EXHIBIT 10.2
SECURITY AGREEMENT
This SECURITY AGREEMENT (the "Agreement"), dated as of March 29 ,
1996, is made by Princeton Publishing, Inc., Princeton Trademarks, Inc., and
Kingston Press, Inc., each a Delaware corporation having an office at 000
Xxxxxxxxx Xxx., Xxxxx 000, Xxxx Xxxxx, XX 00000 (collectively, the
"Debtor"), in favor of Kearny Publishing, Inc. ("Secured Party").
R E C I T A L S :
A. Pursuant to a certain Asset Purchase Agreement of even date
herewith, by and between Debtor and Secured Party (the "Asset Purchase
Agreement"), Debtor has executed certain promissory notes payable to Secured
Party, copies of which are attached hereto (the "Notes"), and has agreed to
secure repayment under the Notes as set forth herein.
B. Debtor is the owner of the Pledged Collateral (as hereinafter
defined).
C. This Agreement is given by Debtor in favor of the Secured Party
for its benefit to secure the payment and performance of Debtor's
obligations pursuant to the Notes (the "Secured Obligations").
A G R E E M E N T :
NOW, THEREFORE, in consideration of the foregoing premises and for
other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, Debtor and Secured Party hereby agree as follows:
Section 1. Grant of Security Interests. As collateral security for
the prompt and complete payment and performance when due of Debtor's
obligations pursuant to the Notes, Debtor hereby pledges, assigns, transfers
and grants to Secured Party a continuing first priority security interest in
and to all those assets purchased by Debtor from Secured Party this date
pursuant to the Asset Purchase Agreement and the proceeds thereof (which
includes, but is not limited to, receivables and work in process) (the
"Pledged Collateral"); provided that, notwithstanding anything set forth
herein to the contrary, the foregoing grant of a security interest shall not
include a security interest in, and the Pledged Collateral shall not
include, any contract or intangible if the granting of a security interest
therein is prohibited by law or by the terms and provisions of the written
agreement, document or instrument creating or evidencing such contract or
intangible or rights related thereto.
Section 2. Representations, Warranties and Covenants. Debtor
represents, warrants and covenants as follows:
(a) No liens. Debtor is as of the date hereof, and, as to Pledged
Collateral acquired by it from time to time after the date hereof, Debtor
will be the owner of all Pledged Collateral free from any lien or other
right, title or interest of any person or entity, other than specifically
provided in the Asset Purchase Agreement, and Debtor shall defend the
Pledged Collateral against all claims and demands of all persons and
entities at any time claiming any interest therein adverse to Secured Party.
(b) Other Financing Statements. So long as any of the Secured
Obligations remains unpaid and this Agreement remains in effect, Debtor
shall not execute or authorize to be filed in any public office any
financing statement (or similar statement or instrument of registration
under the law of any jurisdiction) or statements relating to the Pledged
Collateral, except financing statements filed or to be filed in respect of
and covering the security interests granted hereby by Debtor.
(c) Chief Executive Office; Records. The chief executive office of
Debtor is located at 000 Xxxxxxxxx Xxx., Xxxxx 000, Xxxx Xxxxx, XX 00000.
Debtor also has a place of business in Wisconsin. Debtor shall not move its
chief executive office, except to such new location as Debtor may establish
in accordance with the last sentence of this Section 2(c). Other than with
respect to transactions occurring in the ordinary course of Debtor's
business (to which Secured Party consents notwithstanding contrary
provisions of this Agreement), all Pledged Collateral and all books of
account and records of Debtor relating to the Pledged Collateral are, and
will continue to be, kept at such chief executive office, or at such new
location for such chief executive office as Debtor may establish in
accordance with the last sentence of this Section 2(c). Debtor shall not
establish a new location for its chief executive office nor shall it change
its name until (i) it shall have given to Secured Party not less than 45
days' prior written notice of its intention so to do, clearly describing
such new location or name (which shall be in the continental United States
of America) and providing such other information in connection therewith as
Secured Party may request, and (ii) with respect to such new location or
name, Debtor shall have taken all action satisfactory to Secured Party to
maintain the perfection and proof of the security interest of Secured Party
in the Pledged Collateral intended to be granted hereby, including, without
limitation, obtaining waivers of landlord's or warehouseman's liens with
respect to such new location.
