EXHIBIT 99.2
SECURITY AGREEMENT
THIS SECURITY AGREEMENT ("AGREEMENT") is made as of December 31, 1997, by
VISUAL EDGE SYSTEMS INC. (hereinafter called "DEBTOR", whether one or more), in
favor of HW PARTNERS, L.P., as agent for and representative of (in such
capacity, "PLEDGEE") the Purchasers (as hereinafter defined) under the
Securities Purchase Agreement (as hereinafter defined). Debtor hereby agrees
with Pledgee as follows:
1. DEFINITIONS. As used in this Agreement, the following terms shall
have the meanings indicated below:
(a) The term "BORROWER" shall mean Debtor.
(b) The term "CODE" shall mean the Uniform Commercial Code as in
effect in the State of New York on the date of this Agreement or as it may
hereafter be amended from time to time.
(c) The term "COLLATERAL" shall mean all of the property set forth
below:
(i) All present and future accounts, chattel paper,
documents, instruments, cash, deposit accounts and general intangibles
(including any right to payment for goods sold or services rendered
arising out of the sale or delivery of personal property or work done
or labor performed by Debtor), now or hereafter owned, held, or
acquired by Debtor, together with any and all books of account,
customer lists and other records relating in any way to the foregoing
(including, without limitation, computer software, whether on tape,
disk, card, strip, cartridge or any other form), and in any case where
an account arises from the sale of goods, the interest of Debtor in
such goods.
(ii) All present and hereafter acquired inventory (including
without limitation, all raw materials, work in process and finished
goods) held, possessed, owned, held on consignment, or held for sale,
lease, return or to be furnished under contracts of services, in whole
or in part, by Debtor wherever located, all records relating in any
way to the foregoing (including, without limitation, any computer
software, whether on tape, disk, card, strip, cartridge or any other
form).
(iii) All equipment and fixtures of whatsoever kind and
character now or hereafter possessed, held, acquired, leased or owned
by Debtor and used or usable in Debtor's business, together with all
replacements, accessories, additions, substitutions and accessions to
all of the foregoing, all records relating in any way to the foregoing
(including, without limitation, any computer software, whether on
tape, disk, card, strip, cartridge or any other form). To the extent
that the foregoing property is located on, attached to, annexed to,
related to, or used in connection with, or otherwise made a part of,
and is or shall become fixtures upon, real property, such real
property and the record owner thereof is described on EXHIBIT "A"
attached hereto and made a part hereof.
(iv) All right, title and interest of Debtor in all motor
vehicles and vans owned by Debtor and all replacements, accessories
and additions thereto.
(v) All rights of Debtor in all deposit accounts maintained
by Debtor.
The term Collateral, as used herein, shall also include all PRODUCTS
and PROCEEDS of all of the foregoing (including without limitation,
insurance payable by reason of loss or damage to the foregoing property)
and any property, securities, guaranties or monies of Debtor which may at
any time come into the possession of Secured Party (as hereinafter
defined). Collateral shall not include vans and equipment contained in
such vans to the extent such vans and equipment are now or hereafter leased
by Debtor as lessee, but all of Debtor's right, title and interest under
such van and equipment leases ("V&E LEASES") are included in the Collateral
except with respect to such rights under lease agreements that by their
terms prohibit the granting of a security interest by Debtor in such lease
agreements and rights. The designation of proceeds
does not authorize Debtor to sell, transfer or otherwise convey any of the
foregoing property except finished goods intended for sale in the ordinary
course of Debtor's business or as otherwise provided herein.
(d) The term "INDEBTEDNESS" shall mean (i) all indebtedness,
obligations and liabilities of Borrower to Secured Party of any kind or
character, now existing or hereafter arising, under (a) the Bridge
Securities Purchase Agreement dated as of June 13, 1997 (as amended, the
"SECURITIES PURCHASE AGREEMENT") among Debtor and Infinity Investors
Limited, Infinity Emerging Opportunities Limited, Summit Capital Limited
and Glacier Capital Limited (the "PURCHASERS"), and(b) the Convertible
Notes (as defined in the Securities Purchase Agreement) issued by Borrower
pursuant to the Securities Purchase Agreement, (ii) all accrued but unpaid
interest on any of the indebtedness described in (i) above; (iii) all
obligations owing to Secured Party under any documents evidencing,
securing, governing and/or pertaining to all or any part of the
indebtedness described in (i) and (ii) above; (iv) all costs and expenses
incurred by Secured Party in connection with the collection and
administration of all or any part of the indebtedness and obligations
described in (i), (ii) and (iii) above or the protection or preservation
of, or realization upon, the collateral securing all or any part of such
indebtedness and obligations, including without limitation all reasonable
attorneys' fees; and (v) all renewals, extensions, modifications and
rearrangements of the indebtedness and obligations described in (i), (ii),
(iii) and (iv) above.
(e) The term "LOAN DOCUMENTS" shall mean all instruments and
documents evidencing, securing, governing, guaranteeing and/or pertaining
to the Indebtedness, including without limitation the Securities Purchase
Agreement.
(f) The term "OBLIGATED PARTY" shall mean any party other than
Borrower who secures, guarantees and/or is otherwise obligated to pay all
or any portion of the Indebtedness.
(g) The term "SECURED PARTY" shall mean the Purchasers, and the
Pledgee as agent for the Purchasers, their successors and assigns,
including without limitation, any party to whom any Purchaser or the
Pledgee, or any of their successors or assigns, may assign all or any part
of the Indebtedness or any of its rights and interests under this
Agreement.
