INDEMNIFICATION, REIMBURSEMENT AND SECURITY AGREEMENT THIS INDEMNIFICATION, REIMBURSEMENT AND SECURITY AGREEMENT (this a Nevada corporation (the "Company"), eModel, Inc., a Delaware corporation (hereinafter together with any predecessor entities, the...
EXHIBIT 10.18
INDEMNIFICATION, REIMBURSEMENT
THIS INDEMNIFICATION, REIMBURSEMENT AND SECURITY AGREEMENT (this
"Agreement"), dated as of January 14, 2002 between Sector Communications, Inc.,
a Nevada corporation (the "Company"), eModel, Inc., a Delaware corporation
(hereinafter together with any predecessor entities, the "Subsidiary" and
together with the Company, the "Debtors") and Xxxxxx X. Xxxxxxx, a resident of
the Commonwealth of Virginia (the " Secured Party").
WHEREAS, the Secured Party has previously executed and delivered those
certain guaranties listed on Exhibit A attached hereto (the "Guaranties")
pursuant to which the Secured Party has guaranteed the payment and/or
performance of certain obligations of the Debtors (the "Guaranteed Agreements")
to third party lenders, lessors and other creditors identified in the
Guaranties; and
WHEREAS, it is a condition precedent to the Secured Party's consenting to
that certain Agreement and Plan of Merger dated January 14, 2002, by and among
the Debtors, the Company, Sector Communications Delaware, Inc., a Delaware
corporation, and Xxxxxxx Xxxxx (the "Merger Agreement"), and in consideration of
Secured Party's relinquishing certain voting control of the Debtors, that the
Debtors agree to indemnify, hold harmless and reimburse the Secured Party with
respect to any amounts paid from time to time by the Secured Party under the
Guaranties, and that the Debtors secure their obligations to the Secured Party
by granting a security interest to the Secured Party in the collateral more
particularly described in this Agreement; and
WHEREAS, the Debtors have benefited and will continue to benefit from the
Guaranties by inducing third party lenders, lessors and other creditors to
extend credit to the Debtors as set forth in the Guaranteed Agreements in
reliance on the Guaranties, which extensions of credit would not have been
available to the Debtors if the Secured Party had not issued the Guaranties, and
the Debtors desire to induce the Secured Party to consent to the Merger
Agreement and relinquish voting control of the Debtors notwithstanding that the
Secured Party shall remain contingently liable under the Guaranties to said
creditors of the Debtors after consummation of the transaction contemplated in
the Merger Agreement.
NOW, THEREFORE, in consideration of the Guaranties and the promises
contained herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Debtors hereby agree that the
foregoing recitals are true and correct, and the Debtors hereby jointly and
severally unconditionally and absolutely agree to INDEMNIFY, REIMBURSE,
EXONERATE, DEFEND AND HOLD THE SECURED PARTY HARMLESS from and against any and
all indebtedness, damages, costs, expenses, obligations and liabilities of every
kind and nature, whether now existing or hereunder created or arising, whether
direct or indirect, absolute or contingent, which Secured Party pays or incurs
under the Guaranties with respect to the Guaranteed Agreements, including court
costs and reasonable attorney's fees which Secured Party pays or incurs in
connection therewith, together with interest on any such amounts paid or
incurred by the Secured Party pursuant to the Guaranties as hereinafter
provided, all on the terms and conditions set forth in this Agreement.
1. DEFINITIONS.
The term "State", as used herein, means the Commonwealth of Virginia. All terms
defined in the Uniform Commercial Code of the State and used herein shall have
the same definitions herein as specified therein. However, if a term is defined
in Article 9 of the Uniform Commercial Code of the State differently than in
another Article of the Uniform Commercial Code of the State, the term has the
meaning specified in Article 9. The term "Obligations", as used herein, means
all of the indebtedness, obligations and liabilities of the Debtors to the
Secured Party, individually or collectively, whether direct or indirect, joint
or several, absolute or contingent, due or to become due, now existing or
hereafter arising, under or in respect of this Agreement or at common law,
including without limitation the indemnity and reimbursement obligations of the
Debtors to the Secured Party described herein. The term "Default", as used
herein, means the failure of the Debtors to pay or perform any of the
Obligations as and when due to be paid or performed.
2. GRANT OF SECURITY INTEREST.
The Debtors hereby grant to the Secured Party, to secure the payment and
performance in full of all of the Obligations, a security interest in and so
pledges and assigns to the Secured Party the following properties, assets and
rights of the Debtor, wherever located, whether now owned or hereafter acquired
or arising, and all proceeds and products thereof (all of the same being
hereinafter called the "Collateral"): all personal and fixture property of every
kind and nature including without limitation all goods (including inventory,
equipment and any accessions thereto), instruments (including promissory notes),
documents, accounts (including health-care-insurance receivables), chattel paper
(whether tangible or electronic), deposit accounts, letter-of-credit rights
(whether or not the letter of credit is evidenced by a writing), commercial tort
claims, securities and all other investment property, supporting obligations,
any other contract rights or rights to the payment of money, insurance claims
and proceeds, and all general intangibles (including the Debtors' database of
models (the "Database") and all payment intangibles). The Secured Party
acknowledges that the attachment of its security interest in any commercial tort
claim as original collateral is subject to the Debtors' compliance with Sec.4.7.
3. AUTHORIZATION TO FILE FINANCING STATEMENTS.
The Debtors hereby irrevocably authorize the Secured Party at any time and from
time to time to file in any filing office in any Uniform Commercial Code
jurisdiction any initial financing statements and amendments thereto that (a)
indicate the Collateral (i) as all assets of the Debtors or words of similar
effect, regardless of whether any particular asset comprised in the Collateral
falls within the scope of Article 9 of the Uniform Commercial Code of the State
or such jurisdiction, or (ii) as being of an equal or lesser scope or with
greater detail, and (b) provide any other information required by part 5 of
Article 9 of the Uniform Commercial Code of the State, or such other
jurisdiction, for the sufficiency or filing office acceptance of any financing
statement or amendment, including (i) whether any of the Debtors is an
organization, the type of organization and any organizational identification
number issued to the Debtors and, (ii) in the case of a financing statement
filed as a fixture filing or indicating Collateral as as-extracted collateral or
timber to be cut, a sufficient description of real property to which the
Collateral relates. The Debtors agree to furnish any such information to the
Secured Party promptly upon the Secured Party's request.
