Document:

ex_133310.htm

Exhibit 10.3

 

TERM NOTE

 

	$400,000.00 	January 18, 2019
	Due Date: June 17, 2020 	Minnetonka, Minnesota

    

 

FOR VALUE RECEIVED, AIRCO 1, LLC, a Delaware limited liability company (“Borrower”) promises to pay to the order of MINNESOTA BANK & TRUST, a Minnesota state banking corporation (“Lender”) or its assigns, at Lender’s offices located at 9800 Bren Road East, Suite 200, Minnetonka, MN 554343, or such other place as may be designated from time to time by the holder hereof, in lawful money of the United States of America, the principal sum of FOUR HUNDRED THOUSAND AND NO/100THS DOLLARS ($400,000), together with interest thereon as hereinafter provided.

 

1.     Interest. Interest shall accrue on the principal balance hereof at a fixed rate of 7.25% per annum.

 

2.     Payment. Borrower shall pay the principal of this Note and interest thereon as follows:

 

(a)     On the first day of each month, commencing on February 1, 2019, to and including June 1, 2020, there shall be due and Borrower shall pay monthly installments of accrued interest hereon; and

 

(b)     On June 17, 2020 (the “Maturity Date”), the entire remaining principal balance of this Note, together with any accrued, unpaid interest thereon, shall be due and payable in full.

 

3.     Prepayment. Borrower may voluntarily prepay the loan evidenced by this Note in whole or in part at any time; without premium or penalty.

 

4.     Computation of Interest. Interest charges will be calculated on amounts advanced hereunder on the actual number of days said amounts are outstanding. Such interest shall be computed on the basis of a year comprised of 360 days, but charged for the actual number of days elapsed (including the first day but excluding the last day) occurring in the period for which interest is payable. Payments under this Note shall be applied initially against accrued interest and escrow charges, if any, and thereafter in reduction of principal.

 

5.     Loan Agreement. This Note is one of the Notes referred to in, and is entitled to the benefits of, the Loan Agreement dated as of January 18, 2019 (the Loan Agreement as amended, modified, supplemented or restated from time to time being the “Loan Agreement;” capitalized terms not otherwise defined herein being used herein as therein defined) by and between the Borrower, the Lender and Park State Bank. The Loan Agreement, among other things, (i) provides for the making of the Loan evidenced by the Notes; (ii) contains provisions for acceleration of the maturity hereof upon the happening of certain stated events prior to the maturity hereof upon the terms and conditions therein specified; and (iii) contains provisions for the mandatory prepayment hereof upon certain conditions.

 

 

 

 

TERM NOTE

 

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	$400,000.00 	January 18, 2019
	Due Date: June 17, 2020 	Minnetonka, Minnesota

    

6.     Security. This Note is secured, inter alia, by that certain Security Agreement dated of even date herewith executed by the Borrower in favor of the Collateral Agent for the benefit of itself and for the ratable benefit of the Lenders.

 

