1
EXHIBIT 4.2
GENERAL
SECURITY AGREEMENT
BY AND BETWEEN
VERIDIEN CORPORATION
("Debtor")
AND
DUNVEGAN MORTGAGE CORPORATION
("Secured Party")
DATED THE 19TH DAY OF OCTOBER, 1995
2
SECURITY AGREEMENT
VERIDIEN CORPORATION, a Delaware Corporation, (the "Debtor"), and
DUNVEGAN MORTGAGE CORPORATION, (the "Secured Party"), parties to that certain
Loan and Security Agreement dated of even date herewith (the "Loan Agreement"),
agree as follows:
SECTION 1. CREATION OF SECURITY INTEREST
Debtor hereby grants to Secured Party a security interest in the
Property described in Section 2 of this Agreement (the "Collateral") to secure
performance and payment of (i) that certain Master Promissory Note issued
pursuant to the Loan and Security Agreement dated of even date herewith, in the
maximum principal amount of $2,500,000.00 executed by Debtor payable to the
order of the Secured Party ("Note", whether one or more), bearing interest and
being payable in the manner provided therein; (ii) all renewals and extensions
of the Note; (iii) payment and performance of all obligations under the Loan
Agreement, this Agreement and any related instruments or agreements; and (iv)
all other obligations and indebtedness of Debtor to Secured Party of whatever
kind and whenever or however created or incurred (all of the foregoing described
in this Section 1 being the "Secured Indebtedness").
SECTION 2. COLLATERAL
In the regular course of business Debtor acquires (a) goods, which are
held for sale or lease or are furnished or to be furnished under contracts of
service, or which are supplies, raw materials, work in process or other
materials to Debtor, to be used, consumed or processed by Debtor and (b)
indebtedness or receivables arising upon the sale or lease of goods or rendition
of services by Debtor to others (called "Customers"). The collateral of this
Agreement is (i) all inventory of Debtor now owned or hereafter acquired, and
raw materials, work in progress or materials used or consumed in Debtor's
business, and all products thereof, whether in possession of the Debtor,
warehouseman, bailee or any other person ("Inventory"); (ii) all accounts,
contract rights, chattel paper, instruments, general intangibles and rights to
payment of every kind of Debtor ("Accounts"), now or at any time hereafter
arising; all interests of the Debtor in any goods, the sale or lease of which
shall have given or shall give rise to any of the foregoing, (iii) all
receivables and all guaranties of receivables and security therefore; and all
proceeds of all and any of the foregoing in whatever form received, whether cash
or non-cash; (iv) all of the right title and interest of Borrower in and with
respect to the goods services, or other property that gave rise to or secure any
of the Accounts and insurance policies and proceeds relating thereto, and all of
the rights of Borrower as an unpaid seller of goods or services, including,
without limitation, the rights of stoppage in transit, replevin, reclamation,
and resale; (v) all instruments, documents, securities, cash, and property; (vi)
all contracts, contract rights, promissory notes and all evidences of
indebtedness in favor of Borrower; (vii) all shares, stocks, warrants, bonds,
debentures, or other securities of all corporations now or hereafter owned by,
pledged or assigned to the Borrower, together with all renewals thereof,
subscriptions therefor, accretions thereto and all rights or claims in respect
thereof and all interests of Borrower in any other business ventures; (viii) all
furniture, fixtures, files, books records, equipment, laboratory equipment and
supplies, manufacturing equipment and supplies of the Borrower, and all
documents, contract rights, general intangibles and instruments relating to the
operation or management of the equipment, including, without limitation, any and
all maintenance contracts, permits, licenses, franchises and government
approvals, and all replacements and additions thereto; (ix) all products,
patents, copyrights and trademarks of Borrower; all intellectual property,
formulae, research data and regulatory approvals owned by Borrower or used by
Borrower in the conduct of its business together with all proceeds thereof, and
all rights or claims with respect to patent or trademark infringement, all as
listed in Exhibit "A" attached hereto; (x) all proceeds of each of the foregoing
2
3
whether cash or otherwise owned by Borrower or in which Borrower has an
interest, all such items collective called "Collateral".