All words and phrases used herein which are expressly defined in Section 1-201
or Chapter 9 of the Code shall have the meaning provided for therein. Other
words and phrases defined elsewhere in the Code shall have the meaning specified
therein except to the extent such meaning is inconsistent with a definition in
Section 1-201 or Chapter 9 of the Code.
2. SECURITY INTEREST. As security for the Indebtedness, Debtor, for
value received, hereby grants to Secured Party a continuing security interest in
the Collateral.
3. REPRESENTATIONS AND WARRANTIES. Debtor hereby represents and warrants
the following to Secured Party:
(a) DUE AUTHORIZATION. The execution, delivery and performance of
this Agreement and all of the other Loan Documents by Debtor have been duly
authorized by all necessary corporate action of Debtor.
(b) ENFORCEABILITY. This Agreement and the other Loan Documents
constitute legal, valid and binding obligations of Debtor, enforceable in
accordance with their respective terms, except as limited by bankruptcy,
insolvency or similar laws of general application relating to the
enforcement of creditors' rights and except to the extent specific remedies
may generally be limited by equitable principles.
(c) OWNERSHIP AND LIENS. Debtor has good and marketable title to the
Collateral free and clear of all liens, security interests, encumbrances or
adverse claims, except for the security interest created by this Agreement
and Liens permitted by Section 8.11 of the Securities Purchase Agreement.
No dispute, right of setoff, counterclaim or defense exists with respect to
all or any part of the Collateral. Debtor has not executed any other
security agreement currently affecting the Collateral and no effective
financing statement or other
instrument similar in effect covering all or any part of the Collateral is
on file in any recording office except as may have been executed or filed
in favor of Secured Party.
(d) NO CONFLICTS OR CONSENTS. Neither the ownership, the intended
use of the Collateral by Debtor, the grant of the security interest by
Debtor to Secured Party herein nor the exercise by Secured Party of its
rights or remedies hereunder, will (i) conflict with any provision of (A)
any applicable domestic or foreign law, statute, rule or regulation, (B)
the articles or certificate of incorporation, charter, bylaws or
partnership agreement, as the case may be, of Debtor, or (C) any agreement,
judgment, license, order or permit applicable to or binding upon Debtor, or
(ii) result in or require the creation of any lien, charge or encumbrance
upon any assets or properties of Debtor or of any person except as may be
expressly contemplated in the Loan Documents. Except as expressly
contemplated in the Loan Documents, no consent, approval, authorization or
order of, and no notice to or filing with, any court, governmental
authority or third party is required in connection with the grant by Debtor
of the security interest herein or the exercise by Secured Party of its
rights and remedies hereunder.
(e) SECURITY INTEREST. Debtor has and will have at all times full
right, power and authority to grant a security interest in the Collateral
to Secured Party in the manner provided herein, free and clear of any lien,
security interest or other charge or encumbrance. This Agreement creates a
legal, valid and binding security interest in favor of Secured Party in the
Collateral securing the Indebtedness. Possession by Secured Party of all
certificates, instruments and cash constituting Collateral from time to
time and/or the filing of the financing statements delivered prior hereto
and/or concurrently herewith by Debtor to Secured Party will perfect and
establish the first priority of Secured Party's security interest hereunder
in the Collateral.
(f) LOCATION. Debtor's residence or chief executive office, as the
case may be, and the office where the records concerning the Collateral are
kept is located at its address set forth on the signature page hereof.
Except as specified elsewhere herein, all Collateral (other than vans and
associated equipment) shall be kept at such address and such other
addresses as may be listed in SCHEDULE "A" attached hereto and made a part
hereof.
(g) INVENTORY. The security interest in the inventory shall continue
through all stages of manufacture and shall, without further action, attach
to the accounts or other proceeds resulting from the sale or other
disposition thereof and to all such inventory as may be returned to Debtor
by its account debtors.
(h) ACCOUNTS. Each account represents the valid and legally binding
indebtedness of a bona fide account debtor arising from the sale or lease
by Debtor of goods or the rendition by Debtor of services and is not
subject to contra accounts, setoffs, defenses or counterclaims by or
available to account debtors obligated on the accounts except as disclosed
by Debtor to Secured Party from time to time in writing. The amount shown
as to each account on Debtor's books is the true and undisputed amount
owing and unpaid thereon, subject only to discounts, allowances, rebates,
credits and adjustments to which the account debtor has a right and which
have been disclosed to Secured Party in writing.
(i) CHATTEL PAPER, DOCUMENTS AND INSTRUMENTS. The chattel paper,
documents and instruments of Debtor pledged hereunder have only one
original counterpart and no party other than Debtor or Secured Party is in
actual or constructive possession of any such chattel paper, documents or
instruments.
4. AFFIRMATIVE COVENANTS. Debtor will comply with the covenants
contained in this Section 4 at all times during the period of time this
Agreement is effective unless Secured Party shall otherwise consent in writing.
(a) OWNERSHIP AND LIENS. Debtor will maintain good and marketable
title to all Collateral free and clear of all liens, security interests,
encumbrances or adverse claims, except for the security interest created by
this Agreement and the security interests and other encumbrances expressly
permitted by the other Loan Documents. Debtor will not permit any dispute,
right of setoff, counterclaim or defense to exist with respect to all or
any part of the Collateral. Debtor will cause any financing statement or
other security instrument with respect to the Collateral to be terminated,
except as may exist or as may have been filed in
favor of Secured Party. Debtor will defend at its expense Secured Party's
right, title and security interest in and to the Collateral against the
claims of any third party.
