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EXHIBIT 10.5
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (this "Agreement"), dated as of May
22, 1997, is made between Xxxxxx General Corporation, a California corporation
(the "Company") and Sagaponack Partners, L.P., a Delaware limited partnership
and Sagaponack International Partners, L.P., a Cayman Islands limited
partnership (collectively, the "Investors").
The Company and the Investors are parties to a Securities
Purchase Agreement dated as of May 22, 1997 (as amended, modified, renewed or
extended from time to time, the "Securities Purchase Agreement"). It is a
condition precedent to the consummation of the transactions provided for
therein that the Company enter into this Agreement and grant to the Investors
the security interests hereinafter provided to secure the obligations of the
Company described below.
Accordingly, the parties hereto agree as follows:
SECTION 1 Definitions; Interpretation.
(a) Terms Defined in Securities Agreement. All
capitalized terms used in this Agreement and not otherwise defined herein shall
have the meanings assigned to them in the Securities Purchase Agreement.
(b) Certain Defined Terms. As used in this Agreement,
the following terms shall have the following meanings:
"Accounts" means any and all accounts of the Company, whether
now existing or hereafter acquired or arising, and in any event includes all
accounts receivable, contract rights, rights to payment and other obligations
of any kind owed to the Company arising out of or in connection with the sale
or lease of merchandise, goods or commodities or the rendering of services or
arising from any other transaction, however evidenced, and whether or not
earned by performance, all guaranties, indemnities and security with respect to
the foregoing, and all letters of credit relating thereto, in each case whether
now existing or hereafter acquired or arising.
"Assigned Agreement" means the Stock Purchase Agreement dated
as of May 22, 1997 by and between the
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Company and NDE Environmental Corporation, as amended, modified, renewed or
extended from time to time, including (i) all rights of the Company to receive
moneys and other payments and distributions due or to become due thereunder or
with respect thereto, (ii) all rights of the Company to receive proceeds of any
insurance, indemnity, warranty, letter of credit or guaranty with respect
thereto, (iii) all claims of the Company for damages arising out of any breach
or default thereunder or in respect thereof; and (iv) the right of the Company
to terminate, amend, supplement or modify any such agreement, contract,
instrument or other document, to perform thereunder and to compel performance
and otherwise exercise all rights and remedies thereunder or in respect
thereof.
"Books" means all books, records and other written, electronic
or other documentation in whatever form maintained now or hereafter by or for
the Company in connection with the ownership of its assets or the conduct of
its business or evidencing or containing information relating to the
Collateral, including: (i) ledgers; (ii) records indicating, summarizing, or
evidencing the Company's assets (including Inventory and Rights to Payment),
business operations or financial condition; (iii) computer programs and
software; (iv) computer discs, tapes, files, manuals, spreadsheets; (v)
computer printouts and output of whatever kind; (vi) any other computer
prepared or electronically stored, collected or reported information and
equipment of any kind; and (vii) any and all other rights now or hereafter
arising out of any contract or agreement between the Company and any service
bureau, computer or data processing company or other Person charged with
preparing or maintaining any of the Company's books or records or with credit
reporting, including with regard to the Company's Accounts.
"Chattel Paper" means all writings of whatever sort which
evidence a monetary obligation and a security interest in or lease of specific
goods, whether now existing or hereafter arising.
"Collateral" has the meaning set forth in Section 2.
"Deposit Account" means any demand, time, savings, passbook or
like account now or hereafter maintained by or for the benefit of the Company
with a bank, savings and loan association, credit union or like organization
(including
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the Investors) and all funds and amounts therein, whether or not restricted or
designated for a particular purpose.
"Documents" means any and all documents of title, bills of
lading, dock warrants, dock receipts, warehouse receipts and other documents of
the Company, whether or not negotiable, and includes all other documents which
purport to be issued by a bailee or agent and purport to cover goods in any
bailee's or agent's possession which are either identified or are fungible
portions of an identified mass, including such documents of title made
available to the Company for the purpose of ultimate sale or exchange of goods
or for the purpose of loading, unloading, storing, shipping, transshipping,
manufacturing, processing or otherwise dealing with goods in a manner
preliminary to their sale or exchange, in each case whether now existing or
hereafter acquired or arising.
"Equipment" means all now existing or hereafter acquired
equipment of the Company in all of its forms, wherever located, and in any
event includes any and all machinery, furniture, equipment, furnishings and
fixtures in which the Company now or hereafter acquires any right, and all
other goods and tangible personal property (other than Inventory), including
tools, parts and supplies, automobiles, trucks, tractors and other vehicles,
computer and other electronic data processing equipment and other office
equipment, computer programs and related data processing software, and all
additions, substitutions, replacements, parts, accessories, and accessions to
and for the foregoing, now owned or hereafter acquired, and including any of
the foregoing which are or are to become fixtures on real property.
"Financing Statements" has the meaning set forth in Section 3.
"General Intangibles" means all general intangibles of the
Company, now existing or hereafter acquired or arising, and in any event
includes: i) all tax and other refunds, rebates or credits of every kind and
nature to which the Company is now or hereafter may become entitled; (ii) all
good will, choses in action and causes of action, whether legal or equitable,
whether in contract or tort and however arising; (iii) all Intellectual
Property Collateral; (iv) all uncertificated securities and interests in
limited and general partnerships; (v) all rights of stoppage in transit,
replevin and reclamation; (vi) all
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licenses, permits, consents, indulgences and rights of whatever kind issued in
favor of or otherwise recognized as belonging to the Company by any
Governmental Authority; and (vii) all indemnity agreements, guaranties,
insurance policies and other contractual, equitable and legal rights of
whatever kind or nature; in each case whether now existing or hereafter
acquired or arising.
"Instruments" means any and all negotiable instruments,
certificated securities and every other writing which evidences a right to the
payment of money, in each case whether now existing or hereafter acquired.
