EXECUTION COPY
SECURITY AGREEMENT
SECURITY AGREEMENT, dated as of April 8, 2002 (this "Agreement") between
PC-EPhone, Inc, a Nevada corporation (the "Company"), PC-EPhone Ltd., a company
formed under the laws of Bermuda, PC-EPhone Canada Enterprises, Inc., a company
formed under the laws of British Columbia, Canada, PC-ESolutions, Inc., a
Delaware corporation, (together with PC-EPhone Ltd. and PC-EPhone Canada
Enterprises, Inc., the "Guarantors") and Process Control (Holdings) Limited, a
corporation formed under the laws of the Republic of Ireland (hereinafter, the
"Lender").
WHEREAS, the Company and the Guarantors have entered into a Credit
Agreement dated as of April 8, 2002 (as amended and in effect from time to
time, the "Credit Agreement"), with the Lender, pursuant to which the Lender,
subject to the terms and conditions contained therein, is to make loans to the
Company, and the Guarantors are to guarantee the obligations of the Company
thereunder; and
WHEREAS, it is a condition precedent to the Lender's making any loans to
the Company under the Credit Agreement that the Company and the Guarantors
execute and deliver to the Lender this Agreement; and
WHEREAS, the Company and the Guarantors wish to grant certain security
interests in favor of the Lender as herein provided;
NOW, THEREFORE, in consideration of the promises contained herein and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
1. DEFINITIONS.
All capitalized terms used herein without definitions shall have the respective
meanings provided therefor in the Credit Agreement. The term "State", as used
herein, means the State of New York. All terms defined in the Uniform
Commercial Code of the State and used herein shall have the same definitions
herein as specified therein. However, if a term is defined in Article 9 of the
Uniform Commercial Code of the State differently than in another Article of the
Uniform Commercial Code of the State, the term has the meaning specified in
Article 9.
2. GRANT OF SECURITY INTEREST. The Company and the Guarantors each hereby
grant to the Lender, to secure the payment and performance in full of all of
the Obligations, a security interest in and pledges and assigns to the Lender
the following properties, assets and rights of the Company and each Guarantor
respectively, wherever located, whether now owned or hereafter acquired or
arising, and all proceeds and products thereof (all of the same being
hereinafter called the "Collateral"): all personal and fixture property of
every kind and nature including without limitation all goods (including
inventory, equipment and any accessions thereto), instruments (including
promissory notes), documents, accounts (including health-care-insurance
receivables), chattel paper (whether tangible or electronic), deposit accounts,
letter-of-credit rights (whether or not the letter of credit is evidenced by a
writing), commercial tort claims, securities and all other investment property,
supporting obligations, any other contract rights or rights to the payment of
money, insurance claims and proceeds, and all general intangibles (including
all payment intangibles). The Lender acknowledges that the attachment of its
security interest in any commercial tort claim as original collateral is
subject to the Company's each Guarantor's compliance with section 4.7.
3. AUTHORIZATION TO FILE FINANCING STATEMENTS. The Company and the
Guarantors each hereby irrevocably authorize the Lender at any time and from
time to time to file in any filing office in any Uniform Commercial Code
jurisdiction, or in any appropriate recording office of any applicable foreign
jurisdiction, any initial financing statements and amendments thereto that (a)
indicate the Collateral (i) as all assets of the Company or each Guarantor,
respectively, or words of similar effect, regardless of whether any particular
asset comprised in the Collateral falls within the scope of Article 9 of the
Uniform Commercial Code of the State or such jurisdiction, or the applicable
laws of such foreign jurisdiction, or (ii) as being of an equal or lesser scope
or with greater detail, and (b) provide any other information required by part
5 of Article 9 of the Uniform Commercial Code of the State or such other
jurisdiction, or the applicable laws of such foreign jurisdiction, for the
sufficiency or filing office acceptance of any financing statement or
amendment, including (i) whether the Company or each Guarantor, respectively,
is an organization, the type of organization and any organizational
identification number issued to the Company or each Guarantor, and, (ii) in the
case of a financing statement filed as a fixture filing or indicating
Collateral as as-extracted collateral or timber to be cut, a sufficient
description of real property to which the Collateral relates. The Company and
each Guarantor agrees to furnish any such information to the Lender promptly
upon the Lender's request.
4. OTHER ACTIONS. Further to ensure the attachment, perfection and first
priority of, and the ability of the Lender to enforce, the Lender's security
interest in the Collateral, the Company and the Guarantors each agree, in each
case at the Company's expense, to take the following actions with respect to
the following Collateral and without limitation on the Company's and each
Guarantor's other obligations contained in this Agreement:
4.1. PROMISSORY NOTES AND TANGIBLE CHATTEL PAPER. If the Company or
any Guarantor shall, now or at any time hereafter, hold or acquire any
promissory notes or tangible chattel paper, the Company or such Guarantor, as
applicable, shall forthwith endorse, assign and deliver the same to the Lender,
accompanied by such instruments of transfer or assignment duly executed in
blank as the Lender may from time to time specify.
4.2. DEPOSIT ACCOUNTS. For each deposit account that the Company or
any Guarantor, now or at any time hereafter, opens or maintains, the Company or
such Guarantor, as applicable, shall, at the Lender's request and option,
pursuant to an agreement in form and substance satisfactory to the Lender,
either (a) cause the depositary bank to agree to comply, without further
consent of the Company or such Guarantor, at any time with instructions from
the Lender to such depositary bank directing the disposition of funds from time
to time credited to such deposit account, or (b) arrange for the Lender to
become the customer of the depositary bank with respect to the deposit account,
with the Company or such Guarantor, as applicable, being permitted, only with
the consent of the Lender, to exercise rights to withdraw funds from such
deposit account. The provisions of this paragraph shall not apply to (i) any
deposit account for which the Company or such Guarantor, the depositary bank
and the Lender have entered into a cash collateral agreement specially
negotiated among the Company or such Guarantor, the depositary bank and the
Lender for the specific purpose set forth therein, (ii) a deposit account for
which the Lender is the depositary bank and is in automatic control, and (iii)
deposit accounts specially and exclusively used for payroll, payroll taxes and
other employee wage and benefit payments to or for the benefit of the Company's
or such Guarantor's salaried employees.
