Document:

Exhibit 10.8

 

PLEDGE AGREEMENT

 

THIS PLEDGE AGREEMENT
(“Agreement”) is made this 28th  day
of April, 2006, by and between EVANS & SUTHERLAND COMPUTER CORPORATION,
headquartered at 600 Komas Drive, Salt Lake City, UT  84108 (“Debtor”), and FIRST KEYSTONE BANK (“Bank”), at 22 West
State Street, Media, Pennsylvania, 19063.

 

WHEREAS, SPITZ, INC., a Delaware corporation,
(hereinafter referred to as “Borrower”) has requested that Bank extend a line
of credit facility to Borrower in the maximum principal sum of up to Three Million Dollars ($3,000,000.00) (hereinafter
the “Loan”); and

 

WHEREAS, the Bank
desires to extend credit to Borrower under certain terms and conditions; and

 

WHEREAS, as a
condition of the extension of credit to Borrower, Bank requires that the obligation
of Borrower under the Loan be secured by, inter  alia, that
certain guaranty and suretyship agreement of Debtor executed and delivered to
Bank even date herewith (hereinafter referred to as the “Guaranty”); and

 

WHEREAS, as a
condition of the extension of credit to Borrower, Bank requires that the
obligations of Debtor under the Guaranty be secured by, inter  alia
and all of the issued and outstanding shares of stock in SPITZ, INC.; and

 

WHEREAS, Debtor is
the owner of all of the issued and outstanding shares of stock in SPITZ, INC.; and

 

WHEREAS, the
extension of credit from Bank to Borrower is to be evidenced and secured by, inter
alia, (i) Borrower’s Line
of Credit Note in the original principal sum of up to Three Million Dollars ($3,000,000.00) (the
“Line of Credit Note”), (ii) an
Open-End Mortgage and Security Agreement in the original principal sum of up to
Three Million Dollars ($3,000,000.00) (the
“Mortgage”) encumbering the premises known as Route 1, Chadds Ford Township,
Delaware County, Pennsylvania,  being
Folio No. 04-00-00034-02 ; (iii) a
first lien security interest in personal property of Borrower, including
without limitation all accounts, inventory and equipment of Borrower, to be
evidenced by a Security Agreement of even date herewith, (iv) the Guaranty, and (v) this Agreement.

 

NOW THEREFORE, in
consideration of the foregoing and in order to induce Bank to advance credit to
Borrower and in consideration thereof and for other good and valuable
considerations, receipt of which is hereby acknowledged, and intending to be
legally bound hereby the parties hereto agree as follows:

 

 

	
  JONES, STROHM & GUTHRIE

  	
   

  	
  10 Beatty Road

  
	
  A Professional Corporation

  	
   

  	
  Media, Pennsylvania 19063

  
	
  Attorneys At Law

  	
   

  	
  Telephone (610) 565-7100

  
	
   

  	
   

  	
  Fax (610) 565-7180

  

 

 

(1)                                 Definitions.
When used herein, the following terms shall have the following meanings:

 

(A)                               “Note”
shall mean the Line of Credit Note and any promissory note of Borrower
evidencing any loan or advance made by the Bank to Borrower.

 

(B)                               “Liabilities”
shall mean: (i) all debts and
obligations of Borrower under any Note, including without limitation new
obligations arising after any original debt is extinguished together with any
renewals, extensions, replacements or modifications thereof; (ii) all debts and obligations of Debtor
hereunder and under the Guaranty, together with any renewals,  extensions, replacements or modifications
thereof; (iii) all other debts and
obligations of Borrower to Bank, its successors and assigns, of every kind and
description, howsoever created, arising or evidenced, whether direct or
indirect, absolute or contingent, or now or hereafter existing, or due or to
become due; (iv) the performance
by Debtor of Debtor’s obligations under this Agreement and all agreements,
warranties, representation and covenants set forth in any loan agreement(s),
instrument(s) and document(s) executed and/or delivered in conjunction
herewith; and (v) the cost of
curing any default hereunder that Bank elects to cure on the Debtor’s behalf.

 

(D)                               “Collateral”
shall mean and include (i) the
securities listed on Exhibit “A” attached hereto and made a part hereof, and
all rights and privileges of any nature pertaining thereto, including, without
limitation, all securities and additional securities receivable in respect of
or in exchange, replacement or substitution for such securities, all rights to
purchase, acquire or subscribe for securities incident to or arising from
ownership of such securities, all cash, interest, stock and other dividends or
distributions paid or payable on such securities, and all certificates, books
and records pertaining to the foregoing, including, without limitation, all
stock record and transfer books, (ii)
any and all other securities hereafter pledged by Debtor to Bank to secure
Debtor’s Obligations, and all rights and privileges of any nature pertaining
thereto, including, without limitation, all securities and additional
securities receivable in respect of or in exchange, replacement or substitution
for such securities, all rights to purchase, acquire or subscribe for
securities incident to or arising from ownership of such securities, all cash,
interest, stock and other dividends or distributions paid or payable on such
securities, and all certificates, books and records pertaining to the
foregoing, including, without limitation, all stock record and stock transfer
books, and (iii) any and all
Proceeds of the foregoing.

 

(E)                                 “Proceeds”
shall have the meaning given to that term in the Code and shall include without
limitation whatever is received when Collateral or Proceeds are sold,
exchanged, collected or otherwise disposed of, whether cash or non-cash, and
includes without limitation proceeds of insurance payable by reason of loss of
or damage to Collateral and all dividends or other income from such property,
collections thereon or distributions with respect thereto.

 

(F)                                 “Code”
shall mean the Uniform Commercial Code as in effect on the date of this
Agreement and as amended from time to time, of the state or states having
jurisdiction with respect to all or any portion of the Collateral from time to
time.

 

(2)                                 Security Interest. As security for the
payment of all Liabilities, Debtor hereby assigns, grants and conveys to Bank a
continuing first priority security interest and lien in and to all of the
Collateral.

 

 

(3)                                 Delivery of
Certificates, etc. Upon execution and delivery of this
Agreement, Debtor shall have delivered to and deposited with Bank in pledge,
any and all stock certificates and any other instruments evidencing the
Collateral, together with irrevocable stock powers executed in blank by Debtor
in form and substance acceptable to Bank.

