SECURITY AGREEMENT
This SECURITY AGREEMENT (this "Agreement"), is entered into as
of September 11, 1998, between MELLON BANK, N.A., as agent for the Lender Group,
(in such capacity, "Agent"), with a place of business located at Mellon Bank
Center, 000 Xxxxx Xxxx Xxxxxx, 0xx Xxxxx, Xxx Xxxxxxx, Xxxxxxxxxx 00000, and
SPACE APPLICATIONS CORPORATION, a California corporation ("Guarantor"), with its
chief executive office located at 000 Xxxxxx Xxxx, Xxxxx 000, Xxxxxx, Xxxxxxxx
00000.
WHEREAS, Borrower, the Lenders, and Agent are,
contemporaneously herewith, entering into the Credit Agreement;
WHEREAS, Guarantor has executed that certain General
Continuing Guaranty, of even date herewith, in favor of Agent for the benefit of
the Lender Group (the "Guaranty"), respecting certain obligations of Borrower
owing to the Lender Group under the Credit Agreement;
WHEREAS, Guarantor desires to collateralize its obligations
under the Guaranty by granting to Agent for the benefit of the Lender Group a
security interest in certain of its assets; and
WHEREAS, Guarantor will benefit by virtue of the loan from the
Lender Group to Borrower.
NOW THEREFORE, in consideration of the premises set forth
above, the terms and conditions contained herein and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, and
each intending to be bound hereby, Agent on behalf of the Lender Group and
Guarantor agree as follows:
1. DEFINITIONS AND CONSTRUCTION.
1.1 DEFINITIONS. All capitalized terms used herein and not
otherwise defined herein shall have the meanings ascribed to them in the Credit
Agreement. As used in this Agreement, the following terms shall have the
following definitions:
"ACCOUNTS" means all currently existing and hereafter arising
accounts, contract rights, and all other forms of obligations owing to Guarantor
arising out of the sale, license, or lease of goods or General Intangibles or
the rendition of services by Guarantor, irrespective of whether earned by
performance, and any and all credit insurance, guaranties, or security therefor.
"AGREEMENT" means this Security Agreement and any extensions,
riders, supplements, notes, amendments, or modifications to or in connection
with this Security Agreement.
"BORROWER" means SM & A Corporation, a California corporation.
"CODE" means the California Uniform Commercial Code.
"COLLATERAL" means each of the following: the Accounts;
Guarantor's Books; the Equipment; the General Intangibles; the Inventory; the
Negotiable Collateral; any money, or other assets of Guarantor which now or
hereafter come into the possession, custody, or control of Agent; and the
proceeds and products, whether tangible or intangible, of any of the foregoing,
including proceeds of insurance covering any or all of the Collateral, and any
and all Accounts, Guarantor's Books, Equipment, General Intangibles, Inventory,
Negotiable Collateral, money, deposit accounts, or other tangible or intangible
property resulting from the sale, exchange, collection, or other disposition of
any of the foregoing, or any portion thereof or interest therein, and the
proceeds thereof.
"CREDIT AGREEMENT" means that certain Credit and Security
Agreement, dated as of even date herewith, among Borrower, the Lenders and
Agent.
"EQUIPMENT" means all of Guarantor's present and hereafter
acquired machinery, machine tools, motors, equipment, furniture, furnishings,
fixtures, vehicles (including motor vehicles and trailers), tools, parts, dies,
jigs, goods (other than consumer goods, farm products, or Inventory), wherever
located, and any interest of Guarantor in any of the foregoing, and all
attachments, accessories, accessions, replacements, substitutions, additions,
and improvements to any of the foregoing, wherever located.
"EVENT OF DEFAULT" has the meaning ascribed to it in Section
6.
"GENERAL INTANGIBLES" means all of Guarantor's present and
future general intangibles and other personal property (including contract
rights, rights arising under common law, statutes, or regulations, choses or
things in action, goodwill, patents, trade names, trademarks, servicemarks,
copyrights, source code, blueprints, drawings, purchase orders, customer lists,
monies due or recoverable from pension funds, route lists, rights to payment and
other rights under any royalty or licensing agreements, infringements, claims,
computer programs, computer discs, computer tapes, literature, reports,
catalogs, deposit accounts, insurance premium rebates, tax refunds, and tax
refund claims), other than goods, Accounts, and Negotiable Collateral.
"GUARANTIED OBLIGATIONS" shall have the meaning ascribed to it
in the Guaranty.
"GUARANTOR'S BOOKS" means all of Guarantor's books and
records, including: ledgers; records indicating, summarizing, or evidencing
Guarantor's properties or assets (including the Collateral) or liabilities; all
information relating to Guarantor's business operations or financial condition;
and all computer programs, disc or tape files, printouts, runs, or other
computer prepared information in respect of such books and records.
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"GUARANTOR" has the meaning ascribed thereto in the preamble
to this Agreement.
"GUARANTY" means the General Continuing Guaranty Guarantor to
Agent for the benefit of the Lender Group of even date herewith.
"INVENTORY" means all present and future inventory in which
Guarantor has any interest, including goods held for sale, license, or lease or
to be furnished under a contract of service and all of Guarantor's present and
future raw materials, work in process, finished goods, and packing and shipping
materials, wherever located, and any documents of title representing any of the
above.
"INVESTMENT PROPERTY" means "investment property" as that term
is defined in Section 9115 of the Code.
"LENDER GROUP" means, individually and collectively, each of
the Lenders and Mellon in its capacity as Agent for the Lenders.
"LENDERS" means, individually and collectively, each of the
financial institutions (including Mellon) listed on the signature pages of the
Credit Agreement (together with their respective successors and assigns).
"NEGOTIABLE COLLATERAL" means all of Guarantor's present and
future letters of credit, notes, drafts, instruments, Investment Property,
documents, personal property leases (wherein Guarantor is the lessor), chattel
paper, and Guarantor's Books relating to any of the foregoing.