(d) Authorization, Enforceability. Debtor has full corporate power,
authority and legal right to pledge and grant a security interest in all the
Pledged Collateral pursuant to this Agreement, and this Agreement
constitutes the legal, valid and binding obligation of Debtor, enforceable
against Debtor in accordance with its terms.
(e) No Consents, etc. No consent of any other party and no consent,
authorization, approval, or other action by, and no notice to or filing
with, any governmental authority (other than a court in connection with the
exercise of judicial remedies by Secured Party) or regulatory body is
required either (x) for the pledge by Debtor of the Pledged Collateral
pursuant to this Agreement, or for the execution, delivery or performance of
this Agreement by Debtor or (y) for the exercise by Secured Party of the
rights provided for in this Agreement or the remedies in respect of the
Pledged Collateral pursuant to this Agreement.
Section 3. Provisions Concerning Pledged Collateral.
(a) Protection of Secured Party's Security. Debtor shall not take
any action that impairs the rights of Secured Party in the Pledged
Collateral. Debtor shall at all times keep the tangible Pledged Collateral
insured in favor of Secured Party, at the Debtor's own expense, to Secured
Party's reasonable satisfaction against fire, theft and all other risks to
which the Pledged Collateral may be subject, in such amounts (but in no
event greater than the replacement cost thereof) and with such deductibles
as would be maintained by operators of businesses similar to the business of
Debtor or as Secured Party may otherwise require. Each policy or
certificate with respect to such insurance shall be endorsed to Secured
Party's satisfaction for the benefit of Secured Party (including, without
limitation, by naming Secured Party as an additional named insured or an
additional loss payee as Secured Party may request) and such policy or
certificate shall be delivered to Secured Party. Each such policy shall
state that it cannot be canceled without 30 days' prior written notice to
Secured Party. At least 30 days prior to the expiration of any such policy
of insurance, Debtor shall deliver to Secured Party an extension or renewal
policy or an insurance certificate evidencing renewal or extension of such
policy. If Debtor shall fail to insure such Pledged Collateral to Secured
Party's reasonable satisfaction or if Debtor shall fail to so endorse and
deposit, or to extend or renew, all such insurance policies or certificates
with respect thereto, Secured Party shall have the right (but shall be under
no obligation) to advance funds to procure or renew or extend such insurance
and Debtor agrees to reimburse Secured Party for all costs and expenses
thereof, with interest on all such funds from the date advanced at the
highest rate then payable under the Notes. In the event of insurable loss
or damage to any Pledged Collateral, then Secured Party must use such
proceeds to repair, replace or improve damaged Pledged Collateral unless
Secured Party within thirty (30) days after the receipt of such proceeds
commences the repossession of the Pledged Collateral upon an Event of
Default in accordance with the provisions of Section 5 hereof.
(b) Maintenance of Pledged Collateral. Subject to transactions in
the ordinary course of Debtor's business, Debtor shall cause the Pledged
Collateral to be maintained and preserved in the same condition, repair and
working order as when purchased by Debtor, ordinary wear and tear excepted,
and to the extent consistent with past business practice.
(c) Payment of Taxes; Claims. Debtor shall pay promptly when due
all property and other taxes, assessments and governmental charges or levies
imposed upon, and all claims (including claims for labor, materials and
supplies) against, the Pledged Collateral.
(d) Financing Statements. Debtor shall sign and deliver to Secured
Party such financing and continuation statements, in form acceptable to
Secured Party, as may from time to time be reasonably requested by Secured
Party in order to continue and maintain a valid, enforceable, first priority
security interest in, the Pledged Collateral as provided herein and the
other rights, as against third parties, provided hereby. Debtor authorizes
Secured Party to file any such financing or continuation statements without
the signature of Debtor.
(e) Ordinary Course. Nothing in this Section 3 shall be deemed to
prohibit (i) the sale of inventory and the collection of receivables by
Debtor in the ordinary course of business, or (ii) the disposition and
replacement of obsolete assets.