4.3. INVESTMENT PROPERTY. If the Company or the Guarantors shall, now
or at any time hereafter, hold or acquire any certificated securities, at the
request of the Lender the Company or such Guarantor shall forthwith endorse,
assign and deliver the same to the Lender, accompanied by such instruments of
transfer or assignment duly executed in blank as the Lender may from time to
time specify. If any securities now or hereafter acquired by the Company or any
Guarantor are uncertificated and are issued to the Company or such Guarantor or
its nominee directly by the issuer thereof, the Company or such Guarantor, as
applicable, shall immediately notify the Lender thereof and, at the Lender's
request and option, pursuant to an agreement in form and substance satisfactory
to the Lender, either (a) cause the issuer to agree to comply, without further
consent of the Company or such Guarantor or such nominee, at any time with
instructions from the Lender as to such securities, or (b) arrange for the
Lender to become the registered owner of the securities. If any securities,
whether certificated or uncertificated, or other investment property now or
hereafter acquired by the Company or any Guarantor are held by the Company or
such Guarantor or either party's nominee through a securities intermediary or
commodity intermediary, the Company or such Guarantor, as applicable, shall
immediately notify the Lender thereof and, at the Lender's request and option,
pursuant to an agreement in form and substance satisfactory to the Lender,
either (i) cause such securities intermediary or (as the case may be) commodity
intermediary to agree to comply, in each case without further consent of the
Company, such Guarantor or such nominee, at any time, with entitlement orders
or other instructions from the Lender to such securities intermediary as to
such securities or other investment property, or (as the case may be) to apply
any value distributed on account of any commodity contract as directed by the
Lender to such commodity intermediary, or (ii) in the case of financial assets
or other investment property held through a securities intermediary, arrange
for the Lender to become the entitlement holder with respect to such investment
property, with the Company or such Guarantor, as applicable, being permitted,
only with the consent of the Lender, to exercise rights to withdraw or
otherwise deal with such investment property.
4.4. COLLATERAL IN THE POSSESSION OF A BAILEE. If any Collateral is,
now or at any time hereafter, in the possession of a bailee, the Company or the
relevant Guarantor, as applicable, shall promptly notify the Lender thereof
and, at the Lender's request and option, shall promptly obtain an
acknowledgement from the bailee, in form and substance satisfactory to the
Lender, that the bailee holds such Collateral for the benefit of the Lender or
such Guarantor and such bailee's agreement to comply without further consent of
the Company or such Guarantor, at any time with instructions of the Lender as
to such Collateral.
4.5. ELECTRONIC CHATTEL PAPER AND TRANSFERABLE RECORDS. If the
Company or any Guarantor, now or at any time hereafter, holds or acquires an
interest in any electronic chattel paper or any "transferable record," as that
term is defined in Section 201 of the federal Electronic Signatures in Global
and National Commerce Act, or in section 16 of the Uniform Electronic
Transactions Act as in effect in any relevant jurisdiction, the Company or such
Guarantor, as applicable, shall promptly notify the Lender thereof and, at the
request and option of the Lender, shall take such action as the Lender may
reasonably request to vest in the Lender control, under seciton 9-105 of the
Uniform Commercial Code, of such electronic chattel paper or control under
Section 201 of the federal Electronic Signatures in Global and National
Commerce Act or, as the case may be, section 16 of the Uniform Electronic
Transactions Act, as so in effect in such jurisdiction, of such transferable
record.
4.6. LETTER-OF-CREDIT RIGHTS. If the Company or any Guarantor is, now
or at any time hereafter, a beneficiary under a letter of credit now or
hereafter, the Company or such Guarantor, as applicable, shall promptly notify
the Lender thereof and, at the request and option of the Lender, the Company or
such Guarantor, as applicable, shall, pursuant to an agreement in form and
substance satisfactory to the Lender, either (a) arrange for the issuer and any
confirmer or other nominated person of such letter of credit to consent to an
assignment to the Lender of the proceeds of the letter of credit or (b) arrange
for the Lender to become the transferee beneficiary of the letter of credit.
4.7. COMMERCIAL TORT CLAIMS. If the Company or any Guarantor shall,
now or at any time hereafter, hold or acquire a commercial tort claim, the
Company or such Guarantor, as applicable, shall immediately notify the Lender
in a writing signed by the Company or such Guarantor, as applicable, of the
particulars thereof and grant to the Lender in such writing a security interest
therein and in the proceeds thereof, all upon the terms of this Agreement, with
such writing to be in form and substance satisfactory to the Lender.