1.2 CODE. Any terms used in this Agreement which are
defined in the Code shall be construed and defined as set forth in the Code
unless otherwise defined herein.
1.3 CONSTRUCTION. Unless the context of this Agreement
clearly requires otherwise, references to the plural include the singular,
references to the singular include the plural, the term "including" is not
limiting, and the term "or" has, except where otherwise indicated, the inclusive
meaning represented by the phrase "and/or." The words "hereof," "herein,"
"hereby," "hereunder," and similar terms in this Agreement refer to this
Agreement as a whole and not to any particular provision of this Agreement.
Section, subsection, clause, schedule, and exhibit references are to this
Agreement unless otherwise specified. Any reference in this Agreement or in any
of the other Loan Documents to this Agreement or any of the other Loan Documents
shall include all alterations, amendments, restatements, changes, extensions,
modifications, renewals, replacements, substitutions, and supplements, thereto
and thereof, as applicable. In the event of a direct conflict between the terms
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and provisions of this Agreement and the Credit Agreement, it is the intention
of the parties hereto that both such documents shall be read together and
construed, to the fullest extent possible, to be in concert with each other. In
the event of any actual, irreconcilable conflict that cannot be resolved as
aforesaid, the terms and provisions of the Credit Agreement shall control and
govern; provided, however, that the inclusion herein of additional obligations
on the part of Guarantor and supplemental rights and remedies in favor of the
Lender Group, in each case in respect of the Collateral, shall not be deemed a
conflict with the Credit Agreement.
1.4 SCHEDULES AND EXHIBITS. All of the schedules and
exhibits attached to this Agreement shall be deemed incorporated herein by
reference.
2. CREATION OF SECURITY INTEREST.
2.1 GRANT OF SECURITY INTEREST. Guarantor hereby grants to
Agent for the benefit of the Lender Group a continuing security interest in all
currently existing and hereafter acquired or arising Collateral in order to
secure its performance pursuant to the Guaranty. The security interests of Agent
for the benefit of the Lender Group in the Collateral shall attach to all
Collateral without further act on the part of Agent or Guarantor. Anything
contained in this Agreement or any other Loan Document to the contrary
notwithstanding, except for the sale of Inventory to buyers in the ordinary
course of business, Guarantor has no authority, express or implied, to dispose
of any item or portion of the Collateral.
2.2 NEGOTIABLE COLLATERAL. In the event that any
Collateral, including proceeds, is evidenced by or consists of Negotiable
Collateral, Guarantor shall, immediately upon the request of Agent, endorse and
assign such Negotiable Collateral to Agent for the benefit of the Lender Group
and deliver physical possession of such Negotiable Collateral to Agent.
2.3 COLLECTION OF ACCOUNTS, GENERAL INTANGIBLES,
NEGOTIABLE COLLATERAL. At any time, Agent or Agent's designee may: (a) notify
customers or Account Debtors of Guarantor that the Accounts, General
Intangibles, or Negotiable Collateral have been assigned to Agent for the
benefit of the Lender Group or that Agent for the benefit of the Lender Group
has a security interest therein; and (b) collect the Accounts, General
Intangibles, and Negotiable Collateral directly and charge the collection costs
and expenses to Borrower's loan account. Guarantor agrees that it will hold in
trust for the Lender Group, as The Lender Group's trustee, any cash receipts,
checks, and other items of payment (including, insurance proceeds, proceeds of
cash sales, rental proceeds, and tax refunds) that it receives and immediately
will deliver said cash receipts, checks, and other items of payment to Agent in
their original form as received by Guarantor.
2.4 DELIVERY OF ADDITIONAL DOCUMENTATION REQUIRED.
Guarantor shall execute, and deliver to Agent, prior to or concurrently with
Guarantor's execution and delivery of this Agreement and at any time thereafter
at the request of Agent, all financing statements, continuation financing
statements, fixture filings, security agreements, chattel mortgages, pledges,
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mortgages, deeds of trust, assignments, endorsements of certificates of title,
applications for title, affidavits, reports, notices, schedules of accounts,
letters of authority, and all other documents that Agent may reasonably request,
in form satisfactory to Agent, to perfect and continue perfected the security
interests of Agent for the benefit of the Lender Group in the Collateral and in
order to fully consummate all of the transactions contemplated under the Loan
Documents.
2.5 POWER OF ATTORNEY. Guarantor hereby irrevocably makes,
constitutes, and appoints Agent (and any of Agent's officers, employees, or
agents designated by Agent) as Guarantor's true and lawful attorney, with power
to: (a) if Guarantor refuses to, or fails timely to execute and deliver any of
the documents described in Section 2.4, sign the name of Guarantor on any of the
documents described in Section 2.4; (b) at any time that an Event of Default has
occurred and is continuing or Agent deems itself insecure (in accordance with
Section 1208 of the Code), sign Guarantor's name on any invoice or xxxx of
lading relating to any Account, drafts against Account Debtors, schedules and
assignments of Accounts, verifications of Accounts, and notices to Account
Debtors; (c) send requests for verification of Accounts; (d) at any time that an
Event of Default has occurred and is continuing, endorse Guarantor's name on any
checks, notices, acceptances, money orders, drafts, or other item of payment or
security that may come into Agent's possession; (e) at any time that an Event of
Default has occurred and is continuing or Agent deems itself insecure (in
accordance with Section 1208 of the Code), notify the post office authorities to
change the address for delivery of Guarantor's mail to an address designated by
Agent, to receive and open all mail addressed to Guarantor, and to retain all
mail relating to the Collateral and forward all other mail to Guarantor; (f) at
any time that an Event of Default has occurred and is continuing or Agent deems
itself insecure (in accordance with Section 1208 of the Code), make, settle, and
adjust all claims under Guarantor's policies of insurance and make all
determinations and decisions with respect to such policies of insurance; and (g)
at any time that an Event of Default has occurred and is continuing or Agent
deems itself insecure (in accordance with Section 1208 of the Code), settle and
adjust disputes and claims respecting the Accounts directly with Account
Debtors, for amounts and upon terms which Agent determines to be reasonable, and
Agent may cause to be executed and delivered any documents and releases which
Agent determines to be necessary. The appointment of Agent as Guarantor's
attorney, and each and every one of Agent's rights and powers, being coupled
with an interest, is irrevocable until all of the Guarantied Obligations have
been fully and finally repaid and performed and the Lender Group's obligation to
extend credit under the Credit Agreement is terminated.
