1
EXHIBIT 10.89
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT (hereinafter referred to as the
"Agreement") is made and entered into effective this 28th day of June, 1996, by
and between ▇▇▇▇▇ Medical Devices, Inc., a Colorado corporation with its
principal executive offices located at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ (hereinafter referred to as the "Company"), on the one hand, and ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇▇▇▇▇, whose address is ▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇, ▇▇▇
▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, and ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, whose address is Sleepers,
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇, ▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, on the other hand.
Messrs. ▇▇▇▇▇-▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ are hereinafter sometimes collectively referred
to as the "Debentureholders."
WHEREAS, the Company agreed, pursuant to that certain Agreement dated
June 11, 1996, by and among the parties hereto and Pollution Research and
Control Corp., to purchase 6,300 issued and outstanding 1 pound ordinary shares
(hereinafter referred to as the "Common Shares") of ▇▇▇▇▇ Research Ltd., a
private United Kingdom company limited by shares with its offices located at ▇▇
▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇, ▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ("hereinafter referred
to as "LRL"), owned of record and beneficially collectively by the
Debentureholders, as payment in full of the purchase price for which the Company
agreed to issue debentures (hereinafter referred to as the "Debentures") in the
principal amounts of $285,714.29 and $14,285.71 to Messrs. ▇▇▇▇▇-▇▇▇▇▇▇▇▇ and
▇▇▇▇▇, respectively.
WHEREAS, the Debentureholders have delivered the certificates and
transfers for the Common Shares to the Company prior to the date hereof.
WHEREAS, the Company has duly authorized the issuance of the Debentures
to each of the Debentureholders under this Agreement in the principal amounts
indicated above as payment in full of the purchase price for the Common Shares
and, further, the Company has duly authorized the execution and delivery of this
Agreement to provide therefor and for the respective rights of the Company and
the Debentureholders hereunder and the terms upon which the Debentures are, and
are to be, delivered.
NOW, THEREFORE, in consideration of the mutual promises and agreements
hereinafter set forth, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
Section 1.1. Definitions. When used herein, the following terms shall
have the following meanings:
2
a. "Account(s)": Account(s), contract right(s), chattel
paper, instruments and documents, whether now owned or hereinafter acquired by
the Company.
b. "Agreement": The Loan and Security Agreement described
in the first paragraph of this instrument.
c. "Account Debtor": Any "Person" (as defined in subsection
u. below) who is or who may become obligated to the Company under or on account
of an Account.
d. "Business Day": The term "business day" shall mean each
Monday, Tuesday, Wednesday, Thursday and Friday which is not a legal holiday in
Glendale, California, or is not a day on which banking institutions in the State
of California are closed or are authorized by law to be closed.
e. "Charges": All national, federal, state, county, city,
municipal and/or other governmental taxes, levies, assessments, charges, liens,
claims or encumbrances upon and/or relating to
(a) The "Collateral" (as defined in subsection f.
below);
(b) The "Liabilities" (as defined in subsection s.
below);
(c) The Company's employees, payroll, income and/or
gross receipts;
(d) The Company's ownership and/or use of its assets;
or
(e) Any other aspect of the Company's business.
f. "Collateral": The property and interests in property
securing the Liabilities pursuant to Article IV hereof.
g. "Company": The Person named as the "Company" in the first
paragraph of this document until a successor corporation shall have become such
pursuant to the applicable provisions of this Agreement, and thereafter
"Company" shall mean such successor corporation.
h. "Company Request," "Company Order" and "Company Consent"
mean, respectively, a written request, order or consent signed in the name of
the Company by its Chairman of the Board of Directors, President or a Vice
President and by its Treasurer, an Assistant Treasurer, Secretary or an
Assistant Secretary.
i. "Debenture Register": This term has the meaning specified
in Section 2.3. hereof.
j. "Debentureholder": The Person in whose name such Debenture
is registered in the Debenture Register.
3
k. "Debentures": Those certain instruments of even date
herewith from the Company to each of Messrs. ▇▇▇▇▇-▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ in the
principal amounts of $285,714.29 and $14,285.71, respectively, in the forms of
Exhibits A and B attached hereto and incorporated herein by this reference.
l. "Equipment": All of the Company's now owned or hereinafter
acquired fixtures and equipment, including, without limitation, furniture,
vehicles and trade fixtures.
m. "Event of Default": Any of the events specified in Section
6.1. hereof.
n. "General Intangibles": All choses in action, causes of
action and all other intangible personal property of the Company of every kind
and nature (other than Accounts) now owned or hereinafter acquired by the
Company, including, without limitation, corporate or other business records,
inventions, designs, patents, patent applications, trademarks, trade names,
trade secrets, goodwill, copyrights, registrations, licenses, franchises,
customer lists, tax refund claims, computer programs and the claims under
guaranties, security interests or other security held by or granted to the
Company to secure payment of any of the Accounts by an Account Debtor.
o. "Holder": The Person or Persons in whose name or names a
particular Debenture shall be registered on the Debenture Register.
p. "Indebtedness": All liabilities, obligations and
indebtedness of any and every kind and nature, including, without limitation,
the Liabilities and all obligations to trade creditors, whether heretofore, now
or hereinafter owing, arising, due or payable from the Company to any Person and
howsoever evidenced, created, incurred, acquired or owing, whether primary,
secondary, direct, contingent, fixed or otherwise. Without in any way limiting
the generality of the foregoing, Indebtedness specifically includes the
following:
(i) All obligations or liabilities of the Company
which are secured by any lien, claim, encumbrance or security interest upon
property owned by the Company, even though the Company has not assumed or become
liable for the payment thereof.
(ii) All obligations or liabilities created or
arising under any lease of real or personal property, or conditional sale or
other title retention agreement with respect to property used and/or acquired by
the Company, even though the rights and remedies of the lessor, seller and/or
lender thereunder are limited to repossession of such property; and
(iii) Deferred taxes.
q. "Interest Payment Date": The Stated Maturity (March 31,
June 30, September 30 or December 31, as the case may be) of an installment of
interest on the Debentures.
r. "Inventory": Any and all goods, merchandise and other
personal property, wheresoever located and whether or not in transit, now owned
or hereinafter acquired by the Company which is or may at any time be held for
sale or lease, furnished under any contract of service or held as raw materials,
work in process, supplies or materials used or consumed in the Company's
business, including, without limitation, medical and related products, devices
and components and supplies used
4
or useful in the manufacturing process, and all such property the sale or other
disposition of which has given rise to Accounts and which has been returned to
or repossessed or stopped in transit by the Company.
s. "Liabilities": All liabilities, obligations and
indebtedness of any and every kind and nature (including, without limitation,
interest, charges, expenses, attorneys' fees and other sums chargeable to the
Company by the Debentureholders), whether arising under the Debentures or this
Agreement, under any of the "Other Agreements" (as defined in subsection u.
below) or acquired by the Company from any other source, whether heretofore, now
or hereinafter owing, arising, due or payable from the Company to the
Debentureholders and howsoever evidenced, created, incurred, acquired or owing,
whether primary, secondary, direct, contingent, fixed or otherwise, including
obligations of performance.
t. "Maturity": The date on which the principal of such
Debenture becomes due and payable as therein or herein provided, whether at the
Stated Maturity or by declaration of acceleration, call for redemption or
otherwise.
u. "Other Agreements": All "Supplemental Documentation" (as
defined in subsection ee. below) and all agreements, instruments and documents,
including, without limitation, notes, guaranties, mortgages, deeds of trust,
chattel mortgages, pledges, powers of attorney, consents, assignments,
contracts, notices, security agreements, leases, financing statements,
subordination agreements, trust account agreements and all other written matters
whether heretofore, now or hereinafter executed by or on behalf of the Company
and/or delivered to the Debentureholders, with respect to this Agreement, or
with respect to the Debentureholders.
v. "Person": Any individual, sole proprietorship,
partnership, joint venture, trust, unincorporated organization, association,
corporation, institution, entity, party or government (whether national,
federal, state, county, city, municipal or otherwise, including, without
limitation, any instrumentality, division, agency, body or department thereof.)
w. "Place of Payment": Means the office of the Company
maintained for purpose of payment in the City of Glendale, County of Los
Angeles, State of California.
x. "Presentment Date": When used with respect to any
Debenture to be redeemed means the date when any notice of such redemption is
received by the Company.
y. "Record Date": When used with respect to an interest
payment date means March 1, June 1, September 1 or December 1 next preceding
each such Interest Payment Date, or if such date is not a Business Day in the
State of California, the Business Day next preceding such date and, when used
with respect to the payment of any defaulted interest, means the date,
established by the Company by giving notice thereof to Debentureholders not less
than ten (10) days preceding such date, for the determination of
Debentureholders entitled to such payment.
z. "Redemption Date": When used with respect to any
Debenture to be redeemed means the date fixed for such redemption by or pursuant
to this Agreement.