(b) FURTHER ASSURANCES. Debtor will from time to time at its expense
promptly execute and deliver all further instruments and documents and take
all further action necessary or appropriate or that Secured Party may
request in order (i) to perfect and protect the security interest created
or purported to be created hereby and the first priority of such security
interest, (ii) to enable Secured Party to exercise and enforce its rights
and remedies hereunder in respect of the Collateral, and (iii) to otherwise
effect the purposes of this Agreement, including without limitation:
(A) executing and filing such financing or continuation statements, or
amendments thereto; and (B) furnishing to Secured Party from time to time
statements and schedules further identifying and describing the Collateral
and such other reports in connection with the Collateral, all in reasonable
detail satisfactory to Secured Party. Debtor shall cause each bank or
other depository institution at which it maintains deposit accounts to,
within 60 days after the date of this Agreement, execute and deliver to
Secured Party a blocked account agreement in form and substance
satisfactory to Secured Party.
(c) INSPECTION OF COLLATERAL. Debtor will keep adequate records
concerning the Collateral and will permit Secured Party and all
representatives and agents appointed by Secured Party to inspect any of the
Collateral and the books and records of or relating to the Collateral at
any time upon reasonable prior notice during normal business hours, to make
and take away photocopies, photographs and printouts thereof and to write
down and record any such information; provided, however, such inspections
of Collateral shall be limited to two inspections during any calendar year,
except that no such limitation shall apply after the occurrence and during
the continuance of an Event of Default.
(d) PAYMENT OF TAXES. Debtor (i) will timely pay all property and
other taxes, assessments and governmental charges or levies imposed upon
the Collateral or any part thereof, (ii) will timely pay all lawful claims
which, if unpaid, might become a lien or charge upon the Collateral or any
part thereof, and (iii) will maintain appropriate accruals and reserves for
all such liabilities in a timely fashion in accordance with generally
accepted accounting principles. Debtor may, however, delay paying or
discharging any such taxes, assessments, charges, claims or liabilities so
long as the validity thereof is contested in good faith by proper
proceedings and provided Debtor has set aside on Debtor's books adequate
reserves therefor; provided, however, Debtor understands and agrees that in
the event of any such delay in payment or discharge and upon Secured
Party's written request, Debtor will establish with Secured Party an escrow
acceptable to Secured Party adequate to cover the payment of such taxes,
assessments and governmental charges with interest, costs and penalties and
a reasonable additional sum to cover possible costs, interest and penalties
(which escrow shall be returned to Debtor upon payment of such taxes,
assessments, governmental charges, interests, costs and penalties or
disbursed in accordance with the resolution of the contest to the claimant)
or furnish Secured Party with an indemnity bond secured by a deposit in
cash or other security acceptable to Secured Party. Notwithstanding any
other provision contained in this Subsection, Secured Party may at its
discretion exercise its rights under Subsection 6(c) at any time to pay
such taxes, assessments, governmental charges, interest, costs and
penalties.
(e) MORTGAGEE'S AND LANDLORD'S WAIVERS. Debtor shall use its best
efforts to cause each landlord of real property leased by Debtor to execute
and deliver agreements satisfactory in form and substance to Secured Party,
within 60 days of the date of this Agreement, by which such landlord waives
or subordinates any rights it may have in the Collateral.
(f) CONDITION OF GOODS. Debtor will maintain, preserve, protect and
keep all Collateral which constitutes goods in good condition, repair and
working order and will cause such Collateral to be used and operated in
good and workmanlike manner, in accordance with applicable laws and in a
manner which will not make void or cancelable any insurance with respect to
such Collateral. Debtor will promptly make or cause to be made all
repairs, replacements and other improvements to or in connection with the
Collateral which Secured Party may request from time to time.
(g) INSURANCE. Debtor will, at its own expense, maintain insurance
with respect to all Collateral which constitutes goods in such amounts,
against such risks, in such form and with such insurers, as shall be
satisfactory to Secured Party from time to time. Each policy for property
damage insurance shall provide for all losses to be paid directly to
Secured Party. Each policy of insurance maintained by Debtor shall (i)
name Debtor and Secured Party as insured parties thereunder (without any
representation or warranty by or obligation upon Secured Party) as their
interests may appear, (ii) contain the agreement by the insurer that any
loss thereunder shall be payable to Secured Party notwithstanding any
action, inaction or breach of representation or warranty by Debtor, (iii)
provide that there shall be no recourse against Secured Party for payment
of premiums or other amounts with respect thereto, and (iv) provide that at
least thirty (30) days prior written notice of cancellation or of lapse
shall be given to Secured Party by the insurer. Debtor will, if requested
by Secured Party, deliver to Secured Party original or duplicate policies
of such insurance and, as often as Secured Party may reasonably request, a
report of a reputable insurance broker with respect to such insurance.
Debtor will also, at the request of Secured Party, duly execute and deliver
instruments of assignment of such insurance policies and cause the
respective insurers to acknowledge notice of such assignment. All insurance
payments in respect of loss of or damage to any Collateral shall be paid to
Secured Party and applied as Secured Party in its sole discretion deems
appropriate.
(h) ACCOUNTS AND GENERAL INTANGIBLES. Debtor will, except as
otherwise provided in Subsection 6(f), collect, at Debtor's own expense,
all amounts due or to become due under each of the accounts and general
intangibles. In connection with such collections, Debtor may and, at
Secured Party's direction, will take such action not otherwise forbidden by
Subsection 5(e) as Debtor or Secured Party may deem necessary or advisable
to enforce collection or performance of each of the accounts and general
intangibles. Debtor will also duly perform and cause to be performed all
of its obligations with respect to the goods or services, the sale or lease
or rendition of which gave rise or will give rise to each account and all
of its obligations to be performed under or with respect to the general
intangibles. Debtor also covenants and agrees to take any action and/or
execute any documents that Secured Party may request in order to comply
with the Federal Assignment of Claims Act, as amended.