SECTION 3. PAYMENT OF OBLIGATIONS OF DEBTOR
3.1 Direct Obligations. Debtor shall pay to Secured Party any sum
or sums due or which may become due pursuant to the Note, or any extensions or
renewals thereof, or under the Loan Agreement, this Agreement or any documents
executed in connection therewith or as security therefor.
3.2 Expenses. Debtor shall pay to Secured Party on demand all
expenses and expenditures, including reasonable attorneys' fees and other legal
expenses incurred or paid by Secured Party in exercising or protecting its
interests, rights and remedies under the Loan Agreement and/or this Agreement,
plus interest thereon at the maximum non-usurious rate permitted by applicable
law with respect to Debtor.
3.3 Acceleration. Debtor shall pay immediately, without notice,
the entire unpaid Secured Indebtedness of Debtor to Secured Party whether
created or incurred pursuant to this Agreement or otherwise, upon Debtor's
default under Section 5 of this Agreement and acceleration of said Secured
indebtedness as provided for in this Agreement.
SECTION 4. DEBTOR'S REPRESENTATIONS, WARRANTIES AND AGREEMENTS
Debtor represents, warrants and agrees that:
4.1 Valid Accounts. Each Account will represent the valid and
legally enforceable indebtedness of a bona fide Customer arising from the sale
or lease of goods or rendition by Debtor of services and will be subject to no
setoffs, counterclaims or defenses except the standard reconciliation for
uncollectible accounts ("true-up" process); such goods or services will have
been delivered to or performed for, and accepted by, the Customer, and the
amount shown as to each Account on Debtor's books will be the true and
undisputed amount owing and unpaid thereon, payable in full at the time referred
to in the invoice, or if no time is specified within at least within ninety (90)
days from the date of the particular invoice, and Debtor has no knowledge of any
fact or circumstance that would impair the validity of enforceability of any
Account.
4.2 Title. Except for the security interests granted hereby,
absolute title to all collateral, free and clear of all liens, security
interests and encumbrances, is, or at the time of acquisition thereof will be,
vested in Debtor. All instruments, documents and chattel paper pertaining to the
Accounts will be valid and genuine and free from all liens, security interests
and encumbrances except for the security interests granted hereby.
4.3 Performance of Obligations. Debtor will duly perform and will
cause to be performed all obligations with respect to the goods, the sale or
lease of which gave rise to each Account.
4.4 Information. All information supplied and statements made by
Debtor or any guarantor in any financial, credit or accounting statement or
application for credit prior to, contemporaneously with or subsequent to the
execution of this Agreement are and shall be true, correct, complete, valid and
genuine.
4.5 Place of Business; Records. The chief place of business of
Debtor is the address shown on the signature page of this Agreement. Debtor will
immediately notify Secured Party in
3
4
writing of any change in Debtor's chief place of business. Debtor will (1) keep
such books and records pertaining to the Collateral and all Customers and
Accounts, at such chief place of business, and at such office or offices of
Debtor as shall be approved in writing by Secured Party, (2) permit
representatives of Secured Party at any time to inspect the collateral and
inspect and make reasonable abstracts from the book and records of Debtor
pertaining to the Collateral, and (3) furnish to Secured Party such reasonable
information and reports regarding the Collateral as Secured Party may from time
to time require.
4.6 Notice to Customers. Upon Secured Party's request, Debtor will
give such notice in writing as Secured Party may require at any time to any or
all Customers indebted on all or any of the Accounts and, if Secured Party shall
so request, deliver to Secured Party copies of any and all such notices. After
the occurrence of an Event of Default, Secured Party, or his agents may (1)
transmit to any or, all Customers at any time or times such notice of Secured
Party's interest in any such Accounts as Secured Party may determine (but
Secured Party shall not be required to give any such notice and any failure to
give such notice by Secured Party shall in no affect Secured Party's rights and
interest hereunder or under any, Accounts), (2) request from Customers at any
time or times information concerning the amount owing under any or all Accounts,
(3) request from Customers that Accounts be paid directly to Secured Party or to
a post office box address over which Secured Party has control, or (4) enforce
payment and collect, by legal proceedings or otherwise, all Accounts.
4.7 Information to Secured Party Regarding Accounts and Inventory.
Debtor will transmit to Secured Party all information that it may have or
receive with respect to the Inventory or any Accounts or with respect to
Customers indebted on such Accounts which might in any way affect the value of
the Inventory or Accounts or Secured Party's rights or remedies with respect
thereto, including, but not limited to (1) rejection of goods or services by a
Customers, and (2) assertion of claims, counterclaims or setoffs by a Customer.
