SECURITY AGREEMENT
THIS SECURITY AGREEMENT (the "Agreement") is made and entered into
effective as of August 30, 2000 by and between the Wilmington Trust Company and
Xxxxxx Xxxx Xxxxxx, co-trustees u/a dated November 25, 1970 with, Xxxxxx X.
Xxxxxx FBO Xxxx Xxxxx Xxxxxx or its assigns (the "Secured Party"), and Global
Technovations, Inc., a Delaware corporation (the "Debtor").
WHEREAS, the Secured Party has extended certain credit to the Debtor,
which is to be repaid with interest in accordance with the terms of a Senior
Secured Promissory Note of even date herewith executed by the Debtor in favor of
the Secured Party and in the original principal amount of Five Million
($5,000,000) (the "Note");
WHEREAS, in order to induce the Secured Party to extend the credit to
the Debtor referred to above, and to secure the payment of the Note, the Debtor
enters into this Agreement providing for, among other things, a security
interest in favor of the Secured Party in the Collateral (as such term is
defined below);
NOW, THEREFORE, in consideration of the premises and the mutual
agreements contained herein, the parties hereby agree as follows:
Section 1. Grant of Security Interest. As security for the payment of
the indebtedness of the Debtor to the Secured Party evidenced by the Note and
for the payment and/or performance of all other obligations of the Debtor under
the Note (collectively, the "Obligations"), the Debtor hereby grants, pledges
and assigns to the Secured Party, and creates in favor of the Secured Party, a
first security interest subordinate only to statutory liens in all of the
Debtor's right, title and interest in and to the Collateral.
Section 2. References to the Debtor and Definitions. All capitalized
terms not otherwise defined herein shall have the meanings set forth below:
"Collateral" shall mean all of the Debtor's right, title and interest
in and to all accounts, contract rights, goods, inventory, general intangibles,
equipment and personal property of every kind and nature whatsoever, whether
tangible or intangible, now or hereafter acquired (including replacements,
substitutions, and proceeds and products thereof) now or hereafter (1) located
at, (2) utilized in connection with or (3) arising from the ownership and
operation of the Debtor's business and including, without limitation, all such
items listed on Exhibit A attached hereto, but excluding the capital stock and
assets of Onkyo Acquisition Corporation or Onkyo America, Inc. including their
current and future subsidiaries.
"Event of Default" or "Default" shall include the occurrence of any of
the following if not cured or abated within applicable grace or cure periods:
(a) default under the Note;
(b) to the best of the Debtor's knowledge, any representation, warranty, or
statement made or furnished to the Secured Party by or on behalf of the
Debtor in connection with this Agreement shall be untrue or misleading in
any material respect as of the date when made or furnished, or any covenant
of the Debtor under this Agreement shall be breached; or
(c) the dissolution or termination of existence of the Debtor except where
caused by rule on annual or similar report with the Secretary of State or
similar authority where the Debtor is domiciled; or the insolvency or
business failure of the Debtor, or the admission by the Debtor in writing
of any inability to pay the Debtor's debts as they become due; or the
appointment of a receiver or trustee for all or any part of the property of
the Debtor unless vacated within 10 days, or an assignment by the Debtor of
all or a substantial portion of its assets for the benefit of the Debtor's
creditors; or the commencement of any proceeding under any insolvency laws
against the Debtor if such proceeding is not dismissed within a period of
30 days after commencement.
"Uniform Commercial Code" and "applicable Uniform Commercial Code,"
shall mean the Florida Uniform Commercial Code, except in the case of remedies
of the Secured Party, in which case it shall include the Uniform Commercial Code
under which such remedies arise or which governs the exercise of such remedies.
Section 3. Representations, Warranties and Covenants of the
Debtor. The Debtor represents, warrants and covenants that:
(a) The Debtor's Title. The Debtor is, as to all of the Collateral, the owner
of the Collateral, which is free from any lien, security interest, or
encumbrance, except for immaterial statutory liens, and the Debtor shall
defend the Collateral and proceeds and products thereof against any and all
claims and demands adverse to the interests of the Secured Party.
(b) Filing of Financing Statements and Preservation of Perfected Security
Interests. The Debtor hereby authorizes the Secured Party, to file in such
office or offices as the Secured Party deems necessary or desirable such
financing and continuation statements and amendments thereof or supplements
thereto, and such other documents as the Secured Party may from time to
time require to perfect, preserve and protect the security interest granted
herein. The Debtor shall immediately notify the Secured Party in writing of
any change of address from that shown in this Agreement and shall also,
upon demand, furnish to the Secured Party such further information and
shall execute and deliver to the Secured Party such financing statements
and other documents and shall pay any and all filing fees and costs with
respect thereto and shall do all such acts as the Secured Party may at any
time or from time reasonably request to establish and maintain perfected
security interests in the Collateral.