2.6 RIGHT TO INSPECT. Agent (through any of its officers,
employees, or agents) shall have the right, from time to time hereafter to
inspect Guarantor's Books and to check, test, and appraise the Collateral in
order to verify Guarantor's financial condition or the amount, quality, value,
condition of, or any other matter relating to, the Collateral.
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3. REPRESENTATIONS AND WARRANTIES.
Guarantor represents and warrants as follows:
3.1 NO PRIOR ENCUMBRANCES. Guarantor has good and
indefeasible title to the Collateral, free and clear of liens, claims, security
interests, or encumbrances except for Permitted Liens.
3.2 PLACE OF BUSINESS/CHIEF EXECUTIVE OFFICE; FEIN. The
chief executive office of Guarantor is at the address indicated in the first
paragraph of this Agreement and all other locations at which Guarantor has a
place of business are set forth on SCHEDULE 3.2. Guarantor's FEIN is 00-0000000.
3.3 INVENTORY. All Inventory is now and at all times
hereafter shall be of good and serviceable quality, free from defects.
3.4 LOCATION OF INVENTORY AND EQUIPMENT. The Inventory and
Equipment are not stored with a bailee, warehouseman, or similar party (without
Agent's prior written consent) and are located only at the locations identified
on Schedule 3.2 or as otherwise permitted by Section 5.9.
3.5 INVENTORY RECORDS. Guarantor now keeps, and hereafter
at all times shall keep, correct and accurate records itemizing and describing
the kind, type, quality, and quantity of the Inventory, and Guarantor's cost
therefor.
3.6 DUE ORGANIZATION AND QUALIFICATION; SUBSIDIARIES.
Guarantor is a California corporation, and it is and shall at all times
hereafter be duly organized and existing and in good standing under the laws of
California and qualified and licensed to do business in, and in good standing
in, any state where the failure to be so licensed or qualified could reasonably
be expected to have a material adverse effect on the business, operations,
condition (financial or otherwise), finances, or prospects of Guarantor or on
the value of the Collateral.
3.7 DUE AUTHORIZATION; NO CONFLICT. The execution,
delivery, and performance of this Agreement, the Guaranty, and any other Loan
Document to which Guarantor is a party are within Guarantor's corporate powers,
have been duly authorized, and are not in conflict with nor, constitute a breach
of any provision contained in Guarantor's Articles or Certificate of
Incorporation, By-laws, or any partnership or trust agreement pertaining to
Guarantor, nor will they constitute an event of default under any material
agreement to which Guarantor is now or may hereafter become a party.
3.8 LITIGATION. There are no actions or proceedings
pending by or against Guarantor before any court or administrative agency and
Guarantor does not have knowledge or belief of any pending, threatened, or
imminent litigation, governmental investigations, or claims, complaints,
actions, or prosecutions involving Guarantor, except for: (a) ongoing collection
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matters in which Guarantor is the plaintiff; (b) matters disclosed on SCHEDULE
3.8; and (c) matters arising after the date hereof that, if decided adversely to
Guarantor, would not materially impair the prospect of repayment of the
Guarantied Obligations or materially impair the value or priority of the
security interests of Agent for the benefit of the Lender Group in the
Collateral.
3.9 SOLVENCY. Guarantor is Solvent. No transfer of
property is being made by Guarantor and no obligation is being incurred by
Guarantor in connection with the transactions contemplated by this Agreement or
the other Loan Documents with the intent to hinder, delay, or defraud either
present or future creditors of Guarantor.
3.10 RELIANCE BY THE LENDER GROUP; CUMULATIVE. The
warranties, representations, and agreements set forth herein shall be
conclusively presumed to have been relied upon by the Lender Group and shall be
cumulative and in addition to any and all other warranties, representations, and
agreements which Guarantor shall now or hereinafter give, or cause to be given,
to the Lender Group.
4. AFFIRMATIVE COVENANTS.
Guarantor covenants and agrees that, until payment in full of
the Guarantied Obligations, and unless Agent shall otherwise consent in writing,
Guarantor shall do all of the following:
4.1 SCHEDULES OF ACCOUNTS. With such regularity as Agent
shall require, provide Agent with schedules describing all Accounts. Agent's
failure to request such schedules or Guarantor's failure to execute and deliver
such schedules shall not affect or limit Agent's security interests or other
rights in and to the Accounts.
4.2 INVENTORY REPORTING. From time to time hereafter, at
the request of Agent, execute and deliver to Agent a report regarding
Guarantor's Inventory specifying Guarantor's cost therefor and further
specifying such other information as Agent may reasonably request.
4.3 TITLE TO EQUIPMENT. Upon Agent's request, deliver to
Agent, properly endorsed, any and all evidences of ownership of, certificates of
title, or applications for title to any items of Equipment.
4.4 MAINTENANCE OF EQUIPMENT. Keep and maintain the
Equipment in good operating condition and repair (ordinary wear and tear
excepted), and make all necessary replacements thereto so that the value and
operating efficiency thereof shall at all times be maintained and preserved.
Guarantor shall not permit any item of Equipment to become a fixture to real
estate or an accession to other property, and the Equipment is now and shall at
all times remain personal property.