7.     Default Rate, etc. Borrower acknowledges that if any payment required under this Note is not paid within ten (10) days after the same becomes due and payable, Lender will incur extra administrative expenses (i.e., in addition to expenses incident to receipt of timely payment) in connection with the delinquency in payment. Because, from the nature of the case, the actual damages suffered by Lender in incurring such extra administrative expenses would be impracticable or extremely difficult to ascertain, it is agreed that five percent (5%) of the amount of the delinquency payment shall be the amount of damages to which the Lender is entitled, upon such breach, in compensation for such extra administrative expenses. Therefore, Borrower shall, in such event, without further notice, pay to Lender liquidated damages in the amount of five percent (5%) of the amount of such delinquent payments. The provisions of this paragraph are intended to govern only the determination of the above-described damages in the event of a breach in performance of the obligation of Borrower to make timely payments hereunder. Nothing in this Note shall be construed as an express or implied agreement by Lender to forbear in the collection of any delinquent payment, or be construed as in any way giving the undersigned the right, express or implied, to fail to make timely payment hereunder, whether upon payment of such damages or otherwise. The right of Lender to receive payment of such liquidated damages, and receipt thereof, are without prejudice to the right of Lender to collect such delinquent payments and any other amounts required to be paid hereunder or under any security for this Note or to declare a default hereunder or under any security for this Note. In addition to the foregoing, upon the occurrence of a Default or Event of Default (as defined in the Loan Agreement) or if the principal balance and all interest accrued thereon have not been repaid on or before the Maturity Date, then in addition to any remedies available to Lender, hereunder, under the Loan Agreement, under any other Loan Document, at law or in equity, interest payable hereunder shall be computed thereon from and after that date at a rate of four percent (4%) per annum in excess of the interest rate then payable pursuant to Paragraph 1 of this Note, as such rate changes from time to time, or at the maximum lawful rate of interest which may be charged thereon by Lender, if any, whichever is less (hereinafter called “Default Rate”), until the Default is cured or the principal balance and all accrued, unpaid interest thereon, together with any other amounts payable by Borrower to Lender hereunder, under the Loan Agreement or under any other Loan Document are paid in full.

 

 

 

 

TERM NOTE

 

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	$400,000.00 	January 18, 2019
	Due Date: June 17, 2020 	Minnetonka, Minnesota

    

8.     Waivers. Borrower and any endorsers or guarantors hereof severally waive presentment and demand for payment, notice of intent to accelerate maturity, protest or notice of protest and non-payment, bringing of suit and diligence in taking any action to collect any sums owing hereunder or in proceeding against any of the rights and properties securing payment hereunder, and expressly agree that this Note, or any payment hereunder, may be extended from time to time, and consent to the acceptance of further security or the release of any security for this Note, all without in any way affecting the liability of Borrower and any endorsers or guarantors hereof. No extension of time for the payment of this Note, or any installment thereof, made by agreement by Lender with any person now or hereafter liable for the payment of this Note, shall affect the original liability under this Note of the undersigned, even if the undersigned is not a party to such agreement.

 

9.     Event of Default. Any Event of Default (as defined in the Loan Agreement) shall constitute an Event of Default under this Note. Upon the occurrence of an Event of Default, in addition to any other rights or remedies Lender may have at law or in equity or under the Loan Agreement or under any other Loan Document, Lender may, at its option, without notice to Borrower, declare immediately due and payable the entire unpaid principal sum hereof, together with all accrued and unpaid interest thereon plus any other sums owing at the time of such Event of Default pursuant to this Note, the Security Agreement or any other Loan Document. The failure to exercise the foregoing or any other options shall not constitute a waiver of the right to exercise the same or any other option at any subsequent time in respect of the same event or any other event. The acceptance by the holder of any payment hereunder which is less than payment in full of all amounts due and payable at the time of such payment shall not constitute a waiver of the right to exercise any of the foregoing options at that time or at any subsequent time.

 

10.     Fees and Costs. Borrower agrees to pay all reasonable expenses for the preparation of this Note, as set forth in the Loan Agreement, including exhibits, and any amendments to this Note as may from time to time hereafter be required, and the reasonable attorneys’ fees and legal expenses of counsel for Lender from time to time incurred in connection with the preparation and execution of this Note and any document relevant to this Note, any amendments hereto or thereto. Borrower agrees to reimburse Lender upon demand for all reasonable out-of-pocket expenses (including attorneys’ fees and legal expenses) in connection with Lender’s enforcement of the obligations of the Borrower hereunder or under the Security Agreement or any other collateral document, whether or not suit is commenced including, without limitation, attorneys’ fees and legal expenses in connection with any appeal of a lower court’s order or judgment. The obligations of the Borrower under this paragraph shall survive any termination of the Loan Agreement, this Note, the Security Agreement, and any other Loan Document.