4.8. OTHER ACTIONS AS TO ANY AND ALL COLLATERAL. The Company and each
Guarantor further agrees, upon request of the Lender and at the Lender's
option, to take any and all other actions as the Lender may determine to be
necessary or useful for the attachment, perfection and first priority of, and
the ability of the Lender to enforce, the Lender's security interest in any and
all of the Collateral, including, without limitation, (a) executing, delivering
and, where appropriate, filing financing statements and amendments relating
thereto under the Uniform Commercial Code, to the extent, if any, that the
Company's or any Guarantor's signature thereon is required therefor, (b)
causing the Lender's name to be noted as secured party on any certificate of
title for a titled good if such notation is a condition to attachment,
perfection or priority of, or ability of the Lender to enforce, the Lender's
security interest in such Collateral, (c) complying with any provision of any
statute, regulation or treaty of the United States or any applicable foreign
jurisdiction as to any Collateral if compliance with such provision is a
condition to attachment, perfection or priority of, or ability of the Lender to
enforce, the Lender's security interest in such Collateral, (d) obtaining
governmental and other third party waivers, consents and approvals in form and
substance satisfactory to the Lender, including, without limitation, any
consent of any licensor, lessor or other person obligated on Collateral, (e)
obtaining waivers from mortgagees and landlords in form and substance
satisfactory to the Lender and (f) taking all actions under any earlier
versions of the Uniform Commercial Code or under any other law, as reasonably
determined by the Lender to be applicable in any relevant Uniform Commercial
Code or other jurisdiction, including any foreign jurisdiction.
5. RELATION TO OTHER SECURITY DOCUMENTS. The provisions of this Agreement
supplement the provisions of any real estate mortgage or deed of trust granted
by the Company or any Guarantors to the Lender and which secures the payment or
performance of any of the Obligations. Nothing contained in any such real
estate mortgage or deed of trust shall derogate from any of the rights or
remedies of the Lender hereunder. In addition, to the provisions of this
Agreement being so read and construed with any such mortgage or deed of trust,
the provisions of this Agreement shall be read and construed with the other
Security Documents referred to below in the manner so indicated.
6. REPRESENTATIONS AND WARRANTIES CONCERNING COMPANY'S AND GUARANTORS'S
LEGAL STATUS. The Company and the Guarantors each has previously delivered to
the Lender a certificate signed by the Company or the Guarantors, as
applicable, and entitled "Perfection Certificate" (the "Perfection
Certificate"). The Company and each Guarantor represents and warrants to the
Lender as follows: (a) the Company's each Guarantor's exact legal names are
those indicated on the applicable Perfection Certificate and on the signature
page hereof, (b) the Company and each Guarantor is an organization of the type,
and is organized in the jurisdiction, set forth in the applicable Perfection
Certificate, (c) the Perfection Certificates accurately set forth the Company's
each Guarantor's organizational identification number or accurately states that
the Company or each Guarantor, as applicable, has none, (d) the Perfection
Certificate accurately sets forth the Company's and each Guarantor's respective
places of business or, if more than one, their respective chief executive
offices, as well as their respective mailing addresses, if different, (e) all
other information set forth on the Perfection Certificates pertaining to the
Company or any Guarantor is accurate and complete and (f) there has been no
change in any of such information since the date on which the Perfection
Certificate was signed by the Company or each Guarantor, as applicable.
7. COVENANTS CONCERNING COMPANY'S LEGAL STATUS. The Company and each
Guarantor covenant with the Lender as follows: (a) without providing at least
30 days prior written notice to the Lender, neither the Company nor any
Guarantor will change its name, its place of business or, if more than one,
chief executive office, or its mailing address or organizational identification
number if it has one, (b) if the Company or any Guarantor does not have an
organizational identification number and later obtains one, the Company or such
Guarantor, as applicable, will forthwith notify the Lender of such
organizational identification number, and (c) neither the Company nor any
Guarantor will change its type of organization, jurisdiction of organization or
other legal structure.
8. REPRESENTATIONS AND WARRANTIES CONCERNING COLLATERAL, ETC. The Company
and each Guarantor further represent and warrant to the Lender as follows: (a)
the Company and each Guarantor are the owners of or have other rights in or
power to transfer the Collateral, free from any right or claim of any person or
any adverse lien, security interest or other encumbrance, except for the
security interest created by this Agreement and other liens permitted by the
Credit Agreement, (b) none of the Collateral constitutes, or is the proceeds
of, "farm products" as defined in section 9-102(a)(34) of the Uniform
Commercial Code of the State, (c) none of the account debtors or other persons
obligated on any of the Collateral is a governmental authority covered by the
Federal Assignment of Claims Act or like federal, state or local statute or
rule in respect of such Collateral, (d) neither the Company nor any Guarantor
holds any commercial tort claim except as indicated on the Perfection
Certificate, and (e) the Company and each Guarantor each have at all times
operated their respective businesses in compliance with all applicable
provisions of the federal Fair Labor Standards Act, as amended, and with all
applicable provisions of federal, state and local statutes and ordinances
dealing with the control, shipment, storage or disposal of hazardous materials
or substances, (f) all other information set forth on the Perfection
Certificates pertaining to the Collateral is accurate and complete, and (g)
there has been no change in any of such information since the dates on which
the Perfection Certificates were signed by the Company and each Guarantor,
respectively.