(i) CHATTEL PAPER, DOCUMENTS AND INSTRUMENTS. Debtor will take such
action as may be requested by Secured Party in order to cause any chattel
paper, documents or instruments to be valid and enforceable and will cause
all chattel paper to have only one original counterpart. Upon request by
Secured Party, Debtor will deliver to Secured Party all originals of
chattel paper, documents or instruments and will xxxx all chattel paper
with a legend indicating that such chattel paper is subject to the security
interest granted hereunder.
(j) COLLECTIONS. Debtor will cause all proceeds of and collections
with respect to all Collateral to be deposited in the bank account
described in Section 1(c) of this Agreement. Upon the giving of notice by
Pledgee at any time after the occurrence of any Event of Default (as
hereinafter defined), any such proceeds and collections shall be subject to
withdrawal by Pledgee only, and until so turned over shall be deemed to be
held in trust by Borrower for Secured Party and shall not be commingled
with Borrower's other funds or properties. Such proceeds and collections,
when deposited, shall continue to be collateral security for all of the
Indebtedness and shall not constitute payment thereof until applied as
hereinafter provided. At any time after the occurrence of any Event of
Default, Secured Party shall be entitled to apply all or a part of the
funds on deposit in said account to the principal of or interest on or both
in respect of any of the Indebtedness in accordance with the provisions of
Section 8(b) hereof.
5. NEGATIVE COVENANTS. Debtor will comply with the covenants contained
in this Section 5 at all times during the period of time this Agreement is
effective, unless Secured Party shall otherwise consent in writing.
(a) TRANSFER OR ENCUMBRANCE. Debtor will not, except to the extent
permitted in the Loan Documents, (i) sell, assign (by operation of law or
otherwise), transfer, exchange, lease or otherwise dispose of any of the
Collateral, (ii) xxxxx x xxxx or security interest in or execute, file or
record any financing statement or other security instrument with respect to
the Collateral to any party other than Secured Party, or (iii) deliver
actual or constructive possession of any of the Collateral to any party
other than Secured Party, except for
(A) sales and leases of inventory in the ordinary course of business, and
(B) the sale or other disposal of any item of equipment which is worn out
or obsolete and which has been replaced by an item of equal suitability and
value, owned by Debtor and made subject to the security interest under this
Agreement, but which is otherwise free and clear of any lien, security
interest, encumbrance or adverse claim; provided, however, the exceptions
permitted in clauses (A) and (B) above shall automatically terminate upon
the occurrence of an Event of Default.
(b) IMPAIRMENT OF SECURITY INTEREST. Debtor will not take or fail to
take any action which would in any manner impair the value or
enforceability of Secured Party's security interest in any Collateral.
Debtor will not enter into any amendment to any existing V&E Lease that
would have the effect of prohibiting any grant by Debtor of a security
interest in the Collateral.
(c) POSSESSION OF COLLATERAL. Debtor will not cause or permit the
removal of any Collateral from its possession, control and risk of loss,
nor will Debtor cause or permit the removal of any Collateral from the
address on the signature page hereof and the addresses specified on
SCHEDULE "A" to this Agreement other than (i) as permitted by Subsection
5(a), or (ii) in connection with the possession of any Collateral by
Secured Party or by its bailee.
(d) GOODS. Debtor will not permit any Collateral which constitutes
goods to at any time (i) be covered by any document except documents in the
possession of the Secured Party, (ii) become so related to, attached to or
used in connection with any particular real property so as to become a
fixture upon such real property, or (iii) be installed in or affixed to
other goods so as to become an accession to such other goods unless such
other goods are subject to a perfected first priority security interest
under this Agreement.
(e) COMPROMISE OF COLLATERAL. Debtor will not adjust, settle,
compromise, amend or modify any Collateral, except an adjustment,
settlement, compromise, amendment or modification in good faith and in the
ordinary course of business; provided, however, this exception shall
automatically terminate upon the occurrence of an Event of Default or upon
Secured Party's written request. Debtor shall provide to Secured Party
such information concerning (i) any adjustment, settlement, compromise,
amendment or modification of any Collateral, and (ii) any claim asserted by
any account debtor for credit, allowance, adjustment, dispute, setoff or
counterclaim, as Secured Party may request from time to time.
(f) FINANCING STATEMENT FILINGS. Debtor recognizes that financing
statements pertaining to the Collateral have been or may be filed where
Debtor maintains any Collateral, has its records concerning any Collateral
or has its residence or chief executive office, as the case may be.
Without limitation of any other covenant herein, Debtor will not cause or
permit any change in the location of (i) any Collateral, (ii) any records
concerning any Collateral, or (iii) Debtor's residence or chief executive
office, as the case may be, to a jurisdiction other than as represented in
Subsection 3(f) unless Debtor shall have notified Secured Party in writing
of such change at least thirty (30) days prior to the effective date of
such change, and shall have first taken all action required by Secured
Party for the purpose of further perfecting or protecting the security
interest in favor of Secured Party in the Collateral. In any written
notice furnished pursuant to this Subsection, Debtor will expressly state
that the notice is required by this Agreement and contains facts that may
require additional filings of financing statements or other notices for the
purpose of continuing perfection of Secured Party's security interest in
the Collateral.
6. RIGHTS OF SECURED PARTY. Secured Party shall have the rights
contained in this Section 6 at all times during the period of time this
Agreement is effective.
(a) ADDITIONAL FINANCING STATEMENTS FILINGS. Debtor hereby
authorizes Secured Party to file, without the signature of Debtor, one or
more financing or continuation statements, and amendments thereto, relating
to the Collateral. Debtor further agrees that a carbon, photographic or
other reproduction of this Security Agreement or any financing statement
describing any Collateral is sufficient as a financing statement and may be
filed in any jurisdiction Secured Party may deem appropriate.