4.8 No Additional Security Interests or Liens. Debtor will not
pledge, mortgage or other wise encumber, or create or suffer a security interest
to exist in any of the Collateral to or in favor of any one other than Secured
Party.
4.9 Additional Documentation. Debtor will sign and execute alone
or with Secured Party assignments of accounts receivable, contracts and
insurance and pledges of shares as well as any Financing statement or other
document or procure any document, and pay all connected costs, necessary to
protect the security interests, rights and remedies created by, provided in or
emanating from this Agreement.
4.10 Protective Action. Debtor will, at its own expense, do, make,
procure, execute and deliver all acts, things, writing and assurances as Secured
Party may at any time request to protect, assure or enforce its interests,
rights and remedies created by, provided in or emanating from this Agreement.
4.11 No Leases or Encumbrances. Debtor will not lend, rent, lease
or otherwise dispose of the collateral or any interest therein except as
authorized in this Agreement or in writing by Secured Party, and Debtor shall
keep the Collateral, including the proceeds from any disposition thereof, free
from unpaid charges, including taxes, and from liens, encumbrances, and security
interests.
4.12 Collateral Locations. The Collateral shall remain in Debtor's
possession or control at the location indicated on the signature page of this
Agreement or at such other locations as Secured Party may approve in writing,
and shall not be removed except for temporary removal in the ordinary course of
Debtor's business, from those locations.
4
5
4.13 Insurance. Debtor will have and maintain or cause to be
maintained insurance at all times with respect to all Collateral against risks
of fire, theft and such other risks as Secured Party may require. Such insurance
policies shall contain such terms, be in a form, for a period and be written by
companies satisfactory to Secured Party. Such insurance policies shall also
contain a standard mortgagee's endorsement providing for payment of any loss to
Secured Party. All policies of insurance shall provide for a minimum of thirty
(30) days written cancellation notice to Secured Party. Debtor shall furnish
Secured Party with certificates or other evidence satisfactory to Secured Party
of compliance with the foregoing insurance provisions. Debtor hereby irrevocably
appoints Secured Party as attorney for Debtor in obtaining, adjusting, settling
and cancelling such insurance and endorsing any drafts drawn by insurers of the
Collateral, which power is coupled with an interest, provided, however, Secured
Party shall not be required to obtain, adjust, settle or cancel such insurance
or endorse such drafts and any failure to do so by Secured Party shall in no way
affect Secured Party's rights and interest hereunder or in any of the
collateral. In the event of loss and the payment of insurance proceeds, all
monies shall be payable to Secured Party for the accounts of the Secured Party
and the Debtor, as their interests may appear. At the option of Secured Party,
all monies so received, from less than an actual or constructive total loss
shall be applied (i) to the Note secured thereby, (ii) to repair of the damage
in respect of which the insurance loss was paid, or (iii) in reimbursements for
monies theretofore so applied by the Debtor with the consent of the Secured
Party. In the event of actual or constructive total loss of the Collateral, the
insurance process for such loss shall, unless otherwise agreed by Secured Party,
be applied as follows: (i) to the payment of the costs of collecting such
insurance, if any, (ii) to the payment of all indebtedness, principal, interest
and other sums owed by the Debtor to Secured Party secured hereby; and (iii) the
balance, if any to the Debtor.
4.1.4 Segregation of Returned Goods. Returned or repossessed goods
arising from or relating to any accounts included within the Collateral shall,
if requested by Secured Party, be held separate and apart from any other
property of Debtor. Debtor shall as often as requested by Secured Party, but no
less than weekly, even though no special request has been made, report to
Secured Party the appropriate identifying information with respect to any such
returned or repossessed goods relating to accounts included within the
Collateral.
4.15 Location of Inventor. Debtor will promptly notify Secured
Party in writing of any addition to, change in or discontinuance of its place(s)
of business as shown in this Agreement, places at which inventory is located as
shown herein, the location of its chief executive office and the location of its
office where it keeps its records as set forth herein. All Collateral will be
located at the place(s) of business shown on the signature page of this
Agreement or exhibits to this Agreement as modified by any written notice(s)
given pursuant hereto.