5
aa. "Redemption Price": When used with respect to any
Debenture to be redeemed means the price at which it is to be redeemed pursuant
to this Agreement.
bb. "Stated Maturity": When used with respect to any
Debenture or any installment of interest thereon means the date specified in
such Debenture as the fixed date on which the principal of such Debenture or
such installment of interest is due and payable.
cc. "Stock": All shares, options, interests, participations
or other equivalents (howsoever designated) of or in a corporation, whether
voting or non-voting, including, without limitation, common stock, warrants,
preferred stock, convertible debentures and all agreements, instruments and
documents convertible, in whole or in part, into any one or more or all of the
foregoing.
dd. "Subsidiary": The term "Subsidiary" shall mean any
corporation the majority of the shares of Stock of which at the time outstanding
having voting power for the election of directors is owned directly or
indirectly by the Company or by one or more of its other Subsidiaries.
ee. "Supplemental Documentation": Agreements, instruments,
documents, financing statements, warehouse receipts, bills of lading, notices of
assignment of accounts, schedules of accounts assigned, mortgages, certificates
of title and other written matter necessary or requested by the Debentureholders
to perfect and maintain perfected the Debentureholders' security interests in
the Collateral and to consummate the transactions contemplated in or by this
Agreement and the Other Agreements.
ee. "Other Terms": All other terms contained in this
Agreement shall, when the context so indicates, have the meanings provided for
by the Uniform Commercial Code, as now in effect in the State of Colorado, to
the extent that the same are used or defined therein.
Section 1.2. Acts of Debentureholders.
a. Any request, demand, authorization, direction, notice,
consent, waiver or other action provided by this Agreement to be given or taken
by the Debentureholders may be embodied in and evidenced by one or more
instruments of substantially similar tenor signed by such Debentureholders in
person or by agent duly appointed in writing; and, except as herein otherwise
expressly provided, such action shall become effective when such instrument or
instruments are delivered to the Company. Such instrument or instruments (and in
the action embodied therein and evidenced thereby) are herein sometimes referred
to as the "Act" of the Debentureholders signing such instrument or instruments.
Proof of execution of any such instrument or of a writing appointing any such
agent shall be sufficient for any purpose of this Agreement and conclusive in
favor of the Company, if made in the manner provided in this Section.
b. The fact and date of the execution by any Person of any
such instrument or writing may be proved by the affidavit of a witness of such
execution or by the certificate of any notary public or other officer authorized
by law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. Where such
6
execution is by an officer of a corporation or a member of a partnership on
behalf of such corporation or partnership, such certificate or affidavit shall
also constitute sufficient proof of his authority.
c. The fact and date of execution of any such instrument or
writing or the authority of the Person executing the same may also be proved in
any other manner which the Company deems sufficient; and the Company may in any
instance require further proof with respect to any of the matters referred to in
this Section.
d. The ownership of Debentures shall be proved by the
Debenture Register.
e. Any request, demand, authorization, direction, notice,
consent, waiver or other action by the Holder of any Debenture shall bind every
future Holder of the same Debenture and the Holder of every Debenture issued
upon the transfer thereof or in exchange therefor or in lieu thereof, in respect
of anything done, omitted or suffered to be done by the Company in reliance
thereon, whether or not notation of such action is made upon such Debenture.
Section 1.3. Notices, Etc., to Company. Any request, demand,
authorization, direction, notice, consent, waiver or Act of Debentureholders or
other document provided or permitted by this Agreement to be made upon, given or
furnished to, or filed with, the Company by any Debentureholder shall be
sufficient for every purpose hereunder (except as provided in subsections a. and
b. of Section 6.1) if in writing and mailed, first class, postage prepaid, to
the Company addressed to it at the address of its principal executive offices
specified in the first paragraph of this instrument or at any other address
previously furnished in writing by the Company.
Section 1.4. Notices to Debentureholders; Waiver.
a. Where this Agreement provides for giving notice to
Debentureholders of any event, such notice shall be sufficiently given (unless
otherwise herein expressly provided) if in writing and mailed, first class
postage prepaid, to each Debentureholder at his address as it appears in the
Debenture Register, not later than the latest date, and not earlier than the
earliest date, prescribed for the first giving of such notice. Where this
Agreement provides for the giving of notice in any manner, such notice may be
waived in writing by the Person entitled to receive such notice, either before
or after the event, and such waiver shall be the equivalent of such notice.
Waivers of notice by Debentureholders shall be filed with the Company, but such
filing shall not be a condition precedent to the validity of any action taken in
reliance upon such waiver.
b. In the event that it shall be impracticable to mail notice
of any event to Debentureholders when such notice is required to be given
pursuant to any provision of this Agreement by reason of the suspension of
regular mail service, as a result of a strike, work stoppage or similar
activity, then any manner of giving such notice as shall be satisfactory to the
Company shall be deemed to be a sufficient giving of such notice.
Section 1.5. Effect of Heading and Table of Contents. The Article and
Section headings herein are for convenience only and shall not affect the
construction hereof.
Section 1.6. Successors and Assigns. All covenants and agreements in
this Agreement by the Company shall bind its successors and assigns, whether so
expressed or not.
7
Section 1.7. Separability Clause. In case any provision in this
Agreement or in the Debentures shall be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.
Section 1.8. Benefit of Agreement. Nothing in this Agreement or in the
Debentures, express or implied, shall give to any person, other than the parties
hereto and their successors hereunder, any benefit or any legal or equitable
right, remedy or claim under this Agreement.
Section 1.9. Governing Law. This Agreement shall be construed in
accordance with and governed by the laws of the State of Colorado.
Section 1.10. Legal Holidays. In any case where the date of any
Interest Payment Date, Redemption Date or the Stated Maturity of any Debenture
shall not be a Business Day, then (notwithstanding any other provision of the
Debentures or this Agreement) payment of the principal of or interest on any
Debenture need not be made on such date, but may be made on the next succeeding
Business Day with the same force and effect as if made on the nominal date of
any such Interest Payment Date, Redemption Date or Stated Maturity, as the case
may be, and no interest shall accrue for the period from and after any such
nominal date.
Section 1.11. Execution in Counterparts. This Agreement may be executed
in any number of counterparts, each of which so executed shall be deemed to be
an original, but all such counterparts shall together constitute but one and the
same document.
Section 1.12. Entire Agreement. This Agreement constitutes and embodies
the entire understanding and agreement of the parties and supersedes and
replaces all prior understandings, agreements and negotiations between and among
the parties.
Section 1.13. Waiver and Modification. Any waiver, alteration or
modification of any of the provisions of this Agreement shall be valid only if
made in writing and signed by the parties hereto.
Section 1.14. Attorneys' Fees. The parties agree that, should
litigation arise in relation to this Agreement or its enforcement, as between
the Company and the Debentureholders, the losing party or parties, jointly and
severally, agree to pay the prevailing party or parties the amount of such
prevailing party's or parties' reasonable attorneys' fees, expenses and costs.