 

11.     Binding Effect. This Note shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns except that Borrower may not assign or transfer its rights hereunder without the prior written consent of Lender, which consent may be withheld in Lender’s sole discretion. In connection with the actual or prospective sale by the Lender of any interest or participation in the loan obligation evidenced by this Note, Borrower hereby authorizes the Lender to furnish any information concerning the Borrower or any of its affiliates, however acquired, to any person or entity.

 

 

 

 

TERM NOTE

 

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	$400,000.00 	January 18, 2019
	Due Date: June 17, 2020 	Minnetonka, Minnesota

    

12.     Waiver of Jury Trial; Consent to Jurisdiction. BORROWER WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY ACTION RELATING TO OR ARISING FROM THIS NOTE. AT THE OPTION OF LENDER, THIS NOTE MAY BE ENFORCED IN ANY UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MINNESOTA OR THE STATE COURT SITTING IN HENNEPIN OR RAMSEY COUNTY, MINNESOTA. BORROWER CONSENTS TO THE JURISDICTION AND VENUE OF ANY SUCH COURT AND WAIVES ANY ARGUMENT THAT VENUE IN SUCH FORUMS IS NOT PROPER OR CONVENIENT. IN THE EVENT AN ACTION IS COMMENCED IN ANOTHER JURISDICTION OR VENUE UNDER ANY TORT OR CONTRACT THEORY ARISING DIRECTLY OR INDIRECTLY FROM THE RELATIONSHIP CREATED BY THIS NOTE, LENDER, AT ITS OPTION, SHALL BE ENTITLED TO HAVE THE CASE TRANSFERRED TO ONE OF THE JURISDICTIONS AND VENUES ABOVE DESCRIBED, OR IF SUCH TRANSFER CANNOT BE ACCOMPLISHED UNDER APPLICABLE LAW, TO HAVE SUCH CASE DISMISSED WITHOUT PREJUDICE.

 

13.     Choice of Laws. THE VALIDITY, CONSTRUCTION AND ENFORCEABILITY OF THIS NOTE SHALL BE GOVERNED BY THE INTERNAL LAWS OF THE STATE OF MINNESOTA, WITHOUT GIVING EFFECT TO CONFLICT OF LAWS PRINCIPLES THEREOF.

 

14.     Severability. The invalidity or unenforceability in particular circumstances of any provision of this Note shall not extend beyond such provision or such circumstances and no other provision of this instrument shall be affected thereby.

 

15.     Usury. Borrower and Lender agree that no payment of interest or other consideration made or agreed to be made by Borrower to Lender pursuant to this Note shall, at any time, be in excess of the maximum rate of interest permissible by law. In the event such payments of interest or other consideration provided for in this Note shall result in an effective rate of interest which, for any period of time, is in excess of the limit of the usury or any other law applicable to the loan evidenced hereby, all sums in excess of those lawfully collectible as interest for the period in question shall, without further agreement or notice between or by any party hereto, be applied to the unpaid principal balance and not to the payment of interest; if a surplus remains after full payment of principal and lawful interest, the surplus shall be remitted by Lender to Borrower, and Borrower hereby agrees to accept such remittance. This provision shall control every other obligation of the Borrower and Lender relating to this Note.

 

 

 

 

TERM NOTE

 

	$400,000.00 	January 18, 2019
	Due Date: June 17, 2020 	Minnetonka, Minnesota

    

IN WITNESS WHEREOF, Borrower has executed and delivered this Term Note as of the date first written above.

