GENERAL SECURITY AGREEMENT
GENERAL SECURITY AGREEMENT, dated as of September __, 1997, made by
SONICS & MATERIALS, INC., a Delaware corporation ("Obligor"), to XXXXX BROTHERS
XXXXXXXX & CO., a private bank (the "Secured Party").
SECTION 1. Grant of Security Interest. Obligor hereby grants to
Secured Party a security interest in the following property, whether now owned
or hereafter arising or acquired (collectively, the "Collateral"):
(a) all of Obligor's accounts, general intangibles,
chattel paper, and instruments (collectively, the "Receivables,");
(b) all of Obligor's inventory and documents;
(c) all of Obligor's equipment (whether or not
constituting fixtures);
(d) all of Obligor's financial assets and investment
property; and
(e) all proceeds and products of any of the foregoing,
including insurance payable by reason of loss or damage.
Obligor represents and warrants that it is the sole owner of the
Collateral and has the legal right to grant to Secured Party a security interest
therein, and that the Collateral is free and clear of all other liens, security
interests and encumbrances.
SECTION 2. Security for Liabilities. This Agreement secures the
payment and performance of all indebtedness, obligations, and liabilities of
every kind and nature (whether primary or secondary, direct or indirect,
absolute or contingent, sole, joint, or several, secured or unsecured, similar
or dissimilar, or related or unrelated), heretofore, now, or hereafter
contracted or acquired, of Obligor to Secured Party (collectively, the
"Liabilities").
SECTION 3. Obligor Remains Liable. Anything herein to the contrary
notwithstanding, (a) Obligor shall remain liable under its contracts and
agreements included in the Collateral to the extent set forth therein to perform
all of Obligor's duties and obligations thereunder to the same extent as if this
Agreement had not been executed, (b) the exercise by Secured Party of any of the
rights hereunder shall not release Obligor from any of its duties or obligations
under its contracts and agreements included in the Collateral, and (c) Secured
Party shall not have any obligation or liability under the contracts and
agreements included in the Collateral by reason of this Agreement, nor shall
Secured Party be obligated to perform any of the obligations or duties of
Obligor thereunder or to take any action to collect or enforce any claim for
payment assigned hereunder.
SECTION 4. Further Assurances. (a) Obligor agrees that from time to
time, at its expense, it will promptly execute and deliver all further
instruments and documents, and take all further action, that may be necessary or
desirable, or that Secured Party may request, in order to perfect and protect
any security interest granted or purported to be granted hereby or to enable
Secured Party to exercise and enforce its rights and remedies hereunder with
respect to any Collateral. Without limiting the generality of the foregoing,
Obligor will: (i) upon request by Secured Party, xxxx conspicuously each item of
chattel paper included in its Receivables and each of its records pertaining to
any of the Collateral, with a legend, in form and substance satisfactory to
Secured Party, indicating that such chattel paper or Collateral is subject to
the security interest granted hereby; (ii) if any of its Receivables shall be
evidenced by a promissory note or other instrument, deliver and pledge to
Secured Party hereunder such note or instrument duly indorsed and accompanied by
duly executed instruments of transfer or assignment, all in form and substance
satisfactory to Secured Party, and (iii) execute and file such financing or
continuation statements, or amendments thereto, and such other instruments or
notices, as may be necessary or desirable, or as Secured Party may request, in
order to perfect and preserve the security interests granted or purported to be
granted hereby.
(b) Obligor hereby authorizes Secured Party to file one or
more financing or continuation statements, and amendments thereto, relative to
all or any part of the Collateral without the signature of Obligor where
permitted by law. A carbon, photographic, or other reproduction of this
Agreement or any part thereof shall be sufficient as a financing statement where
permitted by law.
(c) Obligor will furnish to Secured Party from time to time
statements and schedules further identifying and describing the Collateral and
such other reports in connection with the Collateral as Secured Party may
request, all in reasonable detail.