ARTICLE TWO
THE DEBENTURES
Section 2.1. Titles and Terms.
a. The Debentures shall be known and designated as the "9%
Debentures Due June 28, 2006" of the Company. Their stated maturity shall be
June 28, 2006 and they shall bear interest from their date of issuance, payable
quarterly on March 31, June 30, September 30 and December 31
8
of each year commencing on June 30, 1998, at the rate of nine per cent per annum
until the principal thereof has been paid or duly provided for.
b. Every Debenture shall be dated the date of its issuance,
and shall bear interest quarterly on March 31, June 30, September 30 and
December 31, next preceding the date of such Debenture to which interest on the
Debenture has been paid, unless the date of such Debenture is a date to which
such interest has been paid, in which case from the date of such Debenture or
unless the date of such Debenture is prior to the first date to which such
interest has been paid, in which case from June 30, 1998. However, so long as
there is no existing default in the payment of interest on the Debentures, every
Debenture authenticated by the Debenture Registrar after the close of business
on the Record Date for any Interest Payment Date (March 1, June 1, September 1
or December 1, as the case may be) and prior to such Interest Payment Date shall
be dated the date of its issuance but shall bear interest from such Interest
Payment Date; provided, however, that and if the extent that the Company shall
default in the payment of interest due on such Interest Payment Date then any
such Debenture shall bear interest from March 31, June 30, September 30 or
December 31 as the case may be, next preceding the date of such Debenture to
which such interest has been paid or June 30, 1998, in the case of default in
the first payment of interest.
c. Interest payable with respect to a Debenture on an Interest
Payment Date shall be paid to the Holder of such Debenture (or any Debenture or
Debentures issued upon the transfer thereof, or in exchange therefor or in lieu
thereof) at the close of business on the Record Date with respect to such
Interest Payment Date, except that if and to the extent the Company shall
default in the payment of the interest due on such Interest Payment Date, such
defaulted interest shall be paid to the Holder of such Debenture (or any
Debenture or Debentures issued upon the transfer thereof or in exchange therefor
or in lieu thereof) at the close of business on the date of payment of such
defaulted interest, or the Record Date, if the Company shall establish any, with
respect to which payment of such defaulted interest is to be made.
d. Interest which is paid on a Debenture on any Interest
Payment Date shall be paid by check to the order of the person entitled to such
payment, mailed to his last address appearing in the Debenture Register.
Section 2.2. Execution, Delivery and Dating.
a. The Debentures shall be issued only as registered
Debentures without coupons. The Debentures shall be executed on behalf of the
Company by its Chairman of the Board of Directors, its President or one of its
Vice Presidents under its corporate seal reproduced thereon and attested by its
Treasurer, Secretary or one of its Assistant Secretaries. The signature of any
of these officers on the Debentures may be manual or facsimile.
b. At any time and from time to time after the creation and
delivery of this Agreement, the Company may deliver such Debentures as in this
Agreement provided and not otherwise.
c. Each Debenture shall be dated the date of its issuance.
Section 2.3. Registration, Transfer and Exchange.
9
a. The Company shall cause to be kept at its principal
executive offices in Glendale, California, a register (herein sometimes referred
to as the "Debenture Register") in which, subject to such reasonable regulations
as it may prescribe, the Company shall provide for the registration of
Debentures and the registration of transfers of Debentures. The Company is
hereby appointed "Debenture Registrar" for the purpose of registering Debentures
and effecting transfers of Debentures as herein provided.
b. Upon surrender for transfer of any Debenture at the office
of the Company in the Place of Payment, the Debenture Registrar shall execute
and deliver, in the name of the designated transferee or transferees, one or
more new Debentures of a like aggregate principal amount, all as requested by
the transferor.
c. All Debentures surrendered upon any exchange or transfer
provided for in this Agreement shall be promptly canceled by the Debenture
Registrar and thereafter disposed of as directed by a Company Order.
d. Every Debenture presented or surrendered for transfer or
exchange shall (if so required by the Debenture Registrar) be duly endorsed, or
be accompanied by a written instrument of transfer in form satisfactory to the
Debenture Registrar, duly executed by the Holder thereof or his attorney duly
authorized in writing.
e. No service charge shall be made for any transfer or
exchange of Debentures, but the Company may require payment of a sum sufficient
to cover any tax or other governmental charge imposed in connection therewith.
f. The Company shall not be required to transfer or exchange
any Debenture called or being called for redemption in whole or in part.
Section 2.4. Mutilated, Destroyed, Lost or Stolen Debentures.
a. A mutilated Debenture may be surrendered and thereupon the
Debenture Registrar shall execute and deliver in exchange therefor a new
Debenture of like tenor and principal amount, bearing a number not
contemporaneously outstanding.
b. If there be delivered to the Debenture Registrar (i)
evidence to its satisfaction of the destruction, loss or theft of any Debenture
and (ii) such security or indemnity as may be required by it to save the Company
harmless, then, in the absence of notice to the Debenture Registrar that such
Debenture has been acquired by a bona fide purchaser, the Debenture Registrar
shall execute and deliver in lieu of any such destroyed, lost or stolen
Debenture, a new Debenture of like tenor and principal amount, bearing a number
not contemporaneously outstanding.
c. In case any such mutilated, destroyed, lost or stolen
Debenture has become or is about to become due and payable, or has been called
or selected for redemption, the Company in its discretion may, instead of
issuing a new Debenture, pay such Debenture.
d. Upon the issuance of any new Debenture under this Section,
the Debenture Registrar may require the payment of a sum sufficient to cover any
tax or other governmental charge
10
that may be imposed in relation thereto and any other reasonable expenses
(including the fees and expenses of the Debenture Registrar) connected
therewith.
e. Every new Debenture issued pursuant to this Section in lieu
of any destroyed, lost or stolen Debenture shall constitute an original
additional contractual obligation of the Company, whether or not the destroyed,
lost or stolen Debenture shall be at any time enforceable by anyone, and shall
be entitled to all the benefits of this Agreement equally and proportionately
with any and all other Debentures duly issued hereunder.
f. The provisions of this Section are exclusive and shall
preclude (to the extent lawful) all other rights and remedies with respect to
the replacement or payment of mutilated, destroyed, lost or stolen Debentures.
Section 2.5. Interest Rights Preserved. Each Debenture delivered under
this Agreement upon transfer of or in exchange for or in lieu of any other
Debenture shall (subject to Section 2.1.) carry all of the rights to interest
accrued and unpaid, and to accrue, which were carried by such other Debenture,
and each such Debenture shall be so dated in order that neither gain nor loss in
interest shall result from such transfer, exchange or substitution.
Section 2.6. Persons Deemed Owners. The Company and any agent of the
Company may treat the Person in whose name any Debenture is registered as the
owner of such Debenture for the purpose of receiving payment of the principal
of, and (subject to Section 2.1.) interest on, such Debenture and for all other
purposes whatsoever whether or not such Debenture be overdue, and neither the
Company nor any agent of the Company shall be affected by notice to the
contrary.
Section 2.7. Cancellation. All Debentures surrendered for payment,
transfer, exchange, conversion or redemption shall, if surrendered to any person
other than the Debenture Registrar, be delivered to the Debenture Registrar and,
if not already canceled, shall be promptly canceled by it. All Debentures
surrendered for payment, transfer, exchange, conversion or redemption to the
Debenture Registrar shall be promptly canceled. No Debentures shall be issued in
lieu of or in exchange for any Debentures canceled as provided in this Section,
except as expressly permitted by this Agreement. All canceled Debentures held by
the Debenture Registrar shall be disposed of as directed by a Company Order,
which may provide for the destruction thereof.