 

 

	
			 

				
			AIRCO 1, LLC, a Delaware limited liability

			company

				
			 

			
	
			 

				
			 

				
			 

				
			 

			
	
			 

				
			By: 

				
			 

				
			 

			
	
			 

				
			Name:

				
			Chuck Kingsley

				
			 

			
	
			 

				
			Its: 

				
			Vice President

				
			 

			

 

 

 

[Term Note Signature Page]ex_133311.htm

Exhibit 10.4

 

SECURITY AGREEMENT

(Grantor)

 

This SECURITY AGREEMENT is made as of January 18, 2019 (the “Agreement”), by AIRCO 1, LLC, a Delaware limited liability company, with its chief executive office at 5930 Balsom Ridge Road, Denver, NC 28037 (“Grantor”), in favor of MINNESOTA BANK & TRUST, a Minnesota state banking corporation, with an office at 9800 Bren Road East, Suite 200, Minnetonka, MN 554343, in its capacity as collateral agent (in such capacity the “Collateral Agent”) for the benefit of itself and for the ratable benefit of the “Lenders” as hereinafter defined.

 

RECITALS:

 

A.     Grantor has requested extensions of credit from PARK STATE BANK, a Minnesota state banking corporation (“PSB”), MINNESOTA BANK & TRUST, a Minnesota state banking corporation (“MBT”; and together with PSB and their respective successors and assigns being sometimes collectively referred herein as the “Lenders” and individually as a “Lender”) pursuant to the terms of that certain Loan Agreement dated of even date herewith (as it may be amended, modified, supplemented, increased or restated from time to time being the “Loan Agreement”) between Grantor and Lenders.

 

B.     As a condition to the effectiveness of the Loan Agreement and such extensions of credit, the Lenders require that Grantor grant a security interest in its assets in accordance with this Agreement.

 

C.     Grantor has determined that the execution, delivery and performance of this Agreement are in its best business and pecuniary interest.

 

NOW, THEREFORE, for good and valuable consideration the receipt and adequacy of which are hereby acknowledged by each of the parties hereto, it is agreed as follows:

 

ARTICLE I

DEFINITIONS

 

As used herein, the following terms shall have the meanings set forth in this Section:

 

“Accounts” shall have the meaning provided in the UCC.

 

“Chattel Paper” shall have the meaning provided in the UCC and shall include, without limitation, all Electronic Chattel Paper and Tangible Chattel Paper.

 

“Collateral” shall mean all property in which a security interest is granted hereunder.

 

“Collateral Agent” shall have the meaning provided in the preamble.

 

“Commercial Tort Claim” shall have the meaning provided in the UCC.

 

 

 

 

“Controlled Property” shall mean property of every kind and description in which Grantor has or may acquire any interest, now or hereafter at any time in the possession or control of Collateral Agent for any reason and all dividends and distributions on or other rights in connection with such property.

 

“Data Processing Records and Systems” shall mean all of Grantor’s now existing or hereafter acquired electronic data processing and computer records, software (including, without limitation, all “Software” as defined in the UCC), systems, manuals, procedures, disks, tapes and all other storage media and memory.

 

“Default” shall have the meaning provided in the Loan Agreement.

“Deposit Accounts” shall have the meaning provided in the UCC and shall include, without limitation, any demand, time, savings, passbook or similar account maintained with a bank.

 

“Depository Bank” Minnesota Bank & Trust.

 

“Document” shall have the meaning provided in the UCC.

 

“Electronic Chattel Paper” shall have the meaning provided in the UCC.

 

“Equipment” shall have the meaning provided in the UCC.

 

“Event of Default” shall have the meaning specified in Article VI hereof.

 

“Fixtures” shall have the meaning provided in the UCC.

 

“General Intangibles” shall have the meaning provided in the UCC and shall include, without limitation, all Payment Intangibles.

 

“Goods” shall have the meaning provided in the UCC and shall include, without limitation, embedded “Software” to the extent included in “Goods” as defined in the UCC.

 

“Grantor” shall have the meaning provided in the preamble hereto.

 

“Instruments” shall have the meaning provided in the UCC.

 

“Insurance Proceeds” shall mean all proceeds of any and all insurance policies payable to Grantor with respect to any Collateral, or on behalf of any Collateral, whether or not such policies are issued to or owned by Grantor.