 

(4)                                 Debtor’s Representations. The Debtor represents and warrants that:

 

(A)                               Debtor
is the sole record, legal and beneficial owner of and has good and marketable
title to the Collateral;

 

(B)                               the
Collateral was validly issued, fully paid and nonassessable;

 

(C)                               the
Collateral is not encumbered nor subject to restrictions on transfer or resale
or other dispositions in any manner (other than applicable federal and state
securities laws);

 

(D)                               the
Debtor has the unqualified right and power to grant a security interest in the
Collateral without the consent of any other party;

 

(E)                                 this
Agreement constitutes a legal, valid and binding obligation of Debtor,
enforceable in accordance with its terms, except as enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditors=
rights generally;

 

(F)                                 the
execution, delivery and performance of this Agreement will not violate any
provision of any requirement of law or contractual obligation of Debtor and
will not result in the creation or imposition of any lien on any of the
properties or revenues of Debtor pursuant to any requirement of the law or
contractual obligation, except as contemplated hereby;

 

(G)                               there
is no shareholders agreement among the shareholders of SPITZ, INC., as of the
date hereof, and the consent of SPITZ, INC. is not required in connection with
the execution, delivery and performance of this Agreement;

 

(H)                               no
consent or authorization of, filing with, or other act by or in respect of, any
arbitrator or governmental authority and no consent of any other person
(including, without limitation, any creditor of Debtor), is required in
connection with the execution, delivery, performance, validity or
enforceability of this Agreement;

 

(I)                                    no
litigation, investigation or proceeding of or before any arbitrator or
governmental authority is pending or, to the knowledge of Debtor, threatened by
or against Debtor or against any of its properties or revenues, or any of the
transactions contemplated hereby;

 

3

 

(J)                                 Debtor
is the record and beneficial owner of, and has good and marketable title to,
the Collateral, free of any and all liens or options in favor of, or claims of,
any other person, except the lien created by this Agreement;

 

(K)                               collectively,
the shares pledged as Collateral hereunder represent one hundred percent (100%)
of the capital stock of SPITZ, INC. issued and outstanding as of the date
hereof, and no other right or option to acquire any shares of capital stock of
SPITZ, INC. exists;

 

(L)                                upon
delivery of the Collateral to Bank, together with appropriate stock powers
executed in blank, the lien granted pursuant to this Agreement will constitute
a valid, perfected first priority lien on the Collateral, enforceable as such
against all creditors of Debtor and any persons purporting to purchase any of
the Collateral from Debtor; and

 

(M)                             Debtor
has the power and authority to execute and deliver this Agreement and to pledge
the Collateral hereunder.

 

(5)                                 Covenants. Debtor covenants and agrees with
Bank that, from and after the date of this Agreement so long as any of the
Liabilities remain outstanding:

 

(A)                               Without
the prior written consent of Bank, Debtor will not (i) vote to enable, or take
any other action to permit, any issuer of the Collateral to issue any stock or
other equity securities of any nature or to issue any other securities
convertible into or granting the right to purchase or exchange for any stock or
other equity securities of any nature of the issuer; (ii) sell, assign,
transfer, exchange or otherwise dispose of, or grant any option with respect
to, the Collateral; or (iii) create, incur or permit to exist any lien or
option in favor of, or any interest therein, except for the lien provided for
by this Agreement. Debtor, at its sole expense, will defend the right, title
and interest of Bank in and to the Collateral against the claims and demands of
all persons.

 

(B)                               At
any time and from time to time, upon the written request of Bank, and at the
sole expense of Debtor, Debtor will promptly and duly execute and deliver such
further instruments, documents and powers of attorney and take such further
actions as Bank may, in its reasonable discretion, deem necessary or advisable
for the purposes of obtaining or preserving the full benefits of this Agreement
and of the rights and powers herein granted, including, without limitation,
Bank’s first priority perfected security interest in the Collateral. Bank is
hereby irrevocably appointed attorney-in-fact of Debtor to do all acts and
things which Bank, in its sole discretion, may deem necessary or advisable to
obtain and preserve its first priority perfected security interest in the
Collateral.

 

(6)                                 Bank’s Acknowledgment and Duties. The Bank
agrees to hold the Collateral subject to the terms of this Agreement, and,
except as hereinafter provided, the Bank shall not in any way encumber or
otherwise dispose of the Collateral.

 

4

 

(7)                                 Payment of the Liabilities. Upon payment in
full of the Liabilities, and satisfaction of all Notes, the Bank shall deliver
all of the Collateral which it is then holding to the party granting the
security interest in such Collateral, and this Agreement shall terminate upon
such delivery.

 

(8)                                 Transfer Upon Corporate Books. Upon the
occurrence and during the continuance of an Event of Default, the Bank its
successors and/or assigns may cause the Collateral pledged hereunder to be
transferred upon the books of the Corporation or other entity issuing the
Collateral in such manner as the Bank its successors or assigns may determine,
and there shall be full authority in such Corporation or other entity to make
such transfers. To facilitate the Bank’s exercise of its rights hereunder,
Debtor has caused to be executed irrevocable stock powers in favor of the Bank.

 

(9)                                 Stock Dividends, Options, or other Adjustments.
If, during the term of this Agreement, any stock dividends, reclassifications,
adjustments, or other changes are made in the capital structure of the
corporation or other entity issuing the Collateral or any portion thereof, whether
it is a reorganization, recapitalization, share split-up, combination of
shares, merger, transfer, or consolidation, all new, additional, or substituted
shares for securities of whatever class, issued with respect to the Collateral
by reason of such, shall be delivered to the Bank immediately after issuance. The
Bank shall hold the shares or securities so issued as the Collateral under the
terms of this Agreement. If, during the term of this Agreement, warrants,
options, or other rights with respect to the Collateral are issued to Debtor
and if Debtor exercises any such warrant, option, or right, all new stock
securities received upon exercise shall be delivered to the Bank immediately
after they are issued. Such new stock or securities shall be held by the Bank
as Collateral under the terms of this Agreement.