4.16 Accounts as Proceeds. All accounts that are proceeds of the
inventory included within the Collateral shall be subject to the security
interest granted hereby and all of the other terms and provisions hereof.
SECTION 5. EVENTS OF DEFAULT
As used herein, the term "Event of Default" shall have the same meaning
assigned to it by the Loan Agreement.
5
6
SECTION 6. SECURED PARTY'S RIGHTS AND REMEDIES
6.1 Rights Exclusive of an Event of Default.
(a) This Agreement, Secured Party's rights hereunder or
the Secured Indebtedness may be assigned from time to time, and in any
such case the assignee shall be entitled to all of the rights,
privileges and remedies granted in this Agreement to Secured Party.
(b) Debtor hereby appoints the Secured Party its true and
lawful attorney for the purpose of carrying out the provisions of this
Agreement and taking any action and executing any instrument which
Secured Party may deem necessary or advisable to accomplish the
purposes hereof, which appointment as attorney-in-fact is irrevocable
and coupled with an interest. Without limiting the generality of the
foregoing, secured Party shall have the right after the occurrence of
an Event of Default to receive, collect and endorse all checks made
payable to Debtor or its order representing any proceeds in respect of
the Collateral or any part thereof and to give full discharge therefor.
Secured Party may, but is not obligated to, exercise at any time and
from time to time all or any of Debtor's rights including, but not
limited to, the following powers, with respect to all or any of the
Collateral:
(i) to demand, xxx for, collect, receive and
give acquittance for any and all moneys due or to become due
upon or by virtue thereof;
(ii) to receive, take, endorse, assign and
deliver any and all checks, notes, drafts, documents and other
negotiable and non-negotiable instruments and chattel paper
taken or receive by Secured Party in connection therewith;
(iii) to settle, compromise, compound, prosecute
or defend any action or proceeding with respect thereto;
(iv) to sell, transfer, assign or otherwise deal
in or with the same or the proceeds of avails thereof or the
relative goods, as fully and effectually as if Secured Party
were the absolute owner thereof; and
(v) to extend the time of payment of any or all
thereof and to make any allowance and other adjustments with
reference thereto, including without limitation, arrangement
for payment in installments, other modifications of the
payment terms of, or release of;
provided, however, the exercise by Secured Party of or failure to so exercise
any such authority shall in no manner affect or discharge Debtor's liability to
Secured Party hereunder or under the Note or under any other instrument
evidencing or securing any of the Secured Indebtedness, and provided further
that Secured Party shall be under no obligation, responsibility or duty to
exercise any of the powers hereby conferred upon it and it shall be without
liability for any act or failure to act in connection with any of the
collateral. Secured Party shall not be required to take any steps necessary to
preserve the rights of the Collateral, except as required by law. Secured Party
shall at all times have the right to apply the proceeds of any of the Accounts
or other property in which Secured Party has been granted a security interest
herein towards payment of the Note and other Secured Indebtedness immediately
upon receipt or collection of such proceeds.
(c) Secured Party may execute, sign, endorse, transfer or deliver
in the name of Debtor notes, checks, drafts or other instruments for the payment
of money and receipts,
6
7
certificates of origin, applications for certificates of title or any other
documents necessary to evidence, perfect or realize upon the security interest
and obligations created by this Agreement.
6.2 Rights in Event of Default.
(a) Upon the occurrence of an Event of Default, and at any time
thereafter, or in the event Secured Party deems itself insecure, Secured Party
may declare the Secured Indebtedness immediately due and payable and shall have
the rights and remedies of a secured party under the Uniform Commercial Code and
under other applicable laws of each state having jurisdiction over the
collateral or any part thereof, including without limitation thereto, the right
to sell, lease or otherwise dispose of any or all of the collateral and the
right to take possession of the Collateral, and for that purpose Secured Party
may enter upon any premises on which the Collateral or any part thereof may be
situated and remove the Collateral or books and records evidencing same, or may
require Debtor to assemble the Collateral and make it available to Secured Party
at a place to be designated by Secured Party which is reasonably convenient to
both parties. Unless the collateral is perishable or threatens to decline
speedily in value, or is of a type customarily sold on a recognized market,
Secured Party will send Debtor reasonable notice of the time and place of any
public sale thereof or of the time after which any private sale or other
disposition thereof is to be made. The requirement of sending reasonable notice
shall be met if such notice is mailed, postage prepaid, to Debtor at the address
designated in this Agreement at least ten (10) days before the time of the sale
or disposition. Expenses of retaking, holding, preparing for sale, selling or
the like shall include Secured Party's reasonable attorneys' fees and legal
expenses, plus interest thereon at the maximum non-usurious rate permitted by
applicable law with respect to Debtor. Debtor shall remain liable for any
deficiency.