SECTION 5. Insurance. Obligor shall, at its own expense, maintain
liability and casualty insurance with respect to its business and property with
responsible and reputable insurance companies or associations satisfactory to
Secured Party in such amounts and covering such risks as are acceptable to or
specified by Secured Party, taking into account, among other factors, such
amounts and risks as are usually carried by persons engaged in similar
businesses and owning similar properties in the same general areas in which
Obligor operates. Each policy for liability insurance shall provide for payment
to or on behalf of Obligor and Secured Party, as their interests may appear.
Each policy of property damage insurance shall provide for all losses to be paid
to Secured Party. Each policy of property damage insurance shall in addition (a)
name Secured Party as an insured party thereunder (without any representation or
warranty by or obligation upon Secured Party), (b) contain an agreement by the
insurer that any loss thereunder shall be payable to, or on behalf of, as the
case may be, Secured Party notwithstanding any action, inaction, or breach of
representation or warranty by the Obligor, (c) provide that there shall be no
recourse against Secured Party for payment of premiums or other amounts with
respect thereto, and (d) provide that at least 30 days' prior written notice of
cancellation or of lapse shall be given to Secured Party by the insurer. Obligor
shall, if so requested by Secured Party, deliver to Secured Party original or
duplicate policies of insurance maintained pursuant hereto and, as often as
Secured Party may reasonably request, a report of a reputable insurance broker
with respect to such insurance. Further, Obligor shall, at the request of
Secured Party, duly execute and deliver instruments or assignment of such
insurance policies to comply with the requirements of Section 5 and cause the
respective insurers to acknowledge notice of such assignments.
SECTION 6. Certain Covenants as to Inventory and Equipment.
Obligor shall:
(a) Keep its inventory and equipment in the places specified
therefor on Schedule 1 hereto (other than inventory sold or leased in the
ordinary course of business) or, upon 30 days' prior written notice to Secured
Party, at such other places as shall be identified in such notice and which are
in jurisdictions where all action required by Section 4 shall have been taken
with respect to such inventory and equipment.
(b) Cause its equipment to be maintained and preserved in the same
condition, repair, and working order as when new, ordinary wear and tear
excepted, and, in the case of any material loss or damage to any of its
equipment, as quickly as practicable after the occurrence thereof, make or cause
to be made all repairs, replacements, and other improvements in connection
therewith which are necessary or desirable to such end.
(c) Pay promptly when due all property and other taxes, assessments,
and governmental charges or levies imposed upon it, and all claims (including
claims for labor, materials and supplies) against its inventory and equipment.
(d) After the occurrence and during the existence of an Event of
Default (as hereinafter defined), receive in trust for the benefit of Secured
Party all amounts and proceeds received or collected by such Obligor in respect
of its inventory and equipment, segregate such amounts and proceeds from other
funds of such Obligor, and forthwith pay such amounts and proceeds over to
Secured Party in the same form as so received (with any necessary endorsement)
to be held as cash collateral and applied as provided in Section 14(b).
SECTION 7. Certain Covenants as to Receivables.
Obligor shall:
(a) Keep its chief place of business and chief executive office and
the offices where it keeps its records, including all computer hardware and
software, concerning its Receivables, and all originals of all chattel paper
which evidence any such Receivables at the places specified in Schedule 1 hereto
or, upon 30 days' prior written notice to Secured Party, at such other locations
as shall be identified in such notice and which are in a jurisdiction where all
action required by Section 4 shall have been taken with respect to its
Receivables. Obligor will hold and preserve such records and chattel paper and
will, upon reasonable notice, permit representatives of Secured Party at any
time during normal business hours to inspect and make abstracts from such
records and chattel paper. Obligor shall immediately endorse and deliver to
Secured Party each instrument included in the Receivables. Obligor shall
immediately notify Secured Party if any of its accounts arise out of contracts
with the United States or any agency or instrumentality thereof, and execute any
instruments and take any steps required by Secured Party in order that all
moneys due and to become due under such contracts shall be assigned to Secured
Party and notice given to the Government under the Federal Assignment of Claims
Act.
(b) From time to time upon request, Obligor shall provide Secured
Party with (i) schedules describing all accounts, (ii) additional schedules
describing other Receivables, and (iii) specific written assignments to Secured
Party of any of its Receivables. Any failure to execute or deliver any schedule
or assignment shall not, however, affect or limit any security interest or other
right of Secured Party in and to any Receivable. Upon Secured Party's request,
Obligor shall also furnish to Secured Party copies of invoices to customers and
shipping and delivery receipts or warehouse receipts relating thereto, as well
as such other documents and instruments as Secured Party may reasonably request
in connection with any Receivable.