(c) Taxes and Assessments. The Debtor shall promptly pay, as they become due
and payable, any taxes and assessments imposed upon the Collateral.
(d) Authority or Signer to Execute Security Agreement. The undersigned
representative of the Debtor warrants that he has the authority to enter
into and bind the Debtor to the terms of this Agreement.
(e) Key Man Insurance. Within 30 days following the execution of this
Agreement, the Debtor shall obtain a renewable term `key-man' insurance
policy on the life of Xxxxxxx X. Xxxxxx, Xx., President and Chief Executive
Officer of the Debtor, which policy shall have an original insured value of
$5,000,000, and shall be in form and substance acceptable to the Debtor and
the Secured Party.
Section 4. Remedies Upon Default. Upon the occurrence of any Event of
Default and at any time thereafter the Secured Party may, at its option, declare
the Note immediately due and payable without demand or notice, and the Secured
Party may reduce the Note to judgment, and in addition may seek judicial
foreclosure of its security interest in the Collateral or, if applicable, assert
its secured position with respect to the Collateral in any bankruptcy,
receivership, or similar proceeding with respect to the Debtor or the Debtor's
assets.
Section 5. Governing Law. This Agreement shall be interpreted in
accordance with Delaware law, including all matters of construction, validity,
performance and enforcement, without giving effect to any principles of conflict
of laws. This Agreement may not be changed, modified, amended or terminated
orally.
Section 6. Assignment. Except as otherwise provided herein, the Secured
Party may not assign or transfer this Agreement and any or all rights or
obligations hereunder without prior written consent of the Debtor and the Senior
Lender.
Section 7. Benefit. Except as provided herein, the rights and
privileges of the parties under this Agreement shall inure to the benefit of
their successors and assigns. All promises, covenants and agreements contained
in this Agreement shall be binding upon the personal representatives, heirs,
successors and assigns of the parties.
Section 8. Notices. All notices, offers, acceptance and any other acts
under this Agreement (except payment) shall be in writing, and shall be
sufficiently given if delivered to the addressees in person, by Federal Express
or similar receipted delivery, by facsimile delivery or, if mailed, postage
prepaid, by certified mail, return receipt requested, as follows:
The Company: Global Technovations, Inc.
Xxxxxxx X. Xxxxxx, Xx., President
and Chief Executive Officer
0000 Xxxxxxx Xxxxx, Xxxxx 000
Xxxx Xxxxx Xxxxxxx, XX 00000
Facsimile (000) 000-0000
with a copy to: Xxxxxxx X. Xxxxxx, Esq.
Xxxxxxx Xxxxxx, P.A.
0000 Xxxx Xxxxx Xxxxx Xxxx.
Xxxxx 000
Xxxx Xxxx Xxxxx, XX 00000
Facsimile (000) 000-0000
Secured Party: Xxxxxx Xxxx Xxxxxx
TMF Investments, Inc.
00 Xxxxxxx Xxxx, Xxxxxxxx X
Xxxxxxx Xxxx, XX 00000
Facsimile (000)000-0000
And: Wilmington Trust Company
Xxxxxx Square North
0000 Xxxxx Xxxxxx Xxxxxx
Xxxxxxxxxx, XX 00000-0000
Attention: Xxxxxxx XxXxxxxxxx, Esquire
or to such other address as either of them, by notice to the other may designate
from time to time. Time shall be counted to, or from, as the case may be, the
date of delivery.
Section 9. Severability. If a court of competent jurisdiction makes a
final determination that any provision of this Agreement (or any portion
thereof) is invalid, illegal or unenforceable for any reason whatsoever: (i) the
validity, legality and enforceability of the remaining provisions of this
Agreement shall not in any way be affected or impaired thereby; and (ii) to the
fullest extent possible, the provisions of this Agreement shall be construed so
as to give effect to the intent manifested by the provision held invalid,
illegal or unenforceable.
Section 10. Non-Waiver. The failure of the Secured Party to insist upon
strict performance of any provision hereof shall not constitute a waiver of, or
estoppel against asserting, the right to require such performance in the future,
nor shall it be a waiver or estoppel with respect to later breach of a similar
nature or otherwise.
Section 11. Entire Agreement. The terms and conditions of this Security
Agreement set forth the entire understanding and agreement between the parties
hereto, and supersede all other communications negotiations and prior oral or
written statements regarding the subject matter hereof no change, modification,
rescission, discharge, abandonment or waiver of the terms of this Security
Agreement shall be binding upon the Secured Party unless made in writing and
signed on its behalf by an authorized representatives of the Secured Party.
Section 12. Miscellaneous. The headings and subheadings herein are for
the convenience of the parties only, and shall not affect the construction or
interpretation of any of the provisions of this Security Agreement. This
Security Agreement may be executed in one or more counterparts, each of which
shall for all purposes be deemed to be an original but all of which together
shall constitute one and the same Security Agreement. Only one such counterpart
signed by the party against whom enforceability is sought needs to be produced
to evidence the existence of this Security Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Security
Agreement to be executed by their respective duly authorized representatives
effective as of the date first written above.
Global Technovations, Inc.
By:
Xxxxxxx X. Xxxxxx, Xx., President and
Chief Executive Officer
Wilmington Trust Company and Xxxxxx Xxxx Xxxxxx,
co-trustees, Xxxxxx X. Xxxxxx FBO Xxxx Xxxxx Xxxxxx
By: __________________________
Xxxxxx Xxxx Xxxxxx, co-Trustee
EXHIBIT A
Except for the capital stock and assets of Onkyo Acquisition
Corporation or Onkyo America, Inc. including their current and future
subsidiaries, the Debtor's Collateral shall include but shall not be limited to
the property of Debtor of any kind or description, tangible or intangible, real
or personal, of whatever description, whether now existing and/or owned and
hereafter arising and/or acquired, wherever located in the United States
including, but not limited to, the following:
1. all of Debtor's now existing or hereafter arising or acquired
Accounts, accounts receivable, rights to payment and other
contract rights, however created, including without limitation any
right to payment for goods sold or leased or for services
rendered, whether arising out of the sale of Inventory or
otherwise and whether or not it has been earned by performance,
and any and all notes, drafts, acceptances, chattel paper, General
Intangibles and other obligations arising out of or representing
any such right ("Accounts Receivable");
2. accounts, including without limitation, all of Debtor's Accounts
Receivable, chattel paper, contract rights, letters of credit,
instruments and documents ("Accounts"), and all goods whose sale,
lease or other disposition by Debtor has given rise to Accounts
and have been returned to or repossessed or stopped in transit by
Debtor;
3. Inventory, as defined in the Uniform Commercial Code, as adopted
in the State of Delaware and shall include, without limitation,
all of Debtor's goods held or being processed for sale or lease
including all materials, work-in-process, finished goods, supplies
and other goods customarily classified as Inventory;
4. goods (other than Inventory), machinery, equipment, vehicles and
fixtures (hereinafter individually and collectively referred to
as "Equipment");
5. all chooses in action, causes of action and all other intangible
property of Debtor of every kind and nature now owned or hereafter
acquired by Debtor, including, without limitation, corporate and
other business records, deposit accounts, inventions, designs,
patents, patent and trademark registrations and applications,
trademarks, trade names, trade secrets, goodwill, copyrights,
registrations, licenses, franchises, deferred tax benefits, tax
refund claims, prepaid expenses, computer programs, covenants not
to compete, customer lists and mailing lists, contract rights,
indemnification rights, causes of action and any letters of credit
(collectively "Intangibles");
6. monies, reserves, deposits, deposit accounts and interest or
dividends thereon, securities, cash, cash equivalents and other
property now or at any time or times hereafter in the possession
or under the control of Secured Party or its bailee;
7. liens, guarantees and other rights and privileges pertaining to
any of the foregoing;
8. all books, records and computer records in any way relating to the
foregoing;
9. all other assets of Debtor, or hypothecated to Debtor, whether
real, personal, tangible or intangible or mixed, now existing or
hereafter acquired, created, built or otherwise coming into being;
10. all accessions, substitutions, renewals, improvements and replace-
ments of and additions to the foregoing;
11. all investment property of Debtor, including without limitation,
all stock, membership or other equity interests of Debtor in any
subsidiary of Debtor or any other entity and any and all
dividends, distributions and amounts or additional securities
received or receivable or otherwise distributed in respect of or
in exchange for the foregoing, whether, as a result of any
corporate reorganization, merger, consolidation, stock split,
stock dividend, conversion, preemptive right or otherwise
involving the issuer of such investment property, or their
successors or assigns; and
12. all products and proceeds of the foregoing including, without
limitation, proceeds of insurance policies insurance policies
insuring the same.