 

(10)                          Discharge of Debtor’s Obligations. At its
option, the Bank may, without notice to Debtor, (a) discharge any taxes, liens,
security interests, or other encumbrances levied or placed on the Collateral;
and (b) pay for the maintenance and preservation of the Collateral; or (c) pay
for insurance on the Collateral. The amount of such payments, plus any and all
fees, costs, expenses, of whatever kind and nature, which the Bank may incur in
connection therewith, shall, at the Bank’s option, be reimbursed by the Debtor
on demand, with interest thereon at the rate of ten (10%) percent per annum
from the date paid, or added to the Liabilities secured hereby.

 

(11)                          Events of Default. Each of the following shall
constitute an event of default by Debtor (“Event of Default”) hereunder:

 

(A)                               The
breach or failure to perform by the Debtor of any covenant, promise, condition,
obligation, or liability contained or referred to herein, which breach or
failure to perform was not the result of the affirmative action of Debtor and
is susceptible to cure, remains uncured for a period of thirty (30) days from
Bank’s notice to Debtor of such breach or failure to perform;

 

5

 

(B)                               The
failure to cure an event of default under any Note prior to the expiration of
any applicable cure period;

 

(C)                               Proof
being made that any representation, statement, or warranty made or furnished in
any manner to the Bank by or on behalf of the Debtor in connection with this
Agreement was false in any material respect when made or furnished;

 

(D)                               Sale
of any of the Collateral;

 

(E)                                 Any
proceeding under the Bankruptcy Act or under any law of the United States or of
any state relating to insolvency, receivership, reorganization, or debt
adjustment is instituted by Debtor or Borrower or if such proceeding is
instituted against Debtor or Borrower and is consented to by Debtor or Borrower
or remains undismissed for sixty (60) days, or if Debtor or Borrower is
adjudicated a bankrupt, or a trust or receiver is appointed for any substantial
part of Debtor’s or Borrower’s property, or if Debtor or Borrower makes an
assignment for the benefit of creditors, or becomes insolvent; and

 

(F)                                 The
failure to cure any Event of Default under any obligation of Debtor to Bank or
under any agreement between Debtor and Bank prior to the expiration of any
applicable cure period.

 

(12)                          Remedies.

 

(A)                               If
an Event of Default shall occur, Bank or its nominee may: (i) at any time after
such default, at its option, declare the Liabilities to be immediately due and
payable; and/or (ii) exercise, in addition to all other rights and remedies
granted in this Agreement and in any other instrument or agreement securing,
evidencing or relating to Debtor’s and/or Borrower’s Liabilities, all rights
and remedies of a secured party under the Code. Without limiting the generality
of the foregoing, Bank, without demand of performance or other demand,
presentment, protest, advertisement or notice of any kind (except any notice
required by law referred to below) to or upon Debtor or any other person (all
and each of which demands, defenses, advertisements and notices are hereby
waived to the fullest extent permitted by law), may in such circumstances forthwith
collect, receive, appropriate and realize upon the Collateral, or any part
thereof and/or may forthwith sell, deliver the Collateral, or any part thereof
(or contract to do any of the foregoing) in one or more parcels, at public or
private sale or sales, in the over-the-counter market, at any exchange,
broker’s board or office of Bank or elsewhere upon such terms and conditions as
it may deem advisable and at such prices as it may deem best, for cash or on
credit or for future deliver without assumption of any credit risk. Bank shall
have the right upon any such public sale or sales, and, to the extent permitted
by law, upon any such private sale or sales, to purchase the whole or any part
of the Collateral so sold, free of any right or equity of redemption in Debtor,
which right or equity is hereby waived or released. Bank shall apply any
Proceeds from time to time held by it and the net proceeds of any such
collection, recover, receipt, appropriation, realization or sale, after
deducting all reasonable costs and expenses of every kind incurred in

 

6

 

respect thereof or incidental to the care or
safekeeping of any of the Collateral, or in any way relating to the foregoing
or the rights of Bank hereunder, including, without limitation, reasonable
attorneys’ fees and disbursements of counsel to Bank, to the payment in whole
or in part of Debtor’s and/or Borrower’s Liabilities, in such order as Bank may
elect, and only after such application and after the payment of Bank of any
other amount required by any provision of law, need Bank account for the
surplus, if any, to Debtor. To the extent permitted by applicable law, Debtor
waives all claims, damages and demands it may acquire against Bank arising out
of the exercise by it of any rights hereunder. If any notice of a proposed sale
or other disposition of Collateral shall be required by law, such notice shall
be deemed reasonable and proper, if given at least 10 days before such sale or
other disposition. Debtor shall remain liable for any deficiency if the
proceeds of any sale or other disposition of Collateral are insufficient to pay
the Liabilities and the fees and disbursements of any attorneys employed by
Bank to collect such deficiency. Debtor further waives, to the fullest extent
permitted by law, and agrees not to assert any rights or privileges which it
may acquire under the Code.

 

(B)                               Debtor
recognizes that Bank may be unable to effect a public sale of the Collateral,
by reason of certain prohibitions contained in the Securities Act of 1933, as
amended, and applicable state securities laws or otherwise, and may be
compelled to resort to one or more private sales thereof to a restricted group
of purchasers which will be obliged to agree, among other things, to acquire
such securities for their own account for investment and not with a view to the
distribution or resale thereof. Debtor acknowledges and agrees that any such
private sale may result in prices and other terms less favorable than if such
sale were a public sale and, notwithstanding such circumstances, agrees that
any such private sale shall be deemed to have been made in a commercially
reasonable manner. Bank shall not be under any obligation to delay a sale of
any of the Collateral for the period of time necessary to permit the issuer of
such securities to register such securities for public sale under the federal
Securities Act of 1933, as amended, or under applicable state securities laws,
even if the issuer would agree to do so.

 

(C)                               Debtor
further agrees to use its best efforts to do or cause to be done all such other
acts as may be necessary to make such sale or sales of all or any portion of
the Collateral pursuant to this Paragraph 12 valid and binding and in
compliance with any and all other applicable requirements of law. Debtor
further agrees that a breach of any of the covenants contained in this
Paragraph 12 will cause irreparable injury to Bank, that Bank has no adequate
remedy at law in respect to such breach and, as a consequence, that each and
every covenant contained in this Paragraph 12 shall be specifically enforceable
against Debtor, and Debtor hereby waives and agrees not to assert any defenses
against an action for specific performance of such covenants except for a
defense that no Event of Default has occurred.