(c) Obligor shall promptly notify Secured Party of all returns,
repossessions and recoveries of goods covered by the Receivables and of all
claims asserted with respect thereto. Each such notification shall be
accompanied by a statement describing the relevant goods and the location
thereof. Obligor shall not settle or adjust any dispute or claim, grant any
discount, credit or allowance, or accept any return of merchandise except in the
ordinary course of business. When Obligor receives collateral of any kind by
reason of transactions between itself and its customers or account debtors, it
will hold the same on Secured Party's behalf, subject to Secured Party's
instructions, as property forming part of the Receivables.
(d) Except as otherwise provided in Section 14, Obligor shall
continue to collect, at its own expense, all amounts due or to become due to
Obligor under the Receivables. In connection with such collections, Obligor may
take (and, at Secured Party's direction, shall take) such action as Obligor or
Secured Party may deem necessary or advisable to enforce collection of its
Receivables; provided, however, that Secured Party shall have the right, at any
time and from time to time, whether or not an Event of Default shall have
occurred, to notify the account debtors or obligors under any Receivables of the
assignment of such Receivables to Secured Party and to direct such account
debtors or obligors to make payment of all amounts due or to become due
thereunder directly to Secured Party and, upon such notification and at the
expense of Obligor, to enforce collection of any amount, payment, or other terms
thereof, upon terms which it considers advisable. Any amounts received or
collected by Secured Party pursuant to this subsection shall be held as cash
collateral and applied as provided in Section 14(b). After such notification,
and in any event after the occurrence and during the continuance of an Event of
Default, (i) all amounts or proceeds received or collected by Obligor in respect
of Receivables shall be received in trust for the benefit of Secured Party
hereunder, shall be segregated from other funds of Obligor, and shall be
forthwith paid over to Secured Party in the same form as so received (with any
necessary endorsement) to be held as cash collateral and applied as provided in
Section 14(b), and (ii) Obligor shall not adjust, settle, or compromise the
amount or payment of any Receivable, or release wholly or partly any account
debtor or obligor thereunder, or allow any credit or discount thereon.
(e) Secured Party shall have the right from time to time to
communicate directly with account debtors and obligors on the Receivables and to
do test verifications of the Receivables.
SECTION 8. Transfers and Other Liens. Obligor shall not:
(a) Sell, assign (by operation of law or otherwise), or
otherwise dispose of any of the Collateral except sales of inventory in the
ordinary course of business.
(b) Create or suffer to exist any lien, security interest, or
other charge or encumbrance upon or with respect to any of the Collateral, other
than existing liens set forth on Schedule 2 hereto.
SECTION 9. Secured Party Appointed Attorney-in-Fact. Obligor hereby
irrevocably appoints Secured Party as its attorney-in-fact, with full authority
in the place and stead of Obligor and in the name of Obligor, Secured Party, or
otherwise, from time to time in Secured Party's discretion to take any action
and to execute any instrument which Secured Party may deem necessary or
advisable to accomplish the purposes of this Agreement, including, without
limitation:
(a) to sign in the name and on behalf of Obligor any
financing statements or other papers required under Section 4;
(b) to obtain and adjust insurance required to be paid to
Secured Party pursuant to Section 5;
(c) to ask, demand, collect, xxx for, recover, compound,
receive, and give acquittance and receipts for moneys due and to become due
under or in respect of any of the Collateral;
(d) to receive, indorse, and collect any drafts or other
instruments, documents, and chattel paper in connection with subsection (b)
or (c) above; and
(e) to file any claims or take any action or institute any
proceedings which Secured Party may deem necessary or desirable for the
collection of any of the Collateral or otherwise to enforce the rights of
Secured Party with respect to any of the Collateral.