 

“Inventory” shall have the meaning provided in the UCC.

 

“Investment Property” shall have the meaning provided in the UCC.

 

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“Lender(s)” shall have the meaning provided in the recitals hereto.

 

“Letter-of-Credit Rights” shall have the meaning provided in the UCC.

 

“Loan Agreement” shall have the meaning provided in the recitals hereto.

 

“MBT” shall have the meaning provided in the recitals hereto.

 

“MBT Security Agreement” shall mean that certain Security Agreement dated October 27, 2017, executed by the Grantor in favor of MBT, as the same may be amended, modified, replaced or restated from time to time.

 

“Motor Vehicles” shall mean all vehicles (including, without limitation all tractors and trailers) for which the title to such vehicle is governed by a certificate of title or ownership.

 

“Payment Intangibles” shall have the meaning provided in the UCC.

 

“Proceeds” shall have the meaning provided in the UCC.

 

“Products” shall mean any goods now or hereafter manufactured, processed or assembled with any of the Collateral.

 

“PSB” shall have the meaning provided in the recitals hereto.

 

“Supporting Obligations” shall have the meaning provided in the UCC.

 

“Tangible Chattel Paper” shall have the meaning provided in the UCC.

 

“UCC” shall mean the Uniform Commercial Code as enacted in the State of Minnesota, as amended from time to time; provided, however, that: (a) to the extent that the UCC is used to define any term herein, and such term is defined differently in different Articles of the UCC, the definition of such term contained in Article 9 shall govern; and (b) if, by reason of mandatory provisions of law, any or all of the attachment, perfection or priority of, or remedies with respect to, the Collateral Agent’s security interest in any Collateral is governed by the Uniform Commercial Code as enacted and in effect in a jurisdiction other than the State of Minnesota, the term “UCC” shall mean the Uniform Commercial Code as enacted and in effect in such other jurisdiction solely for purposes of the provisions thereof relating to such attachment, perfection or priority of, or remedies with respect to, the Collateral Agent’s security interest and for purposes of definitions related to such provisions.

 

Other terms defined herein shall have the meanings ascribed to them herein. All capitalized terms used herein, not specifically defined herein, shall have the meaning ascribed to them in the Loan Agreement.

 

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ARTICLE II

SECURITY INTERESTS

 

As security for the payment of all Obligations, Grantor hereby grants to Collateral Agent, for the benefit of itself and for the ratable benefit of the Lenders, a security interest in all of Grantor’s right, title and interest in and to the following, whether now owned or existing or hereafter acquired or arising:

 

Accounts;

Chattel Paper;

Commercial Tort Claims, if any, described on Exhibit B attached hereto and incorporated herein by reference;

Controlled Property;

Deposit Accounts;

Documents;

Equipment and Fixtures;

General Intangibles;

Goods;

Instruments;

Inventory;

Investment Property;

Letter-of-Credit Rights;

Proceeds (whether cash or non-cash Proceeds, including Insurance Proceeds and non-cash Proceeds of all types);

Products of all the foregoing; and

Supporting Obligations;

 

provided, however, that the Collateral Agent’s security interest in all of the foregoing, other than in the Acquired Assets and in identifiable Proceeds of Acquired Assets, shall be subordinate to MBT’s separate security interest in such assets granted to MBT pursuant to the MBT Security Agreement.

 

ARTICLE III

REPRESENTATIONS AND COVENANTS OF GRANTOR

 

 Grantor represents, warrants and covenants that:

 

3.1      Authorization. The execution and performance of this Agreement have been duly authorized by all necessary action and do not and will not: (a) require any consent or approval of the members or stockholders of any entity, or the consent of any governmental entity, which in each case has not been obtained; or (b) violate any provision of any indenture, contract, agreement or instrument to which it is a party or by which it is bound.

 

3.2      Title to Collateral. Grantor has good and marketable title to all of the Collateral and none of the Collateral is subject to any security interest except for the security interest created pursuant to this Agreement or other Permitted Liens.