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4.5 TAXES. All assessments and taxes, whether real,
personal, or otherwise, due or payable by, or imposed, levied, or assessed
against Guarantor or any of its property have been paid, and shall hereafter be
paid in full, before delinquency or before the expiration of any extension
period. Guarantor shall make due and timely payment or deposit of all taxes,
assessments, or contributions required of it by law, and will execute and
deliver to Agent, on demand, appropriate certificates attesting to the payment
or deposit thereof. Guarantor will make timely payment or deposit of all tax
payments and withholding taxes required of it by applicable laws, and will, upon
request, furnish Agent with proof satisfactory to Agent indicating that
Guarantor has made such payments or deposits, other than assessments or taxes
that are the subject of a Permitted Protest.
4.6 INSURANCE.
(a) At its expense, keep the Collateral insured
against loss or damage by fire, theft, explosion, sprinklers, and all other
hazards and risks, and in such amounts, as are ordinarily insured against by
other owners in similar businesses. Guarantor also shall maintain business
interruption, public liability, product liability, and property damage insurance
relating to their ownership and use of the Collateral, as well as insurance
against larceny, embezzlement, and criminal misappropriation.
(b) All such policies of insurance shall be in
such form, with such companies, and in such amounts as may be reasonably
satisfactory to Agent. All such policies of insurance (except those of public
liability and property damage) shall contain a 438BFU lender's loss payable
endorsement, or an equivalent endorsement in a form satisfactory to Agent,
showing Agent, for the benefit of the Lender Group as a loss payee thereof as
its interest may appear, shall contain a waiver of warranties, and shall specify
that the insurer must give at least ten (10) days prior written notice to Agent
before canceling its policy for any reason. Guarantor shall deliver to Agent
certified copies of such policies of insurance and evidence of the payment of
all premiums therefor. All proceeds payable under any such policy shall be
payable to Agent for the benefit of the Lender Group to be applied on account of
the Guarantied Obligations.
4.7 LENDER GROUP EXPENSES. Guarantor shall immediately
upon demand reimburse Agent for all sums expended by the Lender Group which
constitute Lender Group Expenses and Guarantor hereby authorizes and approves
all advances and payments by the Lender Group for items constituting Lender
Group Expenses.
5. NEGATIVE COVENANTS.
Guarantor covenants and agrees that until payment in full of
the Guarantied Obligations, it will not do any of the following without Agent's
prior written consent, except as expressly permitted by the Credit Agreement:
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5.1 LIENS. Create, incur, assume, or permit to exist,
directly or indirectly, any lien on or with respect to any of its property or
assets, of any kind, whether now owned or hereafter acquired, or any income or
profits therefrom, except for Permitted Liens (including liens that are
replacements of Permitted Liens to the extent that the original indebtedness is
refinanced under Section 7.1(f) of the Credit Agreement and so long as the
replacement liens secure only those assets or property that secured the original
indebtedness).
5.2 RESTRICTIONS ON FUNDAMENTAL CHANGES. Except as
permitted by the Credit Agreement, enter into any acquisition, merger,
consolidation, reorganization, or recapitalization, or reclassify its capital
stock, or liquidate, wind up, or dissolve itself (or suffer any liquidation or
dissolution), or convey, sell, assign, lease, transfer, or otherwise dispose
of, in one transaction or a series of transactions, all or any substantial part
of its business, property, or assets, whether now owned or hereafter acquired,
or acquire by purchase or otherwise all. or substantially all of the properties,
assets, stock, or other evidence of beneficial ownership of any Person.
5.3 EXTRAORDINARY TRANSACTIONS AND DISPOSAL OF ASSETS.
Enter into any transaction not in the ordinary and usual course of Guarantor's
business, including the sale, lease, or other disposition of, moving,
relocation, or transfer, whether by sale or otherwise, of any of Guarantor's
properties or assets.
5.4 CHANGE NAME. Change Guarantor's name, FEIN, business
structure, or identity, or add any new fictitious name.
5.5 GUARANTEE. Guarantee or otherwise become in any way
liable with respect to the obligations of any third Person except by endorsement
of instruments or items of payment for deposit to the account of Guarantor or
which are transmitted or turned over to Agent and except for the guarantee of
the payment and performance of the Guarantied Obligations.
5.6 NATURE OF BUSINESS; FISCAL YEAR.
(a) Make any change in the principal nature of
Guarantor's business, or (b) without the prior written consent of Agent, which
consent shall not unreasonably be withheld, change the date of its fiscal year.
5.7 TRANSACTIONS WITH AFFILIATES. Guarantor will not
directly or indirectly enter into or permit to exist any material transaction
with any Affiliate of Guarantor except for transactions which are in the
ordinary course of Guarantor's business, upon fair and reasonable terms and
which are fully disclosed to Agent and, no less favorable to Guarantor than
would be obtained in arm's length transaction with a non-Affiliate.
5.8 SUSPENSION. Suspend or go out of business.
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5.9 CHANGE IN LOCATION OF CHIEF EXECUTIVE OFFICE;
INVENTORY AND EQUIPMENT WITH BAILEES. Without thirty (30) days prior written
notification to Agent, relocate its chief executive office to a new location,
unless, at the time of such written notification, Guarantor provides any
financing statements or fixture filings necessary to perfect and continue
perfected the security interests of Agent for the benefit of the Lender Group,
and also provides to Agent a landlord's waiver in form and substance
satisfactory to Agent. The Inventory and Equipment shall not at any time now or
hereafter be stored with a bailee, warehouseman, or similar party without
Agent's prior written consent.