ARTICLE THREE
TERMINATION OF AGREEMENT
Section 3.1. Satisfaction and Discharge of Agreement. This Agreement
shall cease to be of further effect (except as to any surviving rights of
redemption or transfer or exchange of Debentures herein expressly provided for
and rights to receive payments of interest thereon), and the responsibilities of
the Company under this Agreement shall be satisfied and discharged when
a. Either
11
(i) All Debentures theretofore delivered (other than
(a) Debentures which have been destroyed, lost or stolen and which have been
replaced or paid as provided in Section 2.4. and (b) Debentures for whose
payment money has theretofore been segregated and held in trust by the Company
and thereafter repaid to the Company or discharged from such trust, as provided
in subsection c. of Section 5.1.) have been canceled or delivered to the Company
for cancellation; or
(ii) All such Debentures not theretofore canceled or
delivered to the Company for cancellation
(a) Have become due and payable,
(b) Will become due and payable at their
Stated Maturity within one year,
(c) Have been presented to the Company for
redemption, or
(d) Are to be called for redemption within
one year under arrangements satisfactory to the Debentureholders for the giving
of notice of redemption by the Company at its expense,
and the Company, in the case of subsections (a), (b), (c) or (d) above, has
caused to be segregated and held in trust, as trust funds in trust for the
purpose, an amount (said amount to be immediately due and payable to the Holders
of the Debentures) sufficient to pay and discharge the entire indebtedness of
such Debentures not theretofore canceled or delivered to the Company for
cancellation, for principal and interest to the date of such segregation (in the
case of Debentures which have become due and payable) or to the Stated Maturity
or Redemption Date, as the case may be; and
b. The Company has paid or caused to be paid all other
sums payable hereunder by the Company.
Section 3.2. Application of Trust Money. All money segregated pursuant
to Section 3.1. shall be held in trust and applied by the Company in accordance
with the provisions of the Debentures and this Agreement to the payment directly
to the Debentureholders for whose payment or redemption such money has been
segregated, of all sums due and to become due thereon for principal and
interest; but such money need not be segregated from other funds except to the
extent required by law. The Company shall give notice at its expense of the
immediate availability of the money segregated pursuant to Section 3.1. to the
Persons entitled to such money.
ARTICLE IV
COLLATERAL
Section 4.1. Security Interest in Personalty. To secure the prompt
payment to the Debentureholders of the Liabilities, the Company hereby grants to
the Debentureholders, jointly and severally, a continuing first priority
security interest in and to all of its following property and interests
12
in property, whether now owned or existing or hereinafter acquired or arising
and wheresoever located:
a. Accounts;
b. Equipment;
c. Inventory;
d. General Intangibles;
e. All monies, residues and property of any kind now, or at
any time or times hereinafter, in the possession or under the control of the
Debentureholders or a bailee of the Debentureholders;
f. All accessions to, substitutions for and all replacements,
products and proceeds of the foregoing, including, without limitation, proceeds
of insurance policies insuring the collateral; and
g. All books and records (including, without limitation,
customer lists, credit files, computer programs, printouts and other computer
materials and records) of the Company pertaining to any of the foregoing.
(All of the property and interests in property described in subsections (a),
(b), (c), (d), (e), (f) and (g) and all other property and interests in property
which shall, from time to time, secure the Liabilities, including, without
limitation, those described in Section 4.2. immediately below, are herein
collectively referred to as the "Collateral.")
Section 4.2. Security Interest in Real Estate. In addition to the other
Collateral, the Liabilities shall be secured by mortgages conveying a first
priority security interest in any real estate owned by the Company hereinafter,
in any case inclusive of all fixtures appurtenant to any such improved real
property and subject only to usual and ordinary title exceptions. In any such
case, the Debentureholders shall have received from the Company each of the
following:
a. A duly executed mortgage in form and substance reasonably
satisfactory to the Debentureholders with respect to the real property, duly
recorded in the appropriate recording offices with all recording fees and taxes,
if any, paid thereon; and
b. A title insurance policy or binder, in customary form, with
premiums paid thereon, issued by a title insurance company acceptable to the
Debentureholders, and insuring that the Debentureholders' mortgages constitute
valid second priority liens on the real estate described therein, free and clear
of any and all defects and encumbrances whatsoever, other than usual and
ordinary title exceptions acceptable to the Debentureholders in their sole
discretion.
Section 4.3 Disclosure of Security Interest. The Company shall make
appropriate entries upon its financial statements and its books and records
disclosing the Debentureholders' security interest in the Collateral.
13
Section 4.4 Financing Statements. At the Debentureholders' request, the
Company shall execute and/or deliver to the Debentureholders, at any time or
times hereinafter, all Supplemental Documentation that the Debentureholders may
reasonably request, in form and substance acceptable to the Debentureholders,
and pay the costs of any recording or filing of the same. Upon the occurrence of
an Event of Default, the Company hereby irrevocably makes, constitutes and
appoints the Debentureholders (and all Persons designated by the
Debentureholders for that purpose) as the Company's true and lawful attorney
(and agent-in-fact) to sign the name of the Company on any of the Supplemental
Documentation to such Persons as the Debentureholders, in their sole discretion,
may elect. The Company agrees that a photographic, photostatic or other
reproduction of this Agreement or of a financing statement is sufficient as a
financing statement.
Section 4.5 Inspection. The Debentureholders (by any of their agents)
shall have the right, at any time or times during the Company's usual business
hours, to inspect the Collateral, all records related thereto (and to make
extracts from such records), and the premises upon which any of the Collateral
is located, to discuss the Company's affairs and finances with any Person and to
verify the amount, quality, quantity, value and condition of, or any other
matter relating to, the Collateral.
Section 4.6. Perfection and Priority; Location of Collateral. The
Company warrants and represents that:
a. None of the Collateral is subject to any lien, security
interest or other encumbrance, except as disclosed on Exhibit C attached hereto
and incorporated herein by this reference.
b. The offices and/or locations where the Company keeps the
Collateral and books and records, including, without limitation, computer
programs, printouts and other computer materials and records concerning the
Collateral, are at the locations set forth on Exhibit C, and the Company shall
not remove such books and records and/or the Collateral therefrom, except for
removal of Inventory upon its sale, and shall not keep any of such books and
records and/or the Collateral at any other office(s) or location(s) unless (i)
the Company gives the Debentureholders written notice of such removal and the
new location of said books and records and/or the Collateral at least thirty
(30) days prior thereto and (ii) the other office or location is within the
continental United States of America.
Section 4.7. Debentureholders' Payment of Claims Asserted Against
Company. The Debentureholders may, at any time or times hereinafter, in their
sole discretion and without waiving or releasing any obligation, liability or
duty of the Company under this Agreement or the Other Agreements, or any Event
of Default, pay, acquire and/or accept an assignment of any security interest,
lien, claim or encumbrance asserted by any Person against the Collateral;
provided that the Debentureholders shall first give the Company written notice
of their intent to do the same, and the Company does not, within ten (10) days
of such notice, pay such claim and/or obtain to the Debentureholders' reasonable
satisfaction the release of the security interests, liens, claims or
encumbrances to which such notice relates. All sums paid by the Debentureholders
in respect thereof and all costs, fees and expenses, including reasonable
attorneys' fees, court costs, expenses and other charges relating thereto, which
are incurred by the Debentureholders on account thereof, shall be payable, on
demand, by the Company to the Debentureholders and shall be additional
Liabilities hereunder secured by the Collateral.
