SECURED PARTY'S
DUTY WITH RESPECT TO CARE OF COLLATERAL
The Secured Party shall not have any duty as to any Collateral which is
not in its possession or control.
XI. NOTICES
Any demand or notice required or permitted to be given hereunder shall
be given and shall be deemed effective in accordance with the notice provisions
of the Loan Agreement.
-16-
17
XII. RELEASE OF SECURITY INTEREST
When the Debtor shall have paid and performed the Obligations in full,
and shall have also paid to the Secured Party all such further sums as may
become due under the terms of this Agreement as hereinafter provided, the
Secured Party shall automatically release to Debtor all right, title and
interest in and to the Collateral. The Secured Party at any time thereafter, at
the request and expense of the Debtor, shall execute such releases and
terminations of the security interest in the Collateral to the Debtor in a form
suitable for recording by Debtor in the respective Connecticut and Missouri
financing statement recording offices.
XIII. GENERAL PROVISIONS
13.1. SEVERABILITY. Any provision of this Security Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable that provision in any other jurisdiction.
13.2. NO WAIVER BY THE SECURED PARTY; CUMULATIVE REMEDIES. The Secured
Party shall not by any act, delay, omission or otherwise be deemed to have
waived any of its rights or remedies hereunder, and no waiver shall be valid
unless in writing and signed by the Secured Party, and then only to the extent
therein set forth. A waiver by the Secured Party of any right or remedy
hereunder on any one occasion shall not be construed as a bar to the exercise of
any right or remedy which the Secured Party would otherwise have had on any
future occasion. No failure to exercise, nor any delay on the part of the
Secured Party in exercising, any right, power or privilege hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of any
right, power or privilege hereunder preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies hereunder provided are cumulative and may be exercised singly or
concurrently, and are not exclusive of any rights or remedies provided by law.
None of the terms or provisions of this Agreement may be waived, modified,
amended or supplemented except by an instrument in writing, duly executed by the
Secured Party and the Debtor.
13.3. SUCCESSORS AND ASSIGNS. Each reference herein to the Secured Party
shall be deemed to include its successors and assigns, and each reference to the
Debtor or the Secured Party, and any pronouns referring thereto as used herein,
shall be construed in the masculine, feminine, neuter, singular or plural, as
the context may require, and shall be deemed to include the legal
representatives, successors and assigns of the Debtor, all of whom shall be
bound by the provisions hereof.
-17-
18
13.4. GOVERNING LAW. This Agreement is delivered in the Commonwealth of
Massachusetts to the Secured Party and the rights, remedies, duties and
obligations of the parties hereto and all provisions hereof shall be governed by
and construed in accordance with the internal laws (and not the law of
conflicts) of the Commonwealth of Massachusetts.
13.5. FURTHER INDEMNIFICATION. The Debtor agrees to pay, and to save the
Secured Party harmless from, any and all liabilities with respect to or
resulting from any delay in paying any and all excise, sales or other 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, provided, however, that Debtor shall not be liable for the Secured
Party's bad faith, gross negligence, or wilful misconduct.
13.6. COMPLETE AGREEMENT. This Agreement contains the entire
understanding between the parties hereto with respect to the transactions
contemplated herein and such understanding shall not be modified except in
writing signed by or in behalf of the parties hereto.
13.7. SECTION HEADINGS. The section headings herein are included for
convenience only and shall not be deemed to be a part of this Agreement.
13.8. ASSIGNMENT BY SECURED PARTY. Subject to the terms of the Loan
Agreement, the Secured Party may, from time to time, without notice to the
Debtor, sell, assign, transfer or otherwise dispose of all or any part of the
Obligations and/or the Collateral therefor. In such event, each and every
immediate and successive purchaser, assignee, transferee or holder of all or any
part of the Obligations and/or the Collateral shall have the right to enforce
this Agreement by legal action or otherwise for its own benefit as fully as if
such purchaser, assignee, transferee or holder were herein by name specifically
given such rights. The Secured Party shall have an unimpaired right to enforce
this Agreement for its benefit with regard to that portion of the Obligations of
the Debtor that the Secured Party has not sold, assigned, transferred or
otherwise disposed of.
13.9 WAIVER OF TRIAL BY JURY. THE DEBTOR, TO THE EXTENT THAT DEBTOR MAY
LAWFULLY DO SO, WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION BROUGHT ON OR
WITH RESPECT TO THIS SECURITY AGREEMENT, THE CREDIT AGREEMENT OR ANY OTHER
AGREEMENTS EXECUTED IN CONNECTION THEREWITH.
13.10 CONSENT TO JURISDICTION. The Debtor, to the extent that it may
lawfully do so, hereby consents to the jurisdiction of the courts of The
Commonwealth of Massachusetts and the United States District Court for the
District of Massachusetts, as well as to the jurisdiction of all courts from
which an appeal may be taken from the aforesaid courts, for the purpose of any
suit, action or other proceeding arising out of any of its obligations
-18-
19
under or with respect to this Security Agreement and Assignment, and expressly
waives any and all objections it may have as to venue in any of such courts.
IN WITNESS WHEREOF, this Agreement has been executed by the duly
authorized officers of the parties hereto as of the date first above written.
WITNESS: DEBTOR
SHARED TECHNOLOGIES CELLULAR, INC.
\s\ ▇▇▇▇ ▇▇▇▇▇ By:\s\ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
------------------------ -------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, Chief Financial
Officer
SECURED PARTY
STATE STREET BANK AND
TRUST COMPANY
\s\ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ By:\s\ ▇▇▇▇▇▇▇ ▇. St. ▇▇▇▇
------------------------ -------------------------------------
▇▇▇▇▇▇▇ ▇. St. ▇▇▇▇, Vice President
-19-
20
SCHEDULE 3.6
TRADE NAMES
ACQUISITIONS (IDENTIFICATION OF SELLER)
WITHIN PRIOR 5 YEARS
-20-