Obligor hereby ratifies and approves all acts of Secured Party as
such attorney-in-fact. Secured Party shall not, in its capacity as such
attorney-in-fact, be liable for any acts or omissions, nor for any error in
judgment or mistake of fact or law, but only for gross negligence or willful
misconduct. This power, being coupled with an interest, is irrevocable until all
Liabilities have been fully satisfied and until Secured Party is no longer
committed to allow additional Liabilities to be incurred. Any amounts received
or collected by Secured Party in its capacity as such attorney-in-fact shall be
held as cash collateral and applied as provided in Section 14(b).
SECTION 10. Secured Party May Perform. If Obligor fails to perform
any agreement contained herein, Secured Party may itself perform, or cause
performance of, such agreement, and the expenses of Secured Party incurred in
connection therewith shall be payable by Obligor under Section 15(b).
SECTION 11. Secured Party's Duties. The powers conferred on Secured
Party hereunder are solely to protect its interest in the Collateral and shall
not impose any duty to exercise any such powers. Except for the safe custody of
any Collateral in its possession and the accounting for moneys actually received
by it hereunder, Secured Party shall not have any duty as to any Collateral or
as to the taking of any necessary steps to preserve rights against any parties
or any other rights pertaining to any Collateral.
SECTION 12. Inspection Rights. Secured Party at all times shall have
access to inspect, audit, and make extracts from all of Obligor's records,
files, and books of account relating to the Collateral, and Obligor shall
deliver any document or instrument necessary for Secured Party to obtain records
from any service bureau maintaining records for Obligor. Secured Party may also,
at all reasonable times, examine and inspect inventory and other Collateral
owned by Obligor. Obligor shall, at Secured Party's request, take all steps
necessary to facilitate such inspection.
SECTION 13. Default. "Event of Default" means nonpayment of any of
the Liabilities when due (whether at stated maturity or upon demand,
acceleration of maturity or otherwise), any other default with respect to the
Liabilities (including any Event of Default as provided in the Credit
Agreement), any failure by Obligor to perform any of its obligations under this
Agreement or any other agreement, instrument, or document evidencing or securing
any of the Liabilities, or any breach of any representation or warranty made by
Obligor in connection with the transactions contemplated by this Agreement or
any other agreement, instrument, or document evidencing or securing any of the
Liabilities; provided, however, that except for nonpayment of interest or
principal when due under promissory notes of Obligor payable to Secured Party
and except as provided in Section 6.1(d) or (e) of the Credit Agreement, no
Event of Default shall be deemed to have occurred unless such default, failure
or breach continues for thirty (30) days following written notice from Secured
Party.
SECTION 14. Remedies. If any Event of Default shall have
occurred and be continuing:
(a) Secured Party may exercise in respect of the Collateral,
in addition to other rights and remedies provided for herein or otherwise
available to it, all the rights and remedies of a secured party on default under
the Uniform Commercial Code (the "Code") and other applicable laws and
agreements, as they may be amended from time to time, and also may (i) require
Obligor to, and Obligor hereby agrees that it will at its expense and upon
request of Secured Party forthwith, assemble the tangible Collateral as directed
by Secured Party and make it available to Secured Party at a place or places to
be designated by Secured Party which are reasonably convenient to Secured Party
and Obligor and (ii) without notice except as specified below, sell the
Collateral or any part thereof in one or more parcels at public or private sale,
at any of Secured Party's offices or elsewhere, for cash, on credit, or for
future delivery, and upon such other terms as Secured Party may deem
commercially reasonable. Obligor agrees that, to the extent notice of sale shall
be required by law, at least five business days' notice to Obligor of the time
and place of any public sale or the time after which any private sale is to be
made shall constitute reasonable notification. Secured Party shall not be
obligated to make any sale of the Collateral regardless of notice of sale having
been given. Secured Party may adjourn any public or private sale from time to
time by announcement at the time and place fixed therefor, and such sale may,
without further notice, be made at the time and place to which it was so
adjourned.
(b) All cash proceeds received by Secured Party in respect of
any sale of, collection from, or other realization upon all or any part of the
Collateral may, in the discretion of Secured Party, be held by Secured Party
(without interest) as collateral for, and/or then or at any time thereafter
applied (after payment of any amounts payable to Secured Party pursuant to
Section 15) in whole or in part by Secured Party against, all or any part of the
Liabilities in such order as Secured Party shall elect. Any surplus of such cash
or cash proceeds held by Secured Party and remaining after payment in full of
all the Liabilities shall be paid over to Obligor or to whosoever may be
lawfully entitled to receive such surplus.