4. OTHER ACTIONS.
To further the attachment, perfection and first priority of, and the ability of
the Secured Party to enforce, the Secured Party's security interest in the
Collateral, and without limitation on the Debtors' other obligations in this
Agreement, the Debtors agree, in each case at the Debtors' expense, to take the
following actions with respect to the following Collateral:
4.1. PROMISSORY NOTES AND TANGIBLE CHATTEL PAPER. If the Debtors shall
at any time hold or acquire any promissory notes or tangible chattel paper, the
Debtors shall forthwith endorse, assign and deliver the same to the Secured
Party, accompanied by such instruments of transfer or assignment duly executed
in blank as the Secured Party may from time to time specify.
4.2. DEPOSIT ACCOUNTS. For each deposit account that the Debtors at
any time open or maintain, the Debtors shall, at the Secured Party's request and
option, pursuant to an agreement in form and substance satisfactory to the
Secured Party, cause the depositary bank to comply at any time with instructions
from the Secured Party to such depositary bank directing the disposition of
funds from time to time credited to such deposit account, without further
consent of the Debtors. The Secured Party agrees with the Debtors that the
Secured Party shall not give any such instructions or withhold any withdrawal
rights from the Debtors, unless Default has occurred. The provisions of this
paragraph shall not apply to (i) any deposit account for which the Debtors, the
depositary bank and the Secured Party have entered into a cash collateral
agreement specially negotiated among the Debtors, the depositary bank and the
Secured Party for the specific purpose set forth therein, (ii) a deposit account
for which the Secured Party is the depositary bank and is in automatic control,
and (iii) deposit accounts specially and exclusively used for payroll, payroll
taxes and other employee wage and benefit payments to or for the benefit of the
Debtors' salaried employees.
4.3. INVESTMENT PROPERTY. If the Debtors shall at any time hold or
acquire any certificated securities, the Debtors shall forthwith endorse, assign
and deliver the same to the Secured Party, accompanied by such instruments of
transfer or assignment duly executed in blank as the Secured Party may from time
to time specify. If any securities now or hereafter acquired by the Debtors are
uncertificated and are issued to the Debtors or their nominee directly by the
issuer thereof, the Debtors shall immediately notify the Secured Party thereof
and, at the Secured Party's request and option, pursuant to an agreement in form
and substance satisfactory to the Secured Party, either (a) cause the issuer to
agree to comply with instructions from the Secured Party as to such securities,
without further consent of the Debtors or such nominee, or (b) arrange for the
Secured Party to become the registered owner of the securities. If any
securities, whether certificated or uncertificated, or other investment property
now or hereafter acquired by the Debtors are held by the Debtors or their
nominee through a securities intermediary or commodity intermediary, the Debtors
shall immediately notify the Secured Party thereof and, at the Secured Party's
request and option, pursuant to an agreement in form and substance satisfactory
to the Secured Party, either (i) cause such securities intermediary or (as the
case may be) commodity intermediary to agree to comply with entitlement orders
or other instructions from the Secured Party to such securities intermediary as
to such securities or other investment property, or (as the case may be) to
apply any value distributed on account of any commodity contract as directed by
the Secured Party to such commodity intermediary, in each case without further
consent of the Debtors or such nominee, or (ii) in the case of financial assets
or other investment property held through a securities intermediary, arrange for
the Secured Party to become the entitlement holder with respect to such
investment property, with the Debtors being permitted, only with the consent of
the Secured Party, to exercise rights to withdraw or otherwise deal with such
investment property. The Secured Party agrees with the Debtors that the Secured
Party shall not give any such entitlement orders or instructions or directions
to any such issuer, securities intermediary or commodity intermediary, and shall
not withhold its consent to the exercise of any withdrawal or dealing rights by
the Debtors, unless Default has occurred. The provisions of this paragraph shall
not apply to any financial assets credited to a securities account for which the
Secured Party is the securities intermediary.
4.4. COLLATERAL IN THE POSSESSION OF A BAILEE. If any Collateral is at
any time in the possession of a bailee, the Debtors shall promptly notify the
Secured Party thereof and, at the Secured Party's request and option, shall
promptly obtain an acknowledgement from the bailee, in form and substance
satisfactory to the Secured Party, that the bailee holds such Collateral for the
benefit of the Secured Party, and that such bailee agrees to comply, without
further consent of the Debtors, with instructions from the Secured Party as to
such Collateral. The Secured Party agrees with the Debtors that the Secured
Party shall not give any such instructions unless Default has occurred.
4.5. ELECTRONIC CHATTEL PAPER AND TRANSFERABLE RECORDS. If the Debtors
at any time hold or acquire an interest in any electronic chattel paper or any
"transferable record," as that term is defined in Section 201 of the federal
Electronic Signatures in Global and National Commerce Act, or in Sec.16 of the
Uniform Electronic Transactions Act as in effect in any relevant jurisdiction,
the Debtors shall promptly notify the Secured Party thereof and, at the request
and option of the Secured Party, shall take such action as the Secured Party may
reasonably request to vest in the Secured Party control, under Sec.9-105 of the
Uniform Commercial Code, of such electronic chattel paper or control under
Section 201 of the federal Electronic Signatures in Global and National Commerce
Act or, as the case may be, Sec.16 of the Uniform Electronic Transactions Act,
as so in effect in such jurisdiction, of such transferable record. The Secured
Party agrees with the Debtors that the Secured Party will arrange, pursuant to
procedures satisfactory to the Secured Party and so long as such procedures will
not result in the Secured Party's loss of control, for the Debtors to make
alterations to the electronic chattel paper or transferable record permitted
under XXX Xxx.0-000 or, as the case may be, Section 201 of the federal
Electronic Signatures in Global and National Commerce Act or Sec.16 of the
Uniform Electronic Transactions Act for a party in control to make without loss
of control, unless a Default has occurred.