 

(13)                          Voting Rights; Dividends; etc.

 

(A)                               So
long as no Event of Default shall have occurred:

 

7

 

(i)                                    Debtor
shall be entitled to exercise any and all voting and other consensual rights
pertaining to the Collateral or any part thereof for any purpose not
inconsistent with the terms of this Agreement; provided,
however, that Debtor shall not exercise and
shall refrain from exercising any right if such action or inaction would
reasonably be likely to have a material adverse effect on the value of the
Collateral or any part thereof; and provided,
further, that Debtor shall give Bank at
least five (5) business days written notice of the manner in which it intends
to exercise, and the reasons therefor, or the reasons for refraining from
exercising, any such right;

 

(ii)                                Any
and all instruments and other property (other than cash dividends) received,
receivable or otherwise distributed in respect of, or in exchange for, any of
the Collateral, shall be, and shall be forthwith delivered to Bank to hold as
part of the Collateral and shall, if received by Debtor, be received in trust
for the benefit of Bank, be segregated from the other property or funds of
Debtor, and be forthwith delivered to Bank as Collateral in the same form as so
received (with any necessary endorsement); and

 

(iii)                            Bank shall execute and
deliver (or cause to be executed and delivered) to Debtor all such proxies and
other instruments as Debtor may reasonably request for the purpose of enabling
Debtor to exercise the voting and other rights which it is entitled to exercise
pursuant to subparagraph (i) above.

 

(B)                               Upon
the occurrence of an Event of Default hereunder:

 

(i)                                    All
rights of Debtor to exercise the voting and other consensual rights which it
would otherwise be entitled to exercise pursuant to paragraph 13(A)(i) shall
cease, and all such rights shall, upon notice by Bank to Debtor, become vested
in Bank who shall thereupon have the sole right to exercise such voting and
other consensual rights and the sole right to receive and hold as Collateral
such dividends and apply them to payment of Debtor’s Obligations; and

 

(ii) All dividends which are received by
Debtor contrary to the provisions of subparagraph (i) of this paragraph 13 (B)
shall be received in trust for the benefit of Bank, shall be segregated from
other funds of Debtor and shall be forthwith paid over to Bank as Collateral in
the same form as so received (with any necessary endorsement).

 

(14)                          Additional Security. As additional security
for the Liabilities, the Bank shall have a lien, in the amount of the
Liabilities, on the right, title, and interest of the Debtor in any other
property now or hereafter in the possession of the Bank and also upon the
balance of any deposit account of the Debtor with the Bank at any time existing
and the Bank, in its discretion, may resort to such property subject to this
Agreement or to such deposit account, at such time or in such order as the Bank
may determine.

 

(15)                          Waiver.

 

8

 

(A)                               The
Bank shall not be liable for failure to demand or present for payment or
otherwise, protest, give notice of protest, or nonpayment or other notice or
for failure to sue for any Collateral secured hereunder, but the Bank shall
give credit only for what it actually collects or receives on account thereof;
and the Bank shall not be required to examine into the validity of or to
exchange or to collect on any Collateral subject to this Agreement or to take
any action necessary to hold any corporation, issuer or other parties liable on
the Collateral; and diligence in looking after, preserving, or acting with
respect to the Collateral or collecting the same is hereby waived by all
parties hereto.

 

(B)                               The
Bank shall not be deemed to have waived or modified any of the Bank’s rights
hereunder, or under any other writing signed by the Debtor unless such waiver
or modification be in writing and signed by an officer of the Bank, and then
such waiver or modification shall be effective only for the period and under
the terms and conditions as are specifically set forth therein. No delay or
omission on the part of the Bank in exercising any right shall operate as a
waiver of such right or any other right. No waiver of any default on one
occasion shall operate as a waiver of any other default or of the same default
on a future or different occasion. All of the Bank’s rights and remedies,
whether evidenced hereby or by any other writing, shall be cumulative and may
be exercised from time to time singularly or concurrently.

 

(16)                          Entire Agreement. This Agreement embodies the
entire Agreement and understanding between the parties with respect to the
subject matter hereof.

 

(17)                          Amendment. This Agreement may be changed or
amended only by instrument in writing signed by the party against which
enforcement is sought.

 

(18)                          Severability. This Agreement may be executed
in several counterparts, each of which is an original, but all of which shall
constitute one instrument. In the event any provision of this Agreement shall
be held to be invalid or unenforceable, in full or in part, neither the
validity nor the enforceability of the remainder of this Agreement shall be
affected in any way.

 

(19)                          Miscellaneous.

 

(A)                               When
used herein, the male gender shall include the female, and the singular shall
include the plural and vice versa where appropriate.

 

(B)                               The
Debtor and the Bank hereby irrevocably waive their respective rights to trial
by jury in any and all actions in which the Debtor and Bank are parties arising
at any time during the term of this Agreement.

 

(C)                               This
Agreement has been delivered at Media, Pennsylvania, and shall be governed by
the laws of the Commonwealth of Pennsylvania.

 

9

 

IN WITNESS WHEREOF, the parties hereto have
executed this Agreement as of the date first above written.

 

	
  Witness:

  	
  DEBTOR:

  
	
   

  	
   

  
	
   

  	
  EVANS
  & SUTHERLAND COMPUTER

  CORPORATION, a Utah Corporation

  	
   

  
	
   

  
	
   

  
	
  /s/ Analisa
  Marquardt

  	
   

  	
  BY:

  	
  /s/  David
  Bateman

  	
   

  
	
  Witness

  	
   

  	
   

  	
   

  
	
   

  
	
  /s/ Analisa
  Marquardt

  	
   

  	
  ATTEST:

  	
  /s/ Lance
  Sessions

  	
   

  
	
  Witness

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  [Corporate Seal]

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  BANK:

  
	
   

  	
   

  	
  FIRST
  KEYSTONE BANK

  
	
   

  	
   

  	
   

  
	
   

  
	
   

  	
  BY:

  	
  /s/ Robert
  Latshaw

  	
   

  
									

 

10

 

EXHIBIT “A”

 

ALL THE SHARES AND STOCK IN:

 

SPITZ, INC., a Delaware Corporation.