 

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3.3      Disposition or Encumbrance of Collateral. Grantor will not encumber, sell or otherwise transfer or dispose of the Collateral without the prior written consent of Collateral Agent except as provided in this Section or for Permitted Liens. Until a Default or Event of Default has occurred and is continuing, Grantor may sell Collateral consisting of: (a) Inventory in the ordinary course of business provided that Grantor receives as consideration for such sale an amount not less than the fair market value of the Inventory at the time of such sale; and (b) Equipment and Fixtures which in the judgment of Grantor have become obsolete or unusable in the ordinary course of business, provided that all net Proceeds of such sales of Equipment and Fixtures are (i) used to acquire replacement Equipment or Fixtures or (ii) delivered directly to Collateral Agent for application to the Obligations in such order as the Collateral Agent may elect.

 

3.4      Validity of Accounts. Grantor warrants that all Collateral consisting of Accounts, Chattel Paper and Instruments included in Grantor’s schedules, financial statements or books and records are bona fide existing obligations created by the sale and actual delivery of Inventory or the rendition of services to customers in the ordinary course of business, which Grantor then owns free and clear of any security interest other than the security interest created by this Agreement or other Permitted Liens, and which are then unconditionally owing to Grantor without defenses, offset or counterclaim except those arising in the ordinary course of business that are immaterial in the aggregate and that the unpaid principal amount of any such Chattel Paper or Instrument and any security therefor is and will be as represented to Collateral Agent on the date of the delivery thereof to Collateral Agent.

 

3.5      Maintenance of Tangible Collateral. Grantor will maintain the tangible Collateral in good condition and repair (reasonable wear and tear excepted). At the time of attachment and perfection of the security interest granted pursuant hereto and thereafter, all tangible Collateral will be located and will be maintained only at the locations set forth on Exhibit A hereto. Except as otherwise permitted by Section 3.3, Grantor will not remove such Collateral from such locations unless, prior to any such removal, Grantor has given written notice to Collateral Agent of the location or locations to which Grantor desires to remove the Collateral, Collateral Agent has given its written consent to such removal, and Grantor has delivered to Collateral Agent acknowledgment copies of financing statements filed where appropriate to continue the perfection of Collateral Agent’s security interest as a priority security interest on such Collateral that is junior only to the security interest of MBT pursuant to the MBT Security Agreement in all of Grantor’s assets other than the Acquired Assets and identifiable Proceeds of Acquired Assets. Collateral Agent’s security interest attaches to all of the Collateral wherever located and Grantor’s failure to inform Collateral Agent of the location of any item or items of Collateral shall not impair Collateral Agent’s security interest thereon.

 

3.6      Notation on Chattel Paper. For purposes of the security interest granted pursuant to this Agreement, Collateral Agent has been granted a direct security interest in all Chattel Paper constituting part of the Collateral, and such Chattel Paper is not claimed merely as Proceeds of Inventory. Upon Collateral Agent’s request, Grantor will deliver to Collateral Agent the original of all Chattel Paper. Grantor will not execute any copies of such Chattel Paper constituting part of the Collateral other than those which are clearly marked as a copy. Collateral Agent may stamp any such Chattel Paper with a legend reflecting Collateral Agent’s security interest therein.

 

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3.7      Instruments as Proceeds; Deposit Accounts. Notwithstanding any other provision in this Agreement concerning Instruments, Grantor covenants that Instruments constituting cash Proceeds (for example, money and checks) shall be deposited in Deposit Accounts with the Collateral Agent. Grantor has granted to the Collateral Agent a direct security interest in all Deposit Accounts constituting part of the Collateral and such Deposit Accounts are not claimed merely as Proceeds of other Collateral.