4.6. LETTER-OF-CREDIT RIGHTS. If the Debtors are at any time
beneficiaries under a letter of credit, the Debtors shall promptly notify the
Secured Party thereof and, at the request and option of the Secured Party, the
Debtors shall, pursuant to an agreement in form and substance satisfactory to
the Secured Party, either (i) arrange for the issuer and any confirmer or other
nominated person of such letter of credit to consent to an assignment to the
Secured Party of the proceeds of the letter of credit or (ii) arrange for the
Secured Party to become the transferee beneficiary of the letter of credit, with
the Secured Party agreeing, in each case, that the proceeds of the letter to
credit are to be applied as provided herein.
4.7. COMMERCIAL TORT CLAIMS. If the Debtors shall at any time hold or
acquire a commercial tort claim, the Debtors shall immediately notify the
Secured Party in a writing signed by the Debtors of the particulars thereof and
grant to the Secured Party in such writing a security interest therein and in
the proceeds thereof, all upon the terms of this Agreement, with such writing to
be in form and substance satisfactory to the Secured Party.
4.8. OTHER ACTIONS AS TO ANY AND ALL COLLATERAL. The Debtors further
agree, at the request and option of the Secured Party, to take any and all other
actions the Secured Party may determine to be necessary or useful for the
attachment, perfection and first priority of, and the ability of the Secured
Party to enforce, the Secured Party's security interest in any and all of the
Collateral, including, without limitation, (a) executing, delivering and, where
appropriate, filing financing statements and amendments relating thereto under
the Uniform Commercial Code, to the extent, if any, that the Debtors' signature
thereon is required therefor, (b) causing the Secured Party's name to be noted
as secured party on any certificate of title for a titled good if such notation
is a condition to attachment, perfection or priority of, or ability of the
Secured Party to enforce, the Secured Party's security interest in such
Collateral, (c) complying with any provision of any statute, regulation or
treaty of the United States as to any Collateral if compliance with such
provision is a condition to attachment, perfection or priority of, or ability of
the Secured Party to enforce, the Secured Party's security interest in such
Collateral, (d) obtaining governmental and other third party waivers, consents
and approvals in form and substance satisfactory to Secured Party, including,
without limitation, any consent of any licensor, lessor or other person
obligated on Collateral, (e) obtaining waivers from mortgagees and landlords in
form and substance satisfactory to the Secured Party and (f) taking all actions
under any earlier versions of the Uniform Commercial Code or under any other
law, as reasonably determined by the Secured Party to be applicable in any
relevant Uniform Commercial Code or other jurisdiction, including any foreign
jurisdiction.
5. INDEMNITY.
The Debtors hereby jointly and severally unconditionally and absolutely agree to
indemnify, reimburse, exonerate and hold the Secured Party harmless from and
against any and all indebtedness, damages, costs, expenses, obligations and
liabilities of every kind and nature, whether now existing or hereunder created
or arising, whether direct or indirect, absolute or contingent, which Secured
Party pays or incurs under the Guaranties with respect to the Guaranteed
Agreements, including court costs and reasonable attorney's fees which Secured
Party pays or incurs in connection therewith, together with interest on any such
amounts paid or incurred by the Secured Party pursuant to the Guaranties as
hereinafter provided.
5.1. GUARANTEED AGREEMENTS. Debtors covenant and agree to pay and
perform their liabilities and obligations under the Guaranteed Agreements
promptly as and when the same shall become due thereunder, and Debtors shall not
commit nor permit to occur any default under the provisions of the Guaranteed
Agreements. The Secured Party shall notify the Debtors in writing of any notice
or demand for payment or performance received by the Secured Party under any of
the Guaranties from any creditor thereunder. Any such notice by the Secured
Party shall be given in accordance with Section 9.05 of the Merger Agreement,
and notice to either the Company or Subsidiary shall constitute notice to the
other. Debtors hereby jointly and severally agree that they shall promptly (and
in any event within ten (10) days after such notice from the Secured Party) pay
or perform their respective obligations under the Guaranteed Agreements as to
which payment or performance has been demanded from the Secured Party under the
respective Guaranty(ies). If the Debtors in good faith dispute whether such
payment or performance is in fact due under the Guaranteed Agreements, then the
Debtors may contest the same in accordance with any contest procedures set forth
in the Guaranteed Agreements or applicable law, provided that the Debtors shall
diligently and continuously pursue the contest to resolution, and provided
further that the Debtors shall deposit with the Secured Party within said
ten-day period immediately available funds, or other liquid collateral
acceptable to the Secured Party in his sole discretion, in an amount or having a
value equal to 150% of the amount or value of the disputed payment or
performance as additional security for the Debtors' Obligations hereunder. If
the Debtors' contested obligation is not resolved with the respective creditor
within sixty (60) days after such notice from the Secured Party, or if the
contest is resolved adversely to the Debtors, then the Secured Party shall have
the right to apply such deposited funds (and/or to sell the deposited collateral
and apply the proceeds thereof) against the payment and performance of the
Debtor's obligations under the Guaranteed Agreements that were demanded of the
Secured Party under the respective Guaranty(ies).
5.2. DEFENSE OF CLAIMS. The Debtors jointly and severally agree to
defend and hold the Secured Party harmless against any liability for the payment
or performance of any Guaranteed Agreements pursuant to any of the Guaranties,
including court costs and attorneys fees paid or incurred by the Secured Party
in defending against any claim against the Secured Party by any creditor for any
such payment or performance under any of the Guaranties. The Secured Party may
assent to be defended against any such claim by the Debtors' legal counsel, but
the Secured Party may at any time in his sole discretion engage separate legal
counsel of his own selection to defend the Secured Party against such claims,
but in any event the Secured Party shall have the right to direct the conduct of
his defense, and the payment of all costs of such defense by any counsel shall
be included in the Obligations of the Debtors under this Agreement and shall be
payable upon demand by the Secured Party from time to time.