 

11Exhibit 10.9

 

SECURITY AGREEMENT

 

THIS SECURITY AGREEMENT (“Agreement”), made this 28th  day of April, 2006,
between FIRST KEYSTONE BANK
(herein referred to as the “Bank”), with an address of 22 West State Street,
Media, Pennsylvania,19063, and SPITZ, INC.,
a Delaware corporation (herein referred to as “Borrower”), with a mailing
address of P.O. Box 198, Route 1, Chadds Ford, Pennsylvania, 19317.

 

WHEREAS,
Borrower has executed and delivered to Bank Borrower’s Line of Credit Note in
the original principal sum of up to Three
Million Dollars ($3,000,000.00), dated even date herewith (the
“Loan”).

 

Now, for
consideration of any loan or advance (including any loan or advance by renewal
or extension) made to Borrower by the Bank, whether made pursuant to the Note or
otherwise, and for other good and valuable consideration, the parties hereto,
intending to be legally bound, agree as follows:

 

1.                                      Definitions.
When used herein, the following terms shall have the following meanings:

 

A.                                    “Note” shall
mean the Line of Credit Note executed by Borrower and delivered to Bank even
date herewith in the original principal sum of Three Million Dollars ($3,000,000.00), and any extensions,
modifications, substitutions, replacements, and/or renewals thereof, together
with any promissory note of Borrower evidencing any loan or advance made by the
Bank to Borrower hereafter made, without limitation.

 

B.                                    “Liabilities”
shall mean; (i) all debts and
obligations of Borrower under any Note, including without limitation new
obligations arising after any original debt is extinguished together with any
renewals, extensions, replacements or modifications thereof; (ii) all debts and obligations of Borrower
hereunder, together with any renewals, extensions, replacements or
modifications thereof; (iii) all
other debts and obligations of Borrower to the Bank , its successors and
assigns, of every kind and description, howsoever created, arising or
evidenced, whether direct or indirect, absolute or contingent, or now or
hereafter existing, or due or to become due; (iv)
the performance by Borrower of Borrower’s obligations under this Agreement and
all agreements, warranties, representation and covenants set forth in any loan
agreement(s), instrument(s) and document(s) executed and/or delivered in conjunction
herewith; and (v) the cost of
curing any default hereunder that Bank elects to cure on the Borrower’s behalf.

 

C.                                    “Accounts”
shall have the meaning given to that term in the Code and shall include without
limitation all rights of the Borrower, whenever acquired, to payment for goods
sold or leased or for services rendered, whether or not earned by performance.

 

 

	
  JONES,
  STROHM & GUTHRIE

  	
   

  	
  10 Beatty Road

  
	
  A
  Professional Corporation

  	
   

  	
  Media, Pennsylvania 19063

  
	
  Attorneys
  At Law

  	
   

  	
  Telephone (610) 565-7100

  
	
   

  	
   

  	
  Fax (610) 565-7180

  

 

 

D.                                    “Chattel Paper”
shall have the meaning given to that term in the Code and shall include without
limitation all writings owned by the Borrower, whenever acquired, which
evidence both a monetary obligation and a security interest in or a lease of
specific goods.

 

E.                                      “Code” shall
mean the Uniform Commercial Code as in effect on the date of this Agreement and
as amended from time to time, of the state or states having jurisdiction with
respect to all or any portion of the Collateral from time to time.

 

F.                                      “Collateral”
shall mean all tangible and intangible assets of Borrower, including, without
limitation, collectively the Accounts, Chattel Paper, Deposit Accounts,
Documents, Equipment, Fixtures, General Intangibles, Instruments, Intellectual
Property, Inventory, Investment Property and Proceeds of each of them.

 

G.                                    “Copyrights”
means United States or foreign registered or unregistered works of authorship,
regardless of the availability of copyright protection, but including all copyrights
and moral rights recognized by law and any applications for United States or
foreign registration or renewal therefor.

 

H.                                    “Deposit
Accounts” shall have the meaning given to that term in the Code and shall
include a demand, time, savings, passbook or similar account maintained with a
bank, savings bank, savings and loan association, credit union, trust company
or other organization that is engaged in the business of banking.

 

I.                                         “Documents”
shall have the meaning given to that term in the Code and shall include without
limitation all warehouse receipts (as defined by the Code) and other documents
of title (as defined by the Code) owned by the Borrower, whenever acquired.

 

J.                                      “Equipment”
shall have the meaning given to that term in the Code and shall include without
limitation all goods owned by the Borrower, whenever acquired and wherever
located, used or brought for use primarily in the business or for the benefit
of the Borrower and not included in Inventory of the Borrower, together with
all attachments, accessories and parts used or intended to be used with any of
those goods or Fixtures, whether now or in the future installed therein or
thereon or affixed thereto, as well as all substitutes and replacements thereof
in whole or in part.

 

K.                                    “Event of
Default” shall mean the occurrence of any of the following events: (a) an event of default occurs under any
Note and/or any other document executed by Borrower and delivered to Bank in
connection with the Loan; (b) failure
to cure an event of default under
any other document evidencing any or all of the Liabilities which continues
beyond any applicable cure period; (c) the
continuance for fifteen (15) days after notice of the failure of the Borrower
to fulfill any monetary obligation hereunder; and (d) the continuance for thirty (30) days after notice of any
default, other than an monetary default, in the performance of any of the terms
covenants, agreements, obligations, undertakings, provisions or conditions
contained herein.

 

L.                                     “Fixtures”
shall have the meaning given to that term in the Code, and shall include
without limitation leasehold improvements.

 

 

M.                                  “General
Intangibles” shall have the meaning given to that term in the Code and shall
include, without limitation, all leases under which the Borrower now or in the
future leases and or obtains a right to occupy or use real or personal
property, or both, all of the other contract rights of the Borrower, whenever
acquired, and customer lists, choses in action, claims (including claims for
indemnification), books, records, patents, copyrights, trademarks, blueprints,
drawings, designs and plans, trade secrets, methods, processes, contracts,
licenses, license agreements, formulae, tax and any other types of refunds,
returned and unearned insurance premiums, rights and claims under insurance
policies, and computer information, software, records and data, now owned or
acquired after the date of this Agreement by the Borrower.