14
ARTICLE V
COVENANTS
Section 5.1 General Warranties and Representations. The Company
warrants and represents that:
a. Payment of Principal, Premium and Interest. The Company
will duly and punctually pay the principal of and interest on the Debentures in
accordance with the terms of the Debentures and this Agreement.
b. Maintenance of Office. The Company will maintain an office
in the Place of Payment where Debentures may be presented or surrendered for
Payment, where Debentures may be presented or surrendered for transfer, exchange
or conversion and where notices and demands to or upon the Company in respect of
the Debentures and this Agreement may be served and where the principal and
interest of the Debentures shall be payable. The Company will give prompt
written notice of the location, and of any change in the location, of such
office. If at any time the Company shall fail to maintain such office or shall
fail to give notice of the address thereof, such presentations, surrenders,
notices and demands may be made or served at the principal executive offices of
the Company in Glendale, California. The Company may maintain one or more
additional offices for any of such purposes, within or without the Place of
Payment, and will give prompt written notice of the location, and of any change
in the location, of any such additional office.
c. Money for Debenture Payments to Be Held in Trust. The
Company will, on or before each due date of the principal of or interest on any
of the Debentures, segregate and hold in trust for the benefit of the Holders of
such Debentures a sum sufficient to pay the principal or interest so becoming
due until such sums shall be paid to such Holders or otherwise disposed of as
herein provided. Any money then held by the Company, in trust for the payment of
the principal of or interest on any Debenture and remaining unclaimed for six
years after such principal or interest has become due and payable shall be paid
to the Company on Company request, or (if then held by the Company) shall be
discharged from such trust; and the holder of such Debenture shall thereafter,
as an unsecured general creditor, look only to the Company for payment thereof,
and all liability of the Company as trustee of such trust money, shall thereupon
cease; provided, that, before making any such repayment, the Company shall send
notice to the persons entitled to such unclaimed money at their last address
appearing on the Debenture Register, unless previous communications forwarded to
such addresses have been returned unclaimed.
d. Payment of Taxes and Other Claims. The Company will pay or
discharge or cause to be paid or discharged, before the same shall become
delinquent, (i) all taxes, assessments and governmental charges levied or
imposed upon it or upon its income, profits or property and (ii) all lawful
charges for labor, materials and supplies which, if unpaid, might by law become
a lien upon its property; provided, however, that the Company shall not be
required to pay or discharge or cause to be paid or discharged any such tax,
assessment, charge or claim whose amount, applicability or validity is being
contested in good faith by appropriate proceedings.
e. Maintenance of Properties. The Company will cause all the
properties of the Company and of any Subsidiary, used or useful in the conduct
of the business of the Company or of
15
such Subsidiary, to be maintained and kept in good condition, repair and working
order and supplied with all necessary equipment and will cause to be made all
necessary repairs, renewals, replacements, betterments and improvements thereof,
all as in the judgment of the Company may be necessary so that the business
carried on in connection therewith may be properly and advantageously conducted
at all times; provided, however, that nothing in this Section shall prevent the
Company or any Subsidiary from discontinuing the operation and maintenance of
any of its properties if such discontinuance is, in the judgment of the Company
or such Subsidiary, respectively, desirable in the conduct of its business and
not disadvantageous in any material respect to the Debentureholders.
f. Corporate Existence. The Company will do or cause to be
done all things necessary to preserve and keep in full force and effect its
corporate existence, rights (charter and statutory) and franchises; provided,
however, that the Company shall not be required to preserve any right or
franchise if the Board of Directors shall determine that the preservation
thereof is no longer desirable in the conduct of the business of the Company,
and that the loss thereof is not disadvantageous in any material respect to the
Debentureholders.
g. Insurance. The Company will insure and keep insured, and
will cause each of its Subsidiaries to insure and keep insured, to a reasonable
amount with reputable insurance companies, so long as any of the Debentures
shall be outstanding, all property of a character usually insured by
corporations engaged in the same or a similar business against loss or damage of
the kinds customarily insured against by such corporations (including without
limitation against all tort or product liability claims) and carry, and cause
each of its Subsidiaries to carry, such other insurance, all in such amounts and
against such risks, as is usually carried by corporations engaged in the same or
a similar business or owning similar properties.
h. Authorization. The Company has the right and power and is
duly authorized and empowered to enter into, execute, deliver and perform the
Debentures, this Agreement and the Other Agreements executed concurrently
herewith. The execution, delivery and/or performance by the Company of the
Debentures, this Agreement and the other Agreements shall not, by the lapse of
time, the giving of notice or otherwise, constitute a violation of any
applicable law or a breach of any provision contained in the Articles of
Incorporation or Bylaws of the Company or contained in any agreement, instrument
or document to which the Company is now a party or by which it is otherwise
bound.
Section 5.2. Negative Covenants. Without the Debentureholders' prior
written consent, which the Debentureholders may or may not, in their reasonable
discretion, give concurrently herewith or hereinafter, the Company covenants
that it shall not:
a. Merge, consolidate with or acquire any Person.
b. Other than in the ordinary course of its business, make any
investment in the securities of any Person.
c. Except as otherwise expressly permitted herein or in the
Other Agreements, encumber, pledge, mortgage, grant a security interest in,
assign, sell, lease or otherwise dispose of or transfer, whether by sale,
merger, consolidation, liquidation, dissolution or otherwise, any of the
Collateral.
16
d. Incur any Indebtedness for borrowed money (other than the
Liabilities), except for Indebtedness which is unsecured or is to Persons who
execute and deliver to the Debentureholders (in form and substance acceptable to
the Debentureholders and their counsel) subordination agreements subordinating
their claims against the Company to the payment of the Liabilities.
e. Make any substantial change in the nature or scope of or
discontinue or dispose of any part of the Company's business.
Section 5.3. Contesting Charges. Notwithstanding anything to the
contrary herein, the Company may dispute any Charges without prior payment
thereof, even if such non-payment may cause a lien to attach to the assets of
the Company, provided that the Company shall have given the Debentureholders
written notice of said dispute and shall be diligently contesting the same in
good faith in an appropriate proceeding and, provided further that, if the same
are in excess of $10,000 in the aggregate at any time or times hereinafter, the
Company has given the Debentureholders such additional collateral and assurances
that the Debentureholders, in their sole discretion, deems necessary under the
circumstances.
Section 5.4. Payment of Charges. Subject to the provisions of Section
5.3 immediately above, the Company shall pay promptly when due all of the
Charges. In the event that the Company, at any time or times hereinafter, shall
fail to pay the Charges or to promptly obtain the discharge of such Charges, the
Company shall so advise the Debentureholders thereof in writing and the
Debentureholders may, without waiving or releasing any obligation or liability
of the Company hereunder or any Event of Default, in their sole discretion, at
any time or times thereafter, make such payment, or any part thereof, or obtain
such discharge and take any other action with respect thereto which the
Debentureholders deem advisable. All sums so paid by the Debentureholders and
any expenses, including reasonable attorneys' fees, court costs, expenses and
other charges relating thereto, shall be payable, upon demand, by the Company to
the Debentureholders and shall be additional Liabilities hereunder secured by
the Collateral.
Section 5.5. Insurance; Payment of Premiums. All policies of insurance
on the Collateral shall be in form and with insurers recognized as adequate by
prudent business persons and all such policies shall be in such amounts as may
be satisfactory to the Debentureholders. If requested, the Company shall deliver
to the Debentureholders the original (or certified copy) of each policy of
insurance and evidence of payment of all premiums therefor.
ARTICLE VI
EVENTS OF DEFAULT; REMEDIES
Section 6.1. Events of Default. "Event of Default," wherever used
herein, shall mean any one of the following events (whatever the reason for such
Event of Default and whether it shall be voluntary or involuntary or be effected
by operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body):
17
a. The default by the Company in the payment of any
installment of interest upon any Debenture when it becomes due and payable and
the same is not cured within thirty (30) days; or default in the payment of the
principal of any Debenture at its maturity; or default in the performance of or
breach of any other covenant or warranty of the Company in this Agreement and
the same is not cured to the Debentureholders' satisfaction within thirty (30)
days after the Debentureholders give the Company written notice, by registered
or certified mail, identifying such Event of Default.
b. The default by the Company in the payment of the
Liabilities when due and payable or declared due and payable or default in the
payment of any other portion of the Indebtedness and the same is not cured
within thirty (30) days; or default in the performance of or breach of any other
covenant or warranty of the Company in the Other Agreements and the same is not
cured to the Debentureholders' satisfaction within thirty (30) days after the
Debentureholders give the Company written notice, by registered or certified
mail, identifying such Event of Default.
c. The filing by the Company of a voluntary petition or answer
seeking liquidation, reorganization, arrangement, readjustment of its debts or
for any other relief under the United States Bankruptcy Code of 1978, 11 U.S.C.