5.3. REIMBURSEMENT. The Secured Party shall notify the Debtors in
writing of any payment or performance of any Guaranteed Agreement made by the
Secured Party under any of the Guaranties pursuant to any demand by any creditor
thereunder. Any such notice by the Secured Party shall be given in accordance
with Section 9.05 of the Merger Agreement, and notice to either the Company or
Subsidiary shall constitute notice to the other. Debtors hereby jointly and
severally agree that they shall promptly (and in any event within ten (10) days
after such notice from the Secured Party) reimburse the Secured Party for the
full amount of any such payment, or the full amount paid or incurred by the
Secured Party in performing the demanded obligations under the Guaranteed
Agreements, together with interest thereon from the date so paid or incurred by
the Secured Party until the date fully reimbursed by the Debtors at the rate of
seven percent (7%) per annum. All amounts payable hereunder (including such
interest) shall be payable by wire transfer of immediately available funds to an
account designated by the Secured Party or by certified or official bank check
payable to the Secured Party sent to the Secured Party by nationally recognized
overnight courier service at the address of the Secured Party as set forth on
the signature page hereto or such other address as shall be designated in
writing by the Secured Party to the Debtors. All payments shall be applied first
to unpaid interest, next to costs and expenses incurred by the Secured Party,
and thereafter to the principal amount of the Obligations.
5.4. COSTS AND EXPENSES. Debtors agree to pay, upon Secured Party's
demand therefor, any and all costs, fees and expenses (including reasonable
attorney's fees, costs and expenses) incurred by Secured Party (i) in enforcing
any of Secured Party's rights hereunder, and (ii) in representing Secured Party
in any litigation, contest, suit or dispute, or to commence, defend or intervene
or to take any action with respect to any litigation, contest, suit or dispute
(whether instituted by Secured Party, Debtors or any other person) in any way
relating to the Guaranteed Agreements and to the extent not paid the same shall
become part of the Obligations hereunder. Enforcement costs and interest are
included in the "Obligations" and secured by the applicable provisions of this
Agreement.
5.5. UNCONDITIONAL OBLIGATIONS. Debtors' obligations hereunder shall
be unconditional and shall not subject to any defense, setoff, counterclaim or
recoupment whatsoever, irrespective of the genuineness, validity, regularity or
enforceability of the Guaranteed Agreements or the Guaranties or any conduct of
Debtors or the Secured Party which might constitute a legal or equitable
discharge of a surety, guarantor or guaranty.
5.6. RELIANCE. Secured Party may continue to act in reliance on
Debtors' indemnification and hold harmless provisions hereunder, and this
Agreement shall remain in full force and effect with respect to the Obligations
until all amounts to be paid and actions to be performed by Debtors under the
Guaranteed Agreements have been paid and performed in full, or all of the
Guaranties shall have been released in writing by the respective creditors
thereunder. Notwithstanding anything herein to the contrary, Debtors agree that
this Agreement shall continue to be effective or be reinstated, as the case may
be, if at any time payment, or any part thereof, by the Debtors under this
Agreement is set aside, rescinded, or must otherwise be returned by Secured
Party for any reason, including the insolvency, bankruptcy or reorganization of
Debtors or any other person or entity, and this Agreement shall be binding and
enforceable as though such returned or rescinded payment had never been made.
5.7. NO IMPAIRMENT. The liability of Debtors hereunder shall not be
affected or impaired by, and Secured Party is hereby expressly authorized to
make from time to time, without notice to anyone, any sale, pledge, surrender,
compromise, release, renewal, extension, modification or other disposition of or
with respect to the Obligations or this Agreement or any security or collateral
therefor, and such liability shall not be affected or impaired by any acceptance
by Secured Party of any security for, or other guarantors of, the Obligations,
or by any forbearance or indulgence by Secured Party in the collection of or any
failure, neglect or omission on its part to realize upon any collateral or
security therefor, or to enforce any lien upon or right of appropriation of any
monies, credits or property of Debtors in the possession of Secured Party, or by
any application of payments or credits on the Obligations. Any and all monies,
credits or other property belongings to Debtors in the possession or under the
control of Secured Party from time to time may be appropriated and applied
against the liability of Debtors hereunder.
5.8. WAIVERS. Each of the Debtors hereby severally waives presentment,
protest, demand, notice of dishonor or default, notice of acceptance of this
Agreement, notice of any extensions granted or other action taken in reliance
hereon and all demands and notices of any kind in connection with this Agreement
or the Obligations. No delay on the part of Secured Party in the exercise of any
right or remedy shall preclude other or further exercise thereof or the exercise
of any other right or remedy. No action by Secured Party permitted hereunder
shall in any way impair or affect this Agreement. As condition to payment or
performances by Debtors under this Agreement, Secured Party shall not be
required to, and Debtors hereby waive any rights to require Secured Party to,
prosecute or seek to enforce any remedies against any other party liable to
Secured Party on account of the Guaranties, the Guaranteed Agreements or the
Obligations or to require Secured Party to seek to enforce or resort to any
remedies with respect to any security interests, liens or encumbrances granted
to Secured Party by Debtors or any other party on account of the Obligations.
5.9. SUBROGATION. In addition to the other rights and remedies of the
Secured Party hereunder, to the extent that the Secured Party makes any payment
or renders any performance under a Guaranteed Agreement demanded by any creditor
of the Debtors pursuant to any of the Guaranties, the Secured Party shall be
subrogated to the fullest extent provided by applicable law to all claims,
rights and remedies of such creditor against the Debtors in respect of such
Guaranteed Agreement, including any liens or security interests in favor of such
creditor, and the Debtors shall not be released or discharged with respect to
any such claim, right, remedy, lien or security interest until the Debtors shall
have repaid and reimbursed the Secured Party in full for such payment or
performance by the Secured Party in accordance with the provisions of this
Agreement.
6. TERMINATION. Subject to Section 5.6, this Agreement shall terminate when
all amounts to be paid and actions to be performed by Debtors under the
Guaranteed Agreements have been paid and performed in full, or all of the
Guaranties shall have been released in writing by the respective creditors
Thereunder
7. COVENANTS CONCERNING DEBTORS' LEGAL STATUS.
The Debtors covenant with the Secured Party as follows: (a) without
providing at least 30 days prior written notice to the Secured Party, the
Debtors will not change their name, place of business or, if more than one,
chief executive office, or their mailing address or organizational
identification number if they have one, (b) if the Debtors do not have an
organizational identification number and later obtain one, the Debtors shall
forthwith notify the Secured Party of such organizational identification number,
and (c) the Debtors will not change their type of organization, jurisdiction of
organization or other legal structure.