9. COVENANTS CONCERNING COLLATERAL, ETC. The Company and each Guarantor
further covenant with the Lender as follows: (a) the Collateral, to the extent
not delivered to the Lender pursuant to section 4, will be kept at those
locations listed on the Perfection Certificates and neither the Company nor any
Guarantor will remove the Collateral from such locations, without providing at
least 30 days prior written notice to the Lender, (b) except for the security
interest herein granted and liens permitted by the Credit Agreement, the
Company or a Guarantor shall be the owner of or have other rights in the
Collateral free from any right or claim of any other person or any lien,
security interest or other encumbrance, and the Company and such Guarantor
shall defend the same against all claims and demands of all persons at any time
claiming the same or any interests therein adverse to the Lender, (c) neither
the Company nor any Guarantor shall pledge, mortgage or create, or suffer to
exist any right of any person in or claim by any person to the Collateral, or
any security interest, lien or other encumbrance in the Collateral in favor of
any person, other than the Lender except for liens permitted by the Credit
Agreement, (d) the Company and each Guarantor will keep the Collateral in good
order and repair and will not use the same in violation of law or any policy of
insurance thereon, (e) the Company and each Guarantor will permit the Lender,
or its designee, to inspect the Collateral at any reasonable time, wherever
located, (f) the Company or each Guarantor will pay promptly when due all
taxes, assessments, governmental charges and levies upon the Collateral or
incurred in connection with the use or operation of the Collateral or incurred
in connection with this Agreement, (g) the Company and each Guarantor each will
continue to operate its respective business in compliance with all applicable
provisions of the federal Fair Labor Standards Act, as amended, and with all
applicable provisions of federal, state and local statutes and ordinances
dealing with the control, shipment, storage or disposal of hazardous materials
or substances, and (h) neither the Company nor any Guarantor will sell or
otherwise dispose, or offer to sell or otherwise dispose, of the Collateral or
any interest therein except for sales of inventory in the ordinary course of
business.
10. INSURANCE.
10.1. MAINTENANCE OF INSURANCE. The Company and each Guarantor will
obtain, as soon as practicable after the date hereof, with financially sound
and reputable insurers insurance with respect to their properties and
businesses against such casualties and contingencies as shall be in accordance
with general practices of businesses engaged in similar activities in similar
geographic areas. Such insurance shall be in such minimum amounts that neither
the Company nor any Guarantor will be deemed a co-insurer under applicable
insurance laws, regulations and policies and otherwise shall be in such
amounts, contain such terms, be in such forms and be for such periods as may be
reasonably satisfactory to the Lender. In addition, all such insurance shall be
payable to the Lender as loss payee under a "standard" or "New York" loss payee
clause. Without limiting the foregoing, as soon as practicable after the date
hereof, the Company and each Guarantor each will (a) keep all of its physical
property insured with casualty or physical hazard insurance on an "all risks"
basis, with broad form flood and earthquake coverages and electronic data
processing coverage, with a full replacement cost endorsement and an "agreed
amount" clause in an amount equal to 100% of the full replacement cost of such
property, (b) maintain all such workers' compensation or similar insurance as
may be required by law and (c) maintain, in amounts and with deductibles equal
to those generally maintained by businesses engaged in similar activities in
similar geographic areas, general public liability insurance against claims of
bodily injury, death or property damage occurring, on, in or about the
properties of the Company and each Guarantor; business interruption insurance;
and product liability insurance.
10.2. INSURANCE PROCEEDS. The proceeds of any casualty insurance in
respect of any casualty loss of any of the Collateral shall, subject to the
rights, if any, of other parties with an interest having priority in the
property covered thereby, (a) so long as no Default or Event of Default has
occurred and is continuing and to the extent that the amount of such proceeds
is less than $10,000 be disbursed to the Company or the relevant Guarantor, as
applicable, for direct application by the Company or such Guarantor solely to
the repair or replacement of the property so damaged or destroyed and (b) in
all other circumstances, be held by the Lender as cash collateral for the
Obligations. The Lender may, at its sole option, disburse from time to time all
or any part of such proceeds so held as cash collateral, upon such terms and
conditions as the Lender may reasonably prescribe, for direct application by
the Company or such Guarantor, as applicable, solely to the repair or
replacement of the property so damaged or destroyed, or the Lender may apply
all or any part of such proceeds to the Obligations.
10.3. CONTINUATION OF INSURANCE. All policies of insurance shall
provide for at least 30 days prior written cancellation notice to the Lender.
In the event of failure by the Company or any Guarantor to provide and maintain
insurance as herein provided, the Lender may, at its option, provide such
insurance and charge the amount thereof to the Company or such Guarantor. The
Company and each Guarantor shall furnish the Lender with certificates of
insurance and policies evidencing compliance with the foregoing insurance
provision.
11. COLLATERAL PROTECTION EXPENSES; PRESERVATION OF COLLATERAL.
11.1. EXPENSES INCURRED BY LENDER. In the Lender's discretion, if the
Company or any Guarantor fails to do so, the Lender may discharge taxes and
other encumbrances at any time levied or placed on any of the Collateral, make
repairs thereto and pay any necessary filing fees or insurance premiums. The
Company and each Guarantor agree to reimburse the Lender on demand for all
expenditures so made. The Lender shall have no obligation to the Company or any
Guarantor to make any such expenditures, nor shall the making thereof be
construed as a waiver or cure of any Default or Event of Default.
11.2. LENDER'S OBLIGATIONS AND DUTIES. Anything herein to the
contrary notwithstanding, the Company or the relevant Guarantor, as applicable,
shall remain obligated and liable under each contract or agreement comprised in
the Collateral to be observed or performed by the Company or such Guarantor
thereunder. The Lender shall not have any obligation or liability under any
such contract or agreement by reason of or arising out of this Agreement or the
receipt by the Lender of any payment relating to any of the Collateral, nor
shall the Lender be obligated in any manner to perform any of the obligations
of the Company or any Guarantor under or pursuant to any such contract or
agreement, to make inquiry as to the nature or sufficiency of any payment
received by the Lender in respect of the Collateral or as to the sufficiency of
any performance by any party under any such contract or agreement, to present
or file any claim, to take any action to enforce any performance or to collect
the payment of any amounts which may have been assigned to the Lender or to
which the Lender may be entitled at any time or times. The Lender's sole duty
with respect to the custody, safe keeping and physical preservation of the
Collateral in its possession, under section 9-207 of the Uniform Commercial
Code of the State or otherwise, shall be to deal with such Collateral in the
same manner as the Lender deals with similar property for its own account.