"Intellectual Property Collateral" means the following
properties and assets owned or held by the Company or in which the Company
otherwise has any interest, now existing or hereafter acquired or arising:
(i) all patents and patent applications, domestic
or foreign, all licenses relating to any of the foregoing and all income and
royalties with respect to any licenses (including such patents, patent
applications and patent licenses as described in Schedule 1), all rights to xxx
for past, present or future infringement thereof, all rights arising therefrom
and pertaining thereto and all reissues, divisions, continuations, renewals,
extensions and continuations-in-part thereof;
(ii) all copyrights and applications for
copyright, domestic or foreign, together with the underlying works of
authorship (including titles), whether or not the underlying works of
authorship have been published and whether said copyrights are statutory or
arise under the common law, and all other rights and works of authorship, all
rights, claims and demands in any way relating to any such copyrights or works,
including royalties and rights to xxx for past, present or future infringement,
and all rights of renewal and extension of copyright;
(iii) all state (including common law), federal and
foreign trademarks, service marks and trade names, and applications for
registration of such trademarks, service marks and trade names, all licenses
relating to any of the foregoing and all income and royalties with respect to
any licenses (including such marks, names, applications and licenses as
described in Schedule 1), whether registered or unregistered and wherever
registered, all rights to xxx for past, present or future infringement or
unconsented
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thereof, all rights arising therefrom and pertaining thereto and all reissues,
extensions and renewals thereof;
(iv) all trade secrets, confidential information,
customer lists, license rights, advertising materials, operating manuals,
methods, processes, know-how, sales literature, drawings, specifications, blue
prints, descriptions, inventions, name plates and catalogs; and
(v) the entire goodwill of or associated with the
businesses now or hereafter conducted by the Company connected with and
symbolized by any of the aforementioned properties and assets.
"Inventory" means any and all of the Company's inventory in
all of its forms, wherever located, whether now owned or hereafter acquired,
and in any event includes all goods (including goods in transit) which are held
for sale, lease or other disposition, including those held for display or
demonstration or out on lease or consignment or to be furnished under a
contract of service, or which are raw materials, work in process, finished
goods or materials used or consumed in the Company's business, and the
resulting product or mass, and all repossessed, returned, rejected, reclaimed
and replevied goods, together with all parts, components, supplies, packing and
other materials used or usable in connection with the manufacture, production,
packing, shipping, advertising, selling or furnishing of such goods; and all
other items hereafter acquired by the Company by way of substitution,
replacement, return, repossession or otherwise, and all additions and
accessions thereto, and any Document representing or relating to any of the
foregoing at any time.
"Proceeds" means whatever is receivable or received from or
upon the sale, lease, license, collection, use, exchange or other disposition,
whether voluntary or involuntary, of any Collateral or other assets of the
Company, including "proceeds" as defined at UCC Section 9306, any and all
proceeds of any insurance, indemnity, warranty or guaranty payable to or for
the account of the Company from time to time with respect to any of the
Collateral, any and all payments (in any form whatsoever) made or due and
payable to the Company from time to time in connection with any requisition,
confiscation, condemnation, seizure or forfeiture of all or any part of the
Collateral by any Governmental Authority (or any Person acting under color of
governmental authority), any and all other amounts
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from time to time paid or payable under or in connection with any of the
Collateral or for or on account of any damage or injury to or conversion of any
Collateral by any Person, any and all other tangible or intangible property
received upon the sale or disposition of Collateral, and all proceeds of
proceeds.
"Rights to Payment" means all Accounts, and any and all rights
and claims to the payment or receipt of money or other forms of consideration
of any kind in, to and under all Chattel Paper, Documents, General Intangibles,
Instruments, Assigned Agreements and Proceeds.
"Secured Obligations" means the indebtedness, liabilities and
other obligations of the Company to the Investors under or in connection with
the Securities Purchase Agreement, the Senior Subordinated Notes and the other
Material Agreements, all indebtedness, liabilities and other obligations of the
Company to the Investors, whether created under, arising out of or in
connection with the Securities Purchase Agreement, the Senior Subordinated
Notes or any of the other Material Agreements or otherwise, including all
unpaid principal of the Loan, all interest accrued thereon, all fees due under
the Securities Purchase Agreement and all other amounts payable by the Company
to the Investors thereunder or in connection therewith, whether now existing or
hereafter arising, and whether due or to become due, absolute or contingent,
liquidated or unliquidated, determined or undetermined.
"UCC" means the Uniform Commercial Code as the same may, from
time to time, be in effect in the State of New York; provided, however, in the
event that, by reason of mandatory provisions of law, any or all of the
attachment, perfection or priority of the security interest in any Collateral
is governed by the Uniform Commercial Code as in effect in a jurisdiction other
than the State of New York, the term "UCC" shall mean the Uniform Commercial
Code as in effect in such other jurisdiction for purposes of the provisions
hereof relating to such attachment, perfection or priority and for purposes of
definitions related to such provisions.
(c) Terms Defined in UCC. Where applicable and except as
otherwise defined herein, terms used in this Agreement shall have the meanings
assigned to them in the UCC.
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(d) Interpretation. The rules of interpretation set
forth in the Securities Purchase Agreement shall be applicable to this
Agreement and are incorporated herein by this reference.
SECTION 2 Security Interest.
(a) Grant of Security Interest. As security for the
payment and performance of the Secured Obligations, the Company hereby pledges,
assigns, transfers, hypothecates and sets over to the Investors, and hereby
grants to the Investors a security interest in, all of the Company's right,
title and interest in, to and under the following property, wherever located
and whether now existing or owned or hereafter acquired or arising
(collectively, the "Collateral"): (i) all Accounts; (ii) the Assigned
Agreement; (iii) all Chattel Paper; (iv) Deposit Accounts; (v) all Documents;
(vi) all Equipment; (vii) all General Intangibles; (viii) all Instruments; (ix)
all Inventory; (x) all Books; and (xi) all products and Proceeds of any and all
of the foregoing.