8. REPRESENTATIONS AND WARRANTIES CONCERNING COLLATERAL, ETC.
The Debtors further represent and warrant to the Secured Party as follows:
(a) the Debtors are the owner of the Collateral, free from any right or claim or
any person or any adverse lien, security interest or other encumbrance, except
for the security interest created by this Agreement, (b) none of the Collateral
constitutes, or is the proceeds of, "farm products" as defined in
Sec.9-102(a)(34) of the Uniform Commercial Code of the State, (c) none of the
account debtors or other persons obligated on any of the Collateral is a
governmental authority covered by the Federal Assignment of Claims Act or like
federal, state or local statute or rule in respect of such Collateral, (d) the
Debtors hold no commercial tort claim except as indicated on the Perfection
Certificate, and (e) the Debtors have at all times operated its business in
compliance with all applicable provisions of the federal Fair Labor Standards
Act, as amended, and with all applicable provisions of federal, state and local
statutes and ordinances dealing with the control, shipment, storage or disposal
of hazardous materials or substances, (f) all other information set forth on the
Perfection Certificate pertaining to the Collateral is accurate and complete,
and (g) that there has been no change in any information provided in the
Perfection Certificate since the date on which it was executed by the Debtors.
9. COVENANTS CONCERNING COLLATERAL, ETC.
THE Debtors further covenant with the Secured Party as follows: (a) the
Collateral, to the extent not delivered to the Secured Party pursuant to Sec.4,
will be kept at those locations listed on the Perfection Certificate and the
Debtors will not remove the Collateral from such locations, without providing at
least 30 days prior written notice to the Secured Party, (b) except for the
security interest herein granted, the Debtors shall be the owner of the
Collateral free from any right or claim of any other person, lien, security
interest or other encumbrance, and the Debtors shall defend the same against all
claims and demands of all persons at any time claiming the same or any interests
therein adverse to the Secured Party, (c) the Debtors shall not pledge, mortgage
or create, or suffer to exist any right of any person in or claim by any person
to the Collateral, or any security interest, lien or encumbrance in the
Collateral in favor of any person, other than the Secured Party, (d) the Debtors
will keep the Collateral in good order and repair and will not use the same in
violation of law or any policy of insurance thereon, (e) the Debtors will permit
the Secured Party, or its designee, to inspect the Collateral at any reasonable
time, wherever located, (f) the Debtors will pay promptly when due all taxes,
assessments, governmental charges and levies upon the Collateral or incurred in
connection with the use or operation of such Collateral or incurred in
connection with this Agreement, (g) the Debtors will continue to operate, its
business in compliance with all applicable provisions of the federal Fair Labor
Standards Act, as amended, and with all applicable provisions of federal, state
and local statutes and ordinances dealing with the control, shipment, storage or
disposal of hazardous materials or substances, and (h) the Debtors will not sell
or otherwise dispose, or offer to sell or otherwise dispose, of the Collateral
or any interest therein except for (i) sales of inventory and licenses of
general intangibles other than the Database in the ordinary course of business
and (ii) so long as no Default has occurred, sales or other dispositions of
obsolescent items of equipment consistent with past practices.
10. INSURANCE.
10.1. MAINTENANCE OF INSURANCE. The Debtors will maintain with
financially sound and reputable insurers insurance with respect to its
properties and business against such casualties and contingencies as shall be in
accordance with general practices of businesses engaged in similar activities in
similar geographic areas. Such insurance shall be in such minimum amounts that
the Debtors will not be deemed a co-insurer under applicable insurance laws,
regulations and policies and otherwise shall be in such amounts, contain such
terms, be in such forms and be for such periods as may be reasonably
satisfactory to the Secured Party. In addition, all such insurance shall be
payable to the Secured Party as loss payee. Without limiting the foregoing, the
Debtors will (i) keep all of its physical property insured with casualty or
physical hazard insurance on an "all risks" basis, with broad form flood and
earthquake coverages and electronic data processing coverage, with a full
replacement cost endorsement and an "agreed amount" clause in an amount equal to
100% of the full replacement cost of such property, (ii) maintain all such
workers' compensation or similar insurance as may be required by law and (iii)
maintain, in amounts and with deductibles equal to those generally maintained by
businesses engaged in similar activities in similar geographic areas, general
public liability insurance against claims of bodily injury, death or property
damage occurring, on, in or about the properties of the Debtors; business
interruption insurance; and product liability insurance.
10.2. INSURANCE PROCEEDS. The proceeds of any casualty insurance in
respect of any casualty loss of any of the Collateral shall, subject to the
rights, if any, of other parties with an interest having priority in the
property covered thereby, (i) so long as no Default has occurred, be disbursed
to the Debtors for direct application by the Debtors solely to the repair or
replacement of the Debtors' property so damaged or destroyed and (ii) in all
other circumstances, be held by the Secured Party as cash collateral for the
Obligations. The Secured Party may, at its sole option, disburse from time to
time all or any part of such proceeds so held as cash collateral, upon such
terms and conditions as the Secured Party may reasonably prescribe, for direct
application by the Debtors solely to the repair or replacement of the Debtors'
property so damaged or destroyed, or the Secured Party may apply all or any part
of such proceeds to the Obligations.
10.3. CONTINUATION OF INSURANCE. All policies of insurance shall
provide for at least 60 days prior written cancellation notice to the Secured
Party. In the event of failure by the Debtors to provide and maintain insurance
as herein provided, the Secured Party may, at its option, provide such insurance
and charge the amount thereof to the Debtors. The Debtors shall furnish the
Secured Party with certificates of insurance and policies evidencing compliance
with the foregoing insurance provision.