Section 101 et. seq., as amended (the "Bankruptcy Code"), or under any other act
or law pertaining to insolvency or debtor relief, whether state, Federal or
foreign, now or hereinafter existing; or any agreement by the Company indicating
its consent to, approval of or acquiescence in any such petition or proceeding;
the application by the Company for, or the appointment by consent or
acquiescence of a receiver, custodian or trustee of the Company or for all or a
substantial part of its property; the making by the Company of an assignment for
the benefit of creditors; or the inability or failure of the Company , or the
admission in writing by the Company of its inability or failure generally, to
pay its debts as such debts become due.
d. The filing of an involuntary petition against the Company
seeking liquidation, reorganization, arrangement, readjustment of its debts or
for any other relief under the Bankruptcy Code, or under any other act or law
pertaining to insolvency or debtor relief, whether state, Federal or foreign,
now or hereinafter existing, or the involuntary appointment of a receiver,
custodian or trustee of the Company or for all or a substantial part of its
property; the entry of a material judgment or the issuance of a warrant of
attachment, execution or similar process against any substantial part of the
property of the Company; and either (i) the continuance of any of the foregoing
for sixty (60) days undismissed, unbonded or undischarged or (ii) within such
sixty (60) day period, the entry of an order for relief under the Bankruptcy
Code in any such case or proceeding.
e. The cessation of business operations by the Company or the
enjoining, restraining or prevention of the Company by court order from
conducting all or any material part of its business affairs.
f. Except as permitted under Section 5.3. hereinabove, the
filing of record of a notice of lien, levy or assessment with respect to all or
any of the Company's assets by the United States, or any department, agency or
instrumentality thereof, or by any state, county, municipal or other
governmental agency, or if any taxes or debts owing at any time or times
hereinafter to any one of them becomes a lien or encumbrance upon the Collateral
or any of the Company's assets and the same is not released within sixty (60)
days after it becomes a lien or encumbrance.
18
Section 6.2. Acceleration of Maturity; Rescission and Annulment. If an
Event of Default occurs and is continuing, then and in every such case the
Holders of the Debentures may declare the principal of the Debentures to be due
and payable immediately, by a notice in writing to the Company, and upon any
such declaration such principal shall become immediately due and payable. At any
time after such a declaration of acceleration has been made and before a
judgment or decree for payment of the money due has been obtained by the
Debentureholders as hereinafter in this Article provided, the Company, by
written notice to the Debentureholders, may rescind and annul such declaration
and its consequences if:
a. The Company has paid or segregated a sum sufficient to pay
all overdue installments of interest on the Debentures; and
b. All Events of Default, other than the nonpayment of the
principal of the Debentures, have been cured or waived as provided in Section
6.9.
No such rescission shall affect any subsequent default or impair any right
consequent thereon.
Section 6.3. Collection of Indebtedness and Suits for Enforcement. The
Company covenants that if
a. Default is made in the payment of any installment of
interest on any Debenture when such interest becomes due and payable and such
default continues for a period of thirty (30) days, or
b. Default is made in the payment of the principal of any
Debenture at the Maturity thereof, the Company will, upon demand of the
Debentureholders, pay to them the whole amount then due and payable on such
Debentures for principal and, in addition thereto, such further amount as shall
be sufficient to cover the costs and expenses of collection, including the
reasonable compensation, expenses, disbursements and advances of the agents and
counsel of the Debentureholders. If an Event of Default occurs and is
continuing, the Debentureholders may in their discretion proceed to protect and
enforce their rights by such appropriate judicial proceedings as the
Debentureholders shall deem most effectual to protect and enforce any such
rights, whether for the specific enforcement of any covenant or agreement in
this Agreement or in aid of the exercise of any power granted herein, or to
enforce any other proper remedy.
Section 6.4. Debentureholders May File Proofs of Claim. In case of the
pendency of any receivership, insolvency, liquidation, bankruptcy,
reorganization, arrangement, adjustment, composition or other judicial
proceeding relative to the Company or the property of the Company, the
Debentureholders (irrespective of whether the principal of the Debentures shall
then be due and payable as therein expressed or by declaration or otherwise and
irrespective of whether the Debentureholders shall have made any demand on the
Company for the payment of overdue principal or interest) shall be entitled and
empowered, by intervention in such proceeding or otherwise:
a. To file and prove a claim for the whole amount of principal
and interest owing and unpaid in respect of the Debentures and to file such
other papers or documents as may be necessary or advisable in order to have the
claims of the Debentureholders (including any claim for the reasonable
compensation, expenses, disbursements and advances of their agents and counsel)
allowed in such judicial proceedings; and
19
b. To collect and receive any monies or other property payable
or deliverable on any such claims and to distribute the same;
and any receiver, assignee, trustee, liquidator, sequestrator (or other similar
official) in any such judicial proceeding is hereby authorized by each
Debentureholder to make such payments directly to them.
Section 6.3 Application of Money Collected. Any money collected
pursuant to this Article shall be applied in the following order and, in case of
the distribution of such money on account of principal or interest, upon
presentation of the Debentures, and the notation thereon of the payment if only
partially paid and upon surrender thereof if fully paid:
a. First: To the payment of costs and expenses of collection;
b. Second: In case the principal of the Debentures shall not
have become due, to the payment of interest on the Debentures, in the order of
the Maturity of the installments of such interest, such payments to be made
ratably to the Persons entitled thereto, without discrimination or preference;
c. Third: In case the principal of the Debentures shall have
become due, by declaration as authorized by this Agreement or otherwise, to the
payment of the whole amount then owing and unpaid upon the Debentures for
principal and interest, with interest on the overdue principal at the rate per
annum expressed in the Debentures; and in case such monies shall be insufficient
to pay in full the whole amount so due and unpaid upon the Debentures, then to
the payment of such principal and interest, without preference or priority of
principal over interest, or of interest over principal, or of any installment of
interest over any other installment of interest, or of any Debenture over any
other Debentures, ratably to the aggregate of such principal and accrued and
unpaid interest; and
d. Fourth: Any monies remaining after the payment in full of
all sums required to be paid under the foregoing paragraphs a., b. and c., shall
be paid over to the Company.
Section 6.5. Limitation on Suits. No Debentureholder shall have any
right to institute any proceeding, judicial or otherwise, with respect to this
Agreement, or for the appointment of a receiver or trustee, or for any other
remedy hereunder, unless such Debentureholder has previously given written
notice of a continuing Event of Default; it being understood and intended than
no one or more Debentureholders shall have any right in any manner whatever by
virtue of, or by availing of, any provision of this Agreement to affect, disturb
or prejudice the rights of any other Debentureholder, or to obtain or to seek to
obtain priority or preference over any other Debentureholder or to enforce any
right under this Agreement, except in the manner herein provided and for the
equal and ratable benefit of the Debentureholders.
Section 6.6. Unconditional Right of Debentureholders to Receive
Principal and Interest. Notwithstanding any other provision in this Agreement
(but subject to Section 2.1.), the Holder of any Debenture shall have the right
which is absolute and unconditional to receive payment of the principal of and
interest on such Debenture on the respective Stated Maturities expressed in such
Debenture (or, in the case of redemption pursuant to Article Seven or Eight, on
the Redemption Date subject to the
20
limitations of Article Seven or Eight) and to institute suit for the enforcement
of any such payment, and such right shall not be impaired without the consent of
such Holder.