(b) POWER OF ATTORNEY. Debtor hereby irrevocably appoints Secured
Party as Debtor's attorney-in-fact, such power of attorney being coupled
with an interest, with full authority in the place and stead of Debtor and
in the name of Debtor or otherwise, from time to time in Secured Party's
discretion, to take any action and to execute any instrument which Secured
Party may deem necessary or appropriate to accomplish the purposes of this
Agreement, including without limitation: (i) to obtain and adjust
insurance required by Secured Party hereunder; (ii) to demand, collect, xxx
for, recover, compound, receive and give acquittance and receipts for
moneys due and to become due under or in respect of the Collateral; (iii)
to receive, endorse and collect any drafts or other instruments, documents
and chattel paper in connection with clause (i) or (ii) above; and (iv) to
file any claims or take any action or institute any proceedings which
Secured Party may deem necessary or appropriate for the collection and/or
preservation of the Collateral or otherwise to enforce the rights of
Secured Party with respect to the Collateral.
(c) PERFORMANCE BY SECURED PARTY. If Debtor fails to perform any
agreement or obligation provided herein, Secured Party may itself perform,
or cause performance of, such agreement or obligation, and the expenses of
Secured Party incurred in connection therewith shall be a part of the
Indebtedness, secured by the Collateral and payable by Debtor on demand.
(d) DEBTOR'S RECEIPT OF PROCEEDS. All amounts and proceeds
(including instruments and writings) received by Debtor in respect of such
accounts or general intangibles shall be received in trust for the benefit
of Secured Party hereunder and, upon request of Secured Party, shall be
segregated from other property of Debtor and shall be forthwith delivered
to Secured Party in the same form as so received (with any necessary
endorsement) and applied to the Indebtedness in such manner as Secured
Party deems appropriate in its sole discretion.
(e) NOTIFICATION OF ACCOUNT DEBTORS. Secured Party may at its
discretion, after the occurrence and during the continuance of an Event of
Default, from time to time notify any or all obligors under any accounts or
general intangibles (i) of Secured Party's security interest in such
accounts or general intangibles and direct such obligors to make payment of
all amounts due or to become due to Debtor thereunder directly to Secured
Party, and (ii) to verify the accounts or general intangibles with such
obligors. Secured Party shall have the right, at the expense of Debtor, to
enforce collection of any such accounts or general intangibles and to
adjust, settle or compromise the amount or payment thereof, in the same
manner and to the same extent as Debtor.
7. EVENTS OF DEFAULT. Each of the following constitutes an "EVENT OF
DEFAULT" under this Agreement:
(a) DEFAULT UNDER SECURITIES PURCHASE AGREEMENT. The occurrence of
any Event of Default under Article XI of the Securities Purchase Agreement;
or
(b) NON-PERFORMANCE OF COVENANTS. The failure of Borrower or any
Obligated Party to timely and properly observe, keep or perform any
covenant, agreement, warranty or condition required herein and such failure
continues unremedied for ten days after Secured Party shall have given
Debtor written notice thereof; or
(c) DEFAULT UNDER OTHER LOAN DOCUMENTS. The occurrence of an event
of default under any of the other Loan Documents; or
(d) FALSE REPRESENTATION. Any representation contained herein or in
any of the other Loan Documents made by Borrower or any Obligated Party is
false or misleading in any material respect when made; or
(e) DEFAULT TO THIRD PARTY. The occurrence of any event which
permits the acceleration of the maturity of any indebtedness owing by
Borrower or any Obligated Party to any third party under any agreement or
undertaking, which event continues unremedied for five days; or
(f) BANKRUPTCY OR INSOLVENCY. If Borrower or any Obligated Party:
(i) makes a transfer in fraud of creditors, or makes an assignment for the
benefit of creditors, or admits in writing its inability to pay its debts
as they become due; (ii) generally is not paying its debts as such debts
become due; (iii) has a receiver, trustee or custodian appointed for, or
take possession of, all or substantially all of the assets of such party or
any of the Collateral, either in a proceeding brought by such party or in a
proceeding brought against such party and such appointment is not
discharged or such possession is not terminated within sixty (60) days
after the effective date thereof or such party consents to or acquiesces in
such appointment or possession; (iv) files a petition for relief under the
United States Bankruptcy Code or any other present or future federal or
state insolvency, bankruptcy or similar laws (all of the foregoing
hereinafter collectively called "APPLICABLE BANKRUPTCY LAW") or an
involuntary petition for relief is filed against such party under any
Applicable Bankruptcy Law and such involuntary petition is not dismissed
within sixty (60) days after the filing thereof, or an order for relief
naming such party is entered under any Applicable Bankruptcy Law, or any
composition, rearrangement, extension, reorganization or other relief of
debtors now or hereafter existing is requested or consented to by such
party; (v) fails to have discharged within a period of sixty (60) days any
attachment, sequestration or similar writ levied upon any property of such
party; or (vi) fails to pay within thirty (30) days any final money
judgment against such party; or
(g) EXECUTION ON COLLATERAL. The Collateral or any portion thereof
is taken on execution or other process of law in any action against Debtor;
or
(h) ABANDONMENT. Debtor abandons the Collateral or any portion
thereof; or
(i) ACTION BY OTHER LIENHOLDER. The holder of any lien or security
interest on any of the assets of Debtor, including without limitation, the
Collateral (without hereby implying the consent of Secured Party to the
existence or creation of any such lien or security interest on the
Collateral), declares a default thereunder or institutes foreclosure or
other proceedings for the enforcement of its remedies thereunder; or
(j) LIQUIDATION, DEATH AND RELATED EVENTS. The liquidation,
dissolution, merger or consolidation of Borrower or any Obligated Party.