11. COLLATERAL PROTECTION EXPENSES; PRESERVATION OF COLLATERAL.
11.1. EXPENSES INCURRED BY SECURED PARTY. In the Secured Party's
discretion, if the Debtors fail to do so, the Secured Party may discharge taxes
and other encumbrances at any time levied or placed on any of the Collateral,
maintain any of the collateral, make repairs thereto and pay any necessary
filing fees or insurance premiums. The Debtors agrees to reimburse the Secured
Party on demand for all expenditures so made. The Secured Party shall have no
obligation to the Debtors to make any such expenditures, nor shall the making
thereof be construed as the waiver or cure of any Default.
11.2. SECURED PARTY'S OBLIGATIONS AND DUTIES. Anything herein to the
contrary notwithstanding, the Debtors shall remain obligated and liable under
each contract or agreement comprised in the Collateral to be observed or
performed by the Debtors thereunder. The Secured Party shall not have any
obligation or liability under any such contract or agreement by reason of or
arising out of this Agreement or the receipt by the Secured Party of any payment
relating to any of the Collateral, nor shall the Secured Party be obligated in
any manner to perform any of the obligations of the Debtors under or pursuant to
any such contract or agreement, to make inquiry as to the nature or sufficiency
of any payment received by the Secured Party in respect of the Collateral or as
to the sufficiency of any performance by any party under any such contract or
agreement, to present or file any claim, to take any action to enforce any
performance or to collect the payment of any amounts which may have been
assigned to the Secured Party or to which the Secured Party may be entitled at
any time or times. The Secured Party's sole duty with respect to the custody,
safe keeping and physical preservation of the Collateral in its possession,
under Sec.9-207 of the Uniform Commercial Code of the State or otherwise, shall
be to deal with such Collateral in the same manner as the Secured Party deals
with similar property for its own account.
12. SECURITIES AND DEPOSITS.
The Secured Party may at any time following a Default, at its option,
transfer to itself or any nominee any securities constituting Collateral,
receive any income thereon and hold such income as additional Collateral or
apply it to the Obligations. Whether or not any Obligations are due, the Secured
Party may following a Default demand, xxx for, collect, or make any settlement
or compromise which it deems desirable with respect to the Collateral.
Regardless of the adequacy of Collateral or any other security for the
Obligations, any deposits or other sums at any time credited by or due from the
Secured Party to the Debtors may at any time be applied to or set off against
any of the Obligations then due and owing.
13. NOTIFICATION TO ACCOUNT DEBTORS AND OTHER PERSONS OBLIGATED ON
COLLATERAL.
If a Default shall have occurred, the Debtors shall, at the request and
option of the Secured Party, notify account debtors and other persons obligated
on any of the Collateral of the security interest of the Secured Party in any
account, chattel paper, general intangible, instrument or other Collateral and
that payment thereof is to be made directly to the Secured Party or to any
financial institution designated by the Secured Party as the Secured Party's
agent therefor, and the Secured Party may itself, if a Default shall have
occurred without notice to or demand upon the Debtors, so notify account debtors
and other persons obligated on Collateral. After the making of such a request or
the giving of any such notification, the Debtors shall hold any proceeds of
collection of accounts, chattel paper, general intangibles, instruments and
other Collateral received by the Debtors as trustee for the Secured Party
without commingling the same with other funds of the Debtors and shall turn the
same over to the Secured Party in the identical form received, together with any
necessary endorsements or assignments. The Secured Party shall apply the
proceeds of collection of accounts, chattel paper, general intangibles,
instruments and other Collateral received by the Secured Party to the
Obligations, such proceeds to be immediately credited after final payment in
cash or other immediately available funds of the items giving rise to them.
14. POWER OF ATTORNEY.
14.1. APPOINTMENT AND POWERS OF SECURED PARTY. The Debtors hereby
irrevocably constitute and appoint the Secured Party and any officer or agent
thereof, with full power of substitution, as its true and lawful
attorneys-in-fact with full irrevocable power and authority in the place and
stead of the Debtors or in the Secured Party's own name, for the purpose of
carrying out the terms of this Agreement, to take any and all appropriate action
and to execute any and all documents and instruments that may be necessary or
useful to accomplish the purposes of this Agreement and, without limiting the
generality of the foregoing, hereby gives said attorneys the power and right, on
behalf of the Debtors, without notice to or assent by the Debtors, to do the
following:
(a) upon the occurrence of a Default, generally to sell,
transfer, pledge, make any agreement with respect to or otherwise dispose of or
deal with any of the Collateral in such manner as is consistent with the Uniform
Commercial Code of the State and as fully and completely as though the Secured
Party were the absolute owner thereof for all purposes, and to do, at the
Debtors' expense, at any time, or from time to time, all acts and things which
the Secured Party deems necessary or useful to protect, preserve or realize upon
the Collateral and the Secured Party's security interest therein, in order to
effect the intent of this Agreement, all at least as fully and effectively as
the Debtors might do, including, without limitation, (i) the filing and
prosecuting of registration and transfer applications with the appropriate
federal, state, local or other agencies or authorities with respect to
trademarks, copyrights and patentable inventions and processes, (ii) upon
written notice to the Debtors, the exercise of voting rights with respect to
voting securities, which rights may be exercised, if the Secured Party so
elects, with a view to causing the liquidation of assets of the issuer of any
such securities, and (iii) the execution, delivery and recording, in connection
with any sale or other disposition of any Collateral, of the endorsements,
assignments or other instruments of conveyance or transfer with respect to such
Collateral; and
(b) to the extent that the Debtors' authorization given in Sec.3
is not sufficient, to file such financing statements with respect hereto, with
or without the Debtors' signature, or a photocopy of this Agreement in
substitution for a financing statement, as the Secured Party may deem
appropriate and to execute in the Debtors' name such financing statements and
amendments thereto and continuation statements which may require the Debtors'
signature.
14.2. RATIFICATION BY DEBTORS. To the extent permitted by law, the
Debtors hereby ratify all that said attorneys shall lawfully do or cause to be
done by virtue hereof. This power of attorney is a power coupled with an
interest and is irrevocable.