(b) Company Remains Liable. Anything herein to the
contrary notwithstanding, (i) the Company shall remain liable under any
contracts, agreements and other documents included in the Collateral (including
the Assigned Agreement), to the extent set forth therein, to perform all of its
duties and obligations thereunder to the same extent as if this Agreement had
not been executed, (ii) the exercise by the Investors of any of the rights
hereunder shall not release the Company from any of its duties or obligations
under such contracts, agreements and other documents included in the Collateral
and (iii) the Investors shall not have any obligation or liability under any
contracts, agreements and other documents included in the Collateral by reason
of this Agreement, nor shall the Investors be obligated to perform any of the
obligations or duties of the Company thereunder or to take any action to
collect or enforce any such contract, agreement or other document included in
the Collateral hereunder.
(c) Continuing Security Interest. The Company agrees
that this Agreement shall create a continuing security interest in the
Collateral which shall remain in effect until terminated in accordance with
Section 22.
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SECTION 3 Financing Statements, Etc.
The Company shall execute and deliver to the Investors
concurrently with the execution of this Agreement, and at any time and from
time to time thereafter, all financing statements, continuation financing
statements, termination statements, security agreements, chattel mortgages,
assignments, patent, copyright and trademark collateral assignments, fixture
filings, warehouse receipts, documents of title, affidavits, reports, notices,
schedules of account, letters of authority and all other documents and
instruments, in form satisfactory to the Investors (the "Financing
Statements"), and take all other action, as the Investors may request, to
perfect and continue perfected, maintain the priority of or provide notice of
the Investors' security interest in the Collateral and to accomplish the
purposes of this Agreement.
SECTION 4 Representations and Warranties.
In addition to the representations and warranties of the
Company set forth in the Securities Purchase Agreement, which are incorporated
herein by this reference, the Company represents and warrants to the Investors
that:
(a) Location of Chief Executive Office and Collateral.
The Company's chief executive office and principal place of business is located
at the address set forth in Schedule 1, and all other locations where the
Company conducts business or Collateral is kept are set forth in Schedule 1.
(b) Locations of Books. All locations where Books
pertaining to the Rights to Payment are kept, including all equipment necessary
for accessing such Books and the names and addresses of all service bureaus,
computer or data processing companies and other Persons keeping any Books or
collecting Rights to Payment for the Company, are set forth in Schedule 1.
(c) Trade Names and Trade Styles. All trade names and
trade styles under which the Company presently conducts its business operations
are set forth in Schedule 1, and, except as set forth in Schedule 1, the
Company has not, at any time during the preceding five years: (i) been known
as or used any other corporate, trade or fictitious name; (ii) changed its
name; (iii) been the surviving or resulting corporation in a merger or
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consolidation; or (iv) acquired through asset purchase or otherwise any
business of any Person.
(d) Ownership of Collateral. The Company is, and, except
as permitted by Section 5(i), will continue to be, the sole and complete owner
of the Collateral (or, in the case of after-acquired Collateral, at the time
the Company acquires rights in such Collateral, will be the sole and complete
owner thereof), free from any Lien other than the Liens disclosed in Schedule
4(d) ("Permitted Liens").
(e) Enforceability; Priority of Security Interest. (i)
This Agreement creates a security interest which is enforceable against the
Collateral in which the Company now has rights and will create a security
interest which is enforceable against the Collateral in which the Company
hereafter acquires rights at the time the Company acquires any such rights; and
(ii) the Investors have a perfected and (except as disclosed in Schedule 4(e))
first priority security interest in the Collateral, in which the Company now
has rights, and will have a perfected and first priority security interest in
the Collateral in which the Company hereafter acquires rights at the time the
Company acquires any such rights, in each case securing the payment and
performance of the Secured Obligations.
(f) Other Financing Statements. Other than (i) financing
statements disclosed to the Investors and (ii) Financing Statements in favor of
the Investors, no effective Financing Statement naming the Company as debtor,
assignor, grantor, mortgagor, pledgor or the like and covering all or any part
of the Collateral is on file in any filing or recording office in any
jurisdiction.
(g) Rights to Payment.
(i) The Rights to Payment represent valid,
binding and enforceable obligations of the account debtors or other Persons
Obligated thereon, representing undisputed, bona fide transactions completed in
accordance with the terms and provisions contained in any documents related
thereto, and are and will be genuine, free from Liens, and not subject to any
adverse claims, counterclaims, setoffs, defaults, disputes, defenses,
discounts, or conditions precedent of any kind of character, except to the
extent reflected by the Company's reserves for uncollectible Rights to Payment
or to the extent, if any, that such account debtors or other Persons may be
entitled to normal and
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ordinary course trade discounts, returns, adjustments and allowances in
accordance with Section 5(m), or as otherwise disclosed to the Investors in
writing;
(ii) to the best of the Company's knowledge and
belief, all account debtors and other obligors on the Rights to Payment are
solvent and generally paying their debts as they come due;
(iii) all Rights to Payment comply with all
applicable laws concerning form, content and manner of preparation and
execution, including where applicable any federal or state consumer credit
laws;
(iv) the Company has not assigned any of its rights
under the Rights to Payment except as provided in this Agreement or as set
forth in the other Loan Documents;
(v) all statements made, all unpaid balances and all
other information in the Books and other documentation relating to the Rights
to Payment are true and correct and in all respects what they purport to be;
and
(vi) the Company has no knowledge of any fact or
circumstance which would impair the validity or collectibility of any of the
Rights to Payment.
(h) Inventory. No Inventory is stored with any bailee,
warehouseman or similar Person, nor has any Inventory been consigned to the
Company or consigned by the Company to any Person or is held by the Company for
any Person under any "xxxx and hold" or other arrangement, except as set forth
in Schedule 1.