12. SECURITIES AND DEPOSITS. The Lender may at any time following and
during the continuance of a Default or Event of Default, at its option,
transfer to itself or any nominee any securities constituting Collateral,
receive any income thereon and hold such income as additional Collateral or
apply it to the Obligations. Whether or not any Obligations are due, the Lender
may following and during the continuance of a Default and Event of Default
demand, xxx for, collect, or make any settlement or compromise which it deems
desirable with respect to the Collateral. Regardless of the adequacy of
Collateral or any other security for the Obligations, any deposits or other
sums at any time credited by or due from the Lender to the Company or any
Guarantor may at any time be applied to or set off against any of the
Obligations then due and owing.
13. NOTIFICATION TO ACCOUNT DEBTORS AND OTHER PERSONS OBLIGATED ON
COLLATERAL. If a Default or an Event of Default shall have occurred and be
continuing, the Company and each Guarantor shall, at the request and option of
the Lender, notify account debtors and other persons obligated on any of the
Collateral of the security interest of the Lender in any account, chattel
paper, general intangible, instrument or other Collateral and that payment
thereof is to be made directly to the Lender or to any financial institution
designated by the Lender as the Lender's agent therefor, and the Lender may
itself, if a Default or an Event of Default shall have occurred and be
continuing, without notice to or demand upon the Company or any Guarantor, so
notify account debtors and other persons obligated on Collateral. After the
making of such a request or the giving of any such notification, the Company
and each Guarantor shall hold any proceeds of collection of accounts, chattel
paper, general intangibles, instruments and other Collateral received by the
Company or such Guarantor as trustee for the Lender without commingling the
same with other funds of the Company or such Guarantor and shall turn the same
over to the Lender in the identical form received, together with any necessary
endorsements or assignments. The Lender shall apply the proceeds of collection
of accounts, chattel paper, general intangibles, instruments and other
Collateral received by the Lender to the Obligations, such proceeds to be
immediately credited after final payment in cash or other immediately available
funds of the items giving rise to them.
14. POWER OF ATTORNEY.
14.1. APPOINTMENT AND POWERS OF LENDER. The Company and each
Guarantor each hereby irrevocably constitute and appoint the Lender and any
officer or agent thereof, with full power of substitution, as its true and
lawful attorneys-in-fact with full irrevocable power and authority in the place
and stead of the Company and each Guarantor or in the Lender's own name, for
the purpose of carrying out the terms of this Agreement, to take any and all
appropriate action and to execute any and all documents and instruments that
may be necessary or useful to accomplish the purposes of this Agreement and,
without limiting the generality of the foregoing, hereby gives said attorneys
the power and right, on behalf of the Company and each Guarantor, without
notice to or assent by the Company or any Guarantor, to do the following:
(a) upon the occurrence and during the continuance of a Default
or an Event of Default, generally to sell, transfer, pledge, make any
agreement with respect to or otherwise dispose of or deal with any of
the Collateral in such manner as is consistent with the Uniform
Commercial Code of the State or the laws of any applicable foreign
jurisdiction and as fully and completely as though the Lender were
the absolute owner thereof for all purposes, and to do, at the
Company's and Guarantors' expense, at any time, or from time to time,
all acts and things which the Lender deems necessary or useful to
protect, preserve or realize upon the Collateral and the Lender's
security interest therein, in order to effect the intent of this
Agreement, all no less fully and effectively as the Company or any
Guarantor might do, including, without limitation, (i) the filing and
prosecuting of registration and transfer applications with the
appropriate federal, state or local agencies or authorities with
respect to trademarks, copyrights and patentable inventions and
processes, (ii) upon written notice to the Company or the relevant
Guarantor, as applicable, the exercise of voting rights with respect
to voting securities, which rights may be exercised, if the Lender so
elects, with a view to causing the liquidation of assets of the
issuer of any such securities and (iii) the execution, delivery and
recording, in connection with any sale or other disposition of any
Collateral, of the endorsements, assignments or other instruments of
conveyance or transfer with respect to such Collateral; and
(b) to the extent that the Company's and Guarantors'
authorization given in section 3 is not sufficient, to file such
financing statements with respect hereto, with or without the
Company's or any Guarantor's signature, or a photocopy of this
Agreement in substitution for a financing statement, as the Lender
may deem appropriate and to execute in the Company's and the
Guarantors' names such financing statements and amendments thereto
and continuation statements which may require the Company's or any
Guarantor's signature.
14.2. RATIFICATION BY COMPANY AND GUARANTORS. To the extent permitted
by law, the Company and each Guarantor each hereby ratify all that said
attorneys shall lawfully do or cause to be done by virtue hereof. This power of
attorney is a power coupled with an interest and is irrevocable.
14.3. NO DUTY ON LENDER. The powers conferred on the Lender hereunder
are solely to protect its interests in the Collateral and shall not impose any
duty upon it to exercise any such powers. The Lender shall be accountable only
for the amounts that it actually receives as a result of the exercise of such
powers, and neither it nor any of its officers, directors, employees or agents
shall be responsible to the Company or any Guarantor for any act or failure to
act, except for the Lender's own gross negligence or willful misconduct.