14.3. NO DUTY ON SECURED PARTY. The powers conferred on the Secured
Party hereunder are solely to protect its interests in the Collateral and shall
not impose any duty upon it to exercise any such powers. The Secured Party shall
be accountable only for the amounts that it actually receives as a result of the
exercise of such powers, and neither it nor any of its officers, directors,
employees or agents shall be responsible to the Debtors for any act or failure
to act, except for the Secured Party's own gross negligence or willful
misconduct.
15. RIGHTS AND REMEDIES.
If Default shall have occurred, the Secured Party, without any other notice
to or demand upon the Debtors have in any jurisdiction in which enforcement
hereof is sought, in addition to all other rights and remedies, the rights and
remedies of a secured party under the Uniform Commercial Code of the State and
any additional rights and remedies which may be provided to a secured party in
any jurisdiction in which Collateral is located, including, without limitation,
the right to take possession of the Collateral, and for that purpose the Secured
Party may, so far as the Debtors can give authority therefor, enter upon any
premises on which the Collateral may be situated and remove the same therefrom.
The Secured Party may in its discretion require the Debtors to assemble all or
any part of the Collateral at such location or locations within the
jurisdiction(s) of the Debtors' principal office(s) or at such other locations
as the Secured Party may reasonably designate. Unless the Collateral is
perishable or threatens to decline speedily in value or is of a type customarily
sold on a recognized market, the Secured Party shall give to the Debtors at
least five Business Days prior written notice of the time and place of any
public sale of Collateral or of the time after which any private sale or any
other intended disposition is to be made. The Debtors hereby acknowledges that
five Business Days prior written notice of such sale or sales shall be
reasonable notice. In addition, the Debtors waive any and all rights that it may
have to a judicial hearing in advance of the enforcement of any of the Secured
Party's rights and remedies hereunder, including, without limitation, its right
following Default to take immediate possession of the Collateral and to exercise
its rights and remedies with respect thereto.
16. STANDARDS FOR EXERCISING RIGHTS AND REMEDIES.
To the extent that applicable law imposes duties on the Secured Party to
exercise remedies in a commercially reasonable manner, the Debtors acknowledge
and agree that it is not commercially unreasonable for the Secured Party (a) to
fail to incur expenses reasonably deemed significant by the Secured Party to
prepare Collateral for disposition or otherwise to fail to complete raw material
or work in process into finished goods or other finished products for
disposition, (b) to fail to obtain third party consents for access to Collateral
to be disposed of, or to obtain or, if not required by other law, to fail to
obtain governmental or third party consents for the collection or disposition of
Collateral to be collected or disposed of, (c) to fail to exercise collection
remedies against account debtors or other persons obligated on Collateral or to
fail to remove liens or encumbrances on or any adverse claims against
Collateral, (d) to exercise collection remedies against account debtors and
other persons obligated on Collateral directly or through the use of collection
agencies and other collection specialists, (e) to advertise dispositions of
Collateral through publications or media of general circulation, whether or not
the Collateral is of a specialized nature, (f) to contact other persons, whether
or not in the same business as the Debtors, for expressions of interest in
acquiring all or any portion of the Collateral, (g) to hire one or more
professional auctioneers to assist in the disposition of Collateral, whether or
not the collateral is of a specialized nature, (h) to dispose of Collateral by
utilizing Internet sites that provide for the auction of assets of the types
included in the Collateral or that have the reasonable capability of doing so,
or that match buyers and sellers of assets, (i) to dispose of assets in
wholesale rather than retail markets, (j) to disclaim disposition warranties,
(k) to purchase insurance or credit enhancements to insure the Secured Party
against risks of loss, collection or disposition of Collateral or to provide to
the Secured Party a guaranteed return from the collection or disposition of
Collateral, or (l) to the extent deemed appropriate by the Secured Party, to
obtain the services of other brokers, investment bankers, consultants and other
professionals to assist the Secured Party in the collection or disposition of
any of the Collateral. The Debtors acknowledge that the purpose of this Sec. 16
is to provide non-exhaustive indications of what actions or omissions by the
Secured Party would fulfill the Secured Party's duties under the Uniform
Commercial Code or other law of the State or any other relevant jurisdiction in
the Secured Party's exercise of remedies against the Collateral and that other
actions or omissions by the Secured Party shall not be deemed to fail to fulfill
such duties solely on account of not being indicated in this Sec. 16. Without
limitation upon the foregoing, nothing contained in this Sec. 16 shall be
construed to grant any rights to the Debtors or to impose any duties on the
Secured Party that would not have been granted or imposed by this Agreement or
by applicable law in the absence of this Sec. 16.
17. NO WAIVER BY SECURED PARTY, ETC.
The Secured Party shall not be deemed to have waived any of its rights or
remedies in respect of the Obligations or the Collateral unless such waiver
shall be in writing and signed by the Secured Party. No delay or omission on the
part of the Secured Party in exercising any right or remedy shall operate as a
waiver of such right or remedy or any other right or remedy. A waiver on any one
occasion shall not be construed as a bar to or waiver of any right or remedy on
any future occasion. All rights and remedies of the Secured Party with respect
to the Obligations or the Collateral, whether evidenced hereby or by any other
instrument or papers, shall be cumulative and may be exercised singularly,
alternatively, successively or concurrently at such time or at such times as the
Secured Party deems expedient.
18. SURETYSHIP WAIVERS BY DEBTORS.
The Debtors waive demand, notice, protest, notice of acceptance of this
Agreement, notice of loans made, credit extended, Collateral received or
delivered or other action taken in reliance hereon and all other demands and
notices of any description. With respect to both the Obligations and the
Collateral, the Debtors assent to any extension or postponement of the time of
payment or any other indulgence, to any substitution, exchange or release of or
failure to perfect any security interest in any Collateral, to the addition or
release of any party or person primarily or secondarily liable, to the
acceptance of partial payment thereon and the settlement, compromising or
adjusting of any thereof, all in such manner and at such time or times as the
Secured Party may deem advisable. The Secured Party shall have no duty as to the
collection or protection of the Collateral or any income therefrom, the
preservation of rights against prior parties, or the preservation of any rights
pertaining thereto beyond the safe custody thereof as set forth in Sec. 11.2.