Any amounts held, realized or received by Secured Party from any sale
or other disposition of the Collateral or any part thereof, and all amounts
received by Secured Party pursuant to collection of Accounts shall be applied by
Secured Party in the following order to:
(1) all costs, expenses and liabilities of Secured Party
(including attorneys' fees and expenses) incurred in connection with
the exercise of Secured Party's rights under this Agreement or
protecting its interest in the Collateral;
(2) the payment, in the following order (i) all interest
owing on the Note, (ii) all principal owing on the Note (whether or not
then due); (iii) all other Secured Indebtedness of Debtor to Secured
Party; and then
(3) any other amounts held, realized or received by
Secured Party pursuant to the provisions hereof may at the election of
Secured Party be applied by Secured Party in the foregoing manner, or
at the election of Secured Party may be paid to Debtor, its successors
or assigns, or as a court of competent jurisdiction may direct.
(b) Secured Party may remedy any default and may waive any default
without waiving the default remedied or without waiving any other prior or
subsequent default.
(c) The remedies of Secured Party hereunder are cumulative, and
the exercise of any one or more of the remedies provided for herein shall not be
construed as a waiver of any of the other remedies of Secured Party.
(d) SECURED PARTY MAY ENFORCE ITS RIGHTS UNDER THIS AGREEMENT
WITHOUT RESORT TO PRIOR JUDICIAL PROCESS OR JUDICIAL HEARING, AND DEBTOR
EXPRESSLY WAIVES, RENOUNCES AND KNOWINGLY RELINQUISHES ANY LEGAL RIGHT WHICH
MIGHT OTHERWISE REQUIRE SECURED PARTY TO ENFORCE ITS RIGHTS BY JUDICIAL PROCESS.
IN SO PROVIDING FOR A
7
8
NON-JUDICIAL REMEDY, DEBTOR RECOGNIZES AND CONCEDES THAT SUCH A REMEDY IS
CONSISTENT WITH THE USAGE OF THE TRADE, IS RESPONSIVE TO COMMERCIAL NECESSITY
AND IS THE RESULT OF BARGAINING AT ARMS LENGTH. NOTHING IN THIS AGREEMENT IS
INTENDED TO PREVENT DEBTOR OR SECURED PARTY FROM RESORTING TO JUDICIAL PROCESS
AS EITHER PARTY'S OPTION.
(e) Debtor agrees that in performing any act under this Agreement
that time shall be of the essence and that Secured Party's acceptance of a
partial or delinquent payment or payments, or the failure of Secured Party to
exercise any right or remedy shall not be a waiver of any obligation of Debtor
or similar default subsequently occurring.
6.3 Debtor shall, at the request of the Secured Party, notify the
account debtors of the security interest of Secured Party in the accounts
receivable and direct payment therefore to Secured Party. Secured Party may,
upon the occurrence of any event of default, so notify any such account debtor
and may receive any proceeds to which Secured Party may be entitled under this
Agreement.
SECTION 7. ADDITIONAL AGREEMENTS
7.1 Parties. "Secured Party" and "Debtor" as used in this
instrument include the successors, representatives, receivers, trustees and
assigns of those parties.
7.2 Section Headings. The section headings appearing in this
instrument have been inserted for convenience only and shall be given no
substantive meaning or significance whatever in construing the terms and
provisions of this instrument.
7.3 Defined Terms. Terms used in this instrument which are defined
in the Uniform Commercial Code in effect in Delaware are used with the meanings
as therein defined.
7.4 Applicable Law; Place of Payment. The law governing this
secured transaction shall be that of the State of Delaware in force at the date
of this instrument, and all payments and obligations shall be made and performed
in Wilmington, Delaware, unless otherwise agreed.