(i) Intellectual Property.
(i) Except as set forth in Schedule 1, the Company
(directly or through any Subsidiary) does not own, possess or use under any
licensing arrangement any patents, copyrights, trademarks, service marks or
trade names, nor is there currently pending before any Governmental Authority
any application for registration of any patent, copyright, trademark, service
xxxx or trade name;
(ii) all patents, copyrights, trademarks, service
marks and trade names are subsisting and have not been adjudged invalid or
unenforceable in whole or in part;
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(iii) all maintenance fees required to be paid on
account of any patents have been timely paid for maintaining such patents in
force, and, to the best of the Company's knowledge, each of the patents is
valid and enforceable and the Company has notified the Investors in writing of
all prior art (including public uses and sales) of which it is aware;
(iv) to the best of the Company's knowledge after
due inquiry, no material infringement or unauthorized use presently is being
made of any Intellectual Property Collateral by any Person;
(v) the Company is the sole and exclusive owner of
the Intellectual Property Collateral and the past, present and contemplated
future use of such Intellectual Property Collateral by the Company has not,
does not and will not infringe or violate any right, privilege or license
agreement of or with any other Person; and
(vi) the Company owns, has material rights under, is
a party to, or an assignee of a party to all material licenses, patents, patent
applications, copyrights, service marks, trademarks, trademark applications,
trade names and all other Intellectual Property Collateral necessary to
continue to conduct its business as heretofore conducted.
(j) Equipment.
(i) none of the Equipment or other Collateral is
affixed to real property, except Collateral with respect to which the Company
has supplied the Investors with all information and documentation necessary to
make all fixture filings required to perfect and protect the priority of the
Investors' security interest in all such Collateral which may be fixtures as
against all Persons having an interest in the Premises to which such property
may be affixed; and
(ii) none of the Equipment is leased from or to any
Person, except as set forth at Schedule 1 or as otherwise disclosed to the
Investors.
(k) Deposit Accounts. The names and addresses of all
financial institutions at which the Company maintains its Deposit Accounts, and
the account numbers and account names of such Deposit Accounts, are set forth
in Schedule 1.
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SECTION 5 Covenants.
So long as any of the Secured Obligations remain unsatisfied,
the Company agrees that:
(a) Defense of Collateral. The Company will appear in
and defend any action, suit or proceeding which may affect to a material extent
its title to, or right or interest in, or the Investors' right or interest in,
the Collateral.
(b) Preservation of Collateral. The Company will do and
perform all reasonable acts that may be necessary and appropriate to maintain,
preserve and protect the Collateral.
(c) Compliance with Laws, Etc. The Company will comply
with all laws, regulations and ordinances, and all policies of insurance,
relating in a material way to the possession, operation, maintenance and
control of the Collateral.
(d) Location of Books and Chief Executive Office. The
Company will: (i) keep all Books pertaining to the Rights to Payment at the
locations set forth in Schedule 1; and (ii) give at least 30 days' prior
written notice to the Investors of (A) any changes in any such location where
Books pertaining to the Rights to Payment are kept, including any change of
name or address of any service bureau, computer or data processing company or
other Person preparing or maintaining any Books or collecting Rights to Payment
for the Company or (B) any changes in the location of the Company's chief
executive office or principal place of business.
(e) Location of Collateral. The Company will: (i) keep
the Collateral at the locations set forth in Schedule 1 and not remove the
Collateral from such locations (other than disposals of Collateral permitted by
subsection (i)) except upon at least 30 days' prior written notice of any
removal to the Investors; and (ii) give the Investors at least 30 days' prior
written notice of any change in the locations set forth in Schedule 1.
(f) Change in Name, Identity or Structure. The Company
will give at least 30 days' prior written notice of (i) any change in name,
(ii) any changes in, additions to or other modifications of its trade names and
trade styles set
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forth in Schedule 1, and (iii) any changes in its identity or structure in any
manner which might make any Financing Statement filed hereunder incorrect or
misleading.
(g) Maintenance of Records. The Company will keep
separate, accurate and complete Books with respect to the Collateral,
disclosing the Investors' security interest hereunder.
(h) Invoicing of Sales. The Company will invoice all of
its sales upon forms customary in the industry and to maintain proof of
delivery and customer acceptance of goods.
(i) Disposition of Collateral. The Company will not
surrender or lose possession of (other than to the Investors), sell, lease,
rent, or otherwise dispose of or transfer any of the Collateral or any right or
interest therein, except to the extent permitted by the Securities Purchase
Agreement and except for sales of Inventory in the ordinary course of business.
(j) Liens. The Company will keep the Collateral free of
all Liens except Permitted Liens. Without limiting the generality of the
foregoing, the Company will not make any other assignment (other than to the
Investors) of its rights under the Assigned Agreement.
(k) Expenses. The Company will pay all expenses of
protecting, storing, warehousing, insuring, handling and shipping the
Collateral.
(l) Leased Premises. At the Investors' request, the
Company will obtain from each Person from whom the Company leases any Premises
at which any Collateral is at any time present such subordination, waiver,
consent and estoppel agreements as the Investors may require, in form and
substance satisfactory to the Investors.