Section 6.7. Restoration of Rights and Remedies. If any Debentureholder
has instituted any proceeding to enforce any right or remedy under this
Agreement and such proceeding has been discontinued or abandoned for any reason,
or has been determined adversely to such Debentureholder, then and in every such
case the Company and the Debentureholders shall, subject to any determination in
such proceeding, be restored severally and respectively to their former
positions hereunder, and thereafter all rights and remedies of the
Debentureholders shall continue as though no such proceeding had been
instituted.
Section 6.8. Rights and Remedies Cumulative. No right or remedy herein
conferred upon or reserved to the Debentureholders is intended to be exclusive
of any other right or remedy, and every right and remedy shall, to the extent
permitted by law, be cumulative and in addition to every other right and remedy
given hereunder or now or hereinafter existing at law or in equity or otherwise.
The assertion or employment of any right or remedy hereunder, or otherwise,
shall not prevent the concurrent assertion or employment of any other
appropriate right or remedy.
Section 6.9. Delay or Omission Not Waiver. No delay or omission of any
Debentureholder to exercise any right or remedy accruing upon any Event of
Default shall impair any such right or remedy or constitute a waiver of any such
Event of Default or an acquiescence therein. Every right and remedy given by
this Article or by law to the Debentureholders may be exercised from time to
time, and as often as may be deemed expedient by the Debentureholders.
Section 6.10. Waiver of Past Defaults. The Holders of the Debentures
may waive any past default hereunder and its consequences, except a default
a. In the payment of the principal of or interest on any
Debenture, or
b. In respect of a covenant or provision hereof which cannot
be modified or amended without the consent of the Holder of each Debenture
affected.
Upon any such waiver, such default shall cease to exist, and any Event
of Default arising therefrom shall be deemed to have been cured, for every
purpose of this Agreement; but no such waiver shall extend to any subsequent or
other default or impair any right consequent thereon.
Section 6.11. Undertaking for Costs. All parties to this Agreement
agree, and each Debentureholder by his acceptance thereof shall be deemed to
have agreed, that any court may in its discretion require, in any suit for the
enforcement of any right or remedy under this Agreement, or in any suit against
the Company for any action taken or omitted by it, the filing by any party
litigant in such suit of an undertaking to pay the costs of such suit, and that
such court may in its discretion assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in such suit having due regard to
the merits and good faith of the claims or defenses made by such party litigant;
but the provisions of this Section shall not apply to any suit instituted by the
Company, to any suit instituted by any Debentureholder(s), or to any suit
instituted by any Debentureholder(s) for the enforcement of the payment of the
principal or interest on any Debenture on or after the respective Stated
Maturities
21
expressed in such Debenture for such principal or interest (or, in the case of
redemption, on or after the Redemption Date).
Section 6.12. Waiver of Stay or Extension Laws. The Company covenants
(to the extent that it may lawfully do so) that it will not at any time insist
upon, or plead, or in any manner whatsoever claim or take the benefit or
advantage of, any stay or extension law wherever enacted, now or at any time
hereinafter in force, which may affect the covenants or the performance of this
Agreement; and the Company (to the extent that it may lawfully do so) hereby
expressly waives all benefits or advantage of any such law, and covenants that
it will not hinder, delay or impede the execution of any power herein granted to
the Company, but will suffer and permit the execution of every such power as
though no such law had been enacted.
Section 6.13. Secured Creditor Status. If an Event of Default occurs
and is continuing, than and in every such case the Debentureholders shall have
all of the following rights and remedies;
a. All of the rights and remedies of a secured party under the
Uniform Commercial Code of the state where such rights and remedies are
asserted, or under other applicable law, all of which rights and remedies shall
be cumulative, and none exclusive, to the extent permitted by law, in addition
to any other rights and remedies contained in this Agreement and in all of the
Other Agreements.
b. The right to (i) enter upon the premises of the Company,
without any obligation to pay rent to the Company, through self-help and without
judicial process, without first obtaining a final judgment or giving the Company
notice and opportunity for a hearing on the validity of the Debentureholders'
claim and without any obligation to pay rent to the Company, or any other place
or places where the Collateral is located and kept, and remove the Collateral
therefrom to the premises of the Debentureholders or any agent of the
Debentureholders, for such time as the Debentureholders may desire, in order to
effectively collect or liquidate the Collateral and/or (ii) require the Company
to assemble the Collateral and make it available to the Debentureholders at a
place to be designated by the Debentureholders, in their sole discretion.
c. The right to sell or to otherwise dispose of all or any
Collateral in its then condition, or after any further manufacturing or
processing thereof, at public or private sale or sales, without such notice as
may be required by law, in lost or in bulk, for cash or on credit, all as the
Debentureholders, in their sole discretion may deem advisable; such sales may be
adjourned from time to time with or without notice. The Debentureholders hall
have the right to conduct such sales on the premises of the Company or elsewhere
and shall have the right to use such premises without charge for such sales for
such time or times as the Debentureholders may see fit. The Debentureholders are
hereby granted a license or other right to use, without charge, the Company's
labels, patents, copyrights, rights of use of any name, trade secrets, trade
names, trademarks and advertising matter, or any property of a similar nature,
as it pertains to the Collateral, in advertising for sale and selling and
Collateral and the Company's rights under all licenses and all franchise
agreements shall inure to the Company's benefit. The Debentureholders shall have
the right to sell, lease or otherwise dispose of the Collateral, or any part
thereof, for cash, credit or any combination thereof, the Debentureholders may
purchase all or any part of the collateral at public or, if permitted by law,
private sale and, in lieu of actual payment of such purchase price, may set off
the amount of such price against the Liabilities. The proceeds realized from the
sale of any Collateral shall be applied first to the reasonable costs,
22
expenses and attorneys' fees and expenses incurred by the Company for collection
and for acquisition, completion, protection, removal, storage, sale and delivery
of the Collateral; second to interest due upon any of the Liabilities; and third
to the principal of the Liabilities. If any deficiency shall arise, the Company
shall remain liable to the Debentureholders therefor.
d. Notice. Any notice required to be given by the Debentureholders of a
sale, lease other disposition of the Collateral or any other intended action by
the Debentureholders, deposited in the United States mail, postage prepaid and
duly addressed to the Company ten (10) days prior to such proposed action, shall
constitute commercially reasonable and fair notice to the Company.
e. Appointment of Debentureholders as Company's Lawful Attorney. Upon
and after an Event of Default, the Company irrevocably designates, makes,
constitutes and appoints the Debentureholders (and all persons designated by the
Debentureholders) as the Company's true and lawful attorney (and agent-in-fact)
and the Debentureholders, or the Debentureholders' agent, may, without notice to
the Company, and at such time or times thereafter as the Debentureholders or
said agent, in their sole discretion, may determine, in the Debentureholders' or
the Company's name: (i) demand payment of the Accounts; (ii) enforce payment of
the Accounts, by legal proceedings or otherwise; (iii) exercise all of the
Company's rights and remedies with respect to the collection of the Accounts and
Collateral; (iv) settle, adjust, compromise, extend or renew the Accounts; (v)
settle, adjust or compromise any legal proceedings brought to collect the
Accounts; (vi) if permitted by applicable law, sell or assign the Accounts upon
such terms, for such amounts and at such time or times as the Company deems
advisable; (vii) discharge and release the Accounts; (viii) take control, in any
manner, of any item of payment or proceeds; (ix) prepare, file and sign the
Company's name on a Proof of Claim in Bankruptcy or similar document against any
Account Debtor; (x) prepare, file and sign the Company's name on any Notice of
Lien, Assignment or Satisfaction of Lien or similar document in connection with
the Accounts and Collateral; (xi) do all acts and things necessary, in the
Debentureholders' sole discretion, to fulfill the Company's obligations under
this Agreement; (xii) endorse the names of the Debentureholders upon any of the
items of payment or proceeds and deposit the same to the account of the
Debentureholders on account of the Liabilities; (xiii) endorse the name of the
Company upon any chattel paper, document, instrument, invoice, freight ▇▇▇▇,
▇▇▇▇ of lading or similar document or agreement relating to the Accounts,
Inventory and Special Collateral; (xiv) use the Company's stationery and sign
the name of the Company to verifications of the Accounts and notices thereof to
Account Debtors; and (xv) use the information recorded on or contained in any
data processing equipment and computer hardware and software relating to the
Accounts, Inventory and Collateral to which the Company has access.