15. RIGHTS AND REMEDIES. If an Event of Default shall have occurred and be
continuing, the Lender, without any other notice to or demand upon the Company
or any Guarantor, shall have in any jurisdiction in which enforcement hereof is
sought, in addition to all other rights and remedies, the rights and remedies
of a secured party under the Uniform Commercial Code of the State and any
additional rights and remedies as may be provided to a secured party in any
jurisdiction in which Collateral is located, including, without limitation, the
right to take possession of the Collateral, and for that purpose the Lender
may, so far as the Company or any Guarantor can give authority therefor, enter
upon any premises on which the Collateral may be situated and remove the same
therefrom. The Lender may in its discretion require the Company or the relevant
Guarantor, as applicable, to assemble all or any part of the Collateral at such
location or locations within the jurisdiction(s) of the Company's or such
Guarantor's principal office(s) or at such other locations as the Lender may
reasonably designate. Unless the Collateral is perishable or threatens to
decline speedily in value or is of a type customarily sold on a recognized
market, the Lender shall give to the Company or the relevant Guarantor, as
applicable, at least five (5) Business Days prior written notice of the time
and place of any public sale of Collateral or of the time after which any
private sale or any other intended disposition is to be made. The Company and
each Guarantor hereby acknowledge that five (5) Business Days prior written
notice of such sale or sales shall be reasonable notice. In addition, the
Company and each Guarantor each waive any and all rights that it may have to a
judicial hearing in advance of the enforcement of any of the Lender's rights
and remedies hereunder, including, without limitation, its right following an
Event of Default to take immediate possession of the Collateral and to exercise
its rights and remedies with respect thereto.
16. STANDARDS FOR EXERCISING RIGHTS AND REMEDIES. To the extent that
applicable law imposes duties on the Lender to exercise remedies in a
commercially reasonable manner, the Company and each Guarantor each
acknowledges and agrees that it is not commercially unreasonable for the Lender
(a) to fail to incur expenses reasonably deemed significant by the Lender to
prepare Collateral for disposition or otherwise to fail to complete raw
material or work in process into finished goods or other finished products for
disposition, (b) to fail to obtain third party consents for access to
Collateral to be disposed of, or to obtain or, if not required by other law, to
fail to obtain governmental or third party consents for the collection or
disposition of Collateral to be collected or disposed of, (c) to fail to
exercise collection remedies against account debtors or other persons obligated
on Collateral or to fail to remove liens or encumbrances on or any adverse
claims against Collateral, (d) to exercise collection remedies against account
debtors and other persons obligated on Collateral directly or through the use
of collection agencies and other collection specialists, (e) to advertise
dispositions of Collateral through publications or media of general
circulation, whether or not the Collateral is of a specialized nature, (f) to
contact other persons, whether or not in the same business as the Company or
any Guarantor, for expressions of interest in acquiring all or any portion of
the Collateral, (g) to hire one or more professional auctioneers to assist in
the disposition of Collateral, whether or not the collateral is of a
specialized nature, (h) to dispose of Collateral by utilizing Internet sites
that provide for the auction of assets of the types included in the Collateral
or that have the reasonable capability of doing so, or that match buyers and
sellers of assets, (i) to dispose of assets in wholesale rather than retail
markets, (j) to disclaim disposition warranties, (k) to purchase insurance or
credit enhancements to insure the Lender against risks of loss, collection or
disposition of Collateral or to provide to the Lender a guaranteed return from
the collection or disposition of Collateral, or (l) to the extent deemed
appropriate by the Lender, to obtain the services of brokers, investment
bankers, consultants and other professionals to assist the Lender in the
collection or disposition of any of the Collateral. The Company and each
Guarantor acknowledge that the purpose of this section 16 is to provide
non-exhaustive indications of what actions or omissions by the Lender would
fulfill the Lender's duties under the Uniform Commercial Code of the State or
the applicable laws of any other relevant jurisdiction in the Lender's exercise
of remedies against the Collateral and that other actions or omissions by the
Lender shall not be deemed to fail to fulfill such duties solely on account of
not being indicated in this section 16. Without limitation upon the foregoing,
nothing contained in this section 16 shall be construed to grant any rights to
the Company or any Guarantor or to impose any duties on the Lender that would
not have been granted or imposed by this Agreement or by applicable law in the
absence of this section 16.
17. NO WAIVER BY LENDER, ETC. The Lender shall not be deemed to have
waived any of its rights and remedies in respect of the Obligations or the
Collateral unless such waiver shall be in writing and signed by the Lender. No
delay or omission on the part of the Lender in exercising any right or remedy
shall operate as a waiver of such right or remedy or any other right or remedy.
A waiver on any one occasion shall not be construed as a bar to or waiver of
any right or remedy on any future occasion. All rights and remedies of the
Lender with respect to the Obligations or the Collateral, whether evidenced
hereby or by any other instrument or papers, shall be cumulative and may be
exercised singularly, alternatively, successively or concurrently at such time
or at such times as the Lender deems expedient.
18. SURETYSHIP WAIVERS BY COMPANY AND GUARANTORS. The Company and each
Guarantor waives demand, notice, protest, notice of acceptance of this
Agreement, notice of loans made, credit extended, Collateral received or
delivered or other action taken in reliance hereon and all other demands and
notices of any description. With respect to both the Obligations and the
Collateral, the Company and each Guarantor assents to any extension or
postponement of the time of payment or any other indulgence, to any
substitution, exchange or release of or failure to perfect any security
interest in any Collateral, to the addition or release of any party or person
primarily or secondarily liable, to the acceptance of partial payment thereon
and the settlement, compromising or adjusting of any thereof, all in such
manner and at such time or times as the Lender may deem advisable. The Lender
shall have no duty as to the collection or protection of the Collateral or any
income therefrom, the preservation of rights against prior parties, or the
preservation of any rights pertaining thereto beyond the safe custody thereof
as set forth in section 11.2. The Company and each Guarantor further waive any
and all other suretyship defenses.