(m) Rights to Payment. The Company will:
(i) with such frequency as the Investors may
require, furnish to the Investors (A) master customer listings, including all
names and addresses, together with copies or originals (as requested by the
Investors) of documents, customer statements, repayment histories and present
status reports relating to the Accounts; (B) accurate records and summaries of
Accounts, including detailed agings specifying the name, face value and date of
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each invoice, and listings of Accounts that are disputed or have been
cancelled; and (C) such other matters and information relating to the Accounts
as the Investors shall reasonably request;
(ii) give only normal discounts, allowances and
credits as to Accounts and other Rights to Payment, in the ordinary course of
business, according to normal trade practices utilized by the Company in the
past, and enforce all Accounts and other Rights to Payment strictly in
accordance with their terms, and take all such action to such end as may from
time to time be reasonably requested by the Investors, except that the Company
may grant any extension of the time for payment or enter into any agreement to
make a rebate or otherwise to reduce the amount owing on or with respect to, or
compromise or settle for less than the full amount thereof, any Account or
other Right to Payment, in the ordinary course of business, according to normal
trade practices utilized by the Company in the past, or where the Account or
Right to Payment would not be materially impaired;
(iii) if any discount, allowance, credit, extension
of time for payment, agreement to make a rebate or otherwise to reduce the
amount owing on, or compromise or settle, an Account or other Right to Payment
exists or occurs, or if, to the knowledge of the Company, any dispute, setoff,
claim, counterclaim or defense exists or has been asserted or threatened with
respect to an Account or other Right to Payment, disclose such fact fully to
the Investors in the Books relating to such Account or other Right to Payment
and in connection with any invoice or report furnished by the Company to the
Investors relating to such Account or other Right to Payment;
(iv) if any Accounts arise from contracts with the
United States or any department, agency or instrumentality thereof, immediately
notify the Investors thereof and execute any documents and instruments and take
any other steps requested by the Investors in order that all monies due and to
become due thereunder shall be assigned to the Investors and notice thereof
given to the Federal authorities under the Federal Assignment of Claims Act;
(v) in accordance with its sound business judgment
perform and comply in all material respects with its obligations in respect of
the Accounts and other Rights to Payment;
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(vi) upon the request of the Investors (A) at any
time, notify all or any designated portion of the account debtors and other
obligors on the Rights to Payment of the security interest hereunder, and (B)
upon the occurrence of an Event of Default, notify the account debtors and
other obligors on the Rights to Payment or any designated portion thereof that
payment shall be made directly to the Investors or to such other Person or
location as the Investors shall specify; and
(vii) upon the occurrence of any Event of Default,
establish such lockbox or similar arrangements for the payment of the Accounts
and other Rights to Payment as the Investors shall require.
(n) Documents, Etc. Upon the request of the Investors,
the Company will (i) immediately deliver to the Investors, or an agent
designated by it, appropriately endorsed or accompanied by appropriate
instruments of transfer or assignment, all Documents, Instruments and Chattel
Paper, and all other Rights to Payment at any time evidenced by promissory
notes, trade acceptances or other instruments, and (ii) xxxx all Documents and
Chattel Paper with such legends as the Investors shall specify.
(o) Inventory. The Company will:
(i) at least once per calendar quarter, and at such
other times as the Investors shall request,] prepare and deliver to the
Investors a report of all Inventory, in form and substance satisfactory to the
Investors;
(ii) upon the request of the Investors, but at least
every six months, take a physical listing of the Inventory and promptly deliver
a copy of such physical listing to the Investors; and
(iii) not store any Inventory with a bailee,
warehouseman or similar Person, nor dispose of any Inventory on a xxxx-
and-hold, guaranteed sale, sale and return, sale on approval, consignment or
similar basis, nor acquire any Inventory from any Person on any such basis,
without in each case giving the Investors prior written notice thereof.
(p) Equipment. The Company will, at least once a year or
upon the Investors' request, deliver to the Investors a report of each item of
Equipment, in form and substance satisfactory to the Investors.
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(q) Intellectual Property Collateral. The Company will:
(i) not enter into any agreement (including any
license or royalty agreement) pertaining to any Intellectual Property
Collateral except in the ordinary course of business without in each case the
prior consent of the Investors;
(ii) not allow or suffer any Intellectual Property
Collateral to become abandoned, nor any registration thereof to be terminated,
forfeited, expired or dedicated to the public;
(iii) promptly give the Investors notice of any
rights the Company may obtain to any new patentable inventions, copyrightable
works or other new Intellectual Property Collateral, prior to the filing of any
application for registration thereof; and
(iv) diligently prosecute all applications for
patents, copyrights and trademarks, and file and prosecute any and all
continuations, continuations-in-part, applications for reissue, applications
for certificate of correction and like matters as shall be reasonable and
appropriate in accordance with prudent business practice, and promptly and
timely pay any and all maintenance, license, registration and other fees, taxes
and expenses incurred in connection with any Intellectual Property Collateral.
(r) Notices, Reports and Information. The Company will
(i) notify the Investors of any material claim made or asserted against the
Collateral by any Person and of any change in the composition of the Collateral
or other event which could materially adversely affect the value of the
Collateral or the Investors' Lien thereon; (ii) furnish to the Investors such
statements and schedules further identifying and describing the Collateral and
such other reports and other information in connection with the Collateral as
the Investors may reasonably request, all in reasonable detail; and (iii) upon
request of the Investors make such demands and requests for information and
reports as the Company is entitled to make in respect of the Collateral.
(s) Assigned Agreement. (i) The Company will furnish to
the Investors promptly upon receipt thereof
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copies of (A) all amendments or modifications to the Assigned Agreement entered
into by the Company and (B) all material notices, requests and other documents
received by the Company in respect of the Assigned Agreement. (ii) The Company
will perform and observe in all material respects all terms and provisions of
the Assigned Agreement to be performed or observed by it, maintain the Assigned
Agreement in full force and effect, enforce the Assigned Agreement in
accordance with their terms, and take all such action to such end as may be
from time to time be reasonably requested by the Investors. (iii) The Company
will not without the prior consent of the Investors (A) cancel or terminate any
of the Assigned Agreement or consent to or accept any cancellation or
termination thereof; (B) amend or otherwise modify in any material respect the
Assigned Agreement or give any material consent, waiver or approval thereunder;
(C) waive any material default under or breach of the Assigned Agreement; or
(D) take any other action in connection with the Assigned Agreement that would
impair the value of the interest or rights of the Company thereunder or that
would impair the interest or rights of the Investors.]
SECTION 6 Collection of Rights to Payment.