 

N.                                    “Instruments”
shall have the meaning given to that term in the Code and shall include,
without limitation, all negotiable instruments (as defined in the Code), all
certificated securities (as defined in the Code) and all other writings which
evidence a right to the payment of money now or after the date of this
Agreement owned by the Borrower.

 

O.                                   “Intellectual
Property” means Copyrights, Patent Rights, Trademark Rights, Internet domain
names, World Wide Web sites and all pages thereof, Know-How, Trade Secret
Rights, Software, and similar rights under corresponding foreign laws, owned by
the Borrower or which any person or entity is under an obligation to assign
ownership to the Borrower.

 

P.                                     “Inventory”
shall have the meaning given to that term in the Code and shall include without
limitation all goods owned by the Borrower, whenever acquired and wherever
located, held for sale or lease or furnished or to be furnished under contracts
of service, and all raw materials, work in process and materials owned by the
Borrower and used or consumed in the Borrower’s business, whenever acquired and
wherever located.

 

Q.                                   “Investment
Property,” “Securities Intermediary” and “Commodities Intermediary” each shall
have the meaning set forth in the Code.

 

R.                                    “Know-How”
means all documented and undocumented research, ideas, data, theories,
conclusions, reports, drawings, designs, blueprints, schematics, exhibits,
models, prototypes, source code, object code, flow charts, manuals, processes,
specifications, formulae, product configurations, notes, inventions (whether or
not patentable and whether or not reduced to practice) and any other
information of any kind developed, in development or maintained by the Borrower
or any of its employees, agents or representatives relating to any goods or
services sold or licensed or offered for sale or license by the Borrower or
goods or services which the Borrower has a present intention to sell or
license.

 

S.                                     “Patent
Rights” means United States and foreign patent applications and patents and
other patent rights, including any and all divisions, continuations, continuations
in part, substitutions, reissues, re-examinations, extensions and renewals
thereof.

 

T.                                     “Proceeds”
shall have the meaning given to that term in the Code and shall include without
limitation whatever is received when Collateral or Proceeds are sold, exchanged,

 

3

 

collected or
otherwise disposed of, whether cash or non-cash, and includes without
limitation proceeds of insurance payable by reason of loss of or damage to
Collateral.

 

U.                                     “Software”
means any set of statements or instructions to be used directly or indirectly
in a computer or microprocessor to bring about a certain result, including all
software under development and all related documentation.

 

V.                                    “Trademark
Rights” means United States or foreign trademarks, service marks, trade names,
trade dress, domain names and corporate names, whether registered or
unregistered, and all pending United States and foreign applications therefor
associated with any goods or services sold or licensed or offered for sale or
license by the Borrower or goods or services which the Borrower has a present
intention to sell or license.

 

W.                                “Trade Secret
Rights” means all documentation, Know-How, Software and other materials owned
by the Borrower that is considered to be proprietary to the Borrower, is
maintained on a confidential or secret basis, and is generally not known to
other persons or entities who are not subject to confidentiality restrictions.

 

X.                                    “Obligor”
shall mean Borrower and each other party primarily or secondarily liable on any
note or any other Liabilities.

 

2.                                      Grant of
Security Interest. As security for the payment of all Liabilities,
Borrower hereby assigns, grants and conveys to Bank, a continuing security
interest in and lien on the Collateral, whether now or hereafter existing or
acquired, including without limitation, all Accounts, Inventory and Equipment,
whether or not specifically assigned as hereinafter provided.

 

3.                                      Assignment of
Collateral. Upon request from Bank at any time or times, Borrower shall
execute and deliver to Bank, in form and substance satisfactory to Bank, a
specific assignment or assignments of any Collateral covered by this Agreement.
Each such assignment shall identify in a manner satisfactory to Bank the
Account Debtors and the amounts of the respective accounts being thereby
assigned, and shall contain such additional information and be accompanied by
such documents or copies thereof as Bank may require. The execution and
delivery of such assignments and other documents or copies thereof shall in
each instance constitute a representation and warranty to Bank with respect to
the Collateral thereby assigned that: (a)
each of such Accounts arose from a bonafide outright sale of goods by Borrower
or for services performed by Borrower and such goods have been shipped to the
respective Account Debtors or the services have been performed for the
respective Account Debtors; (b)
none of such Accounts is subject to any assignment, claim, lien or security
interest of any character except the security interest of Bank; and (c) Borrower has not received any note,
trade acceptance, draft or other instrument with respect to or in payment for
any such account nor any chattel paper with respect to the merchandise giving
rise to such account and if any such instrument or chattel paper is received by
Borrower it will immediately notify Bank thereof and at Bank’s request will
endorse or assign and deliver the same to Bank.

 

4.                                      Warranties.
Borrower warrants represents and covenants, all of which shall survive this
Agreement that:

 

4

 

(a)                                  No
financing statement (other than; [i]
any which may have been filed on behalf of the Bank or [ii] security interests in favor of the
Owner of Equipment which may, from time to time, be leased by Borrower)
covering any of the Collateral is on file in any public office; Borrower is and
will be the lawful owner of the Collateral, free of all liens, claims, setoffs
and counterclaims whatsoever, other than the security interest hereunder, with
full power and authority to execute this agreement and perform Borrower’s
obligations hereunder, and to subject the Collateral to the security interest
hereunder; all information with respect to Collateral and Account Debtors set forth
in any schedule, certificate or other writing at any time heretofore or
hereafter furnished by Borrower to the Bank, and all other written information
heretofore or hereafter furnished by Borrower to the Bank, is and will be true
and correct in all material respects as of the date furnished, Borrower will
make no deductions or discount therein; and Borrower will fully cooperate with
and assist Bank in Bank’s efforts to collect any and all Collateral.

 

(b)                                  Borrower
will execute immediately upon Bank’s request such UCC financing statements,
powers of attorney, certificates of title, applications for title or lien,
lease assignments, lessee notifications, account Borrower notifications and
other documents as are necessary or desirable in Bank’s sole discretion to
perfect and continue perfected the liens and security interests granted herein.
Borrower hereby appoints Bank, its officers, employees and agents, as
Borrower’s attorney-in-fact to do, at Bank’s option and at Borrower’s expense,
all acts and things that Bank may deem necessary or desirable to perfect and
continue perfected the liens and security interests created herein and to
protect the Collateral. Borrower will pay to Bank upon demand the costs and
reasonable fees associated with filing the same with appropriate governmental
agencies.