SECTION 15. Indemnity and Expenses. (a) Obligor agrees to indemnify
Secured Party (including any partner, officer, employee, director or agent of
the Secured Party) from and against any and all claims, losses, and liabilities
growing out of or resulting from this Agreement (including, without limitation,
enforcement of this Agreement), except claims, losses, or liabilities resulting
from Secured Party's gross negligence or willful misconduct.
(b) Obligor will upon demand pay to Secured Party the amount
of any and all reasonable expenses, including the reasonable fees and
disbursements of its counsel and of any experts and agents, which Secured Party
may incur in connection with (i) the preparation, administration and amendment
of this Agreement, (ii) the custody, preservation, use, or operation of, or the
sale of, collection from, or other realization upon, any of the Collateral,
(iii) the exercise or enforcement of any of the rights of Secured Party, or (iv)
the failure by Obligor to perform or observe any of the provisions hereof.
SECTION 16. Amendments, Indulgences, Etc. No amendment or waiver of
any provision of this Agreement nor consent to any departure by Obligor herefrom
shall in any event be effective unless the same shall be in writing and signed
by Secured Party and Obligor, and then such waiver or consent shall be effective
only in the specific instance and for the specific purpose for which given. No
failure or delay on the part of Secured Party in the exercise of any right,
power, or remedy under this Agreement shall constitute a waiver thereof, or
prevent the exercise thereof in that or any other instance.
SECTION 17. Notices. All notices, requests and demands to or upon
the respective parties hereto shall be deemed to have been given or made, (a) if
delivered by hand against receipt, on the date of such delivery, or (b) if
deposited in the mails, postage prepaid, registered or certified mail, return
receipt requested, on the third day following the date of postmark, addressed as
follows or to such other address as may be hereafter designated in writing by
the respective parties hereto:
If to Obligor:
For notices sent prior to May 1, 1998:
Sonics & Materials, Inc.
Xxxx Xxxxxxx Xxxxxx
Xxxxxxx, XX 00000
Attn: Xxxxxx X. Xxxxxx, President
Attn: Xxxxxx X. Xxxxxx, Vice President - Legal Affairs and Investor
Relations
Facsimile: (000) 000-0000
For notices sent after to May 1, 1998:
Sonics & Materials, Inc.
00 Xxxxxx Xxxx Xxxx
Xxxxxxx, XX 00000
Attn: Xxxxxx X. Xxxxxx, President
Attn: Xxxxxx X. Xxxxxx, Vice President - Legal Affairs and Investor
Relations
Facsimile: (000) 000-0000
If to Secured Party:
Xxxxx Brothers Xxxxxxxx & Co.
00 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Chief Credit Officer
Fax No: 000-000-0000
SECTION 18. Continuing Security Interest; etc. This Agreement shall
create a continuing security interest in the Collateral and shall (a) be binding
upon Obligor, its heirs, administrators, successors, and assigns and (b) inure
to the benefit of Secured Party and its successors, transferees, and assigns.
The execution and delivery of this Agreement shall in no manner impair or affect
any other security (by endorsement or otherwise) for the payment or performance
of the Liabilities and no security taken hereafter as security for payment or
performance of the Liabilities shall impair in any manner or affect this
Agreement or the security interest granted hereby, all such present and future
additional security to be considered as one general, continuing security. Any of
the Collateral may be released from this Agreement without altering, varying, or
diminishing in any way this Agreement or the security interest granted hereby as
to the Collateral not expressly released, and this Agreement and such security
interest shall continue in full force and effect as to all of the Collateral not
expressly released.
SECTION 19. Representations and Warranties. Obligor represents
and warrants to Secured Party that:
(a) Obligor has all requisite power and authority to execute and
deliver this Agreement and to carry out the transactions contemplated hereby.