6. EVENTS OF DEFAULT.
Any one or more of the following events shall constitute an
event of default (each, an "Event of Default") under this Agreement:
6.1 The occurrence of an Event of Default (as defined in
the Credit Agreement);
6.2 If Guarantor fails or neglects to perform, keep, or
observe, in any material respect, any term, provision, condition, covenant, or
agreement contained in this Agreement or in the Guaranty, or in any other
present or future agreement between Guarantor and the Lender Group
6.3 If there is a material impairment of the prospect of
repayment of any portion of the Guarantied Obligations owing to the Lender Group
or a material impairment of the value or priority of the security interests of
Agent for the benefit of the Lender Group in the Collateral;
6.4 If a notice of lien, levy, or assessment is filed of
record with respect to any of Guarantor's properties or assets by the United
States Government, or any department, agency, or instrumentality thereof, or by
any state, county, municipal, or governmental agency, or if any taxes or debts
owing at any time hereafter to any one or more of such entities becomes a lien,
whether xxxxxx or otherwise, upon any of Guarantor's properties or assets and
the same is not paid on the payment date thereof; and
6.5 If a judgment or other claim becomes a lien or
encumbrance upon any material portion of Guarantor's properties or assets;
6.6 If there is a default in any material agreement to
which Guarantor is a party with one or more third Persons resulting in a right
by such third Persons, irrespective of whether exercised, to accelerate the
maturity of Guarantor's obligations thereunder;
6.7 If Guarantor makes any payment on account of
indebtedness that has been contractually subordinated in right of payment to the
payment of the Guarantied Obligations, except to the extent such payment is
permitted by the terms hereof and by the subordination provisions applicable to
such indebtedness;
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6.8 If any misstatement or misrepresentation exists now or
hereafter in any warranty, representation, statement, or report made to the
Lender Group by Guarantor or any officer, employee, agent, or director of
Guarantor, or if any such warranty or representation is withdrawn.
7. THE LENDER GROUP'S RIGHTS AND REMEDIES.
7.1 RIGHTS AND REMEDIES. Upon the occurrence of an Event
of Default, the security hereby constituted shall become enforceable and, in
addition to all other rights and remedies available to the Lender Group as
provided hereafter, Agent, on behalf of the Lender Group, may, at its election,
without notice of its election and without demand, [but subject to any
applicable terms and conditions set forth in the Bankruptcy Court Order, if any]
do any one or more of the following, all of which are authorized by Guarantor:
(a) Proceed directly and at once, without notice,
against the Guarantor to collect and recover the full amount or any portion of
the Guarantied Obligations, without first proceeding against Borrower, or
against any security or collateral for the Guarantied Obligations.
(b) Without notice to the Guarantor and
regardless of the acceptance of any security or collateral for the payment
hereof, appropriate and apply toward the payment of the Guarantied Obligations
(i) any indebtedness due or to become due from the Lender Group to the Guarantor
and (ii) any moneys, credits or other property belonging to the Guarantor at any
time held by or coming into the possession of the Lender Group.
(c) May exercise in respect of the Collateral, in
addition to other rights and remedies provided for herein and the Guaranty or
otherwise available to it, all the rights and remedies available to it at law
(including those of a secured party under the Code) or in equity.
(d) Settle or adjust disputes and claims directly
with Account Debtors for amounts and upon terms which Agent considers advisable,
and in such cases, Agent will credit Borrower's loan account with only the net
amounts received by Agent in payment of such disputed Accounts after deducting
all Lender Group Expenses incurred or expended in connection therewith;
(e) Cause Guarantor to hold all returned
Inventory in trust for the Lender Group, segregate all returned Inventory from
all other property of Guarantor or in Guarantor's possession and conspicuously
label said returned Inventory as the property of the Lender Group;
(f) Without notice or demand, make such payments
and do such acts as Agent considers necessary or reasonable to protect the
security interest of Agent for the benefit of the Lender Group in the
Collateral. Guarantor agrees to assemble the Collateral if Agent so requires,
and to make the Collateral available to Agent as Agent may designate. Guarantor
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authorizes Agent to enter the premises where the Collateral is located, to take
and maintain possession of the Collateral, or any part of it, and to pay,
purchase, contest, or compromise any encumbrance, charge, or lien which in
Agent's determination appears to be prior or superior to its security interest
and to pay all expenses incurred in connection therewith. With respect to any of
Guarantor's owned premises, Guarantor hereby grants Agent for the benefit of the
Lender Group a license to enter into possession of such premises and to occupy
the same, without charge, for up to one hundred twenty (120) days in order to
exercise any of the Lender Group's rights or remedies provided herein, at law,
in equity, or otherwise;
(g) Ship, reclaim, recover, store, finish,
maintain, repair, prepare for sale, advertise for sale, and sell (in the manner
provided for herein) the Collateral. Agent for the benefit of the Lender Group
is hereby granted a license or other right to use, without charge, Guarantor's
labels, patents, copyrights, rights of use of any name, trade secrets, trade
names, trademarks, service marks, and advertising matter, or any property of a
similar nature, as it pertains to the Collateral, in completing production of
advertising for sale and selling any Collateral, and Guarantor's rights under
all licenses and all franchise agreements shall inure to the benefit of Agent
for the benefit of the Lender Group;
(h) Sell all or any part of the Collateral at
either a public or private sale, or both, by way of one or more contracts or
transactions, for cash or on terms, in such manner and at such places (including
Guarantor's premises) as Agent determines is commercially reasonable. It is not
necessary that the Collateral be present at any such sale. Agent on behalf of
the Lender Group shall have the right upon any such public sale or sales, and,
to the extent permitted by law, upon any such private sale or sales, to purchase
the whole or any part of the Collateral so sold, free of any right or equity of
redemption in Guarantor, which right or equity is hereby waived or released to
the extent permitted by law;
(i) By an instrument in writing, appoint a
receiver (which term shall include a receiver and manager) of all or any part of
the Collateral and may remove or replace such receiver from time to time or may
institute proceedings in any court of competent jurisdiction for the appointment
of such receiver;
(j) Require Guarantor to establish a lockbox or
other restricted account satisfactory to Agent for the collection of Accounts of
Guarantor, General Intangibles, or Negotiable Collateral;
(k) Notify customers or Account Debtors of
Guarantor that the Accounts of Guarantor, General Intangibles, or Negotiable
Collateral have been assigned to Agent for the benefit of the Lender Group or
that Agent for the benefit of the Lender Group has a security interest therein;
(l) Collect the Accounts of Debtor, General
Intangibles, and Negotiable Collateral directly, and charge the collection costs
and expenses as Lender Group Expenses; but, unless and until Agent does so or
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gives Guarantor other written instructions, Guarantor shall collect all Accounts
of Guarantor, General Intangibles, and Negotiable Collateral for the Lender
Group, receive in trust all payments thereon as the Lender Group's trustee, and
immediately deliver said payments to Agent for the benefit of the Lender Group
in their original form as received from such Account Debtor;
(m) Any deficiency which exists after disposition
of the Collateral as provided above will be paid immediately by Guarantor up to
the maximum amount, if any, of Guarantor's liability under the Guaranty. Any
excess will be returned to Guarantor, without interest and subject to the rights
of third parties, by Agent.