Section 4. Transfers and Other Liens. Debtor agrees that it will
not, except as otherwise expressly permitted by Secured Party (i) sell,
convey, assign or otherwise dispose of, or grant any option with respect to,
any of the Pledged Collateral or (ii) create or permit to exist any lien
upon or with respect to any of the Pledged Collateral other than the lien
and security interest granted to Secured Party under this Agreement.
Notwithstanding the foregoing, Debtor may transfer Pledged Collateral to an
affiliate controlled by, which controls, or which is under common control
with, Debtor, but in any such case the transferee shall be bound by all the
provisions of this Agreement.
Section 5. Remedies.
(a) Remedies; Obtaining the Pledged Collateral Upon Event of
Default. If any Event of Default (as defined in the Notes) shall have
occurred, and subsequent thereto the Secured Party has accepted payment of
all arrearages under the Notes, and a period of not less than six (6) months
has elapsed since the date of payment of all such arrearages without the
occurrence of another Event of Default, then the original Event of Default
shall be automatically deemed a "Waived Event of Default" hereunder.
If any Event of Default which is not a Waived Event of Default shall
have occurred, then and in every such case, Secured Party may, at any time
or from time to time thereafter (until such Event of Default becomes a
Waived Event of Default, if ever):
(i) Personally, or by agents or attorneys, immediately take
possession of the Pledged Collateral or any part thereof, from Debtor
or any other person or entity who then has possession of any part
thereof with or without notice or process of law, and for that purpose
may enter upon Debtor's premises where any of the Pledged Collateral
is located and remove such Pledged Collateral and use in connection
with such removal any and all services, supplies, aids and other
facilities of Debtor;
(ii) Instruct the obligor or obligors on any agreement,
instrument or other obligation constituting the Pledged Collateral to
make any payment required by the terms of such instrument or agreement
directly to Secured Party; provided, however, that in the event that
any such payments are made directly to Debtor, Debtor shall segregate
all amounts received pursuant thereto in a separate account and pay
the same promptly to Secured Party;
(iii) Sell, assign or otherwise liquidate, or direct Debtor to
sell, assign or otherwise liquidate, any or all investments made in
whole or in part with the Pledged Collateral or any part thereof, and
take possession of the proceeds of any such sale, assignment or
liquidation;
(iv) Take possession of the Pledged Collateral or any part
thereof, by directing Debtor in writing to deliver the same to Secured
Party at any place or places designated by Secured Party, in which
event Debtor shall at its own expense: (a) forthwith cause the same
to be moved to the place or place so designated by Secured Party and
there
delivered to Secured Party; (b) store and keep any Pledged Collateral so
delivered to Secured Party at such place or places pending further action
by
Secured Party; and (c) while the Pledged Collateral shall be so stored
and
kept, provide such guards and maintenance services as shall be necessary
to
protect the same and to preserve and maintain them in good condition.
Debtor's obligation to deliver the Pledged Collateral is of the essence
of
this Agreement. Upon application to a court of equity having
jurisdiction,
Secured Party shall be entitled to a decree requiring specific
performance
by the Debtor of such obligation.
(b) Remedies: Disposition of the Pledged Collateral.
(i) In connection with the Secured Party's proper exercise of
its rights and remedies provided in subsection 5(a) above, the Secured
Party may from time to time exercise in respect of the Pledged
Collateral, in addition to other rights and remedies provided for
herein or otherwise available to it, all the rights and remedies of a
secured party under the Uniform Commercial Code at the time of an
event of default, and the Secured Party may also in its sole
discretion, without notice except as specified below, sell the Pledged
Collateral or any part thereof in one or more parcels at public or
private sale, at any exchange, broker's board or at any of the Secured
Party's offices or elsewhere, for cash, on credit or for future
delivery, and at such price or prices and upon such other terms as are
commercially reasonable. The Secured Party may be the Purchaser of
any or all of the Pledged Collateral at any such sale and shall be
entitled, for the purpose of bidding and making settlement or payment
of the purchase price for all or any portion of the Pledged Collateral
sold at such sale, to use and apply any of the Secured Obligations
owed to such Person as a credit on account the purchase price of any
Pledged Collateral payable by such Person at such sale. Each
purchaser at any such sale shall acquire the property sold absolutely
free from any claim or right on the part of Debtor, and Debtor hereby
waives, to the full extent permitted by law, all rights of redemption,
stay or appraisal hereafter enacted. The Secured Party shall not be
obligated to make any sale of Pledged Collateral regardless of notice
of sale having been given. The Secured Party may adjourn any public
or private sale from time to time by announcement at the time and
place fixed therefor, and such sale may, without further notice, be
made at the time and place to which it was so adjourned.