7.5 Severability. If any provision of this Agreement is held to be
illegal, invalid, or unenforceable, such provision shall be fully severable, and
the remaining provisions of this Agreement shall be in full force and effect.
8
9
7.6 Secured Party shall have the right to syndicate, assign or
participate its interest herein, in whole or in part, to one or more parties
without limitation. In such event, the term "Secured Party" herein shall refer
to all such assignees or participants. Debtor agrees that any such assignment
may be made without notice and further agrees to cooperate fully with Secured
Party in the execution of any such assignment and further agrees to execute such
documents as Secured Party may from time to time require in connection with any
such assignment, participation or syndication.
EXECUTED on this 19th day of October , 1995.
Debtor: VERIDIEN CORPORATION
By:
-----------------------------------------
Title:
---------------------------------
Address: 000 Xxxxxxxx Xxxx
-------------------------------
Xxxxxxxx, Xxxxxxx 00000
-------------------------------
-------------------------------
Secured Party: DUNVEGAN MORTGAGE CORPORATION
By:
-----------------------------------------
Title:
---------------------------------
Address: 000 Xxxxxxxx Xxxxxx
-------------------------------
X.X.Xxx 2306
-------------------------------
Wilmington, Delaware
-------------------------------
19899
-------------------------------
9
10
EXHIBIT "A"
TO
GENERAL SECURITY AGREEMENT
By and Between
VERIDIEN CORPORATION
AND
DUNVEGAN MORTGAGE CORPORATION
LIST OF PATENTS, TRADEMARKS, ETC.
10
11
EXHIBIT "A"
EXHIBIT NO. A DESCRIPTION
Patents, Trademarks, Copyrights
- ISSUED PATENTS
- PENDING PATENT APPLICATIONS
- REGISTERED TRADEMARKS
- PENDING TRADEMARK APPLICATIONS
12
ISSUED PATENTS
Title (Country) Issued Action Due Date
--------------- ------ ------ --------
DS I (U.S.A.) 09.08.92 Maintenance 09.08.92
Fee Due
DS I (AU) 01.22.93 Annuity Due 01.30.96
DS I (GB) 04.14.93 Annuity Due 01.30.96
CCS II (U.S.A.) 04.11.95 Maintenance 04.11.98
Fee Due
XX XX (U.S.A.) 08.15.95 Maintenance 08.15.98
Fee Due
13
PENDING PATENT APPLICATIONS
Title (Country) Filed Action Date
--------------- ----- ------ ----
DS I (CA) 05.23.89 Awaiting
Issuance
DS I (JP) 07.26.91 Request For 01.30.97
Examination
XX XX (LK) 09.11.93 Amendment 09.07.95
filed
XX XX (MX) 02.08.94 Awaiting
Examiner's
Review
XX XX (PCT) 02.14.94 Enter 01.16.96
Nat'l. Phase
XX XX (NZ) 02.28.95 Awaiting
Examiner's
Review
CCS II (AU) 06.09.93 Annuity Due 06.09.96
CCS II (EPO) 06.09.93 Annuity Due 06.09.96
CCSS/AOCCS III (U.S.A.) 02.14.94 Amendment 08.16.95
Mailed
14
REGISTERED TRADEMARKS
Title (Country) Registered Action Due Date
--------------- ---------- ------ --------
ON GUARD (U.S.A.) 02.26.91 8&15 02.26.96
Declaration
VIRAHOL (U.S.A.) 09.24.91 8&15 09.24.96
Declaration
POXALL-200 (U.S.A.) 02.02.93 8&15 02.02.98
Declaration
VIRAGEL (U.S.A.) 07.20.93 8&15 07.20.98
Declaration
VIRAHOL (MEX) 09.27.94 8&15 09.27.97
Declaration
VIRASONIC (U.S.A.) 11.15.94 8&15 11.15.99
Declaration
VIRASCRUB (U.S.A.) 01.31.95 8&15 01.31.00
Declaration
STERIHOL (U.S.A.) 02.28.95 8&15 02.28.00
VERIDIEN (U.S.A.) 09.05.95 8&15 09.05.00
Declaration
15
PENDING TRADEMARK APPLICATIONS
Title (Country) Filed Action
--------------- ----- ------
VIRAWASH (U.S.A.) 05.04.92 Approved
Awaiting
Registration