Except as required by law, Agent on behalf of the Lender Group
may take any or all of the foregoing action without demand, presentment,
protest, advertisement or notice of any kind to or upon Guarantor or any other
person.
7.2 REMEDIES CUMULATIVE. The rights and remedies of Agent
for the benefit of the Lender Group under this Agreement, the Loan Documents,
and all other agreements shall be cumulative. The Lender Group shall have all
other rights and remedies not inconsistent herewith as provided under the Code,
by law, or in equity. No exercise by the Lender Group of one right or remedy
shall be deemed an election, and no waiver by the Lender Group of any Event of
Default on Borrower's part shall be deemed a continuing waiver. No delay by the
Lender Group shall constitute a waiver, election, or acquiescence by it.
8. TAXES AND EXPENSES REGARDING THE COLLATERAL.
If Guarantor fails to pay any monies (whether taxes, rents,
assessments, insurance premiums, or otherwise) due to third persons or entities,
or fails to make any deposits or furnish any required proof of payment or
deposit, all as required under the terms of this Agreement, then, to the extent
that Agent determines that such failure, by Guarantor could have a material
adverse effect on the interests of Agent for the benefit of the Lender Group in
the Collateral, in its discretion and without prior notice to Guarantor, Agent
on behalf of the Lender Group may do any or all of the following: (a) make
payment of the same or any part thereof; (b) set up such reserves in Borrower's
loan account as Agent deems necessary to protect the Lender Group from the
exposure created by such failure; or (c) obtain and maintain insurance policies
insuring Guarantor's ownership and use of the Collateral, and take any action
with respect to such policies as Agent deems prudent. Any amounts paid or
deposited by Agent on behalf of the Lender Group shall constitute :Lender Group
Expenses, shall immediately become additional Guarantied Obligations, shall bear
interest at the applicable rate described in the Loan Document, and shall be
secured by the Collateral. Any payments made by Agent on behalf of the Lender
Group shall not constitute an agreement by the Lender Group to make similar
payments in the future or a waiver by the Lender Group of any Event of Default
under this Agreement. Agent need not inquire as to, or contest the validity of,
any such expense, tax, security interest, encumbrance, or lien and the receipt
of the usual official notice for the payment thereof shall be conclusive
evidence that the same was validly due and owing. Agent shall use its best
efforts to provide notice to Guarantor of any action taken by it under this
SECTION 8.
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9. WAIVERS; INDEMNIFICATION.
9.1 DEMAND; PROTEST; ETC. To the extent permitted by law,
Guarantor waives demand, protest, notice of protest, notice of default or
dishonor, notice of payment and nonpayment, notice of any default, nonpayment at
maturity, release, compromise, settlement, extension, or renewal of accounts,
documents, instruments, chattel paper, and guarantees at any time held by the
Lender Group on which Guarantor may in any way be liable.
9.2 LENDER GROUP'S LIABILITY FOR COLLATERAL. So long as
the Lender Group complies with its obligations, if any, under Section 9207 of
the Code, the Lender Group shall not in any way or manner be liable or
responsible for: (a) the safekeeping of the Collateral; (b) any loss or damage
thereto occurring or arising in any manner or fashion from any cause; (c) any
diminution in the value thereof; or (d) any act or default of any carrier,
warehouseman, bailee, forwarding agency, or other Person. All risk of loss,
damage, or destruction of the Collateral shall be borne by Guarantor.
9.3 INDEMNIFICATION. Guarantor agrees to defend,
indemnify, save, and hold Indemnified Person harmless against: (a) all
obligations, demands, claims, and liabilities claimed or asserted by any other
Person, and (b) all losses (including attorneys fees and disbursements) in any
way suffered, incurred, or paid by the Lender Group as a result of or in any way
arising out of, following, or consequential to transactions with Borrower or
Guarantor, whether under this Agreement, the other Loan Documents or otherwise,
but excluding any obligations, demands, claims, liabilities, and losses caused
by the Lender Group's gross negligence or willful misconduct. This provision
shall survive the termination of this Agreement.
9.4 WAIVERS.
(a) To the maximum extent permitted by law,
Guarantor hereby waives: (i) notice of acceptance hereof; (ii) notice of any
loans or other financial accommodations made or extended under the Credit
Agreement, or the creation or existence of any Obligations; (iii) notice of the
amount of the Obligations, subject, however, to Guarantor's right to make
inquiry of Agent to ascertain the amount of the Obligations at any reasonable
time; (iv) notice of any adverse change in the financial condition of Borrower
or of any other fact that might increase Guarantor's risk hereunder; (v) notice
of presentment for payment, demand, protest, and notice thereof as to any
instrument among the Loan Documents; (vi) notice of any unmatured Event of
Default or Event of Default under the Credit Agreement; and (vii) all other
notices (except if such notice is specifically required to be given to Guarantor
under this Agreement) and demands to which Guarantor might otherwise be
entitled.
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(b) To the fullest extent permitted by applicable
law, Guarantor waives the right by statute or otherwise to require the Lender
Group to institute suit against Borrower or to exhaust any rights and remedies
which the Lender Group has or may have against Borrower. Guarantor further
waives any defense arising by reason of any disability or other defense (other
than the defense that the Obligations shall have been fully and finally
indefeasibly paid) of Borrower or by reason of the cessation from any cause
(other than that the Obligations shall have been fully and finally indefeasibly
paid) whatsoever of the liability of Borrower in respect thereof.
(c) To the maximum extent permitted by law,
Guarantor hereby waives: (i) any rights to assert against the Lender Group any
defense (legal or equitable), set-off, counterclaim, or claim which Guarantor
may now or at any time hereafter have against Borrower or any other party liable
to the Lender Group on account of or with respect to the Obligations; (ii) any
defense, set-off, counterclaim, or claim, of any kind or nature, arising
directly or indirectly from the present or future sufficiency, validity, or
enforceability of the Obligations; (iii) any defense arising by reason of any
claim or defense based upon an election of remedies by the Lender Group
including, to the extent applicable, the provisions of xx.xx. 580d and 726 of
the California Code of Civil Procedure, or any similar law of California or any
other jurisdiction; (iv) the benefit of any statute of limitations affecting
Guarantor's liability hereunder or the enforcement thereof.
(d) To the maximum extent permitted by law,
Guarantor hereby waives any right of subrogation Guarantor has or may have as
against Borrower with respect to the Obligations. In addition, Guarantor hereby
waives any right to proceed against Borrower, now or hereafter, for
contribution, indemnity, reimbursement, or any other suretyship rights and
claims (irrespective of whether direct or indirect, liquidated or contingent),
with respect to the Obligations. Guarantor also hereby waives any right to
proceed or to seek recourse against or with respect to any property or asset of
Borrower. Guarantor hereby agrees that, in light of the waivers contained in
this Section, Guarantor shall not be deemed to be a "creditor" (as that term is
defined in the Bankruptcy Code or otherwise) of Borrower, whether for purposes
of the application of Sections 547 or 550 of the United States Bankruptcy Code
or otherwise.
(e) If any of the Guarantied Obligations at any
time are secured by a mortgage or deed of trust upon real property, Agent on
behalf of the Lender Group may elect, in its sole discretion, upon a default
with respect to the Guarantied Obligations, to foreclose such mortgage or deed
of trust judicially or nonjudicially in any manner permitted by law, before or
after enforcing this Agreement, without diminishing or affecting the liability
of Guarantor hereunder. Guarantor understands that (a) by virtue of the
operation of California's antideficiency law applicable to nonjudicial
foreclosures, an election by the Lender Group nonjudicially to foreclose such a
mortgage or deed of trust probably would have the effect of impairing or
destroying rights of subrogation, reimbursement, contribution, or indemnity of
Guarantor against Borrower or guarantors or sureties, and (b) absent the waiver
given by Guarantor herein, such an election might estop Agent from enforcing
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this Agreement against Guarantor. Understanding the foregoing, and understanding
that Guarantor is hereby relinquishing a defense to the enforceability of this
Agreement, Guarantor hereby waives any right to assert against the Lender Group
any defense to the enforcement of this Agreement, whether denominated "estoppel"
or otherwise, based on or arising from an election by the Lender Group
nonjudicially to foreclose any such mortgage or deed of trust. Guarantor
understands that the effect of the foregoing waiver may be that Guarantor may
have liability hereunder for amounts with respect to which Guarantor may be left
without rights of subrogation, reimbursement, contribution, or indemnity against
Borrower or guarantors or sureties. Guarantor also agrees that the "fair market
value" provisions of Section 580a of the California Code of Civil Procedure
shall have no applicability with respect to the determination of Guarantor's
liability under this Agreement.
(f) WITHOUT LIMITING THE GENERALITY OF ANY OTHER
WAIVER OR OTHER PROVISION SET FORTH IN THIS AGREEMENT, GUARANTOR HEREBY WAIVES,
TO THE MAXIMUM EXTENT SUCH WAIVER IS PERMITTED BY LAW, ANY AND ALL DEFENSES
ARISING DIRECTLY OR INDIRECTLY UNDER ANY ONE OR MORE OF CALIFORNIA CIVIL CODE
xx.xx. 2808, 2809, 2810, 2815, 2819, 2820, 2821, 2838, 2839, 2845, 2848, 2849,
AND 2850, TO THE EXTENT APPLICABLE, CALIFORNIA CODE OF CIVIL PROCEDURE xx.xx.
580a, 580b, 580c, 580d, AND 726, AND, TO THE EXTENT APPLICABLE, CHAPTER 2 OF
TITLE 14 OF THE CALIFORNIA CIVIL CODE.
(g) WITHOUT LIMITING THE GENERALITY OF ANY OTHER
WAIVER OR OTHER PROVISION SET FORTH IN THIS AGREEMENT, GUARANTOR HEREBY WAIVES
ALL RIGHTS AND DEFENSES ARISING OUT OF AN ELECTION OF REMEDIES BY THE LENDER
GROUP, EVEN THOUGH THAT ELECTION OF REMEDIES, SUCH AS A NONJUDICIAL FORECLOSURE
WITH RESPECT TO SECURITY FOR A SECURED OBLIGATION, HAS DESTROYED GUARANTOR'S
RIGHTS OF SUBROGATION AND REIMBURSEMENT AGAINST THE PRINCIPAL BY THE OPERATION
OF SECTION 580d OF THE CODE OF CIVIL PROCEDURE OR OTHERWISE.