(ii) Debtor agrees that, to the extent notice of sale shall be
required by law, 10 days' notice from Secured Party of the time and
place of any public sale or of the time after which a private sale or
other intended disposition is to take place shall be commercially
reasonable notification of such matters. No notification need be
given to Debtor if it has signed, after the occurrence of an Event of
Default, a statement renouncing or modifying any right to notification
of sale or other intended disposition. In addition to the rights and
remedies provided in this Agreement and in the Notes, Secured Party
shall have all the rights and remedies of a secured party under the
Uniform Commercial Code.
(c) In the event Secured Party shall have instituted any proceeding
to enforce any right, power or remedy under this Agreement by foreclosure,
sale, entry or otherwise, and such proceeding shall have been discontinued
or abandoned for any reason or shall have been determined adversely to
Secured Party, then and in every such case, Debtor and Secured Party shall
be restored to their respective former positions and rights hereunder with
respect to the Pledged Collateral and the Notes, and all rights, remedies
and powers of Secured Party shall continue as if no such proceeding had been
instituted.
(d) Reversion of Title to Pledged Collateral. In the event the
Secured Party properly exercises any of its rights and remedies provided in
subsection 5(a) above, then immediately upon the exercise of any such right,
all Pledged Collateral shall be deemed to have reverted to ownership by
Secured Party. Any such action by Secured Party shall operate to divest all
rights, title, interest, claim and demand, either at law or in equity, of
Debtor in and to the Pledged Collateral, and shall be a perpetual bar both
at law and in equity against Debtor and against any and all persons and
entities claiming or attempting to claim the Pledged Collateral, or any part
thereof, from, through or under Debtor. In such event, if Secured Party
chooses to retain the Pledged Collateral, the indebtedness then remaining
unpaid pursuant to the Notes shall be deemed reduced by the fair market
value of the Pledged Collateral at the time.
Section 6. Application of Proceeds. The proceeds of any Pledged
Collateral obtained pursuant to the exercise of any remedy set forth in
Section 5 shall be applied, together with any other sums then held by
Secured Party pursuant to this Agreement, promptly by Secured Party:
First, to the payment of all costs and expenses, fees, commissions and
taxes of such sale, collection or other realization, including, without
limitation, reasonable compensation to the Secured Party and its agents and
counsel, and all expenses, liabilities and advances made or incurred by the
Secured Party in connection therewith;
Second, to the indefeasible payment in full in cash of the Secured
Obligations, ratably according to the unpaid amounts thereof, without
preference or priority of any kind among amounts
so due and payable; and
Third, to Debtor, or its successors or assigns, or to whomsoever may
be lawfully entitled to receive the same or as a court of competent
jurisdiction may direct, of any surplus remaining from such proceeds.
Section 7. Modifications in Writing. No amendment, modification,
supplement, termination or waiver of or to any provision of this Agreement,
nor consent to any departure by Debtor therefrom, shall be effective unless
the same shall be writing and signed by the Secured Party. Any amendment,
modification or supplement of or to any provision of this Agreement, any
waiver of any provision of this Agreement, and any consent to any departure
by Debtor from the terms of any provision of this Agreement, shall be
effective only in the specific instance and for the specific purpose for
which made given. Except where notice is specifically required by this
Agreement or the Notes, no notice to or demand on Debtor in any case shall
entitle Debtor to any other or further notice or demand in similar or other
circumstances.