19. MARSHALLING. The Lender shall not be required to marshal any present
or future collateral security (including but not limited to the Collateral)
for, or other assurances of payment of, the Obligations or any of them or to
resort to such collateral security or other assurances of payment in any
particular order, and all of its rights and remedies hereunder and in respect
of such collateral security and other assurances of payment shall be cumulative
and in addition to all other rights and remedies, however existing or arising.
To the extent that it lawfully may, the Company and each Guarantor hereby
agrees that it will not invoke any law relating to the marshalling of
collateral which might cause delay in or impede the enforcement of the Lender's
rights and remedies under this Agreement or under any other instrument creating
or evidencing any of the Obligations or under which any of the Obligations is
outstanding or by which any of the Obligations is secured or payment thereof is
otherwise assured, and, to the extent that it lawfully may, the Company and
each Guarantor hereby irrevocably waives the benefits of all such laws.
20. PROCEEDS OF DISPOSITIONS; EXPENSES. The Company and each Guarantor
shall pay to the Lender on demand any and all expenses, including reasonable
attorneys' fees and disbursements, incurred or paid by the Lender in
protecting, preserving or enforcing the Lender's rights and remedies under or
in respect of any of the Obligations or any of the Collateral. After deducting
all of said expenses, the residue of any proceeds of collection or sale or
other disposition of Collateral shall, to the extent actually received in cash,
be applied to the payment of the Obligations in such order or preference as the
Lender may determine, proper allowance and provision being made for any
Obligations not then due, if any. Upon the final payment and satisfaction in
full of all of the Obligations and after making any payments required by
Sections 9-608(a)(1)(C) or 9-615(a)(3) of the Uniform Commercial Code of the
State, any excess shall be returned to the Company. In the absence of final
payment and satisfaction in full of all of the Obligations, the Company and
each Guarantor shall remain liable for any deficiency.
21. OVERDUE AMOUNTS. Until paid, all amounts due and payable by the
Company or any Guarantor hereunder shall be a debt secured by the Collateral
and shall bear, whether before or after judgment, interest at the rate of
interest for overdue principal set forth in the Credit Agreement.
22. GOVERNING LAW; CONSENT TO JURISDICTION. THIS AGREEMENT IS INTENDED TO
TAKE EFFECT AS A SEALED INSTRUMENT AND SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE. The Company and each Guarantor agrees
that any action or claim arising out of any dispute in connection with this
Agreement, any rights or obligations hereunder or the performance or
enforcement of such rights or obligations may be brought in the courts of the
State or any federal court sitting therein and consents to the non-exclusive
jurisdiction of such court. The Company and each Guarantor hereby waives any
objection that it may now or hereafter have to the venue of any such suit or
any such court or that such suit is brought in an inconvenient court.
23. WAIVER OF JURY TRIAL. THE COMPANY AND EACH GUARANTOR WAIVES ITS RIGHT
TO A JURY TRIAL WITH RESPECT TO ANY ACTION OR CLAIM ARISING OUT OF ANY DISPUTE
IN CONNECTION WITH THIS AGREEMENT, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THE
PERFORMANCE OR ENFORCEMENT OF ANY SUCH RIGHTS OR OBLIGATIONS. Except as
prohibited by law, the Company and each Guarantor waive any right which it may
have to claim or recover in any litigation referred to in the preceding
sentence any special, exemplary, punitive or consequential damages or any
damages other than, or in addition to, actual damages. The Company and each
Guarantor (a) certify that neither the Lender nor any representative, agent or
attorney of the Lender has represented, expressly or otherwise, that the Lender
would not, in the event of litigation, seek to enforce the foregoing waivers or
other waivers contained in this Agreement and (b) acknowledge that, in entering
into the Credit Agreement and the other Loan Documents to which the Lender is a
party, the Lender is relying upon, among other things, the waivers and
certifications contained in this section 23.
24. MISCELLANEOUS. The headings of each section of this Agreement are for
convenience only and shall not define or limit the provisions thereof. This
Agreement and all rights and obligations hereunder shall be binding upon the
Company, each Guarantor and their respective successors and assigns, and shall
inure to the benefit of the Lender and its successors and assigns. If any term
of this Agreement shall be held to be invalid, illegal or unenforceable, the
validity of all other terms hereof shall in no way be affected thereby, and
this Agreement shall be construed and be enforceable as if such invalid,
illegal or unenforceable term had not been included herein. The Company and
each Guarantor acknowledge receipt of a copy of this Agreement.
25. ADDITIONAL GUARANTORS. Upon the execution and delivery by any other
Person of a supplement in the form of Annex 1 hereto, such Person shall become
a "Guarantor" hereunder with the same force and effect as if it were originally
a party to this Agreement and named as a Guarantor hereunder. The execution and
delivery of such supplement shall not require the consent of any other
Guarantor hereunder, and the rights and obligations of each Guarantor hereunder
shall remain in full force and effect notwithstanding the addition of any new
Guarantor as a party to this Agreement.
IN WITNESS WHEREOF, intending to be legally bound, the Company and the
Guarantors have caused this Agreement to be duly executed as of the date first
above written.
PC-EPHONE, INC.
By: ____________________________
Name:
Title:
PC-EPHONE LTD.
By: ____________________________
Name:
Title:
PC-EPHONE CANADA ENTERPRISES, INC.
By: ____________________________
Name:
Title:
PC-ESOLUTIONS, INC.
By: ____________________________
Name:
Title:
Accepted:
PROCESS CONTROL (HOLDINGS) LIMITED
By: _______________________
Name:
Title:
CERTIFICATE OF ACKNOWLEDGMENT
COMMONWEALTH OR STATE OF )
) ss.