The execution, delivery and performance of this Agreement by Obligor has been
duly authorized by all requisite corporate action, and this Agreement has been
duly executed and delivered by Obligor and constitutes its valid and binding
obligation, enforceable against Obligor in accordance with its terms, except as
such enforcement may be limited by bankruptcy, insolvency, moratorium,
reorganization and other similar laws relating to or affecting the enforcement
of creditors' rights generally, and except that the availability of specific
performance, injunctive relief or other equitable remedies is subject to the
discretion of the court before which any such proceeding may be brought.
(b) The execution, delivery and performance of this Agreement by
Obligor will not violate any provision of law, any rule or regulation of any
governmental authority, or any judgment, decree or order of any court binding on
Obligor, and will not conflict with or result in any breach of any of the terms,
conditions or provisions of, or constitute a default under, or, except as
expressly provided herein, result in the creation of any lien, security
interest, charge or encumbrance upon any of its properties, assets or
outstanding stock under its Articles of Incorporation or By-Laws or any
indenture, mortgage, lease, agreement or other instrument to which Obligor is a
party or by which it or any of its properties is bound.
SECTION 20. Governing Law; Consent to Jurisdiction; etc. This
Agreement shall be governed by and construed in accordance with the laws of the
State of New York. Obligor consents to the jurisdiction of the courts of New
York and of the courts of the United States sitting in New York in any
litigation concerning this Agreement, and Obligor waives any objection based on
venue or inconvenient forum. Obligor waives any right to trial by jury in any
litigation involving this Agreement. Unless otherwise defined herein, terms
defined in the Code as in effect in New York on the date hereof (including the
terms "inventory," "accounts," "general intangibles," "chattel paper,"
"instruments," "equipment," "fixtures," "proceeds," "products," "documents,"
"financial assets" and "investment property") are used herein as therein defined
as of such date. This Agreement may be executed in any number of counterparts,
all of which taken together shall constitute one and the same instrument, and
any of the parties hereto may execute this Agreement by signing any such
counterpart.
SECTION 21. Severability. The provisions of this Agreement are
independent of and separable from each other, and no such provision shall be
affected or rendered invalid or unenforceable by virtue of the fact that for any
reason any other such provision may be invalid or unenforceable in whole or in
part.
IN WITNESS WHEREOF, Obligor, intending to be legally bound, has
executed or caused the execution of this Agreement, under seal, as of the date
first above written.
SONICS & MATERIALS, INC.
By:_____________________________________
Name:
Title:
Per pro. XXXXX BROTHERS XXXXXXXX & CO.
By:_____________________________________
PHTRANS:169334_4.WP5
SCHEDULE 1
Locations of chief place of business and executive office:
Prior to May 1, 1998: On or After May 1, 1998:
Sonics & Materials, Inc. Sonics & Materials, Inc.
West Kenosia Avenue 00 Xxxxxx Xxxx Xxxx
Xxxxxxx, XX 00000 Xxxxxxx, XX 00000
Locations of records concerning Receivables, financial assets, investment
property, originals of chattel paper:
Prior to May 1, 1998: On or After May 1, 1998:
Sonics & Materials, Inc. Sonics & Materials, Inc.
West Kenosia Avenue 00 Xxxxxx Xxxx Xxxx
Xxxxxxx, XX 00000 Xxxxxxx, XX 00000
Locations of Inventory and Equipment:
Prior to May 1, 1998: On or After May 1, 1998:
Sonics & Materials, Inc. Sonics & Materials, Inc.
West Kenosia Avenue 00 Xxxxxx Xxxx Xxxx
Xxxxxxx, XX 00000 Xxxxxxx, XX 00000
In addition, at all times on or after the date of this Security Agreement,
Inventory and Equipment is located at the following additional locations:
TOOLTEX ULTRA SONIC SEAL
0000 Xxxxx Xxxx 000 Xxxxxx Xxx
Xxxxx Xxxx, XX 00000-0000 Xxxxx, XX 00000
SONICS & MATERIALS, INC. SONICS & MATERIALS, INC.
000 Xxxxxx Xxxxx Xxxxx 00 Xxxxxx xx Xxxxxx
Xxxxxxxxxx, XX 00000 XX-0000 Xxxxx
Xxxxxxxxxxx