The Debtors further waive any and all other suretyship defenses.
19. MARSHALLING.
The Secured Party shall not be required to marshal any present or future
collateral security (including but not limited to the Collateral) for, or other
assurances of payment of, the Obligations or any of them or to resort to such
collateral security or other assurances of payment in any particular order, and
all of its rights and remedies hereunder and in respect of such collateral
security and other assurances of payment shall be cumulative and in addition to
all other rights and remedies, however existing or arising. To the extent that
it lawfully may, the Debtors hereby agree that it will not invoke any law
relating to the marshalling of collateral which might cause delay in or impede
the enforcement of the Secured Party's rights and remedies under this Agreement
or under any other instrument creating or evidencing any of the Obligations or
under which any of the Obligations is outstanding or by which any of the
Obligations is secured or payment thereof is otherwise assured, and, to the
extent that it lawfully may, the Debtors hereby irrevocably waive the benefits
of all such laws.
20. PROCEEDS OF DISPOSITIONS; EXPENSES.
The Debtors shall pay to the Secured Party on demand any and all expenses,
including reasonable attorneys' fees and disbursements, incurred or paid by the
Secured Party in protecting, preserving or enforcing the Secured Party's rights
and remedies under or in respect of any of the Obligations or any of the
Collateral. After deducting all of said expenses, the residue of any proceeds of
collection or sale or other disposition of the Collateral shall, to the extent
actually received in cash, be applied to the payment of the Obligations in such
order or preference as the Secured Party may determine proper, allowance and
provision being made for any Obligations not then due. Upon the final payment
and satisfaction in full of all of the Obligations and after making any payments
required by Sections 9-608(a)(1)(C) or 9-615(a)(3) of the Uniform Commercial
Code of the State, any excess shall be returned to the Debtors. In the absence
of final payment and satisfaction in full of all of the Obligations, and the
Debtors shall remain liable for any deficiency.
21. OVERDUE AMOUNTS.
Until paid, all amounts due and payable by the Debtors hereunder shall be a
debt secured by the Collateral and shall bear, whether before or after judgment,
interest at the rate of interest equal to 7% per annum.
22. GOVERNING LAW; CONSENT TO JURISDICTION.
THIS AGREEMENT IS INTENDED TO TAKE EFFECT AS A SEALED INSTRUMENT AND SHALL
BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE. The
Debtors agree that any action or claim arising out of, or any dispute in
connection with, this Agreement, any rights, remedies, obligations, or duties
hereunder, or the performance or enforcement hereof or thereof, may be brought
in the courts of the State or any federal court sitting therein and consents to
the non-exclusive jurisdiction of such court and to service of process in any
such suit being made upon the Debtors by mail at the address set forth on the
signature page hereto. The Debtors hereby waive any objection that it may now or
hereafter have to the venue of any such suit or any such court or that such suit
is brought in an inconvenient court.
23. WAIVER OF JURY TRIAL.
THE DEBTORS WAIVE THEIR RIGHT TO A JURY TRIAL WITH RESPECT TO ANY ACTION OR
CLAIM ARISING OUT OF ANY DISPUTE IN CONNECTION WITH THIS AGREEMENT, ANY RIGHTS,
REMEDIES, OBLIGATIONS, OR DUTIES HEREUNDER, OR THE PERFORMANCE OR ENFORCEMENT
HEREOF OR THEREOF. Except as prohibited by law, the Debtors waive any right
which it may have to claim or recover in any litigation referred to in the
preceding sentence any special, exemplary, punitive or consequential damages or
any damages other than, or in addition to, actual damages. The Debtors (i)
certify that neither the Secured Party nor any representative, agent or attorney
of the Secured Party has represented, expressly or otherwise, that the Secured
Party would not, in the event of litigation, seek to enforce the foregoing
waivers or other waivers contained in this Agreement, and (ii) acknowledge that,
in entering into this Agreement, the Secured Party is relying upon, among other
things, the waivers and certifications contained in this Sec.23.
24. MISCELLANEOUS.
The headings of each section of this Agreement are for convenience only and
shall not define or limit the provisions thereof. This Agreement and all rights
and obligations hereunder shall be binding upon the Debtors and their respective
successors and assigns, and shall inure to the benefit of the Secured Party and
its successors and assigns. If any term of this Agreement shall be held to be
invalid, illegal or unenforceable, the validity of all other terms hereof shall
in no way be affected thereby, and this Agreement shall be construed and be
enforceable as if such invalid, illegal or unenforceable term had not been
included herein. The Debtors acknowledge receipt of a copy of this Agreement.
IN WITNESS WHEREOF, intending to be legally bound, the Debtors have caused this
Agreement to be duly executed as of the date first above written.
SECTOR COMMUNICATIONS, INC.
By: /S/ Xxxxxxx Xxxxx
---------------------
Name: Xxxxxxx Xxxxx
Title: Chairman of the Board
Address: 0000 Xxxxxxx Xxxx Xxxx
00xx Xxxxx
Xxx Xxxxxxx, XX 00000
EMODEL, INC.
By:/S/ Xxxxxx Xxxxxxx
---------------------
Name: Xxxxxx Xxxxxxx
Title: Vice President
Accepted:
By:/S/ Xxxxxx X. Xxxxxxx
------------------------
Xxxxxx X. Xxxxxxx
c/o Federal News Service
000 Xxxxxxxx Xxxxx Xxxxxxxx
Xxxxxxxxxx, XX 00000
CERTIFICATE OF ACKNOWLEDGMENT
COMMONWEALTH OF VIRGINIA )
) ss.
COUNTY OF FAIRFAX )
Before me, the undersigned, a Notary Public in and for the county
aforesaid, on this 14 day of January, 2002, personally appeared Xxxxxxx Xxxxx to
me known personally, and who, being by me duly sworn, deposes and says that he
is the Chairman of Sector Communications, Inc., and that said instrument was
signed and sealed on behalf of said corporation by authority of its Board of
Directors, and said Chairman acknowledged said instrument to be the free act and
deed of said corporation.
/S/Xxxxxxxx X. Flammea
----------------------
Notary Public
My commission expires: January 31, 2005