Until the Investors exercise their rights hereunder to collect
Rights to Payment, the Company shall endeavor in the first instance diligently
to collect all amounts due or to become due on or with respect to the Rights to
Payment. At the request of the Investors, upon and after the occurrence of any
Event of Default, all remittances received by the Company shall be held in
trust for the Investors and, in accordance with the Investors' instructions,
remitted to the Investors or deposited to an account with the Investors in the
form received (with any necessary endorsements or instruments of assignment or
transfer).
SECTION 7 Authorization; Investors Appointed Attorney-in-Fact.
The Investors shall have the right to, in the name of the
Company, or in the name of the Investors or otherwise, without notice to or
assent by the Company, and the Company hereby constitutes and appoints the
Investors (and any of the Investors' officers, employees or agents designated
by the Investors) as the Company's true and lawful attorney-in-fact, with full
power and authority to:
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(i) sign any of the Financing Statements which must
be executed or filed to perfect or continue perfected, maintain the priority of
or provide notice of the Investors' security interest in the Collateral;
(ii) take possession of and endorse any notes,
acceptances, checks, drafts, money orders or other forms of payment or security
and collect any Proceeds of any Collateral;
(iii) sign and endorse any invoice or xxxx of lading
relating to any of the Collateral, warehouse or storage receipts, drafts
against customers or other obligors, assignments, notices of assignment,
verifications and notices to customers or other obligors;
(iv) notify the Postal Service authorities to change
the address for delivery of mail addressed to the Company to such address as
the Investors may designate and, without limiting the generality of the
foregoing, establish with any Person lockbox or similar arrangements for the
payment of the Rights to Payment;
(v) receive, open and dispose of all mail addressed
to the Company;
(vi) send requests for verification of Rights to
Payment to the customers or other obligors of the Company;
(vii) contact, or direct the Company to contact, all
account debtors and other obligors on the Rights to Payment and instruct such
account debtors and other obligors to make all payments directly to the
Investors;
(viii) assert, adjust, xxx for, compromise or
release any claims under any policies of insurance;
(ix) exercise dominion and control over, and refuse
to permit further withdrawals from, Deposit Accounts maintained with the
Investors;
(x) notify each Person maintaining lockbox or
similar arrangements for the payment of the Rights to Payment to remit all
amounts representing collections on the Rights to Payment directly to the
Investors;
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(xi) ask, demand, collect, receive and give
acquittances and receipts for any and all Rights to Payment, enforce payment or
any other rights in respect of the Rights to Payment and other Collateral,
grant consents, agree to any amendments, modifications or waivers of the
agreements and documents governing the Rights to Payment and other Collateral,
and otherwise file any claims, take any action or institute, defend, settle or
adjust any actions, suits or proceedings with respect to the Collateral, as the
Investors may deem necessary or desirable to maintain, preserve and protect the
Collateral, to collect the Collateral or to enforce the rights of the Investors
with respect to the Collateral;
(xii) execute any and all applications, documents,
papers and instruments necessary for the Investors to use the Intellectual
Property Collateral and grant or issue any exclusive or non-exclusive license
or sublicense with respect to any Intellectual Property Collateral;
(xiii) execute any and all endorsements, assignments
or other documents and instruments necessary to sell, lease, assign, convey or
otherwise transfer title in or dispose of the Collateral; and
(xiv) execute any and all such other documents and
instruments, and do any and all acts and things for and on behalf of the
Company, which the Investors may deem necessary or advisable to maintain,
protect, realize upon and preserve the Collateral and the Investors' security
interest therein and to accomplish the purposes of this Agreement.
The Investors agrees that, except upon and after the
occurrence of an Event of Default, they shall not exercise the power of
attorney, or any rights granted to the Investors, pursuant to clauses (ii)
through (xiii) and, with respect to realization upon the Collateral and the
Investors' security interest therein, clause (xiv). The foregoing power of
attorney is coupled with an interest and irrevocable so long as the Investors
has any Commitment or the Secured Obligations have not been paid and performed
in full. The Company hereby ratifies, to the extent permitted by law, all that
the Investors shall lawfully and in good faith do or cause to be done by virtue
of and in compliance with this Section 7.
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SECTION 8 Investors' Performance of Company Obligations.
The Investors may perform or pay any obligation which the
Company has agreed to perform or pay under or in connection with this
Agreement, and the Company shall reimburse the Investors on demand for any
amounts paid by the Investors pursuant to this Section 8.
SECTION 9 Investors' Duties.
Notwithstanding any provision contained in this Agreement, the
Investors shall have no duty to exercise any of the rights, privileges or
powers afforded to them and shall not be responsible to the Company or any
other Person for any failure to do so or delay in doing so. Beyond the
exercise of reasonable care to assure the safe custody of Collateral in the
Investors' possession and the accounting for moneys actually received by the
Investors hereunder, the Investors shall have no duty or liability to exercise
or preserve any rights, privileges or powers pertaining to the Collateral.
SECTION 10 Remedies.
(a) Remedies. Upon the occurrence of any Event of
Default, the Investors shall have, in addition to all other rights and remedies
granted to it in this Agreement, the Securities Purchase Agreement or any other
Material Agreement, all rights and remedies of a secured party under the UCC
and other applicable laws. Without limiting the generality of the foregoing,
the Company agrees that:
(i) The Investors may peaceably and without notice
enter any Premises of the Company, take possession of any the Collateral,
remove or dispose of all or part of the Collateral on any Premises or
elsewhere, or, in the case of Equipment, render it nonfunctional, and otherwise
collect, receive, appropriate and realize upon all or any part of the
Collateral, and demand, give receipt for, settle, renew, extend, exchange,
compromise, adjust, or xxx for all or any part of the Collateral, as the
Investors may determine.
(ii) The Investors may require the Company to
assemble all or any part of the Collateral and make it available to the
Investors at any place and time designated by the Investors.
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(iii) The Investors may use or transfer any of the
Company's rights and interests in any Intellectual Property Collateral, by
license, by sublicense (to the extent permitted by an applicable license) or
otherwise, on such conditions and in such manner as the Investors may
determine.
(iv) The Investors may secure the appointment of a
receiver of the Collateral or any part thereof (to the extent and in the manner
provided by applicable law).
(v) The Investors may withdraw (or cause to be
withdrawn) any and all funds from Deposit Accounts.
(vi) The Investors may sell, resell, lease, use,
assign, transfer or otherwise dispose of any or all of the Collateral in its
then condition or following any commercially reasonable preparation or
processing (utilizing in connection therewith any of the Company's assets,
without charge or liability to the Investors therefor) at public or private
sale, by one or more contracts, in one or more parcels, at the same or
different times, for cash or credit, or for future delivery without assumption
of any credit risk, all as the Investors deem advisable; provided, however,
that the Company shall be credited with the net proceeds of sale only when such
proceeds are finally collected by the Investors. The Investors shall have the
right upon any such public sale, and, to the extent permitted by law, upon any
such private sale, to purchase the whole or any part of the Collateral so sold,
free of any right or equity of redemption, which right or equity of redemption
the Company hereby releases, to the extent permitted by law. The Company hereby
agrees that the sending of notice by ordinary mail, postage prepaid, to the
address of the Company set forth in the Securities Purchase Agreement, of the
place and time of any public sale or of the time after which any private sale
or other intended disposition is to be made, shall be deemed reasonable notice
thereof if such notice is sent ten days prior to the date of such sale or other
disposition or the date on or after which such sale or other disposition may
occur, provided that the Investors may provide the Company shorter notice or no
notice, to the extent permitted by the UCC or other applicable law.
(b) License. For the purpose of enabling the Investors
to exercise their rights and remedies under this Section 10 or otherwise in
connection with this Agreement,
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the Company hereby grants to the Investors an irrevocable, non-exclusive and
assignable license (exercisable without payment or royalty or other
compensation to the Company) to use, license or sublicense any Intellectual
Property Collateral.
(c) Proceeds Account. To the extent that any of the
Secured Obligations may be contingent, unmatured or unliquidated at such time
as there may exist an Event of Default, the Investors may, at their election,
(i) retain the proceeds of any sale, collection, disposition or other
realization upon the Collateral (or any portion thereof) in a special purpose
non-interest-bearing restricted deposit account (the "Proceeds Account")
created and maintained by the Investors for such purpose (which shall
constitute a Deposit Account included within the Collateral hereunder) until
such time as the Investors may elect to apply such proceeds to the Secured
Obligations, and the Company agrees that such retention of such proceeds by the
Investors shall not be deemed strict foreclosure with respect thereto; (ii) in
any manner elected by the Investors, estimate the liquidated amount of any such
contingent, unmatured or unliquidated claims and apply the proceeds of the
Collateral against such amount; or (iii) otherwise proceed in any manner
permitted by applicable law.
(d) Application of Proceeds. The cash proceeds actually
received from the sale or other disposition or collection of Collateral, and
any other amounts received in respect of the Collateral the application of
which is not otherwise provided for herein, shall be applied as the Investors
may, from time to time, determine; provided that any amounts applied to
interest or principal shall be applied promptly. Any surplus thereof which
exists after payment and performance in full of the Secured Obligations shall
be promptly paid over to the Company or otherwise disposed of in accordance
with the UCC or other applicable law. The Company shall remain liable to the
Investors for any deficiency which exists after any sale or other disposition
or collection of Collateral.
SECTION 11 Certain Waivers.
The Company waives, to the fullest extent permitted by law,
(i) any right of redemption with respect to the Collateral, whether before or
after sale hereunder, and all rights, if any, of marshalling of the Collateral
or other collateral or security for the Secured Obligations;
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(ii) any right to require the Investors (A) to proceed against any Person, (B)
to exhaust any other collateral or security for any of the Secured Obligations,
(C) to pursue any remedy in the Investors' power, or (D) to make or give any
presentments, demands for performance, notices of nonperformance, protests,
notices of protests or notices of dishonor in connection with any of the
Collateral; and (iii) all claims, damages, and demands against the Investors
arising out of the repossession, retention, sale or application of the proceeds
of any sale of the Collateral
SECTION 12 Notices.
All notices or other communications hereunder shall be given
in the manner and to the addresses specified in the Securities Purchase
Agreement. All such notices and other communications shall be effective (i) if
delivered by hand, when delivered; (ii) if sent by mail, upon the earlier of
the date of receipt or five Business Days after deposit in the mail, first
class, postage prepaid; (iii) if sent by telex, upon receipt by the sender of
an appropriate answerback; and (iv) if sent by facsimile transmission, when
sent.
SECTION 13 No Waiver; Cumulative Remedies.
No failure on the part of the Investors to exercise, and no
delay in exercising, any right, remedy, power or privilege hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such right, remedy, power or privilege preclude any other or further exercise
thereof or the exercise of any other right, remedy, power or privilege. The
rights and remedies under this Agreement are cumulative and not exclusive of
any rights, remedies, powers and privileges that may otherwise be available to
the Investors.
SECTION 14 Costs and Expenses; Indemnification; Other
Charges.
(a) Costs and Expenses. The Company agrees to pay on
demand:
(i) the reasonable out-of-pocket costs and expenses
of the Investors and any of their respective affiliates, and the reasonable
fees and disbursements of counsel to the Investors (including allocated costs
of internal counsel), in connection with the negotiation,
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preparation, execution, delivery and administration of this Agreement, and any
amendments, modifications or waivers of the terms thereof, and the custody of
the Collateral;
(ii) all title, appraisal (including the allocated
costs of internal appraisal services), survey, audit, consulting, search,
recording, filing and similar costs, fees and expenses incurred or sustained by
the Investors or any of their respective affiliates in connection with this
Agreement or the Collateral; and
(iii) all costs and expenses of the Investors and
their respective affiliates, and the fees and disbursements of counsel
(including the allocated costs of internal counsel), in connection with the
enforcement or attempted enforcement of, and preservation of any rights or
interests under, this Agreement, including in any out-of-court workout or other
refinancing or restructuring or in any bankruptcy case, and the protection,
sale or collection of, or other realization upon, any of the Collateral,
including all expenses of taking, collecting, holding, sorting, handling,
preparing for sale, selling, or the like, and other such expenses of sales and
collections of Collateral, and any and all losses, costs and expenses sustained
by the Investors as a result of any failure by the Company to perform or
observe its obligations contained herein.
(b) Indemnification. The Company hereby agrees to
indemnify the Investors, any affiliate thereof, and their respective directors,
officers, employees, agents, counsel and other advisors (each an "Indemnified
Person") against, and hold each of them harmless from, any and all liabilities,
obligations, losses, claims, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or nature whatsoever, including
the reasonable fees and disbursements of counsel to an Indemnified Person
(including allocated costs of internal counsel), which may be imposed on,
incurred by, or asserted against any Indemnified Person, in any way relating to
or arising out of this Agreement or the transactions contemplated hereby or any
action taken or omitted to be taken by it hereunder (the "Indemnified
Liabilities"); provided that the Company shall not be liable to any Indemnified
Person for any portion of such Indemnified Liabilities to the extent they are
found by a final decision of a court of competent jurisdiction to have resulted
from such Indemnified Person's gross negligence or willful
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misconduct. If and to the extent that the foregoing indemnification is for any
reason held unenforceable, the Company agrees to make the maximum contribution
to the payment and satisfaction of each of the Indemnified Liabilities which is
permissible under applicable law.
(c) Other Charges. The Company agrees to indemnify the
Investors against and hold it harmless from any and all present and future
stamp, transfer, documentary and other such taxes, levies, fees, assessments
and other charges made by any jurisdiction by reason of the execution,
delivery, performance and enforcement of this Agreement.
(d) Interest. Any amounts payable to the Investors under
this Section 14 or otherwise under this Agreement if not paid upon demand shall
bear interest from the date of such demand until paid in full, at the rate of
interest set forth in Section 2.7 of the Securities Purchase Agreement.
SECTION 15 Binding Effect.
This Agreement shall be binding upon, inure to the benefit of
and be enforceable by the Company, the Investors and their respective
successors and assigns.
SECTION 16 Governing Law.
THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK, EXCEPT AS REQUIRED BY
MANDATORY PROVISIONS OF LAW AND TO THE EXTENT THE VALIDITY OR PERFECTION OF THE
SECURITY INTERESTS HEREUNDER, OR THE REMEDIES HEREUNDER, IN RESPECT OF ANY
COLLATERAL ARE GOVERNED BY THE LAW OF A JURISDICTION OTHER THAN NEW YORK.
SECTION 17 Entire Agreement; Amendment.
This Agreement contains the entire agreement of the parties
with respect to the subject matter hereof and shall not be amended except by
the written agreement of the parties as provided in the Securities Purchase
Agreement.
SECTION 18 Severability.
Whenever possible, each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under all applicable
laws and
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regulations. If, however, any provision of this Agreement shall be prohibited
by or invalid under any such law or regulation in any jurisdiction, it shall,
as to such jurisdiction, be deemed modified to conform to the minimum
requirements of such law or regulation, or, if for any reason it is not deemed
so modified, it shall be ineffective and invalid only to the extent of such
prohibition or invalidity without affecting the remaining provisions of this
Agreement, or the validity or effectiveness of such provision in any other
jurisdiction.
SECTION 19 Counterparts.
This Agreement may be executed in any number of counterparts
and by different parties hereto in separate counterparts, each of which when so
executed shall be deemed to be an original and all of which taken together
shall constitute but one and the same agreement.
SECTION 20 Incorporation of Provisions of the Securities
Purchase Agreement.
To the extent the Securities Purchase Agreement contains
provisions of general applicability to the Loan Documents, including any such
provisions contained in Article VIII thereof, such provisions are incorporated
herein by this reference.
SECTION 21 No Inconsistent Requirements.
The Company acknowledges that this Agreement and the other
Loan Documents may contain covenants and other terms and provisions variously
stated regarding the same or similar matters, and agrees that all such
covenants, terms and provisions are cumulative and all shall be performed and
satisfied in accordance with their respective terms.
SECTION 22 Termination.
Upon payment and performance in full of all Secured
Obligations, this Agreement shall terminate and the Investors shall promptly
execute and deliver to the Company such documents and instruments reasonably
requested by the Company as shall be necessary to evidence the reconveyance and
termination of all security interests given by the Company to the Investors
hereunder and redeliver to Pledgor any Collateral then in Investors'
possession; provided,
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however, that the obligations of the Company under Section 14 shall survive
such termination.
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IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement, as of the date first above written.
THE COMPANY
XXXXXX GENERAL CORPORATION
By /s/ XXXXXX X. XXXXX
--------------------------------------
Title:
THE INVESTORS
SAGAPONACK PARTNERS, L.P.
By: RSP Capital L.L.C., its general
partner
By /s/ XXXXX X. XXXXXXXXXX
--------------------------------------
Name: Xxxxx X. Xxxxxxxxxx
Title:
------------------------------
SAGAPONACK INTERNATIONAL PARTNERS, L.P.
By /s/ XXXXX X. XXXXXXXXXX
--------------------------------------
Name: Xxxxx X. Xxxxxxxxxx
Title:
------------------------------
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SCHEDULES
Schedule 1 Location of Offices
Trade Names, Styles, Other Names
Inventory Locations
Patents, Copyrights, Trademarks
Leased Equipment
Deposit Accounts