Section 8. Termination; Release. When all the Secured Obligations
have been indefeasibly paid in full and have been terminated, this Agreement
shall terminate. Upon termination of this Agreement, Secured Party shall,
upon the request and at the expense of Debtor, forthwith assign, transfer
and deliver to Debtor, proper instruments (including Uniform Commercial Code
termination statements on Form UCC-3) acknowledging the termination of this
Agreement.
Section 9. Notices. Unless otherwise provided herein or in the
Notes, any notice or other communication herein required or permitted to be
given shall be in writing and may be personally served, telecopied, telexed
or sent by United States mail, to Debtor or Secured Party, as the case may
be, addressed to it at the respective address set forth in the Notes, or at
such other address as shall be designated by Debtor or Secured Party, as the
case may be, in a written notice to the other party complying as to delivery
with the terms of this Section 9. All such notices and other communications
shall be deemed to have been given when delivered in person, or received by
telecopy or telex; or four business days after deposit in the United States
mail, registered or certified, with postage prepaid and properly addressed;
provided that notices to Secured Party shall not be effective until received
by Secured Party.
Section 10. Governing Law; Terms. This Agreement shall be governed
by, and shall be construed and enforced in accordance with, the laws of the
State of New York, without regard to principles of conflicts of laws, except
to the extent that the validity or perfection of the security interest
hereunder, or remedies hereunder, in respect of any particular property are
governed by the laws of a jurisdiction other than the State of New York.
Section 11. Severability of Provisions. Any provision of this
Agreement 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
affecting the validity or enforceability of such provision in any other
jurisdiction.
Section 12. Execution in Counterparts. This Agreement and any
amendments, waivers, consents or supplements hereto may be executed in any
number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed and delivered shall be deemed
to be an original, but all such counterparts together shall constitute one
and the same agreement.
Section 13. Headings. The Section headings used in this Agreement
are for convenience of reference only and shall not affect the construction
of this Agreement.
Section 14. Obligations Absolute. All obligations of Debtor
hereunder shall be absolute and unconditional irrespective of:
(a) any bankruptcy, insolvency, reorganization, arrangement,
readjustment, composition, liquidation or the like of Debtor;
(b) any lack of validity or enforceability of the Notes, or any
other agreement or instrument relating thereto;
(c) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Secured Obligations, or any other amendment
or waiver of or any consent to any departure from the Notes, or any other
agreement or instrument relating thereto;
(d) any exchange, release or non-perfection of any other collateral,
or any release or amendment or waiver of or consent to any departure from
any guarantee, for all or any of the Secured Obligations;
(e) any exercise or non-exercise, or any waiver of any right,
remedy, power or privilege under or in respect of this Agreement or the
Notes except as specifically set forth in a written waiver or as otherwise
provided in Section 5 hereof; or
(f) any other circumstances which might otherwise constitute a
defense available to, or a discharge of, the Debtor.
Section 15. Bankruptcy. Debtor may not file any voluntary bankruptcy
petition, or make any voluntary assignment for the benefit of creditors,
without, at least four months prior thereto, advising Secured Party as to
Debtor's intention to do so. Such notification shall be deemed an Event of
Default. In the event that a bankruptcy petition is filed by or against
Debtor, such an event shall be deemed an additional Event of Default, and
the Pledged Collateral shall be deemed to have been reconveyed to Secured
Party four months and one day prior to such filing, and Secured Party shall
be deemed the owner of the Pledged Collateral Assets as of that time.
Additionally, in the event of any such bankruptcy filing, Secured Party
shall, with the permission of the Court, be appointed the Trustee of the
Pledged Collateral for bankruptcy purposes and shall take the place and
stead of a debtor in possession.
IN WITNESS WHEREOF, Debtor has caused this Agreement to be executed
and delivered under seal by its duly authorized officer as of the date first
above written.
Princeton Publishing, Inc.,
as Debtor
By:/s/ Xxxxx X. XxXxxxxx, Pres.
Princeton Trademarks, Inc.,
as Debtor
By:/s/ Xxxxx X. XxXxxxxx, Pres.
Kingston Press, Inc.,
as Debtor
By:/s/ Xxxxx X. XxXxxxxx, Pres.
Kearny Publishing, Inc.
as Secured Party
By: /s/ Xxxxxx Xxxxx