8. REMEDIES AND RELATED RIGHTS. If an Event of Default shall have
occurred which shall be continuing, and without limiting any other rights and
remedies provided herein, under any of the other Loan Documents or otherwise
available to Secured Party, Secured Party may exercise one or more of the rights
and remedies provided in this Section.
(a) REMEDIES. Secured Party may from time to time at its discretion,
without limitation and without notice except as expressly provided in any
of the Loan Documents:
(i) exercise in respect of the Collateral all the rights and
remedies of a secured party under the Code (whether or not the Code
applies to the affected Collateral);
(ii) require Debtor to, and Debtor hereby agrees that it will
at its expense and upon request of Secured Party, assemble the
Collateral as directed by Secured Party and make it available to
Secured Party at a place to be designated by Secured Party which is
reasonably convenient to both parties;
(iii) reduce its claim to judgment or foreclose or otherwise
enforce, in whole or in part, the security interest granted hereunder
by any available judicial procedure;
(iv) sell or otherwise dispose of, at its office, on the
premises of Debtor or elsewhere, the Collateral, as a unit or in
parcels, by public or private proceedings, and by way of one or more
contracts (it being agreed that the sale or other disposition of any
part of the Collateral shall not exhaust Secured Party's power of
sale, but sales or other dispositions may be made from time to time
until all of the Collateral has been sold or disposed of or until the
Indebtedness has been paid
and performed in full), and at any such sale or other disposition it
shall not be necessary to exhibit any of the Collateral;
(v) buy the Collateral, or any portion thereof, at any public
sale;
(vi) buy the Collateral, or any portion thereof, at any
private sale if the Collateral is of a type customarily sold in a
recognized market or is of a type which is the subject of widely
distributed standard price quotations;
(vii) apply for the appointment of a receiver for the
Collateral, and Debtor hereby consents to any such appointment; and
(viii) at its option, retain the Collateral in satisfaction of
the Indebtedness whenever the circumstances are such that Secured
Party is entitled to do so under the Code or otherwise.
Debtor agrees that in the event Debtor is entitled to receive any notice
under the Uniform Commercial Code, as it exists in the state governing any
such notice, of the sale or other disposition of any Collateral, reasonable
notice shall be deemed given when such notice is deposited in a depository
receptacle under the care and custody of the United States Postal Service,
postage prepaid, at Debtor's address set forth on the signature page
hereof, ten (10) days prior to the date of any public sale, or after which
a private sale, of any of such Collateral is to be held. Secured Party
shall not be obligated to make any sale of Collateral regardless of notice
of sale having been given. Secured Party may adjourn any public or private
sale from time to time by announcement at the time and place fixed
therefor, and such sale may, without further notice, be made at the time
and place to which it was so adjourned.
(b) APPLICATION OF PROCEEDS. If any Event of Default shall have
occurred, Secured Party may at its discretion apply or use any cash held by
Secured Party as Collateral, and any cash proceeds received by Secured
Party in respect of any sale or other disposition of, collection from, or
other realization upon, all or any part of the Collateral as follows in
such order and manner as Secured Party may elect:
(i) to the repayment or reimbursement of the reasonable costs
and expenses (including, without limitation, reasonable attorneys'
fees and expenses) incurred by Secured Party in connection with (A)
the administration of the Loan Documents, (B) the custody,
preservation, use or operation of, or the sale of, collection from, or
other realization upon, the Collateral, and (C) the exercise or
enforcement of any of the rights and remedies of Secured Party
hereunder;
(ii) to the payment or other satisfaction of any liens and
other encumbrances upon the Collateral;
(iii) to the satisfaction of the Indebtedness until paid in
full;
(iv) by holding such cash and proceeds as Collateral;
(v) to the payment of any other amounts required by
applicable law (including without limitation, Section 9-504(1)(c) of
the Code or any other applicable statutory provision); and
(vi) by delivery of the remaining balance to Debtor or as
directed by a court of competent jurisdiction.
(c) DEFICIENCY. In the event that the proceeds of any sale of,
collection from, or other realization upon, all or any part of the
Collateral by Secured Party are insufficient to pay all amounts to which
Secured Party is legally entitled, Borrower and any party who guaranteed or
is otherwise obligated to pay all
or any portion of the Indebtedness shall be liable for the deficiency,
together with interest thereon as provided in the Loan Documents.
(d) NON-JUDICIAL REMEDIES. In granting to Secured Party the power to
enforce its rights hereunder without prior judicial process or judicial
hearing, Debtor expressly waives, renounces and knowingly relinquishes any
legal right which might otherwise require Secured Party to enforce its
rights by judicial process. Debtor recognizes and concedes that
non-judicial remedies are consistent with the usage of trade, are
responsive to commercial necessity and are the result of a bargain at arm's
length. Nothing herein is intended to prevent Secured Party or Debtor from
resorting to judicial process at either party's option.
(e) OTHER RECOURSE. Debtor waives any right to require Secured Party
to proceed against any third party, exhaust any Collateral or other
security for the Indebtedness, or to have any third party joined with
Debtor in any suit arising out of the Indebtedness or any of the Loan
Documents, or pursue any other remedy available to Secured Party. Debtor
further waives any and all notice of acceptance of this Agreement and of
the creation, modification, rearrangement, renewal or extension of the
Indebtedness. Debtor further waives any defense arising by reason of any
disability or other defense of any third party or by reason of the
cessation from any cause whatsoever of the liability of any third party.