10. NOTICES.
All notices and other communications hereunder to Agent shall
be in writing and shall be mailed, sent or delivered in accordance with the
Credit Agreement and all notices and other communications hereunder to Guarantor
shall be in writing and shall be mailed, sent or delivered in care of Borrower
in accordance with the Credit Agreement.
11. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.
THE VALIDITY OF THIS AGREEMENT, ITS CONSTRUCTION,
INTERPRETATION, AND ENFORCEMENT, AND THE RIGHTS OF THE PARTIES HERETO SHALL BE
DETERMINED UNDER, GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
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STATE OF CALIFORNIA. THE PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING
IN CONNECTION WITH THIS AGREEMENT SHALL BE TRIED AND LITIGATED ONLY IN THE STATE
AND FEDERAL COURTS LOCATED IN THE COUNTY OF LOS ANGELES, STATE OF CALIFORNIA OR,
AT THE SOLE OPTION OF AGENT, IN ANY OTHER COURT IN WHICH AGENT SHALL INITIATE
LEGAL OR EQUITABLE PROCEEDINGS AND WHICH HAS SUBJECT MATTER JURISDICTION OVER
THE MATTER IN CONTROVERSY. EACH OF GUARANTOR AND AGENT WAIVES, TO THE EXTENT
PERMITTED UNDER APPLICABLE LAW, ANY RIGHT EACH MAY HAVE TO ASSERT THE DOCTRINE
OF FORUM NON CONVENIENS OR TO OBJECT TO VENUE TO THE EXTENT ANY PROCEEDING IS
BROUGHT IN ACCORDANCE WITH THIS SECTION 11.
GUARANTOR AND AGENT HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A
JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS
AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREIN, INCLUDING CONTRACT
CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR
STATUTORY CLAIMS. GUARANTOR AND AGENT REPRESENT THAT EACH HAS REVIEWED THIS
WAIVER AND EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING
CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF LITIGATION, A COPY OF THIS
AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
12. DESTRUCTION OF GUARANTOR'S DOCUMENTS.
All documents, schedules, agings, or other papers delivered to
Agent may be destroyed or otherwise disposed of by Agent four (4) months after
they are delivered to or received by Agent, unless Guarantor requests, in
writing, the return of said documents, schedules or other papers and makes
arrangements, at Guarantor's expense, for their return.
13. GENERAL PROVISIONS.
13.1 EFFECTIVENESS. This Agreement shall be binding and
deemed effective when executed by Guarantor and accepted and executed by Agent.
13.2 SUCCESSORS AND ASSIGNS. This Agreement shall bind and
inure to the benefit of the respective successors and assigns of each of the
parties; provided, however, that Guarantor may not assign this Agreement or any
rights or duties hereunder without Agent's prior written consent and any
prohibited assignment shall be absolutely void. No consent to an assignment by
Agent shall release Guarantor from its Guarantied Obligations. Agent may assign
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this Agreement and its rights and duties hereunder and no consent or approval by
Guarantor is required in connection with any such assignment. The Lender Group
reserves the right to sell, assign, transfer, negotiate, or grant participations
in all or any part of, or any interest in the Lender Group's rights and benefits
hereunder. In connection therewith, the Lender Group may disclose all documents
and information which the Lender Group now or hereafter may have relating to
Guarantor or Guarantor's business. To the extent that Agent assigns its rights
and obligations to a third Person, Agent thereafter shall be released from such
assigned obligations to Guarantor and such assignment shall effect a novation
between Guarantor and such third Person.
13.3 SECTION HEADINGS. Headings and numbers have been set
forth herein for convenience only. Unless the contrary is compelled by the
context, everything contained in each section applies equally to this entire
Agreement.
13.4 INTERPRETATION. Neither this Agreement nor any
uncertainty or ambiguity herein shall be construed or resolved against the
Lender Group or Guarantor, whether under any rule of construction or otherwise.
On the contrary, this Agreement has been reviewed by all parties and shall be
construed and interpreted according to the ordinary meaning of the words used so
as to fairly accomplish the purposes and intentions of all parties hereto.
13.5 SEVERABILITY OF PROVISIONS. Each provision of this
Agreement shall be severable from every other provision of this Agreement for
the purpose of determining the legal enforceability of any specific provision.
13.6 AMENDMENTS IN WRITING. This Agreement can only be
amended by a writing signed by both Agent and Guarantor.
13.7 COUNTERPARTS. This Agreement may be executed in any
number of counterparts and by different parties on separate counterparts, each
of which, when executed and delivered, shall be deemed to be an original, and
all of which, when taken together, shall constitute but one and the same
Agreement.
13.8 REVIVAL AND REINSTATEMENT OF OBLIGATIONS. If the
incurrence or payment of the Guarantied Obligations by Guarantor or the transfer
by Guarantor to the Lender Group of any property of Guarantor should for any
reason subsequently be declared to be void or voidable under any state or
federal law relating to creditors' rights, including provisions of the
Bankruptcy Code relating to fraudulent conveyances, preferences, and other
voidable or recoverable payments of money or transfers of property
(collectively, a "Voidable Transfer"), and if the Lender Group is required to
repay or restore, in whole or in part, any such Voidable Transfer, or elects to
do so upon the reasonable advice of its counsel, then, as to any such Voidable
Transfer, or the amount thereof that the Lender Group is required or elects to
repay or restore, and as to all reasonable costs, expenses, and attorneys fees
of the Lender Group related thereto, the liability of Guarantor automatically
shall be revived, reinstated, and restored and shall exist as though such
Voidable Transfer had never been made.
[Signature page to follow.]
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed at Los Angeles, California.
SPACE APPLICATIONS CORPORATION,
a California corporation
By /s/ Xxxxxx X. Xxxx
---------------------------------------
Its VP and Assistant Secretary
--------------------------------------
MELLON BANK, N.A.,
as agent
By /s/ Xxxxxxx X. XxXxxxx
---------------------------------------
Xxxxxxx X. XxXxxxx
Assistant Vice President
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