 

(c)                                  If
the Collateral includes any property for which a Document of Title is issuable,
Borrower will submit to Bank a Document of Title for such Collateral within
three days after acquisition of such Collateral and Borrower will cause a
notation of the lien and security interest granted to Bank herein to be made
and noted on such Document of Title at Borrower’s sole expense. If no Document
of Title has been issued for such Collateral, Borrower will file all documents
necessary to obtain a Document of Title within three days of the acquisition of
such Collateral and to cause a notation of the lien and security interest of
Bank granted herein to be noted thereon. If Borrower fails or refuses to so
file such documents or to cause Bank’s lien and security interest to be so
noted, Bank may, at Borrower’s sole expense, file such documents as Bank, in
its sole discretion, deems appropriate to perfect its lien and security
interest.

 

(d)                                  If
the Collateral or any part of the Collateral is purchased or to be purchased by
Borrower with the proceeds of any of the Liabilities, Borrower will join with
Bank in executing all notices and other documents necessary to enable Bank to
obtain a Purchase Money Security Interest of first priority in such Collateral.

 

5.                                      Borrower’s Right to Sell. Borrower may sell any or all of the
Inventory in Borrower’s ordinary course of business. Borrower may not otherwise
dispose of Inventory without the written consent of Bank.

 

5

 

6.                                      Collections,
Etc. Until such time as the Bank shall declare an Event of Default (and
such Event of Default shall be continuing) and notify Borrower of the
revocation of such power and authority, Borrower will, at its own expense,
endeavor to collect, as and when due, all amounts due under the Collateral,
including the taking of such action with respect to such collection as the Bank
may reasonably request or, in the absence of such request, as Borrower may deem
advisable. At any time after any revocation of such power and authority Bank
shall have the right in its own name or the name of the Borrower to do any of
the following:

 

(a)                                  to
demand, collect, receive payment of, receipt for and give discharges and
releases of all or any of the Collateral, including without limitation any
Account;

 

(b)                                  to
settle, compromise, compound or adjust all or any of the Collateral;

 

(c)                                  to
commence and prosecute any and all suits, actions or proceedings in law or in
equity in any court of competent jurisdiction to collect or otherwise realize
on all or any of the Collateral or to enforce any rights in respect thereof;

 

(d)                                  to
settle, compromise, compound, adjust or defend any actions, suits or
proceedings relating or pertaining to all or any of the Collateral;

 

(e)                                  to
file any claim or take any other action or proceeding which Bank may deem
necessary or appropriate to protect and preserve and realize upon the security
interest of Bank in the Collateral and the proceeds thereof; and

 

(f)                                    generally
to sell, assign, transfer, make any agreement with respect to or otherwise deal
with all or any of the Collateral as fully and completely as though the Bank
were the absolute owner thereof for all purposes.

 

Upon the
occurrence of an Event of Default, upon request of Bank, Borrower will, at
Borrower’s sole cost and expense, notify Account Debtors to make payment to the
Bank of any amounts due or to become due thereunder.

 

Upon the
occurrence of an Event of Default, Borrower will (except as the Bank may
otherwise consent in writing) forthwith, upon receipt, transmit and deliver to
the Bank, in the form received, all cash, checks, drafts and other instruments
or writings for the payment of money (properly endorsed, where required, so
that such items may be collected by the Bank) which may be received by Borrower
at any time in full or partial payment on account of any of the Collateral. Any
such items which may be so received by Borrower will not be commingled with any
other of its funds or property, but will be held separate and apart from its
own funds or property, and upon express trust for the Bank until delivery is
made to the Bank. Borrower will comply with the terms and conditions of any
consent given by the Bank pursuant to the provisions of this paragraph.

 

All items or
amounts which are delivered by Borrower to the Bank on account of partial or
full payment or otherwise as proceeds of any of the Collateral shall be
deposited to the credit of a

 

6

 

deposit account
(herein called the “Operating Deposit Account”) of Borrower with the Bank, as
security for payment of the Liabilities. If an Event of Default shall occur and
be continuing, the Bank may apply any and all amounts in the Operating Deposit
Account representing collected funds to the payment of the Liabilities in such
order as the Bank shall in its discretion determine. If an vent of Default is
not continuing, the Borrower may direct the Bank to apply any amounts in the
Operating Deposit Account representing collected funds to the payment of such
Liabilities, or for such other purposes, as the Borrower may direct.

 

The Bank is
authorized to endorse, in the name of Borrower, any item, howsoever received by
the Bank, representing any payment on or other proceeds of any of the
Collateral. The costs of collection and enforcement of the accounts receivable,
including attorneys= fees and out of pocket
expenses, shall be borne solely by Borrower whether the same are incurred by
Bank or Borrower.

 

7.                                      Certificates,
Schedules and Reports. Borrower will from time to time, as the Bank may
request, deliver to the Bank a schedule identifying each Account and Inventory
(not previously so identified) subject to the security interest hereunder, and
such additional schedules and such certificates and reports respecting all or
any of the Collateral at the time subject to the security interest hereunder,
the items or amounts received by Borrower in full or partial payment of any of
the Collateral, and any goods (the sale or lease of which shall have given rise
to any of the Collateral) possession of which has been obtained by Borrower,
all to such extent as the Bank may request. Any such schedule, certificate or
report shall be executed by a duly authorized officer of Borrower, certified to
be true and correct in all material respects, and shall be in such form and
detail as the Bank may specify. Any such schedule identifying any Account or
Inventory subject to the security interest hereunder shall be accompanied (if
the Bank so requests) by a true and correct copy of the invoice evidencing such
Account or Inventory and by evidence of shipment or performance.

 

8.                                      Covenants of
Borrower. Borrower covenants that so long as any Liabilities are
outstanding and unpaid, Borrower will:

 

(a)                                  Upon request of the
Bank, execute such financing statements and other documents (and pay the cost
of filing or recording the same in all public offices deemed necessary by the
Bank) and do such other acts and things, all as the Bank may from time to time request
to establish, perfect and maintain a valid security interest in the Collateral
(free of all other liens, claims and rights of third parties whatsoever) to
secure the payment of the Liabilities;

 

(b)                                  Execute and deliver
to Bank any instruments, documents, assignments or other writing which may be
necessary or convenient to Bank to carry out the terms of this Agreement and to
perfect Bank’s security interest in and facilitate the collection of amounts
due under the Collateral;

 

7

 

(c)                                  Keep, at its address
shown above, its records concerning the Collateral, which records will be of
such character as will enable the Bank or its designees to determine at any
time the status of the Collateral, and Borrower will not, unless the Bank shall
otherwise consent in writing, duplicate any such records at any other address;

 

(d)                                  Promptly advise Bank
in writing of its opening of any new place of business or the closing of an
existing place of business;

 

(e)                                  Furnish the Bank such
information concerning Borrower, the Collateral and the Account Debtors as the
Bank may from time to time reasonably request;

 

(f)                                    Permit the Bank and
its designees, from time to time, to call at Borrower’s place or places of
business at any reasonable time, and without hindrance or delay, to inspect,
audit and make copies of and extracts from all records and all other papers,
books, journals, orders, receipts and any correspondence and other data in the
possession of Borrower pertaining to the Collateral and the Account Debtors,
and will, upon request of the Bank, deliver to the Bank all such records and
papers;

 

(g)                                 Store and warehouse
all Inventory on Borrower’s premises or such other warehouse as may be agreed
from time to time;

 

(h)                                 Keep all Inventory
insured for an amount at least equal to the Borrower’s cost therefor with
insurance companies satisfactory to Bank and covering loss by fire and other
casualty, with a loss payable to the Bank to the extent of the Liabilities;

 

(i)                                    Upon request of the
Bank, stamp on its records concerning the Collateral a notation, in form
satisfactory to the Bank, of the security interest of the Bank hereunder;

 

(j)                                    Upon request of the
Bank, deliver to the Bank, appropriately endorsed to the order of the Bank, any
note, trade acceptance, chattel paper or other instrument or writing which
shall be received by Borrower and which may at any time evidence any obligation
to Borrower for payment for goods sold or leased or services rendered;

 

(k)                                Not sell, assign or
create or permit to exist any lien on or security interest in any Collateral to
or in favor of anyone other than the Bank (except for security interests in
favor of the owner of equipment which may from time to time be leased by
Borrower) and will not create or permit to exist any lien on or security
interest in any Inventory of Borrower;

 

(l)                                    Reimburse the Bank
for all expenses, including reasonable attorneys= fees and legal expenses, incurred by the Bank in seeking to collect or
enforce any rights under the Collateral and, in case of Default, incurred by
the Bank in seeking to collect each Note and all other Liabilities and to
enforce rights hereunder;

 

8

 

(m)                              Permit the Bank to make
direct verification from the Account Debtors with respect to any or all
Accounts;

 

(n)                                 Upon request of the
Bank, notify Bank in the event of any bankruptcy, insolvency or financial
embarrassment of any Account Debtor and of any claim asserted for credit,
allowance, adjustment, set off or counterclaim.

 

9.                                      Default. Upon
the occurrence of an Event of Default, each Note and all other Liabilities may
(notwithstanding any provisions thereof), at the option of the Bank, and
without demand or notice of any kind, be declared, and thereupon immediately
shall become, due and payable, and the Bank may exercise from time to time any
rights and remedies available to it under applicable law. Any notification of
intended disposition of any of the Collateral required by law shall be deemed
reasonably and properly given if given at least fifteen (15) days before such
disposition. Any proceeds of any disposition by the Bank of any of the
Collateral may be applied by the Bank to the payment of expenses in connection
with the Collateral, including reasonably attorneys fees and legal expenses,
and any balance of such proceeds may be applied by the Bank on account of the
payment of such of the Liabilities, and in such good order of application, as
the Bank may from time to time elect.

 

10.                               General. The Bank
shall be deemed to have exercised reasonable care in the custody and
preservation of any of the Collateral in its possession if it takes such action
for that purpose as Borrower requests in writing, but failure of the Bank to
comply with any such request shall not of itself be deemed a failure to
exercise reasonable care, and no failure of the Bank to preserve or protect any
rights with respect to such Collateral against prior parties, or to do any act
with respect to the preservation of such Collateral not so requested by
Borrower, shall be deemed a failure to exercise reasonable care in the custody
or preservation of such Collateral.

 

Any
notice from the Bank to Borrower, if mailed, shall be deemed given three days
from the date of mailing, postage prepaid, addressed to Borrower either at
Borrower’s address shown above, or at any address of Borrower appearing on the
records of the Bank, with a copy to the Guarantor of the Loan at the address
stated, and in accordance with, the Line of Credit Agreement.

 

No
delay on the part of the Bank in the exercise of any right or remedy shall
operate as a waiver thereof, and no single or partial exercise by the Bank of
any right or remedy shall preclude other or further exercise thereof or the
exercise of any other right or remedy.

 

This
Agreement has been delivered at Media, Pennsylvania, and shall be governed by
the laws of the Commonwealth of Pennsylvania. Wherever possible each provision
of this Agreement shall be interpreted in such manner as to be effective and
valid under applicable law, but if any provision of this Agreement is not
entirely valid under applicable law, such provision shall be ineffective to the
extent of such prohibition or invalidity without invalidating the remainder of
such provision or the remaining provisions of this Agreement.

 

9

 

The
rights and privileges of the Bank hereunder shall inure to the benefit of its
successors and assigns.

 

IN
WITNESS WHEREOF, Borrower and Bank have executed this Agreement the day and
year first above written.

 

 

	
  Signed,
  sealed and delivered

  	
  BORROWER:

  
	
  in the
  presence of:

  
	
   

  	
  SPITZ,
  INC., a Delaware Corporation

  
	
   

  
	
   

  
	
  /s/ Donn L.
  Guthrie

  	
   

  	
  BY:

  	
  /s/  Jonathan
  Shaw

  	
   

  
	
  (As to Both)
  Witness

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  ATTEST:

  	
  /s/ Paul L.
  Dailey

  	
   

  
	
  Witness

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  [Corporate Seal]

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  BANK:

  
	
   

  	
   

  	
  FIRST
  KEYSTONE BANK

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  BY:

  	
  /s  Robert
  Latshaw

  	
   

  
												

 

10

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