Until all of the Indebtedness shall have been paid in full, Debtor shall
have no right of subrogation and Debtor waives the right to enforce any
remedy which Secured Party has or may hereafter have against any third
party, and waives any benefit of and any right to participate in any other
security whatsoever now or hereafter held by Secured Party. Debtor
authorizes Secured Party, and without notice or demand and without any
reservation of rights against Debtor and without affecting Debtor's
liability hereunder or on the Indebtedness to (i) take or hold any other
property of any type from any third party as security for the Indebtedness,
and exchange, enforce, waive and release any or all of such other property,
(ii) apply such other property and direct the order or manner of sale
thereof as Secured Party may in its discretion determine, (iii) renew,
extend, accelerate, modify, compromise, settle or release any of the
Indebtedness or other security for the Indebtedness, (iv) waive, enforce or
modify any of the provisions of any of the Loan Documents executed by any
third party, and (v) release or substitute any third party.
9. INDEMNITY. Debtor hereby indemnifies and agrees to hold harmless
Secured Party, and its officers, directors, employees, agents and
representatives (each an "INDEMNIFIED PERSON") from and against any and all
liabilities, obligations, claims, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or nature
(collectively, the "CLAIMS") which may be imposed on, incurred by, or asserted
against, any Indemnified Person arising in connection with the Loan Documents,
the Indebtedness or the Collateral (including without limitation, the
enforcement of the Loan Documents and the defense of any Indemnified Person's
actions and/or inactions in connection with the Loan Documents). WITHOUT
LIMITATION, THE FOREGOING INDEMNITIES SHALL APPLY TO EACH INDEMNIFIED PERSON
WITH RESPECT TO ANY CLAIMS WHICH IN WHOLE OR IN PART ARE CAUSED BY OR ARISE OUT
OF THE NEGLIGENCE OF SUCH AND/OR ANY OTHER INDEMNIFIED PERSON, except to the
limited extent the Claims against an Indemnified Person are proximately caused
by such Indemnified Person's gross negligence or willful misconduct. If Debtor
or any third party ever alleges such gross negligence or willful misconduct by
any Indemnified Person, the indemnification provided for in this Section shall
nonetheless be paid upon demand, subject to later adjustment or reimbursement,
until such time as a court of competent jurisdiction enters a final judgment as
to the extent and effect of the alleged gross negligence or willful misconduct.
The indemnification provided for in this Section shall survive the termination
of this Agreement and shall extend and continue to benefit each individual or
entity who is or has at any time been an Indemnified Person hereunder.
10. MISCELLANEOUS.
(a) ENTIRE AGREEMENT. This Agreement contains the entire agreement
of Secured Party and Debtor with respect to the Collateral. If the parties
hereto are parties to any prior agreement, either written or oral, relating
to the Collateral, the terms of this Agreement shall amend and supersede
the terms of such prior agreements as to transactions on or after the
effective date of this Agreement, but all security agreements, financing
statements, guaranties, other contracts and notices for the benefit of
Secured Party shall continue in
full force and effect to secure the Indebtedness unless Secured Party
specifically releases its rights thereunder by separate release.
(b) AMENDMENT. No modification, consent or amendment of any
provision of this Agreement or any of the other Loan Documents shall be
valid or effective unless the same is in writing and signed by the party
against whom it is sought to be enforced.
(c) ACTIONS BY SECURED PARTY. The lien, security interest and other
security rights of Secured Party hereunder shall not be impaired by (i) any
renewal, extension, increase or modification with respect to the
Indebtedness, (ii) any surrender, compromise, release, renewal, extension,
exchange or substitution which Secured Party may grant with respect to the
Collateral, or (iii) any release or indulgence granted to any endorser,
guarantor or surety of the Indebtedness. The taking of additional security
by Secured Party shall not release or impair the lien, security interest or
other security rights of Secured Party hereunder or affect the obligations
of Debtor hereunder.
(d) WAIVER BY SECURED PARTY. Secured Party may waive any Event of
Default without waiving any other prior or subsequent Event of Default.
Secured Party may remedy any default without waiving the Event of Default
remedied. Neither the failure by Secured Party to exercise, nor the delay
by Secured Party in exercising, any right or remedy upon any Event of
Default shall be construed as a waiver of such Event of Default or as a
waiver of the right to exercise any such right or remedy at a later date.
No single or partial exercise by Secured Party of any right or remedy
hereunder shall exhaust the same or shall preclude any other or further
exercise thereof, and every such right or remedy hereunder may be exercised
at any time. No waiver of any provision hereof or consent to any departure
by Debtor therefrom shall be effective unless the same shall be in writing
and signed by Secured Party and then such waiver or consent shall be
effective only in the specific instances, for the purpose for which given
and to the extent therein specified. No notice to or demand on Debtor in
any case shall of itself entitle Debtor to any other or further notice or
demand in similar or other circumstances.
(e) COSTS AND EXPENSES. Debtor will upon demand pay to Secured Party
the amount of any and all costs and expenses (including without limitation,
attorneys' fees and expenses), which Secured Party may incur in connection
with (i) to the extent set forth in the Loan Documents, the transactions
which give rise to the Loan Documents, (ii) to the extent set forth in the
Loan Documents, the preparation of this Agreement and the perfection and
preservation of the security interests granted under the Loan Documents,
(iii) the administration of the Loan Documents, (iv) the custody,
preservation, use or operation of, or the sale of, collection from, or
other realization upon, the Collateral, (v) the exercise or enforcement of
any of the rights of Secured Party under the Loan Documents, or (vi) the
failure by Debtor to perform or observe any of the provisions hereof.
(F) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK AND APPLICABLE FEDERAL
LAWS, EXCEPT TO THE EXTENT PERFECTION AND THE EFFECT OF PERFECTION OR
NON-PERFECTION OF THE SECURITY INTEREST GRANTED HEREUNDER, IN RESPECT OF
ANY PARTICULAR COLLATERAL, ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER
THAN THE STATE OF NEW YORK.
(g) APPOINTMENT OF PLEDGEE AS AGENT. Pledgee has been appointed to
act as Pledgee hereunder by and for the benefit of the Purchasers.
(h) SEVERABILITY. If any provision of this Agreement is held by a
court of competent jurisdiction to be illegal, invalid or unenforceable
under present or future laws, such provision shall be fully severable,
shall not impair or invalidate the remainder of this Agreement and the
effect thereof shall be confined to the provision held to be illegal,
invalid or unenforceable.
(i) NO OBLIGATION. Nothing contained herein shall be construed as an
obligation on the part of Secured Party to extend or continue to extend
credit to Borrower.
(j) NOTICES. All notices, requests, demands or other communications
required or permitted to be given pursuant to this Agreement shall be in
writing and given by (i) personal delivery, (ii) expedited delivery service
with proof of delivery, (iii) facsimile, at the facsimile number set forth
on the signature page hereof or (iv) United States mail, postage prepaid,
registered or certified mail, return receipt requested, sent to the
intended addressee at the address set forth on the signature page hereof or
to such different address as the addressee shall have designated by written
notice sent pursuant to the terms hereof and shall be deemed to have been
received either, in the case of personal delivery, at the time of personal
delivery, in the case of expedited delivery service, as of the date of
first attempted delivery at the address and in the manner provided herein,
in the case of facsimile, when sent and confirmed, or in the case of mail,
upon deposit in a depository receptacle under the care and custody of the
United States Postal Service. Either party shall have the right to change
its address for notice hereunder to any other location within the
continental United States by notice to the other party of such new address
at least thirty (30) days prior to the effective date of such new address.
(k) BINDING EFFECT AND ASSIGNMENT. This Agreement (i) creates a
continuing security interest in the Collateral, (ii) shall be binding on
Debtor and the heirs, executors, administrators, personal representatives,
successors and assigns of Debtor, and (iii) shall inure to the benefit of
Secured Party and its successors and assigns. Without limiting the
generality of the foregoing, Secured Party may pledge, assign or otherwise
transfer the Indebtedness and its rights under this Agreement and any of
the other Loan Documents to any other party. Debtor's rights and
obligations hereunder may not be assigned or otherwise transferred without
the prior written consent of Secured Party.
(l) TERMINATION. Upon (i) the satisfaction in full of the
Indebtedness and (ii) the termination or expiration of any commitment of
Secured Party to extend credit to Borrower, this Agreement and the security
interests created hereby shall terminate. Upon termination of this
Agreement and Debtor's written request, Secured Party will, at Debtor's
sole cost and expense, return to Debtor such of the Collateral as shall not
have been sold or otherwise disposed of or applied pursuant to the terms
hereof and execute and deliver to Debtor such Uniform Commercial Code
termination statements and other documents as Debtor shall reasonably
request to evidence such termination.
(m) PLEDGEE AS AGENT. Pledgee has been appointed to act as agent for
Secured Parties hereunder. Any communications and/or notices given by
Debtor to Secured Party pursuant to this Agreement shall be deemed given to
each of the Secured Parties if given to Pledgee at the address set forth on
the signature page hereto.
(n) CUMULATIVE RIGHTS. All rights and remedies of Secured Party
hereunder are cumulative of each other and of every other right or remedy
which Secured Party may otherwise have at law or in equity or under any of
the other Loan Documents, and the exercise of one or more of such rights or
remedies shall not prejudice or impair the concurrent or subsequent
exercise of any other rights or remedies.
(o) GENDER AND NUMBER. Within this Agreement, words of any gender
shall be held and construed to include the other gender, and words in the
singular number shall be held and construed to include the plural and words
in the plural number shall be held and construed to include the singular,
unless in each instance the context requires otherwise.
(p) DESCRIPTIVE HEADINGS. The headings in this Agreement are for
convenience only and shall in no way enlarge, limit or define the scope or
meaning of the various and several provisions hereof.
[SIGNATURE PAGE FOLLOWS]
EXECUTED as of the date first written above.
Debtor's Address: DEBTOR:
0000 Xxxxx Xxxxxxx Xxxxxxx VISUAL EDGE SYSTEMS INC.
Xxxxx 000
Xxxx Xxxxx, Xxxxxxx 00000
Fax: (000) 000-0000
Attn: Xxxx Xxxxxxxx By: /s/ Xxxx Xxxxxx
-----------------------------------
Xxxx Xxxxxx,
Chairman of the Board and Vice President
ACKNOWLEDGED, ACCEPTED AND AGREED:
HW PARTNERS, L.P., as agent for and
representative of the Purchasers
By: /s/ HW Partners, L.P.
------------------------------
Its:
------------------------------
Agent's Address:
HW Partners, L.P.
0000 Xxx Xxxxxx
0000 Xxxxxxxxxxxx Xxxxx
Xxxxxx, Xxxxx 00000
Fax: 214/000-0000
Attn: Xxxxxxx Xxxxxxx
SCHEDULE "A"
TO
SECURITY AGREEMENT
DATED FEBRUARY __, 1998
The other addresses referenced in Subsection 3(f) are as follows:
EXHIBIT "A"
TO
SECURITY AGREEMENT
DATED FEBRUARY __, 1998
Location:
Owner of Record:
Legal Description:
