EXHIBIT 10.8
AMENDED AND RESTATED SECURITY AGREEMENT
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THIS AMENDED AND RESTATED SECURITY AGREEMENT (this "AGREEMENT"), dated
as of March 1, 2003 (the "EFFECTIVE DATE"), is made by TELENETICS CORPORATION, a
California corporation having its principal place of business at 00000 Xxxxxx
Xxxxx, Xxxx Xxxxxx, Xxxxxxxxxx 00000 (the "GRANTOR"), for the benefit of DOLPHIN
OFFSHORE PARTNERS, L.P. (the "SECURED PARTY").
W I T N E S S E T H:
WHEREAS, as of the Effective Date, the Grantor has executed a secured
promissory note in favor of the Secured Party in an aggregate principal amount
of $2,232,714.65 (the "NOTE"), pursuant to the Amended and Restated Note and
Warrant Purchase Agreement, dated as of the Effective Date among the Grantor,
the Secured Party and other parties thereto (the "PURCHASE AGREEMENT"). In order
to provide security for the payment of all of the obligations of the Grantor to
the Secured Party under the Note, the Grantor has agreed to grant to the Secured
Party a continuing lien and security interest in all of the Grantor's Inventory
(as defined below) and to execute this and such other security agreements and
instruments as are necessary to grant such lien and security interest and enable
the Secured Party to perfect such security interest; and
WHEREAS, this Agreement is intended to and shall replace the Security
Agreements (the "ORIGINAL SECURITY AGREEMENTS") executed by the parties as part
of the Original Documents (as defined in the Purchase Agreement).
NOW, THEREFORE, in consideration of the premises contained herein and
in the Note and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the Grantor agrees with the Secured
Party as follows:
Section 1. DEFINITIONS.
Capitalized terms used in this Agreement which are not otherwise
defined herein shall have the following meanings:
"CODE" shall mean the Uniform Commercial Code as in effect in the State
of New York from time to time.
"COLLATERAL" shall have the meaning assigned thereto in SECTION 2 of
this Agreement.
"INVENTORY" shall have the meaning assigned to that term in the Code.
Section 2. GRANT OF SECURITY INTEREST.
The Grantor hereby pledges, assigns and grants to the Secured Party a
continuing security interest in and lien on all Inventory of the Grantor,
wherever located and whether now or hereafter existing and whether now owned or
hereafter acquired and, to the extent not otherwise included all payments under
insurance (whether or not the Secured Party is the loss payee) or under any
indemnity, warranty, guaranty or government award which is payable by reason of
any damage to, or any loss, taking or condemnation of, the Inventory
(collectively, the "COLLATERAL").
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Section 3. OBLIGATIONS SECURED.
The Collateral hereunder constitutes and will constitute continuing
security for the strict performance and observance by the Grantor of the prompt
payment, when due, of all present and future obligations and indebtedness of the
Grantor to the Secured Party under the Note (after giving effect to any offset
rights of the Grantor thereunder with respect thereto) and of the Grantor under
this Agreement (collectively, the "OBLIGATIONS").
Section 4. GRANTOR REMAINS LIABLE.
Anything herein to the contrary notwithstanding, in the absence of the
Secured Party's express prior written consent thereto, (a) the Grantor shall
remain liable under any and all contracts and agreements included in the
Collateral 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, (b) the exercise by the Secured Party of any of the rights hereunder
shall not release the Grantor from any of its duties or obligations under any
contracts and agreements included in the Collateral, and (c) the Secured Party
shall not have any obligation or liability under any contracts and agreements
included in the Collateral by reason of this Agreement, nor shall the Secured
Party be obligated to perform any of the obligations or duties of the Grantor
under any such contract or agreement or to take any action to collect or enforce
any claim for payment assigned hereunder.
Section 5. REPRESENTATIONS AND WARRANTIES.
The Grantor represents and warrants to the Secured Party that:
5.1 The Grantor is a corporation duly incorporated, validly existing
and in good standing under the laws of its state of incorporation, is duly
qualified and in good standing under the laws of each jurisdiction where the
character of its properties or the transaction of its business makes such
qualification necessary, except for any jurisdictions(s) (alone or in the
aggregate) in which the failure to be so qualified will not have a Material
Adverse Effect (as defined in the Purchase Agreement), and has the requisite
corporate power to own or hold under lease its properties and assets and to
conduct its business as it is now being conducted.