COUNTY OF )
Before me, the undersigned, a Notary Public in and for the county aforesaid, on
this ____ day of ________, 2002, personally appeared __________________________
to me known personally, and who, being by me duly sworn, deposes and says that
[s]he is the _________________ of PC-EPhone, Inc., and that said instrument
was signed and sealed on behalf of said corporation by authority of its Board
of Directors, and said __________________________________ acknowledged said
instrument to be the free act and deed of said corporation.
__________________________
Notary Public
My commission expires:
CERTIFICATE OF ACKNOWLEDGMENT
COMMONWEALTH OR STATE OF )
) ss.
COUNTY OF )
Before me, the undersigned, a Notary Public in and for the county aforesaid, on
this ____ day of ________, 2002, personally appeared ________________________
to me known personally, and who, being by me duly sworn, deposes and says that
[s]he is the _________________ of PC-EPhone, Ltd., and that said instrument
was signed and sealed on behalf of said corporation by authority of its Board
of Directors, and said __________________________________ acknowledged said
instrument to be the free act and deed of said corporation.
________________________
Notary Public
My commission expires:
CERTIFICATE OF ACKNOWLEDGMENT
COMMONWEALTH OR STATE OF )
) ss.
COUNTY OF )
Before me, the undersigned, a Notary Public in and for the county aforesaid, on
this ____ day of ________, 2002, personally appeared _________________________
to me known personally, and who, being by me duly sworn, deposes and says that
[s]he is the _________________ of PC-EPhone Canada Enterprises, Inc., and that
said instrument was signed and sealed on behalf of said corporation by
authority of its Board of Directors, and said ____________________________
acknowledged said instrument to be the free act and deed of said corporation.
__________________________
Notary Public
My commission expires:
CERTIFICATE OF ACKNOWLEDGMENT
COMMONWEALTH OR STATE OF )
) ss.
COUNTY OF )
Before me, the undersigned, a Notary Public in and for the county aforesaid, on
this ____ day of ________, 2002, personally appeared ________________________
to me known personally, and who, being by me duly sworn, deposes and says that
[s]he is the _________________ of PC-ESolutions, Inc., and that said instrument
was signed and sealed on behalf of said corporation by authority of its Board
of Directors, and said __________________________________ acknowledged said
instrument to be the free act and deed of said corporation.
_________________________
Notary Public
My commission expires:
ANNEX I
TO SECURITY AGREEMENT
This SUPPLEMENT, dated as of ________ __, ____ (this "Supplement"), is to
the Security Agreement, dated as of April 8, 2002 (as amended, supplemented,
amended and restated or otherwise modified from time to time, the "Security
Agreement"), among each Guarantor (such capitalized term, and other terms used
in this Supplement, to have the meanings set forth in the preamble and Section
1 of the Security Agreement) from time to time party thereto, in favor of
Process Control (Holdings) Limited, as Lender.
W I T N E S S E T H:
WHEREAS, pursuant to the provisions of Section 25 of the Security
Agreement, each of the undersigned is becoming a Guarantor under the Security
Agreement; and
WHEREAS, each of the undersigned desires to grant the security interests
under the Security Agreement in order to induce the Lenders to continue to
extend the Loans and issue the Letters of Credit under the Credit Agreement;
NOW, THEREFORE, in consideration of the premises, and for other
consideration (the receipt and sufficiency of which is hereby acknowledged),
each of the undersigned agrees, for the benefit of the Lender, as follows:
Party to Security Agreement, etc. In accordance with the terms of the
Security Agreement, by its signature below each of the undersigned hereby
irrevocably agrees to become a Guarantor under the Security Agreement with the
same force and effect as if it were an original signatory thereto and each of
the undersigned hereby (a) agrees to be bound by and comply with all of the
terms and provisions of the Security Agreement applicable to it as a Guarantor
and (b) represents and warrants that the representations and warranties made by
it as a Guarantor thereunder are true and correct in all material respects as
of the date hereof. In furtherance of the foregoing, each reference to the term
"Guarantors" in the Security Agreement shall be deemed to include each of the
undersigned.
Representations. Each of the undersigned hereby represents and warrants
that this Supplement has been duly authorized, executed and delivered by it and
that this Supplement and the Security Agreement constitute the legal, valid and
binding obligation of each of the undersigned, enforceable against it in
accordance with its terms.
Full Force of Security Agreement. Except as expressly supplemented hereby,
the Security Agreement shall remain in full force and effect in accordance with
its terms.
Severability. Wherever possible each provision of this Supplement shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Supplement shall be prohibited by or invalid under
such law, such provision shall be ineffective to the extent of such prohibition
or invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Supplement or the Security Agreement.
Indemnity; Fees and Expense, etc. Without limiting the provisions of any
other Loan Document, each of the undersigned agrees to reimburse the Lender for
its reasonable out-of-pocket expenses incurred in connection with this
Supplement, including reasonable attorney's fees and expenses of the Lender's
counsel.
Governing Law, Entire Agreement, etc. THIS SUPPLEMENT SHALL BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. This
Supplement and the other Loan Documents constitute the entire understanding
among the parties hereto with respect to the subject matter thereof and
supersede any prior agreements, written or oral, with respect thereto.
Counterparts. This Supplement may be executed by the parties hereto in
several counterparts, each of which shall be deemed to be an original and all
of which shall constitute together but one and the same agreement.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Supplement to be duly executed and delivered by its officer thereunto duly
authorized as of the date first above written.
[NAME OF ADDITIONAL GUARANTOR]
By:_________________________
Title:
ACCEPTED AND AGREED:
Process Control (Holdings)
Limited, as Lender
By:_________________________
Title:
