LOAN SALE AGREEMENT
THIS LOAN SALE AGREEMENT is made and entered into as of the _____ day
of November, 1999, by and between Communications Research, Inc. (the "Buyer")
and Communication Systems Technology, Inc. (the "Seller").
W I T N E S S E T H
WHEREAS, Seller is the owner of and wishes to sell that certain Secured
Promissory Note dated as of December 19, 1997 by and between the Seller and
Optel Communications, Inc. (the "Loan"); and
WHEREAS Seller attests they are the rightful holder of said Secured
Promissory Note; and
WHEREAS Buyer and Seller have agreed upon an inventory of assets
pledged, including all physical property, trade names, patents, copyrights and
intellectual property as defined in Attachment 5 attached; and
WHEREAS, Buyer wishes to buy the Loan; per a revised offer to purchase
Optel Communications Note dated August 2, 1999, to Barbara Perrier-Dreyer,
Senior Vice President, Outreach Technologies, A Division of CSTI, and
WHEREAS, Seller and Buyer wish to enter into an agreement setting forth
the terms and conditions of the purchase and sale of the Loan;
NOW, THEREFORE, in consideration of the mutual promises, covenants and
conditions hereinafter set forth and other good and valuable consideration, the
receipt and sufficiency of which are hereby expressly acknowledged, the parties
hereto agree as follows:
1.1 Definitions. For purposes of this Agreement, the following terms
shall have the meanings indicated below:
Agreement means this Loan Sale Agreement, including all exhibits
attached hereto and referenced herein and any written amendments hereto.
Business Day means any day other than a Saturday, Sunday, federal
holiday or any other day on which the Offices of the Seller are closed.
Closing means the payment of the balance of the Purchase Price by Buyer
and the delivery of the Closing Documents.
Closing Date means the date on which Buyer pays the balance of the
Purchase Price for the Loan in accordance with this Agreement, as designated in
writing by the Seller or its counsel as provided in Section 2.2 hereof.
Closing Documents means the documents to be delivered to Buyer by
Seller under the terms of this Agreement at the Closing.
Collateral means any real or personal property which may secure a Loan.
Loan means the Loan, including the documentation evidencing the Loan
and rights in any Collateral.
Note means the original executed promissory note (or copy thereof
accompanied by a lost note affidavit) evidencing the Loan.
Obligor means Optel Communications, Inc.
Principal Office means, as to Buyer and Seller, the business office
designated in or pursuant to Section 8.1 of this Agreement.
Purchase Price means that amount indicated in Section 2.1 of this
Agreement, as adjusted in accordance with the terms of this Agreement.
PURCHASE AND SALE OF LOAN
2.1 Agreement to Buy and Sell Loan. Seller hereby agrees to sell to
Buyer, and Buyer hereby agrees to buy from Seller, on the Closing Date, all of
Seller's right, title and interest in the Loan for the total Purchase Price of
2.2 Closing. Provided that Buyer has not terminated this Agreement
pursuant to its rights hereunder, Closing shall occur no later than November 17
1999, unless extended by Seller in writing. The Closing of the purchase and sale
of the Loan shall take place on the Closing Date in escrow at the offices of
Seller's counsel, Piper & Marbury L.L.P., 1200 19th Street, N.W., Washington,
D.C. 20036, or such other place as is agreed upon by Buyer and Seller.
2.3 Payment of Purchase Price.
2.3.1 On the Closing Date, Buyer agrees to pay Seller an amount
equal to the Purchase Price. Buyer shall remit payment of the Purchase Price to
Seller on the Closing Date, prior to 2:00 p.m. EST as set forth below.
188.8.131.52 Fifteen Thousand Dollars ($15,000.00) of the Purchase
Price shall be paid by delivery, by wire transfer, cash or certified funds to
Seller's Principal Office.
184.108.40.206 One Hundred Thirty-Five Thousand Dollars ($135,000.00) of
the Purchase Price shall be paid by delivery of the Convertible Secured
Promissory Note from the Seller, in the form attached hereto as Exhibit A.
2.4 Transfer Documentation.
2.4.1 Upon payment of the balance of the Purchase Price on the
Closing Date in accordance with the terms of Section 2.3, Seller shall execute
and deliver to Buyer at the Closing the Note, each duly endorsed unto Buyer, as
set forth in Section 2.6.3 below. In addition, Seller shall execute and deliver
(a) a general Assignment, which shall be effective to transfer the Loan and any
and all other security agreements, mortgages, judgments, deeds of trust, deeds,
claims and similar documents, which Assignment shall be in the form attached
hereto as Exhibit B and made a part hereof, and (b) financing statements as
Seller, in its reasonable discretion, deems to be necessary or appropriate for
the legal transfer of Seller's right, title and interest in the Loan. Buyer
shall be responsible for the recording of such assignments and for payment of
any costs and recording fees associated with recording such assignments.
2.4.2 Should any assignments in addition to those delivered
pursuant to Section 2.4.1 above be required by applicable law, Buyer shall
prepare and submit such additional assignments to Seller for execution within
ninety (90) days after the Closing Date. Buyer shall be responsible for the
preparation and filing of, and any costs associated with the preparation of such
additional assignments and for any costs or filing fees associated with the
recording of, such additional assignments. Additionally, any such assignments
shall be without recourse, representation or warranty and in a form acceptable
to Seller's counsel. Seller shall have no obligation to execute any additional
assignment that is not received by Seller within ninety (90) days after the
2.4.3 Seller shall endorse the Note purchased hereunder in the
Pay to the order of COMMUNICATIONS RESEARCH, INC., WITHOUT
RECOURSE, REPRESENTATION OR WARRANTY EXCEPT FOR THOSE EXPLICITLY
SET FORTH IN THE LOAN SALE AGREEMENT DATED NOVEMBER 17, 1999
BETWEEN COMMUNICATIONS RESEARCH, INC. AND COMMUNICATION SYSTEMS
COMMUNICATION SYSTEMS TECHNOLOGY, INC.
If this form of endorsement does not conform to the requirements of applicable
federal, state or local law, the parties agree to modify the form of endorsement
to conform to such requirements.
2.5.4 The assignment of the Loan shall be in substantially the
form attached hereto as Exhibit B.
2.5.5 Financing statement assignments shall be in accordance with
the customary UCC-3 printed form for the applicable jurisdiction.
2.6 Delivery of Documents. On the Closing Date, Seller shall deliver to
Buyer at Closing the original Note and all assignment instruments necessary to
transfer ownership as provided in Section 2.6. Thereafter, risk of loss with
respect to such documents and instruments shall rest with Buyer.
REPRESENTATIONS, WARRANTIES AND COVENANTS OF SELLER
3.1 Seller's Warranties and Representations. Seller hereby represents
and warrants to Buyer that the following statements are true and correct, as of
the date of this Agreement, and shall be true and correct as of the Closing
3.1.1 Seller has not previously sold or assigned the Loan.
3.1.2 Seller has the corporate authority to transfer the Loan.
3.2 Seller's Business Records. Seller will warrant at Closing to its
best knowledge, information and belief, based solely on its current business
records and no independent verification with the maker of the applicable Note,
that the actual amount of the principal balance, accrued interest and late
charges due under the applicable Note does not differ in any material respect
from the amount of the principal balance, accrued interest and late charges
shown by the Seller's current business records. If it is determined after
Closing that Seller breached this warranty, Seller shall reimburse Buyer in an
amount equal to the difference between the amount of the principal balance,
accrued interest and late charges shown by Seller's current business records and
the actual amount of the principal balance, accrued interest and late charges
due under the applicable Note.
3.3 Disclaimer Of Warranties And Representations Not Expressed Herein.
3.3.1 Except for those expressed in Sections 3.1 and 3.2, no
warranties or representations, express or implied, have been made by Seller or
by anyone acting on its behalf, particularly, but without in any way limiting
the generality of the foregoing, no warranties or representations regarding (i)
the collectability of any loan asset, (ii) the creditworthiness or personal
liability of any Obligor, (iii) the value or existence of any Collateral
securing payment of any loan asset, (iv) any loan asset's freedom from liens and
encumbrances, in whole or in part, (iv) the transferability and enforceability
of the Note, judgments, claims, deeds, and collateral documents supporting any
loan asset, or (v) condition of the underlying collateral including but not
limited to any environmental matter or condition, whether latent or observable.
Except as otherwise provided in Sections 3.1 and 3.2, all assets sold to Buyer
under this agreement are sold and transferred without recourse and "as is, where
is and with all faults". Seller further makes no warranty or representation as
to the nature or content of the Loan as described herein except as otherwise
provided in Sections 3.1 and 3.2. Seller also makes no warranty or
representation with respect to the effect of applicable bankruptcy, insolvency,
reorganization, moratorium, and other laws affecting the rights of creditors
3.4 Limitation on Warranties.
3.4.1 Prior to the Closing Date, Buyer's sole and exclusive
recourse shall be as provided in Section 5.1. After the Closing Date, Buyer
shall have no recourse whatsoever against Seller, except for a breach of any
warranty or representation under Sections 3.1 and 3.2, in which case damages
shall be limited as provided in Section 7.2.
3.4.2 The recourse provided hereunder against Seller for the
breach of a representation or warranty is intended to run exclusively to Buyer
and its assignee as permitted by Section 8.6, and no subsequent assignee of
Buyer's rights in any of the Loan shall have any right to make a claim against
Seller for such breach.
3.5 Seller's Covenants to Buyer.
3.5.1 After the Closing Date, Seller will not continue to service
the Loan (or continue to fulfill its obligations and duties under any servicing
agreement, as the case may be). All payments received by Seller after the
Closing Date with respect to any Asset purchased by Buyer shall belong to Buyer,
and Seller shall promptly deliver all such payments to Buyer's Principal Office
within a reasonable time after their receipt in cash or with any instruments
properly endorsed to Buyer. Notwithstanding the foregoing, prior to the Closing
Date, Seller shall be authorized to continue, in its sole and absolute
discretion, without notice to Buyer, with all actions it deems appropriate in
servicing the Loan. In addition, all collections received on or before Closing
shall be the sole property of Seller, in which case the Purchase Price will be
reduced by an amount equal to the amount of any such collection.
3.5.2 Seller agrees to respond, on written request by Buyer, to
reasonable inquiries by Buyer with respect to the Loan for a period of ninety
(90) days after the Closing Date. Seller shall have no obligation to respond to
any inquiries by Buyer which are not received within such ninety (90) day
3.5.3 Each party to this Agreement represents and warrants to the
other that, in connection with the sale and purchase of the Loan hereunder, the
party so representing and warranting has not dealt with any broker, agent or
finder, and there is no commission, charge or other compensation due on account
thereof. Buyer and Seller shall indemnify and hold each other harmless against
and from any inaccuracy in such representation. The rights, obligations,
warranties and representations of the parties hereto under the provisions of
this Section shall survive Closing or any termination of this Agreement before
3.6 Organization; Good Standing. Seller is a corporation duly organized
and validly existing and in good standing under the laws of the State of
Delaware and has all requisite power and authority to conduct its business as
3.7 Authority. Seller is duly and legally authorized to enter into this
Agreement and has complied with all laws, rules, regulations, partnership
agreements, charter provisions, articles and bylaws to which it may be subject.
If this Agreement is executed by a representative of Seller, the undersigned
representative of Seller is duly authorized to act on behalf of and to bind
Seller to the terms of this Agreement.
3.8 Enforceability. This Agreement, when duly executed and delivered,
and all of Seller's obligations hereunder will be the legal, valid and binding
obligations of Seller, enforceable in accordance with the terms of this
Agreement, except as enforcement might be limited by bankruptcy, insolvency,
reorganization or similar laws affecting the enforcement of creditors' rights
generally and by general principles of equity (regardless of whether such
enforcement is considered in a proceeding in equity or at law).
3.9 Performance. Seller's performance of its duties and obligations of
Seller under this Agreement will not conflict with, result in a breach of or
default under, or be adversely affected by, any agreements, instruments,
decrees, judgments, injunctions, orders, writs, laws, rules or regulations, or
any determination or award of any arbitrator, to which Seller is a party or by
which it or its assets are bound.
REPRESENTATIONS, WARRANTIES AND COVENANTS OF BUYER
4.1 Buyer's Representations and Warranties. Buyer hereby represents and
warrants to Seller that the following statements are true and correct, as of the
date of this Agreement, and shall be true and correct as of the Closing Date.
4.1.1 Decision to Purchase. Buyer has independently reviewed, or
may elect to review before the Closing Date, the Loan, and has made its decision
to buy the Loan based upon its own independent evaluation and has not relied
upon any oral or written information provided by any employee or representative
of Seller. Buyer has not relied on any statements or representations of Seller
other than those specifically contained in this Agreement. Buyer acknowledges
that Seller has not given any investment advice or rendered any opinion as to
whether the purchase of the Loan is prudent. Buyer is aware that the amount
ultimately paid or recovered on account of the Loan may be less than the
consideration paid to Seller by Buyer pursuant to this Agreement.
4.1.2 Organization; Good Standing. Buyer is a corporation duly
organized and validly existing and in good standing under the laws of the State
of Nevada and has all requisite power and authority to conduct its business as
4.1.3 Authority. Buyer is duly and legally authorized to enter
into this Agreement and has complied with all laws, rules, regulations,
partnership agreements, charter provisions, articles and bylaws to which it may
be subject. If this Agreement is executed by a representative of Buyer, the
undersigned representative of Buyer is duly authorized to act on behalf of and
to bind Buyer to the terms of this Agreement.
4.1.4 Enforceability. This Agreement, when duly executed and
delivered, and all of Buyer's obligations hereunder will be the legal, valid and
binding obligations of Buyer, enforceable in accordance with the terms of this
Agreement, except as enforcement might be limited by bankruptcy, insolvency,
reorganization or similar laws affecting the enforcement of creditors' rights
generally and by general principles of equity (regardless of whether such
enforcement is considered in a proceeding in equity or at law).
4.1.5 Performance. Buyer's performance of its duties and
obligations of Buyer under this Agreement will not conflict with, result in a
breach of or default under, or be adversely affected by, any agreements,
instruments, decrees, judgments, injunctions, orders, writs, laws, rules or
regulations, or any determination or award of any arbitrator, to which Buyer is
a party or by which it or its assets are bound.
4.2 Buyer's Covenants to Seller.
4.2.1 Notification of Obligors. Buyer shall, promptly after the
Closing Date with respect to the Loan purchased under this Agreement, (or Seller
may on its own at its sole discretion) notify the Obligor of Buyer's purchase of
the Loan, and direct that all payments on and communications regarding the Loan
be sent to Buyer's Principal Office after the Closing Date. Buyer understands
that, except to the extent required by law, Seller is not required hereunder to
send any notification of the assignment of the Loan to any Obligor.
4.2.2 Use of Seller's Name. Buyer will not, without the express
written consent of Seller, institute any legal action in the name of Seller or
any affiliate thereof; nor shall Buyer through misrepresentation or
nondisclosure, mislead or conceal from any person the identity of the owner of
the Loan purchased under this Agreement; nor shall Buyer use or refer to Seller
or any affiliate thereof, or any name derived therefrom or confusingly similar
therewith, to promote Buyer's sale, collection or management of the Loan
purchased under this Agreement. Buyer acknowledges that there is no adequate
remedy at law for violation of this provision and consents to the entry of an
order by a court of competent jurisdiction enjoining any violation or threatened
violation of this provision.
4.2.3 Access to Documents. Before the Closing Date, a
representative of Seller shall deliver to Buyer or its duly authorized agents
copies of all documents concerning the Loan. These documents shall be included
as attachments to this Loan Sale Agreement.
4.2.4 Collection Practices. Buyer agrees not to violate any law
relating to unfair collection practices in connection with any of the Loan
purchased by Buyer hereunder. Buyer further agrees to indemnify Seller and hold
Seller harmless from and against any and all claims, demands, losses, damages,
penalties, fines, forfeitures, judgments, legal fees and other costs, fees and
expenses at any time incurred by Seller as a result of (i) Buyer's breach of the
aforesaid agreement or (ii) any acts or omissions of Buyer resulting in any
claim, demand or assertion that Seller, subsequent to the Closing Date, was in
any way involved in or had in any way authorized any unlawful collection
practices in connection with any of the Loan. Each party agrees to notify the
other within ten (10) days of receiving notice or knowledge of any such claim,
demand or assertion.
4.2.5 Compliance with Terms. Buyer agrees to abide by and be bound
by all of the terms and conditions of the Note and other agreements related to
the Loan purchased hereunder to the extent that such terms and conditions
continue to bind the holder of the Note and other agreements related to the
4.2.6 Waiver of Notice of Assignment of Proof of Claim. Seller
waives the right to receive any notice from Buyer with respect to its assignment
under this Agreement of any proof of claim under the United States Bankruptcy
WITHDRAWAL OF LOAN
5.1 Withdrawal of Loan. If, prior to the Closing Date, either Buyer or
Seller discovers the breach of any of the representations and warranties set
forth in Article 3 of this Agreement as to the Loan or any other matter which in
Seller's sole and absolute discretion merits the withdrawal of such Loan from
this sale, the party making the discovery will promptly but in no event after
the Closing Date give notice of such discovery to the other party, along with a
description of the breach. Seller shall be allowed 90 days to cure the breach,
and if it is impossible to cure such breach or Seller chooses not to cure or
correct the breach, prior to the Closing Date, then this Agreement shall
terminate and become null and void.
6.1 Release of Seller. Buyer hereby releases and forever discharges
Seller, its agents, servants, directors, officers, employees, successors,
assigns and affiliates (all such persons being collectively referred to as the
"Related Persons"), of and from any and all causes of action, claims, demands
and remedies of whatsoever kind and nature that Buyer has or may in the future
have against Seller or any Related Persons, and in any manner on account of,
arising out of or related to the Loan purchased hereunder except for claims or
causes of action arising by reason of Seller's breach of this Agreement.
6.2 Release of Buyer. Seller hereby releases and forever discharges
Buyer, and its Related Persons, of and from any and all causes of action,
claims, demands and remedies of whatsoever kind and nature that Seller has or
may in the future have against Buyer or any Related Persons, and in any manner
on account of, arising out of or related to the Loan purchased hereunder except
for claims or causes of action arising by reason of Buyer's breach of this
7.1 Seller's Breach Before Closing. If Seller breaches this Agreement,
and the breach is discovered prior to Closing, Buyer's sole remedies are those
described in Sections 3.4 and 5.1 of this Agreement.
7.2 Seller's Breach After Closing. Except as to a breach of any
warranty or representation under Sections 3.1 and 3.2, if Seller breaches this
Agreement, and such breach is discovered after Closing, Buyer shall have no
recourse against Seller. Buyer has factored this risk into its decision to
purchase. If it is determined after Closing that Seller breached any warranty or
representation under Sections 3.1 and 3.2. Seller will reimburse Buyer in an
amount equal to Buyer's actual and verifiable damages resulting from such
breach. The remedies set forth in this Section 7.2 shall be Buyer's sole and
exclusive remedies with respect to a breach of such warranties or
8.1 Notices. Any notice, request, demand or other communication
required or permitted under this Agreement shall be given in writing and shall
be delivered or sent by certified mail, return receipt requested in a prepaid
envelope, by overnight mail or courier, or by facsimile transmission, to the
addresses set forth below or such other addresses as such party shall hereafter
specify in accordance with this Section:
If to Seller: Communication Systems Technology, Inc.
8975 Guilford Road
Columbia, Maryland 21046
ATTN: Barbara Perrier Dreyer
Facsimile Number: (301) 621-8608
With a copy to: Piper & Marbury L.L.P.
1200 19th Street, N.W.
Washington, D.C. 20036
ATTN: Christian E. Plaza, Esq.
Facsimile Number: (202) 223-2085
If to Buyer: Communications Research, Inc.
69 Wesley Street
So. Hackensack, NJ 07606
ATTN: Carl R. Ceragno, President
Facsimile Number: (201) 457-0400
With a copy to: Larry Hartman, Esq.
=============== 1241 N. Kenmore Avenue
Los Angeles, CA 90028
Facsimile Number: (323) 461-4007
Such notice or other communication shall be deemed to have been given (i) when
delivered, if sent by certified mail or delivered personally or by facsimile
transmission, or (ii) on the second following Business Day if sent by overnight
mail or overnight courier.
8.2 Choice of Law and Venue. The validity of this Agreement, its
construction, interpretation, and enforcement, and the rights of the parties
hereto, shall be determined under, governed by, and construed in accordance with
the internal laws of the State of Maryland, without regard to principles of
conflicts of laws. The parties agree that all actions or proceedings arising in
connection with this Agreement shall be tried and litigated only in the state
and federal courts located in the State of Maryland. Buyer and Seller waive any
right each may have to assert the doctrine of forum non conveniens or to object
to venue to the extent any proceeding is brought in accordance with this
8.3 Waiver of Jury Trial. The parties hereto hereby waive all right to
trial by jury of all claims, defenses, counterclaims and suits of any kind
arising from or relating to (i) this Agreement, (ii) the Loan purchased
hereunder, (iii) the use, ownership, control, operation or condition of the
Collateral and (iv) and any contingency fee contracts with attorneys or
collection agencies. The parties acknowledge that they make this waiver
voluntarily and knowingly after consultation with counsel of their choice. The
parties hereto agree that all such claims, defenses, counterclaims and suits
shall be tried before a judge of competent jurisdiction, without a jury. 8.4
Severability. Each part of this Agreement is intended to be severable. If any
term, covenant, condition or provision of this Agreement is unlawful, invalid or
unenforceable, such illegality, invalidity or unenforceability shall not affect
the remaining provisions of this Agreement, which shall remain in full force and
effect and shall be binding upon the parties.
8.5 Headings. The headings of the Articles and Sections of this
Agreement are inserted for convenience only and shall not affect the meaning or
interpretation of this Agreement or any provision thereof.
8.6 Assignments; Binding Effect. This Agreement shall not be assigned
by either party without the express written consent of the other party. This
Agreement shall inure to the benefit of and be binding upon the respective
successors and permitted assigns of the parties.
8.7 Survival. Seller and Buyer agree that the covenants, warranties and
representations herein contained shall survive the Closing, shall not merge into
the Closing Documents, and shall be independently enforceable.
8.8 Entire Agreement; Amendments. This Agreement, including any
attachments, exhibits and schedules referred to in this Agreement, any other
documents executed by Seller or Buyer at Closing in connection with this
Agreement constitute the entire agreement between the parties pertaining to the
subject matter hereof and supersedes any and all prior agreements,
representations and understandings of the parties, written or oral. The terms of
this Agreement shall not be modified or amended except by subsequent written
agreement of the parties.
8.9 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original and all of which shall
constitute one and the same instrument.
8.10 Construction. Unless the context requires otherwise, singular
nouns and pronouns used herein shall be deemed to include the plural, and
pronouns of one gender shall be deemed to include the equivalent pronoun of the
8.11 Waiver. No waiver by either party of the other party's breach of
any term, covenant or condition contained in this Agreement shall be deemed to
be a waiver of any subsequent breach of the same or any other term, covenant or
condition of this Agreement. In addition, no waiver by Seller of any condition
prior to closing is enforceable unless in writing.
8.12 No Alteration. By executing this Agreement below, the parties
acknowledge and affirm that no alterations have been made to the Loan Sale
Agreement, except for filling in any blanks.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and sealed as of the day and year first written above.
COMMUNICATIONS RESEARCH, INC.
THIS ASSIGNMENT is made as of the 17th day of November, 1999.
FOR VALUE RECEIVED AND WITHOUT WARRANTY, REPRESENTATION OR RECOURSE,
except for those explicitly set forth in the Loan Sale Agreement dated as of
November 17, 1999 by and between Communications Research, Inc. ("Assignee") and
Communication Systems Technology, Inc. ("Assignor"), Assignor does hereby
assign, transfer and convey unto Assignee the following:
1. Letter Agreement, dated December 19, 1997, among Communication Systems
Technology, Inc., Optel Communications, Inc., Abraham J. Zelkin and
2. Secured Promissory Note dated December 19, 1997 in the amount of
$250,000 executed by Optel Communications, Inc., in favor of
Communication Systems Technology, Inc.
3. Security Agreement dated December 19, 1997 executed by Optel
Communications, Inc., in favor of
4. Escrow Agreement dated May 8, 1998, executed by Optel Communications,
Inc., Communication Systems Technology, Inc. and Wilson, Elser,
Maskowitz, Edelman & Dicker L.L.P.
5. A list of all intellectual and material properties securing the loan
IN WITNESS WHEREOF, the Assignor has executed and delivered this
Assignment to Assignee as of the day and year first above written.
STATE OF ______________________ )
CITY/COUNTY OF _______________ )
I HEREBY CERTIFY that on this 17th day of November 1999, before me, the
undersigned officer, personally appeared ____________________, who acknowledged
himself/herself to be the ____________________ of Communication Systems
Technology, Inc., and that (s)he, in such capacity, being authorized to do so,
executed the foregoing instrument for the purposes therein contained, by signing
the name of Communication Systems Technology, Inc., as ____________________ of
Communication Systems Technology, Inc.
IN WITNESS WHEREOF, I hereunto set my hand and Notarial Seal.
My Commission expires:
The undersigned, an attorney duly admitted to practice before the Court
of Appeals of Maryland, hereby certifies that the foregoing instrument was
prepared by or under his supervision.
Christian E. Plaza
Attachment to Assignment
2-Sony 13" video monitors
3-9" B&W monitors
6 Video VGA's
2 Coreco cards
Sharp Laser Printer
3 Elmo Projectors
1-Fotovix slide to video converter
3 Howard video cameras
1-proshare video camera
20-Metal shipping cases
1-20 foot booth in shipping containers
station PC speakers, power supplies, cables and keyboards
1-chroma PIP box
THIS SECURITY AGREEMENT (this "Agreement") is made as of this 17th day
of November, 1999, by Communications Research, Inc., a Nevada ("CRI"), with an
address of 69 Wesley Street, South Hackensack, New Jersey 07606, and Telewriter
Corporation, Inc., a Nevada corporation (the "Company"), with an address of 69
Wesley Street, South Hackensack, New Jersey 07606, in favor of Communication
Systems Technology, Inc., a Delaware corporation (the "Holder").
A. CRI and the Holder have entered into a Loan Sale Agreement of even
date herewith (the "Loan Agreement") which sets forth the terms under which CRI
will issue to the Holder a Convertible Secured Note in the aggregate principal
amount of $135,000 (the "Note").
B. CRI has simultaneously herewith assigned the Note to the Company,
which is 51% owned by CRI.
C. The Company has simultaneously herewith assigned all of its
interests in that certain loan (as defined in Attachment 5 of the Loan Sale
Agreement executed on the same day hereof in connection herewith) to Optel
Communications, Inc. ("Optel"), the maker of the Note subject to the loan, in
exchange for all of the assets in and of Optel.
D. As a condition of entering into the Loan Agreement and the
transactions contemplated therein, the Holder requires that the Company enter
into this Security Agreement.
NOW, THEREFORE, in consideration of the receipt of One Dollar ($1.00)
and other good and valuable consideration, the receipt of which is hereby
acknowledged, the Company hereby agrees in favor of the Holder as follows:
ARTICLE I: DEFINITIONS
1.01 Definitions. In addition to the terms defined elsewhere herein,
when used herein, the following capitalized terms shall have the meanings
"Chattel Paper" shall mean and includes without limitation,
collectively, all of the Company's now owned and hereafter acquired "chattel
paper," as that term is defined in Section 9-105(1)(b) of the Applicable UCC.
"Collateral" shall mean and includes without limitation, collectively,
the now-owned and hereafter acquired tangible and intangible property of the
Company that was previously held by Optel as defined in Attachment 5 of the LOAN
SALE AGREEMENT, including all of the following: (i) all Accounts; (ii) all
Chattel Paper, (iii) all Equipment; (iv) all Goods; (v) all Instruments; (vi)
all Inventory; (vii) all General Intangibles; (viii) all Contract Rights; (ix)
all Proceeds; (x) all books and records of Optel, including those relating to
any of the foregoing; (xi) all monies, deposit accounts, and rights to money of
any kind; (xii) all additions or accessions to any of the foregoing; (xiii) all
substitutions for any of the foregoing; and (xiv) all replacements, products and
proceeds of the foregoing.
"Contract Rights" shall mean and includes without limitation,
collectively, all of the Company's now-owned or hereafter acquired "contract
rights" as now or formerly defined in the Applicable UCC and also any right to
payment under a contract not yet earned by performance and not evidenced by an
instrument or Chattel Paper.
"Equipment" shall mean and includes without limitation, collectively,
all of Company's now owned or hereinafter acquired tangible property previously
held by Optel as defined in Attachment 5 of the LOAN SALE AGREEMENT.
"Goods" shall mean and includes without limitations, collectively, all
of the Company's now owned and hereafter acquired "goods," as that term is
defined in Section 9-105(1)(h) of the Applicable UCC.
"General Intangibles" shall mean and includes without limitation,
collectively, all of the Company's now owned and hereafter "general intangibles"
that were previously held by Optel as defined in Attachment 5 of the LOAN SALE
AGREEMENT, including without limitation, all rights, licenses, permits and
authorizations held by the Company; all rights under governmental ordinances or
agreements with governmental authorities; things in action; contractual rights;
goodwill; literary rights; rights to performance; rights in curriculum design,
structure and content, and all of the Intellectual Property (as defined below).
"Instruments" shall mean and includes without limitation, collectively,
all of the Company's now owned or hereafter "instruments" that were previously
held by Optel as defined in Attachment 5 of the LOAN SALE AGREEMENT and all
other instruments, notes, items of payment, negotiable documents, and documents
of title, including without limitation, the Secured Promissory Note assigned by
Holder to the Company pursuant to the Loan Agreement.
"Intellectual Property" shall mean, collectively, all of the Company's
now owned and hereafter acquired intellectual property that was previously held
by Optel as defined in Attachment 5 of the LOAN SALE AGREEMENT, including,
without limitation the following: (a) all patents (including all rights
corresponding thereto throughout the world, and all improvements thereon); (b)
all trademarks (including service marks, trade names and trade secrets, and all
goodwill associated therewith), (c) all copyrights (including all renewals,
extensions and continuations thereof); (d) all applications for patents,
trademarks or copyrights and all applications otherwise relating in any way to
the subject matter of such patents, copyrights and trademarks; (e) all patents,
copyrights, trademarks or applications therefor arising after the date of this
Agreement; (f) all reissues, continuations, continuations-in-part and divisions
of the property described in the preceding clauses (a), (b), (c), (d), and (e),
including, without limitation, any claims by the Company against third parties
for infringement thereof; and (g) all rights to sue for past, present and future
infringements or violations of any such patents, trademarks, and copyrights.
"Inventory" shall mean and includes without limitation,
collectively, all of the Company's now owned and hereafter acquired "inventory"
that was previously held by Optel as defined in Attachment 5 of the LOAN SALE
AGREEMENT and all products, replacements, and substitutions therefor and
thereof, and all accessions thereto, and all books, records, computer software
and logs relating to and necessary or appropriate to the conduct of the business
and operation the Company.
"Obligations" shall mean and includes without limitation, collectively,
all of the Company's indebtedness, liabilities and obligations arising under
this Agreement, any renewals, modifications, and extensions thereof, and any
other obligations of the Company to the Holder, including such other or
additional financing that the Holder may extend to the Company at any time in
the Holder's sole discretion.
"Permitted Encumbrances" shall mean any lien, mortgage, security
interest or other encumbrance that results from any of the following: (i) the
liens, mortgages, security interests and other encumbrances created or arising
pursuant to this Agreement, the Note or the Loan Agreement; (ii) liens for taxes
and assessments not delinquent or actively being contested in good faith by the
Company by appropriate proceedings provided that the Company has set aside on
its books and records adequate reserves in accordance with generally accepted
accounting principles and provided further that no action is being taken by a
governmental authority or agency to enforce any such lien or encumbrance; (iii)
deposits or pledges for goods or services made in the ordinary course of the
Company's business; and (iv) title of a bona fide lessor of tangible personal
property to the Company (other than a capital lease).
"Person" shall mean any individual, corporation, partnership, joint
venture, limited liability company, unincorporated association, trust, or other
"Proceeds" shall mean and includes without limitation "proceeds" as
defined in the Applicable UCC, all insurance proceeds and each type of property
described in the definition of "Collateral" in this Agreement and all other cash
and noncash proceeds resulting from any complete or partial transfer of the
Collateral or any portion thereof or otherwise relating to or generated by, any
of the Collateral.
"Real Property" shall mean, collectively, all real property owned by
the Company or in which the Company has a leasehold interest and all real
property hereafter acquired by the Company in fee or by means of a leasehold
interest, together with all goods located on any such real property that are or
may become "fixtures" under the law of the jurisdiction in which such real
property is located.
ARTICLE II: GRANT OF SECURITY INTEREST
2.01 Grant. As security for the payment and performance of each of the
Obligations, the Company hereby grants to the Holder a continuing security
interest in all of the Collateral.
2.02 Rights of Holder as Secured Party. In addition to the rights and
remedies granted to the Holder herein, the Holder shall have all of the rights
and remedies of a secured party under the Applicable UCC with respect to all of
ARTICLE III: REPRESENTATIONS AND WARRANTIES
To induce the Holder to enter into the Loan Agreement, Company
represents and warrants to the Holder as follows (which representations and
warranties shall survive the execution and delivery of this Agreement and the
funding of the Note):
3.01 Due Organization and Corporate Authorization. The Company presently is and
shall hereafter remain in good standing as a Nevada corporation and is and shall
hereafter remain duly qualified and in good standing in each state in which, by
reason of the nature or location of the Company's assets or operation of the
Company's business, such qualification may be necessary. The execution and
delivery of this Agreement and of any other documents,
instruments, and agreements executed in connection herewith constitute
representations by the individual signing this Agreement and said instruments
and by the Company that by such execution and delivery the Company has received
all such corporate authorization as may be necessary to permit such execution
and delivery to, and that they do, bind the Company.
3.02 No Conflicting Agreements. There is no provision in the
Certificate of Incorporation or By-laws of the Company, each as amended to date,
or in any document by which the Company may be bound which prohibits the
execution and delivery of this Agreement or of any other instrument, agreement,
or paper which relates to the Company's relationship with the Holder or which
prohibits or adversely affects the Company's carrying out of the terms thereof.
3.03 Mailing Address; Chief Executive Office; Principal Place of
Business. The address for Company on the first page of this Agreement is the
Company's correct mailing address, the address of Company's chief executive
office, and the address of Company's principal place of business.
3.04 Other Names. The Company has not changed its name or ever used any
other name or any trade name.
3.05 Location of Goods and Inventory. All of the Goods and Inventory
are located only at its principal place of business set forth in the Preamble to
this Agreement and the locations, if any, listed on Schedule
3.06 attached hereto and made a part hereof, and none of the Goods or
Inventory is stored with, or in the possession of, any bailee, warehouseman,
subcontractor, or other similar Person.
ARTICLE IV: COVENANTS
Until the Note is repaid in full or converted pursuant to the Loan
Agreement and each of the other Obligations has been satisfied in full and
discharged, the Company covenants and agrees with the Holder as follows:
4.01 Offices. CRI and the Company shall maintain the their respective
chief executive offices and principal places of business at the address for CRI
on the first page of this Agreement and shall not change the location of their
respective chief executive offices or principal places of business without
providing sixty (60) days' prior written notice to the Holder.
4.02 Books and Records.
(a) CRI will keep and maintain, at its own cost and
expense, satisfactory and complete books and records of and with respect to the
(b) The Holder shall at all reasonable times, at intervals to be
determined by the Holder, before or after the occurrence of an Event of Default
under the Note, and without hindrance or delay, have full and free access to the
above-referenced books and records and any other data relating to the Collateral
and the right at all reasonable times to examine the same and to audit, inspect,
verify, check and make extracts or photocopies therefrom;
(c) The Holder shall have the right, at the cost and expense of
the Holder, to audit the books and records of the Company concerning the
Collateral and to require the Company to procure and, following the occurrence
of an Event of Default under the Note, deliver to the Holder, at the Company's
and/or CRI's own cost and expense, all reports and information pertaining to the
Collateral and to such portion of the financial condition and business
operations of the Company as the Holder may reasonably deem necessary; and
(d) The Holder shall have a special property interest in all
books and records of the Company pertaining to the Collateral and, at any time,
upon the request of the Holder following the occurrence of an Event of
Default under the Note, the Company and/or CRI shall, at its own cost and
expense, deliver all such books or records to the Holder or its designated
representatives and shall deliver to the Holder or its designated
representatives all original and other documents evidencing and relating to the
4.03 Equipment. The Company shall use the Equipment solely in the
conduct of its business and in a careful and proper manner. The Company shall
keep all of the Equipment at the Company's principal place of business and shall
not change the location of any item of the Equipment without the prior written
consent of the Holder.
4.04 Goods and Inventory. The Company shall store all of the Goods and
all of the Inventory in a careful, secure and proper manner at its principal
place of business as provided in Section 4.01 hereof and shall not change the
location of any item of the Goods or Inventory without providing sixty (60)
days' prior written notice to the Holder.
4.05 No Transfers of Collateral. Notwithstanding that Proceeds are
included within the definition of "Collateral" (and therefore subject to the
Holder's' security interest hereby granted), the Company shall not transfer the
Collateral or any portion thereof or any interest therein without the prior
written consent of the Holder other than Inventory in the ordinary course of
4.06 Liens, Claims and Attachments. The Company shall maintain the
Collateral free from all claims, liens, encumbrances and legal processes (other
than Permitted Encumbrances), and the Company shall notify the Holder
immediately of notice of any lien, attachment or judicial proceeding affecting
the Collateral in whole or in part.
4.07 Payment of Taxes, Assessments and Fees. The Company shall pay all
taxes, assessments and fees relating to the ownership or use of the Collateral
or any portion thereof as and when the same shall be due and payable.
4.08 Maintenance, Repairs and Replacements. The Company shall keep and
maintain, or cause to be kept and maintained, all of the tangible Collateral in
good condition and shall provide all maintenance and service and make all
repairs and replacements necessary for such purpose. If any parts or accessories
forming part of the tangible Collateral become worn out, lost, destroyed,
damaged beyond repair or otherwise permanently rendered unfit for use, the
Company, at its own expense, shall promptly replace such parts or accessories or
cause the same to be replaced by replacement parts or accessories that have a
value and utility at least equal to the parts or accessories replaced. All
accessories, parts and replacements for or which are added to or become attached
to any of the tangible Collateral shall immediately be deemed incorporated in
the tangible Collateral and subject to the security interest granted herein.
4.09 Right to Inspect. The Holder shall have the right to inspect all
of the tangible Collateral and all maintenance and repair records relating
thereto at all reasonable times; provided, however, if the Holder desires to
inspect the tangible Collateral or any such records during other than the
Company's normal hours of operation, then at any time prior to the occurrence of
an Event of Default under the Note the Holder shall provide the Company with
twenty-four (24) hours prior notice of such inspection.
4.10 Supporting Materials. The Company, upon the reasonable request of
the Holder, but not more frequently then once every 60 days, shall provide the
Holder from time to time with: (a) written statements or schedules identifying
and describing the Collateral, and all additions, substitutions, and
replacements thereof, in such detail as the Holder may require; (b) copies of
customers' invoices or billing statements; (c) proof of the sale or lease of
goods or evidence of the satisfactory performance of services which gave rise to
any Accounts; and (d) such other schedules and information as the Holder
reasonably may require. The items to be provided under this Section 4.10 shall
be in form satisfactory to the Holder and are to be executed and delivered to
the Holder from time to time solely for the Holder's convenience in maintaining
records of the Collateral. The Company's failure to give any of such items to
the Holder shall not affect, terminate, modify or otherwise limit the Holder's
security interest in any of the Collateral.
4.11 No Material Changes. The Company shall not make any material
change (or changes which are not in the ordinary course of the Company's
business) to the terms of any General Intangible, Chattel Paper, Instrument, or
Account, without the prior written permission of the Holder.
4.12 Notification of Delays. The Company, upon request of a Holder,
shall regularly advise the Holder of any delay in delivery or performance, or
claims made, in regard to any of the Collateral.
4.13 Additional Covenants Relating to Accounts and Chattel Paper.
(a) Upon the reasonable request of a Holder, but not more
frequently then once every 60 days, the Company shall deliver to the Holder
promptly, but not more than fifteen (15) calendar days after the last day of
each month, a listing and aging report for the Accounts, in reasonable form and
substance, together with such other information and financial reports as the
Holder may request in Holder's reasonable discretion from time to time; and
(b) Upon the request of the Holder, at any time after the
occurrence of an Event of Default under the Note, the Company shall deposit, or
cause to be deposited, all checks, drafts, cash and other remittances in payment
of, or on account of payment of, any and all Accounts and Chattel Paper (all of
the foregoing herein collectively referred to as "items of payment" to an
account (the "Collateral Account") designated by the Holder at a bank or other
financial institution designated by the Holder. The Holder shall not be
responsible for the solvency of any such bank or other financial institution, or
the management and administration of the Collateral Account. The Holder alone
shall have the power to access and make withdrawals from the Collateral Account.
The Company shall deposit such items of payment for credit to the Collateral
Account within one banking day of the receipt thereof and in precisely the form
received, except for the endorsement of the Company where necessary to permit
the collection of such items of payment, which endorsement the Company hereby
agrees to make. Pending such deposit, the Company will not commingle any such
items of payment with any of its other funds or property, but will hold them
separate and apart. The Holder shall be entitled, from time to time in the
Holder's' discretion, to apply the funds in the Collateral Account against any
of the Obligations.
4.14 Notice to Holder; Joinder by Company. The Company will promptly
notify the Holder if the Company learns of any unauthorized use by any Person
with respect to any of the Collateral. If requested by a Holder, the Company, at
the Company's expense, shall join with the Holder in such action as the Holder,
in the Holder's discretion, may reasonably deem advisable for the protection of
the perfected security interest of the Holder in and to all of the Collateral.
4.15 Indebtedness. The Company does not and shall not hereafter have
any indebtedness with the exception of (a) any indebtedness to the Holder; (b)
the indebtedness (if any) listed on Schedule 4.15 attached hereto and made a
part hereof and approved by the Holder; and (c) ordinary trade payables incurred
in the normal course of the Company's business which are less than sixty (60)
days past invoice date.
4.16 Dividends, Investments, etc. The Company shall not without the
prior written consent of the Holder (a) pay any dividend, other than a common
stock dividend of the Company's own capital stock; (b) own, redeem, retire,
purchase, or acquire any of the Company's capital stock; (c) invest in or
purchase any stock or securities or rights to purchase any such stock or
securities, of any corporation or other entity; (d) merge or consolidate or be
merged or consolidated with or into any other corporation or other entity; (e)
consolidate any of the Company's operations with those of any other corporation
or other entity; or (f) subordinate any debts or obligations owed to the Company
by any third party to any other debts owed by such third party to any other
party unless this agreement survives in total.
4.17 Sale and Leaseback. The Company shall not enter into any
arrangement, directly or indirectly whereby the Company shall sell or transfer
any property owned by it in order then or thereafter to lease such property or
lease other property that the Company intends to use for substantially the same
purpose as the property being sold or transferred.
4.18 Corporate Loans. The Company shall not make any loans or advances
to any individual, firm, corporation, or other entity including, without
limitation, any officer, employee, director, shareholder, or salesperson of the
4.19. Line of Business. The Company shall not without the prior written
consent of the Holder engage in any business other than the business in which it
is currently engaged, or a business reasonably allied thereto.
4.20 Insurance. The Company shall have and maintain at all times
insurance covering such risks, in such amounts, containing such terms, in such
form, for such periods, and written by such companies as may be satisfactory to
the Holder. All such insurance shall provide for a minimum of thirty (30) days'
written notice of cancellation to the Holder and all such insurance which covers
the Collateral shall include such endorsements in favor of the Holder as the
Holder may specify. Each such endorsement shall provide that the insurance, to
the extent of the Holder's' interest therein, shall not be impaired or
invalidated, in whole or in part, by reason of any act or neglect of the Company
or by the failure of the Company to comply with any warranty or condition of the
policy. In the event of the failure by the Company to provide and maintain
insurance as herein provided, the Holder may, at its option, provide such
insurance. The Company shall furnish to the Holder certificates, binders,
endorsements or other evidence satisfactory to the Holder regarding compliance
by the Company with the foregoing insurance provisions. Originals of all such
policies shall be delivered to and held by the Holder. The Company shall advise
the Holder of each claim made by the Company under any policy of insurance which
covers the Collateral and will permit the Holder, at the Holder's' option in
each instance, to the exclusion of the Company, to conduct the adjustment of
each such claim. The Company hereby appoints the Holder as the Company's
attorney in fact to obtain, adjust, settle, and cancel any insurance described
in this section and to endorse in favor of the Holder any and all drafts and
other instruments with respect to such insurance. The within appointment, being
coupled with an interest, is irrevocable until this Agreement is terminated by a
written instrument executed by a duly authorized officer of the Holder. The
Holder shall not be liable on account of any exercise pursuant to said power
except for any exercise in actual willful misconduct and bad faith. The Holder
may apply any proceeds of such insurance against the Obligations, whether or not
such have matured, in such order of application as the Holder may determine.
4.21 Interest in the Company. Without the prior written consent of the
Holder, CRI shall not transfer or otherwise dispose of its interest in the
Company, or any portion thereof, and shall maintain such interest free and clear
of all claims, liens, encumbrances and legal process (other than Permitted
Encumbrances), until such time as the total amounts due under the Note have been
ARTICLE V: INDEMNIFICATION
5.01 Indemnification. The Company hereby agrees to indemnify, defend
and hold the Holder harmless jointly and severally from and against any claim,
suit, loss, liability, damage or expense (including attorneys' fees and
expenses) resulting from or arising out of the Loan Agreement and the
transactions contemplated therein with the Company, except for any such claims
resulting from the gross negligence or willful misconduct of the Holder as
determined by a court of competent jurisdiction after the expiration of all
applicable appeal periods. Any actual or threatened claim may be defended,
compromised, settled, or pursued by the Holder with counsel of the Holder's'
selection, but at the expense of the Company.
ARTICLE VI: DEFAULT AND REMEDIES
Upon the occurrence of either (a) the failure of the Company to perform
any term, covenant or agreement contained herein, in the Note, the Loan
Agreement, or any other document executed and delivered in connection herewith,
(b) any representation or warranty of the Company under this Agreement, the Note
or the Loan Agreement or any other document executed and delivered in connection
herewith shall not be correct in any material respect upon the date when made or
deemed to have been made or repeated or (c) the occurrence of any Event of
Default under and as defined in the Note, an event of default shall have
occurred hereunder and the Holder shall be entitled at its election, without
notice of its election and without demand to exercise, in addition to those
available at law or in equity, any or all of the following rights and remedies:
6.01 Acceleration. The Holder may declare all Obligations immediately
due and payable (provided upon the occurrence of an event of default on account
of a petition in bankruptcy filed by the Company all Obligations shall become
immediately due and payable without any action by the Holder).
6.02 Assemble Collateral. The Holder may require the Company (at the
Company's sole expense) to assemble and to forward promptly any or all of the
Goods, Equipment, Chattel Paper, and Inventory to the Holder at such location(s)
as shall be reasonably required by the Holder.
6.03 Take Possession. Without breaching the peace, the Holder may enter
upon the premises where any Goods, Equipment, Chattel Paper or Inventory is
located and take immediate possession thereof, by summary proceedings or
otherwise, and the Holder may remove the Goods, Equipment, Chattel Paper or
Inventory, all without liability of the Holder to the Company for or by reason
of such entry, taking of possession or removal, whether for the restoration of
damage to property caused by such taking or otherwise.
6.04 Appointment of Receiver. The Holder shall be entitled to
appointment of a receiver to take possession of and to manage all or any portion
of the Collateral. The Holder may obtain such appointment without notice to, or
demand of the Company, on an ex parte basis before any court of competent
jurisdiction, and without regard to the adequacy of the Collateral as security
for the Obligations.
6.05 Sale of Collateral. The Holder may sell, assign, and deliver or
otherwise dispose of or cause to be sold or otherwise disposed of, the whole or
any part of the Collateral, at one (1) or more commercially reasonable public or
private sales, without demand or advertisement of the time or place of sale or
of any adjournment thereof, each of which is hereby expressly waived by the
Company. The sale or other disposition may be made for such price and upon such
terms and conditions as the Holder may deem best in its exercise of its
commercially reasonable discretion. The Holder may apply the proceeds from such
sale or sales or such other disposition or dispositions: first, to the
settlement of all liens or claims on the Collateral with a lien priority greater
than that of the Holder, if any; second, to the payment of all expenses
connected with the assembly, preservation, preparation, and sale or other
disposition of the Collateral, including any trustees' or auctioneers' fees,
commissions or other expenses; third, to the payment of all amounts due under
the Note and all other monetary Obligations; and fourth, returning the excess,
if any, to the Company. The Company hereby expressly waives all rights of
appraisal, whether before or after the sale or other disposition, and any right
of redemption after the sale or other disposition. The Company shall have the
right to redeem any of the Collateral up to the time of the sale or other
disposition by paying to the Holder the aggregate indebtedness under the Note
and this Agreement, together with all costs incurred by the Holder in collecting
such amounts or in enforcing its rights and remedies hereunder, and any other
monetary Obligations then due and owing.
6.06 Attorney-in-Fact. The Company hereby irrevocably appoints the
Holder as Company's attorney-in-fact, with power of substitution, to do each of
the following in the name of Company or in the name of the Holder or otherwise,
for the use and benefit of the Holder, but at the cost and expense of the
Company, and without notice to the Company:
(a) notify the debtors or other party(ies) obligated under
any of the Accounts, Chattel Paper or General Intangibles to make payments
thereon directly to the Holder, and to take control of the cash and non-cash
proceeds of any Collateral;
(b) compromise, extend, or renew any of the Collateral or deal
with the same as it may deem advisable;
(c) release, make exchanges, substitutions, or surrender
of all or any part of the Collateral;
(d) remove from Company's place of business all books, records,
ledger sheets, correspondence, invoices and documents, relating to or evidencing
any of the Collateral or without cost or expense to the Holder, make such use of
the Company's place(s) of business as may be reasonably necessary to administer,
control and collect the Collateral;
(e) repair, alter or supply goods, if any, necessary to fulfill
in whole or in part the purchase order of any Account debtor;
(f) demand, collect, receipt for and give renewals, extensions,
discharges and releases of any of the Collateral;
(g) institute and prosecute legal and equitable proceedings to
enforce collection of, or realize upon, any of the Collateral;
(h) settle, renew, extend, compromise, compound, exchange or
adjust claims with respect to any of the Collateral or any legal proceedings
brought with respect thereto;
(i) endorse the name of the Company upon any items of payment
relating to the Collateral or upon any proof of claim in bankruptcy against an
(j) institute and prosecute legal and equitable proceedings to
reclaim any of the goods sold to any debtor obligated on an Account, Chattel
Paper, or General Intangible at a time when such debtor was insolvent;
(k) receive and open all mail addressed to the Company and
notify the postal authorities to change the address for the delivery of mail to
the Company to such address as the Holder may designate; and
(l) execute and deliver on behalf of the Company one or more
instruments of assignment of the Intellectual Property (or application, letters
patent or recording relating thereto), in form suitable for filing, recording or
6.07 Right to Make Payments or Otherwise Cure. Whether or not such
failure shall constitute an Event of Default under the terms of the Note, the
Holder may, in its sole discretion, pay any amount or do any act which the
Company fails to do or pay as required by the terms of this Agreement. The
Holder may also take any actions, make any payments, or incur any reasonable
expenses (including, without limitation, the payment of filing fees, court
costs, travel expenses and attorneys' fees) as may be necessary or appropriate
to preserve, defend, protect, maintain, record or enforce the Obligations, the
Collateral, or the assignment granted hereunder.
6.08 Right to Defend. Whether or not such failure shall constitute an
Event of Default under the terms of the Note, if any of the Collateral is or
becomes the subject of any litigation or other proceeding and the Company fails
to fully defend such litigation or other proceeding and to fully protect the
Company's and the Holder's' rights in such Collateral in good faith, then the
Holder may, at its sole option, elect to defend and control the
defense of such litigation or other proceeding, including the right to: (a)
select and retain counsel; (b) determine whether settlement shall be offered or
accepted; and (c) determine and negotiate all settlement terms. Any Holder
choosing to do so shall be fully indemnified by the Company and shall be
reimbursed for all costs of litigation and settlement, including, without
limitation, all costs, expenses and reasonable attorneys' fees. Any payments
made pursuant to the authority granted in Section 6.07 above or this Section
6.08 shall be deemed added to the principal amount outstanding under the Note
and shall accrue interest as provided in the Note.
ARTICLE VII:ADDITIONAL PROVISIONS
7.01 Deficiency. The Company shall be liable for all Obligations
remaining after crediting to the Company any net proceeds received by the Holder
following exercise of any of its rights and remedies hereunder.
7.02 No Duty to Act. Nothing contained in this Agreement shall be
construed as requiring the Holder to take any particular enforcement or remedial
action or combination of enforcement or remedial actions at any time.
7.03 Remedies Not Limited; Partial Exercise. All of the Holder's'
rights and remedies, whether provided under this Agreement, at law, in equity,
or otherwise shall be cumulative and none is exclusive. Such rights and remedies
may be enforced alternatively, successively or concurrently, and the Company
hereby agrees that the Holder may enforce its rights separately hereunder with
respect to individual items or classes of Collateral without waiving or
prejudicing in any respect a Holder's rights hereunder with respect to any other
items or classes of Collateral. The Holder may exercise any other right or
remedy which may be available to it under this Agreement or Applicable Law or
may proceed by appropriate court action to enforce the terms hereof or to
recover damages for the breach hereof or to rescind this Agreement in whole or
7.04 Costs of Enforcement. The Company shall be liable for all costs
incurred by the Holder in collecting any sums owed to the Holder under the Note
or in otherwise enforcing any of the Obligations (whether or not suit is
brought), including, but not limited to, all attorneys' fees and expenses, court
costs, and costs of consultants, appraisers and other advisors retained by the
7.05 Mitigation of Damages. To the extent permitted by Applicable Law,
Company hereby waives any notice or other mandatory requirements of Applicable
Law, now or hereafter in effect, which might require Holder to sell, lease or
otherwise use any of the Collateral in mitigation of Holder's damages; provided,
however, that Company does not waive any legal requirement that a Holder act in
a commercially reasonable manner.
7.06 No Waivers by Holder. No failure of the Holder to exercise, or
delay by the Holder in the exercise of, any of its rights and remedies granted
herein following the occurrence of an event of default shall constitute a waiver
of any of the Holder's' rights with respect to such event of default or any
subsequent event of default (whether or not similar). Any failure or delay by a
Holder to require strict performance by Company of any of the provisions,
warranties, terms and conditions contained herein or in any other agreement,
document or instrument, shall not affect the Holder's right to demand strict
compliance and performance therewith.
7.07 Holder's Actions. The Holder may take or release the Collateral or
other security, may release any party primarily or secondarily liable for any
indebtedness to the Holder, may grant extensions, renewals or indulgences with
respect to such indebtedness, and may apply any other security therefor held by
it to the satisfaction of such indebtedness, all without prejudice to any of its
rights or the Company's obligations hereunder or under the Note.
7.08 Notices. All notices, claims, certificates, requests, demands and
other communications hereunder shall be in writing and shall be deemed to have
been duly given if delivered personally, if delivered by fax
transmission with printed confirmation receipt, if sent by recognized overnight
courier service (e.g. Federal Express), or if sent by U.S. registered or
certified mail, postage prepaid, return receipt requested, as follows:
To the Company:
If to the Company, at Communications Research, Inc., 69 Wesley Street,
South Hackensack, New Jersey 07606, Attn: Carl R. Ceragno, President, with a
copy to Larry Hartman, Esq., 1241 N. Kenmore Avenue, Los Angeles, CA 90028;
If to TeleWriter Corporation, Inc., 69 Wesley Street, South Hackensack,
New Jersey 07606, Attn: Carl R. Ceragno, Vice President, with a copy to Larry
Hartman, Esq., 1241 N. Kenmore Avenue, Los Angeles, CA 90028;
If to the Holder, at Communication Systems Technology, Inc., 8975
Guilford Road, Columbia, Maryland, Attention: President, or at such other
address or addresses as may have been furnished to the Company in writing by the
Holder, with a copy to Christian E. Plaza, Esq., Piper & Marbury L.L.P., 1200
19th Street, N.W., Washington, D.C. 20036-2430;
The Company agrees that ten (10) days prior notice of the time and
place of any public sale of all or any portion of the Collateral, or of the time
after which a private sale of all or any portion of the Collateral will be made,
is commercially reasonable notice.
7.09 Further Assurances. The Company will promptly and duly execute and
deliver to the Holder such further documents and assurances and take such
further actions as a Holder may from time to time reasonably request in order to
carry out the intent and purpose of this Agreement and to establish and protect
the rights and remedies created or intended to be created in favor of the Holder
hereunder. Without limiting the generality of the foregoing, the Company hereby
authorizes the Holder to execute and file one or more financing statements (or
similar documents) with respect to the Collateral, signed only by The Holder.
7.10 Successors and Assigns. This Agreement shall inure to the benefit
of the Holder and its successors and assigns, and shall be binding upon the
successors and assigns of the Company.
7.11 Assignment. The Company may not assign any of its rights or
delegate any of its duties under this Agreement without prior written consent of
the Holder. The Holder may assign all of its right, title and interest in and to
this Agreement and the Collateral to any transferee of the Note or interest in
7.12 Governing Law. This Agreement and the rights and obligations of
the parties hereunder shall, in all respects, be governed by, and construed in
accordance with, the laws of the State of Maryland, excluding its conflict of
laws rules, including all matters of construction, validity and performance,
regardless of the location of the Collateral.
7.13 No Oral Modifications or Waivers. This Agreement shall not be
modified nor any of its provisions waived except by a writing signed by the
party against whom such modification or waiver is sought to be enforced.
7.14 Termination of Agreement; Release of Security Interest. Upon the
repayment in full of all amounts owing under the Note and the satisfaction of
all other Obligations, this Agreement shall terminate without further action by
the Holder. Notwithstanding the foregoing, upon request, the Holder will execute
and deliver to the Company any releases, termination statements or similar
instruments of reconveyance as the Company may reasonably
request. All such instruments and documents shall be prepared by the Company and
filed or recorded by the Company, at the Company's sole expense, and the Holder
shall not have any duty, obligation or liability with respect thereto.
7.15 Severability. Any provision of this Agreement or of any related
instrument or document executed pursuant hereto which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof or thereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction. To the extent permitted
by applicable law, the Company hereby waives any provision of law which renders
any provision hereof or thereof prohibited or unenforceable in any respect. 7.16
Captions. The captions in this Agreement are for convenience of reference only
and shall not define or limit any of the terms or provisions hereof.
IN WITNESS WHEREOF, and intending to be legally bound hereby, the
undersigned execute this Agreement under seal as of the day and year first above
COMMUNICATIONS RESEARCH, INC.
TELEWRITER CORPORATION, INC.