5.2 The Grantor has the requisite corporate power and authority to
enter into and perform this Agreement, which has been duly authorized by all
necessary corporate action, and no further consent or authorization of the
Grantor or its board of directors or shareholders or any public authority is
required in connection therewith. The execution, delivery and performance by the
Grantor of this Agreement will not violate any provision of law applicable to
the Grantor and will not conflict with or result in the breach of any order,
writ, injunction or decree of any court or government instrumentality, or its
charter or by-laws or create a default under any agreement, note or indenture to
which it is a party or by which it is bound or to which any of its property is
subject, or result in the imposition of any lien, charge, security interest or
encumbrance of any nature whatsoever upon any of its properties or assets under
any agreement or any commitment to which the Grantor is bound or by which any of
its properties or assets are bound, except for the liens created under this
Agreement and except for such conflicts, defaults, violations, breaches and the
like that would not, individually or in the aggregate, have a Material Adverse
Effect.
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5.3 This Agreement has been duly executed and delivered, and
constitutes the legal, valid and binding obligation of the Grantor, enforceable
in accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation,
conservatorship, receivership or similar laws relating to, or affecting
generally the enforcement of, creditor's rights and remedies or by other
equitable principles of general application.
5.4 Except as disclosed on SCHEDULE 1 to this Agreement, the Grantor
has good title to and is the lawful owner of the Collateral free from all
claims, liens, encumbrances, charges or security interests whatsoever. Except as
provided in SECTION 6.9 of this Agreement, the Collateral will at all times be
kept at the locations set forth on EXHIBIT A hereto.
5.5 The provisions of this Agreement create a valid, and upon filing a
UCC-1 financing statement with the Secretary of State of the State of
California, a perfected, security interest in the Collateral, enforceable in
accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation,
conservatorship, receivership or similar laws relating to, or affecting
generally the enforcement of, creditor's rights and remedies or by other
equitable principles of general application.
5.6 Except as disclosed on SCHEDULE 1 to this Agreement, there are no
judgments outstanding against the Grantor and there are no actions or
proceedings before any court or administrative agency pending or, to the
knowledge of the Grantor, threatened against the Grantor which, if determined
adversely to the Grantor, would affect the Collateral.
5.7 The Grantor's principal office and place of business where it
maintains its records concerning the Collateral is at its address stated above.
The Grantor has no other office or place of business except as indicated on
EXHIBIT A hereto.
Section 6. COVENANTS.
The Grantor covenants and agrees that from the date of this Agreement
until payment in full of all of the Obligations:
6.1 The Grantor shall keep and maintain the Collateral insured against
loss or damage by fire and all other risks as is customarily maintained by
similar businesses for the full insurable value thereof. Certificates of all
such policies shall be delivered to the Secured Party. Such policies shall by
their terms provide that the Secured Party be given at least 30 days prior
written notice of any amendment, modification or cancellation thereof and that
the Secured Party shall have the option, but not the obligation, to pay the
premiums to continue such insurance in effect or obtain like coverage. The
Grantor agrees that any payment made by the Secured Party pursuant to the
foregoing authorization shall bear interest thereon at the rate of 10% per annum
from the date of such payment and shall become part of the Obligations and be
shall secured by the Collateral pursuant to the terms of this Agreement. The
Grantor hereby appoints the Secured Party as its attorney-in-fact to make,
adjust or settle any claim under any insurance policy insuring the Collateral
while an Event of Default (as defined below) shall have occurred and be
continuing.
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6.2 The Grantor shall maintain the Collateral in good repair, working
order and condition, subject to normal wear and tear, and make all reasonable
repairs, replacements, additions and improvements thereto.
6.3 The Grantor shall give the Secured Party full and free access to
the Collateral and to all books, correspondence and records of the Grantor with
respect thereto upon reasonable notice and at all reasonable times, and shall
permit upon the occurrence and continuance of an Event of Default the Secured
Party and its representatives to examine the same and to make extracts therefrom
all at the Grantor's expense.
6.4 The Grantor shall promptly pay and discharge or cause to be paid
and discharged all its obligations and liabilities including, without
limitation, all taxes, assessments and governmental charges upon it or its
income or properties, when due unless and to the extent only that the same shall
be contested in good faith and by appropriate proceedings and then only to the
extent that a bond is filed in cases where the filing of a bond is necessary to
avoid the creation of a lien against any of its property.
6.5 The Grantor shall do, or cause to be done, all things necessary to
preserve and keep in full force and effect its corporate existence and all
franchises, rights and privileges necessary for the proper conduct of its
business, and continue to engage in the business of the same type as now
conducted by it.
6.6 The Grantor shall not grant, permit or suffer to exist any lien,
claim, security interest or encumbrance upon the Collateral, that is senior or
on parity with that in favor of the Secured Party other than the security
interest granted by the Grantor pursuant to the Amended and Restated Security
Agreement dated as of the Effective Date by and between the Grantor and the
holders of the other notes pursuant to the Purchase Agreement and other than
such liens, claims, security interests and encumbrances as exist as of the
Effective Date.
6.7 The Grantor shall notify the Secured Party in writing within five
(5) business days after the occurrence thereof, of the occurrence of any event
which constitutes, or which with notice or lapse of time, or both, would
constitute an Event of Default.
6.8 The Grantor shall execute and deliver such further or additional
instruments and assurances, and take all such additional action as the Secured
Party may require for the purpose of carrying out the provisions of this
Agreement.
6.9 Except as expressly permitted by or described in this Agreement or
its schedules or exhibits, the Grantor shall not sell, assign, lease or
otherwise dispose of the Collateral except in the ordinary course of business.
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6.10 The Grantor shall not change its principal office or the place
where it maintains its records pertaining to the Collateral as specified in
SECTION 5.7 hereof without giving the Secured Party at least 30 days prior
written notice thereof.
6.11 The Grantor shall not remove or permit the removal of the
Collateral from its present location as set forth on EXHIBIT A hereto except in
the ordinary course of business without the prior written consent of the Secured
Party.
Section 7. OPTION TO PERFORM OBLIGATION OF THE GRANTOR IN RESPECT OF THE
COLLATERAL.
If the Grantor fails or refuses to make any payment, perform any
covenant or obligation, or take any other action which the Grantor is obligated
hereunder to perform, observe, take or do, then the Secured Party may, at its
option, without notice or demand upon the Grantor and without releasing the
Grantor from any obligation or covenant hereof, perform, observe, take or do the
same in such manner and to such extent as the Secured Party may deem necessary
to protect any of the Collateral and its rights hereunder including, without
limitation, obtaining insurance and the payment of any taxes and the payment of
any sums necessary to discharge liens or security interests at any time levied
or placed on the Collateral.
Section 8. EVENTS OF DEFAULT.
For purposes of this Agreement, any of the following events shall
constitute an "EVENT OF DEFAULT":
8.1 The Grantor shall fail to make any payment of principal and
interest on the Note prior to the expiration of all applicable cure periods;
8.2 The Grantor shall default in the performance or observance of any
covenant or agreement contained in this Agreement and such default shall
continue for a period of seven (7) business days following the Grantor's receipt
of written notice thereof;
8.3 Any representation or warranty made by the Grantor in this
Agreement or the other Transaction Documents (as defined in the Purchase
Agreement) or in any other certificate, agreement, instrument or statement
delivered to the Secured Party by or on behalf of the Grantor shall at any time
prove to have been incorrect when made in any material respect;
8.4 There shall be a defect in the Grantor's title to any of the
Collateral and such defect in title shall not have been cured or removed within
20 days after the Grantor's receipt of written notice thereof;
8.5 The Grantor shall become insolvent, make a general assignment for
the benefit of creditors, file a petition in bankruptcy, be adjudicated
insolvent or bankrupt, admit in writing its inability to pay its debts as they
mature, petition or apply for, consent to, or acquiesce in the appointment of, a
trustee or receiver for all or a substantial part of the Grantor's property; or
any other bankruptcy, reorganization, debt arrangement or other proceeding under
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any bankruptcy, insolvency law, or any dissolution or liquidation proceeding
shall be instituted by or against the Grantor, and if instituted against it,
shall be consented to or acquiesced in by the Grantor or shall not be dismissed
or, if contested, stayed within a period of 90 days; or any judgment, writ of
attachment or execution or any similar process shall be issued or levied against
a substantial part of the property of the Grantor and shall not be released,
stayed, bonded or vacated within a period of 90 days after its issue or levy;
8.6 The Grantor shall, at any time without the prior written consent of
the Secured Party, enter into an agreement to change the location of the
Collateral or permit any change in such location of the Collateral from that
specified in SECTION 5.4 hereof except as permitted by SECTION 6.9 of this
Agreement; and/or
8.7 The lien created hereunder shall, for any reason other than by or
through the conduct of the Secured Party, cease to be valid.
Section 9. REMEDIES.
In case any Event of Default shall have occurred and be continuing, the
Secured Party shall have, in addition to all other rights and remedies given it
by this Agreement or the Note, those allowed by law and the rights and remedies
of a secured party under the Uniform Commercial Code as enacted in any
jurisdiction in which any of the Collateral may be located and, without limiting
the generality of the foregoing, the Secured Party may immediately, without
demand of performance and without notice of intention to sell or of time or
place of sale or redemption or other notice or demand whatsoever to the Grantor,
all of which are hereby expressly waived, and without advertisement, enter onto
the premises where the Collateral is located and take possession thereof without
liability for any lawsuit or action, and sell, lease or otherwise dispose of all
or any part of the Collateral or any interest which the Grantor may have
therein, either at pubic or private sale or otherwise, and after deducting from
the proceeds of sale or other disposition of the Collateral all expenses
(including all reasonable fees and expenses of counsel) as provided in SECTION
14 hereof, shall apply the residue of such proceeds toward the payment of the
Obligations. If notice of any sale or other disposition is required by law to be
given, the Grantor hereby agrees that a notice sent at least five (5) days
before the time of any intended public sale or before the time after which any
private sale or other disposition of the Collateral is to be made shall be
reasonable notice of such sale or other disposition. The Grantor agrees to
assemble the Collateral, or cause it to be assembled, at such place or places as
the Secured Party may designate by written notice to the Grantor. At any such
sale or other disposition, the Secured Party may purchase the whole or any part
of the Collateral, free from any right of redemption on the part of the Grantor,
which right is hereby waived and released. Without limiting the generality of
the rights and remedies conferred upon the Secured Party under this SECTION 9,
the Secured Party may: (a) enter upon the premises of the Grantor and take
immediate possession of the Collateral, either personally or by means of a
receiver appointed by a court therefor, using reasonable force to do so; (b) at
the Secured Party's option, use, operate, manage and control the Collateral in
any lawful manner; (c) collect and receive all rents, income, revenue, earnings,
issue and profits therefrom; and (d) maintain, repair, renovate, alter or remove
the Collateral as the Secured Party may determine in its discretion and any
monies so collected or received by the Secured Party shall be applied to, or may
be accumulated for application upon, the Obligations and the Grantor shall be
liable for any deficiency.
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Section 10. POWER OF ATTORNEY.
The Grantor authorizes the Secured Party and does hereby make,
constitute and appoint the Secured Party and agents of the Secured Party with
full power of substitution, as the Grantor's true and lawful attorney-in-fact
with power, in its own name or in the name of the Grantor, upon the occurrence
and continuance of any Event of Default, to endorse any notes checks, drafts,
money orders, or other instruments of payment (including, payments under or in
respect of any policy of insurance) in respect of the Collateral that may come
into possession of the Secured Party; to sign and endorse any documents relating
to the Collateral; to pay or discharge taxes, liens, security interests or other
encumbrances at any time levied or placed on or threatened against the
Collateral; to grant, collect, receive, compromise, settle and xxx for monies
due in respect of the Collateral; and generally, to do at the Secured Party's
option and at the Grantor's expense, at any time, or from time to time, all acts
and things which the Secured Party deems necessary to protect, preserve and
realize upon the Collateral and the Secured Party's security interests therein
in order to effect the intent of this Agreement, as fully and effectually as the
Grantor might or could do; and the Grantor hereby ratifies all that said
attorney shall do or cause to be done by virtue hereof. THIS POWER OF ATTORNEY
IS COUPLED WITH AN INTEREST AND SHALL BE IRREVOCABLE FOR AS LONG AS ANY OF THE
OBLIGATIONS SHALL BE OUTSTANDING. The Grantor agrees that any reasonable fees,
costs and expenses incurred by the Secured Party pursuant to the foregoing
authorization, and interest thereon at the rate of 10% per annum from the date
of incurring any such reasonable fees, costs and expense, shall become part of
the Obligations and be secured by the Collateral.
Section 11. NOTICES.
All notices, requests, demands and other communications to or upon the
respective parties hereto shall be made in accordance with SECTION 4.1 of the
Note.
Section 12. NO WAIVER; REMEDIES CUMULATIVE.
No failure on the part of the Secured Party to exercise, and no delay
in exercising any right hereunder shall operate as a waiver thereof, nor shall
any single or partial exercise by the Secured Party of any right hereunder
preclude any other or further exercise thereof or the exercise of any other
right. The remedies herein provided are cumulative and not exclusive of any
remedies provided by law.
Section 13. FINANCING STATEMENTS; FURTHER ASSURANCES; FILING.
On the date hereof, the Grantor shall deliver UCC-1 financing
statements in form and substance satisfactory to the Secured Party and with the
Secured Party's security interest duly noted thereon with respect to the
Collateral for filing at the appropriate offices. Thereafter, within ten (10)
business days after the Secured Party's written request therefor, the Grantor
shall cause such additional Uniform Commercial Code financing statements with
respect to the Collateral or any modifications or amendments to any such
financing statements (all in form and substance reasonable satisfactory to the
Secured Party) to be delivered to the Secured Party for filing at the
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appropriate offices. The Grantor from time to time, at its sole expense, will
promptly execute and deliver all further instruments and documents, and take all
further action that the Secured Party may reasonably request, and hereby
authorizes the Secured Party to take all action (including the filing of any
financing statements, continuation statements or amendments thereto with respect
to the Collateral without the signature of the Grantor where permitted by law)
as the Secured Party in each case may deem reasonably necessary, proper or
desirable in order to perfect and protect any security interest granted or
purported to be granted hereby or to enable the Secured Party to exercise and
enforce its rights and remedies hereunder with respect to any Collateral. A
carbon, photographic or other reproduction of this Agreement or any financing
statement covering the Collateral or any part thereof shall be sufficient as a
financing statement where permitted by law. The Secured Party shall execute
terminations to any such financing statements within three (3) business days of
the Grantor's request therefore upon payment of the Obligations. The Secured
Party hereby consents to the Grantor's filing of amendments to and/or
terminations of Uniform Commercial Code financing statements as may be required
in connection with the replacement of the Original Security Agreements by this
Agreement.
Section 14. COSTS AND EXPENSES.
The Grantor shall reimburse the Secured Party for all reasonable costs
and expenses incurred by it and shall pay the reasonable fees and disbursements
to one attorney for the Secured Party in connection with enforcement of the
Secured Party's rights hereunder.
Section 15. AMENDMENTS.
No amendment, modification or waiver of any provision of this Agreement
nor consent to any departure by the Grantor therefrom shall be effective unless
the same shall be in writing and signed by the Secured Party and then such
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given.
Section 16. TERMINATION.
Upon the payment in full of all Obligations, the Secured Party shall
execute and deliver to the Grantor all such documents and instruments as shall
be necessary to evidence termination of this Agreement and the security
interests created hereunder; PROVIDED, HOWEVER, the obligations of the Grantor
under SECTION 13 hereof shall survive any termination under this SECTION 16.
Section 17. GOVERNING LAW.
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OR
CHOICE OF LAW.
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Section 18. ASSIGNMENT, ETC.
The Grantor shall not assign, pledge, mortgage, sublet or otherwise
transfer or encumber any of its rights or obligations, as the case may be, under
this Agreement without the Secured Party's prior written consent. Any such
purported assignment, pledge, mortgage, sublet, transfer or other action without
such written consent shall be void. This Agreement shall be binding upon each of
the Grantor and its successors and shall inure to the benefit of the Secured
Party and its successors and assigns.
Section 19. SEVERABILITY.
The provisions of this Agreement are severable, and if any provision
shall be held invalid or unenforceable in whole or in part in any jurisdiction,
then such invalidity or unenforceability shall not in any manner affect such
provision in any other jurisdiction or any other provision of this Agreement in
any jurisdiction.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed by their authorized representatives on the date first above
written.
GRANTOR: TELENETICS CORPORATION
By: /s/ Xxxxx X. Xxxxx
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Name: Xxxxx X. Xxxxx
Title: President
SECURED PARTIES: DOLPHIN OFFSHORE PARTNERS, L.P.
By: /s/ Xxxxx X. Xxxxx
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Name: Xxxxx X. Xxxxx
Title: General Partner
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Exhibit A
to
Security Agreement
GRANTOR'S PLACES OF BUSINESS
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The following address is the Grantor's principal place of business and
is a location where Collateral is kept:
25111 Arctic Ocean
Xxxx Xxxxxx, Xxxxxxxxxx 00000
The Company maintains the following additional place of business where
a portion of the Collateral is kept:
SDC
0000 Xxxxxx Xxx. #0
Xxxxxxx, Xxxxxxxxxx 00000
Collateral also is kept at the following third party locations:
Corlund Electronics
00000 Xxxxxx Xxxx
Xxxxxx, Xxxxxxxxxx 00000
American Optisurgical
00000 Xxxxxx Xxxxx
Xxxx Xxxxxx, Xxxxxxxxxx 00000
DisCopy Labs
0000-X Xxxxxx Xx.
Xxxxxxx, Xxxxxxxxxx 00000
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Schedule 1
to
Security Agreement
EXCEPTIONS
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Title to the Collateral:
See Schedule 2.1(l) to the Purchase Agreement (except with regard to
the promissory note in favor of Xxxxxx, Xxxxxxx Xxxxx & Bear LLP and the various
capital leases).
Legal Proceedings:
See Schedule 2.1(m) to the Purchase Agreement.
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