ARTICLE SEVEN
REDEMPTION OF DEBENTURES BY COMPANY
Section 7.1. Right of Redemption. The Debentures shall be subject to
redemption at any time on or after December 28, 1996, at the option of the
Company, as a whole, or from time to time in part, in each case upon payment of
the Redemption Price which shall consist of the principal amount of the
Debentures so redeemed set forth in the forms of Debenture attached hereto as
Exhibits A and B, plus in each case (subject to Section 7.6.) interest accrued
to the Redemption Date on such Debentures.
23
Section 7.2. Applicability of Article. Redemption of Debentures at the
option of the Company as permitted or required by any provision of this
Agreement, shall be made in accordance with such provision and this Article.
Section 7.3. Election To Redeem. The election of the Company to redeem
any Debenture shall be evidenced by a resolution of the Board of Directors. For
all purposes of this Agreement, unless the context otherwise requires, all
provisions relating to the redemption of Debentures at the option of the Company
shall relate, in the case of any Debenture redeemed or to be redeemed only in
part, to the portion of the principal of such Debenture which has been or is to
be redeemed.
Section 7.4. Notice of Redemption. Notice of redemption shall be given
by first-class mail, postage prepaid, mailed not less than thirty (30) nor more
than sixty (60) days prior to the Redemption Date, to each Holder of a Debenture
to be redeemed, at his last address appearing in the Debenture Register.
All notices of redemption shall state:
a. The Redemption Date,
b. The Redemption Price,
c. The identification (and, in the case of partial redemption,
the respective principal amounts) of the Debentures to be redeemed,
d. That on the Redemption Date the Redemption Price will
become due and payable upon each such Debenture, and that interest thereon shall
cease to accrue on and after said date,
e. The place where such Debenture is to be surrendered for
payment of the Redemption Price, which shall be the office of the Company in the
Place of Payment and each appropriate additional office established in
accordance with subsection b. of Section 5.1.
Any notice which is mailed in the manner herein provided shall be
conclusively presumed to have been duly given, whether or not the Holder
receives the notice. In any case, failure duly to give notice by mail, or any
defect in the notice, to the Holder of any Debenture designated for redemption
as a whole or in part shall not affect the validity of the proceedings for the
redemption of any Debenture.
Notice of redemption of Debentures to be redeemed at the election of
the Company shall be given by the Company.
Section 7.5. Deposit of Redemption Price. At least one business day
prior to any Redemption Date, the Company shall segregate and hold in trust as
provided in subsection c. of Section 5.1. an amount of money sufficient to pay
the Redemption Price of all the Debentures which are to be redeemed on such
Redemption Date.
24
Section 7.6. Debentures Payable on Redemption Date. Notice of
redemption having been given as aforesaid, the Debenture so to be redeemed
shall, on the Redemption Date, become due and payable at the Redemption Price
therein specified and on and after such date (unless the Company shall default
in the payment of the Redemption Price) such Debenture shall cease to bear
interest. Upon surrender of any such Debenture for redemption in accordance with
said notice, said Debenture shall be paid by the Company at the Redemption
Price. Interest maturing on an Interest Payment Date which is payable on or
prior to the Redemption Date shall continue to be payable (but without interest
thereon, unless the Company shall default in the payment thereof) to the persons
entitled thereto according to the terms of this Agreement in the customary
manner. If any Debenture called for redemption shall not be so paid upon
surrender thereof for redemption, the principal shall, until paid, bear interest
from the Redemption Date at the rate provided by the Debenture.
Section 7.7. Debentures Redeemed in Part. Any Debenture which is to be
redeemed only in part shall be surrendered (with, if the Company so requires,
due endorsement by, or a written instrument of transfer in form satisfactory to
the Company duly executed by the Holder thereof or his attorney duly authorized
in writing) and the Company shall execute, authenticate and deliver to the
Holder of such Debenture, without service charge, a new Debenture as requested
by such Holder in aggregate principal amount equal to the unredeemed portion of
the principal of the Debenture so surrendered.
ARTICLE EIGHT
LIMITED RIGHT OF REDEMPTION BY DEBENTUREHOLDERS
Section 8.1. Limited Right of Redemption. The Debentures shall be
subject to redemption at any time after June 28, 1998, by the Holders thereof,
by payment by the Company of the Redemption Price which shall consist of the
principal amount of such Debenture plus (in each case (subject to Section 8.5.)
interest accrued to the Redemption Date.
Section 8.2. Applicability of Article. Redemption of Debentures by
exercise of the limited right of redemption as permitted or required by any
provision of this Agreement, shall be made in accordance with such provision and
this Article.
Section 8.3. Election to Redeem. The election of a Holder to redeem a
Debenture in whole or in part shall be made by delivering to the Company at the
Place of Payment, a request for redemption, in form satisfactory to the Company,
together with the Debenture to be redeemed. The date of receipt of such request
together with the Debenture shall be the Presentment Date thereof. The
Redemption Date of such Debentures shall be not more than thirty (30) days from
the Presentment Date (subject to Section 8.5.). For all purposes of this Loan
and Security Agreement, unless the context otherwise requires, all provisions
relating to the limited right of redemption by Holders shall relate, in the case
of any Debenture so redeemed or to be redeemed only in part, to the portion of
the principal of such Debenture which has been or is to be redeemed.
Section 8.4. Deposit of Redemption Price. Subject to the provisions of
Section 8.6., not later than the due date of the principal of or interest on any
of the Debentures, the Company shall segregate and hold in trust as provided in
subsection c. of Section 5.1. an amount of money sufficient to pay the
25
Redemption Price of the Debentures. No Debenture presented for redemption
pursuant to this Article 8. shall be subject to redemption at the option of the
Company pursuant to the provisions of Article 9. of this Agreement or otherwise
after the redemption thereof, nor shall such Debenture bear interest after the
Redemption Date thereof, unless, until and to the extent the request for
redemption is withdrawn.
Section 8.5. Debentures Payable on Redemption Date. Notice of election
to redeem having been given and received as aforesaid, the Debenture so to be
redeemed shall on the Redemption Date (subject to the provisions of Section
8.6.), become due and payable at the Redemption Price, and on and after such
date (unless the Company shall default in the payment of the Redemption Price)
such Debenture shall cease to bear interest. The Company shall pay or cause to
be paid the Redemption Price for such Debenture on the Redemption Date. Interest
maturing on an Interest Payment Date which is on or prior to the Redemption Date
shall continue to be payable to the persons entitled thereto according to the
terms of this Agreement in the customary manner.
Section 8.6. Limitation on Right of Redemption. Debentures presented
for redemption pursuant to this Article 8. shall be paid in the order of their
respective Presentment Dates.
Section 8.7. Debentures Redeemed in Part. Any Debenture which is to be
redeemed only in part pursuant to this Article 8. shall be surrendered with such
notice as is required by Section 8.3. of this Agreement (together with, if the
Company so requires, due endorsement by or a written instrument of transfer in
form satisfactory to the Company duly executed by the Holder thereof or his
attorney duly authorized in writing) and the Company shall execute and deliver
to the Holder of such Debenture, without service charge, a new Debenture in the
principal amount equal to the unredeemed portion of the principal of the
Debenture so surrendered.
IN WITNESS WHEREOF, the parties hereto have duly executed and delivered
this Agreement effective the day and year first above written.
ATTEST: ▇▇▇▇▇ MEDICAL DEVICES, INC.
By: By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇▇▇▇▇
------------------------------ ------------------------------------
, Secretary ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇▇▇▇▇, President
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇▇▇▇▇ /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
------------------------------ ------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