 

3.8      Protection of Collateral. All expenses of protecting, storing, warehousing, insuring, handling and shipping of the Collateral, all costs of keeping the Collateral free of any liens, encumbrances and security interests prohibited by this Agreement and of removing the same if they should arise, and any and all excise, property, sales and use taxes imposed by any state, federal or local authority on any of the Collateral or in respect of the sale thereof, shall be borne and paid by Grantor and if Grantor fails to promptly pay any thereof when due, Collateral Agent may, at its option, but shall not be required to pay the same whereupon the same shall constitute Obligations and shall bear interest at the Default Rate specified in the Notes and shall be secured by the security interest granted hereunder.

 

3.9      Insurance. Grantor will procure and maintain, or cause to be procured and maintained, insurance issued by responsible insurance companies insuring the Collateral against damage and loss by theft, fire, collision (in the case of Motor Vehicles), and such other risks as are usually carried by owners of similar properties or as may be requested by Collateral Agent in an amount equal to the replacement value thereof, and, in any event, in an amount sufficient to avoid the application of any co-insurance provisions and payable, in the case of any loss in excess of $50,000.00, to Grantor and Collateral Agent jointly. All such insurance shall contain an agreement by the insurer to endeavor to provide Collateral Agent with 30 days’ prior notice of cancellation and an agreement that the interest of Collateral Agent shall not be impaired or invalidated by any act or neglect of Grantor nor by the occupation of the premises wherein such Collateral is located for purposes more hazardous than are permitted by said policy. Grantor will maintain, with financially sound and reputable insurers, insurance with respect to its properties and business against such casualties and contingencies of such types (which may include, without limitation, public and product liability, larceny, embezzlement, business interruption or other criminal misappropriation insurance) and in such amounts as may from time to time be required by Collateral Agent. Grantor will deliver evidence of such insurance and the policies of insurance or copies thereof to Collateral Agent upon request.

 

3.10      Compliance with Law. Grantor will not use the Collateral, or knowingly permit the Collateral to be used, for any unlawful purpose or in violation of any federal, state or municipal law.

 

3.11      Books and Records; Access.

 

(a)      Grantor will permit Collateral Agent and its representatives to examine Grantor’s books and records (including Data Processing Records and Systems) with respect to the Collateral and make extracts therefrom and copies thereof at any time and from time to time, and Grantor will furnish such information and reports to Collateral Agent and its representatives regarding the Collateral as Collateral Agent and its representatives may from time to time request. Grantor will also permit Collateral Agent and its representatives to inspect the Collateral at any time and from time to time as Collateral Agent and its representatives may request.

 

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(b)      Collateral Agent shall have authority, at any time, to place, or require Grantor to place, upon Grantor’s books and records relating to Accounts, Chattel Paper and other rights to payment covered by the security interest granted hereby a notation or legend stating that such Accounts, Chattel Paper and other rights to payment are subject to Collateral Agent’s security interest.

 

3.12      Notice of Default. Immediately upon any officer of Grantor becoming aware of the existence of any Default or Event of Default, Grantor will give notice to Collateral Agent that such Default or Event of Default exists, stating the nature thereof, the period of existence thereof, and what action Grantor proposes to take with respect thereto.

 

3.13      Additional Documentation. Grantor will execute, from time to time, and authorizes Collateral Agent to execute from time to time as Grantor’s attorney-in-fact and/or file, such financing statements, assignments, and other documents covering the Collateral, including Proceeds, as Collateral Agent may request in order to create, evidence, perfect, maintain or continue its security interest in the Collateral (including additional Collateral acquired by Grantor after the date hereof), and Grantor will pay the cost of filing the same in all public offices in which Collateral Agent may deem filing to be appropriate and will notify Collateral Agent promptly upon acquiring any additional Collateral that may require an additional filing. Upon request, Grantor will deliver to Collateral Agent all Grantor’s Documents, Chattel Paper and Instruments constituting part of the Collateral.

 

3.14      Chief Executive Office; State of Organization. The location of the chief executive office of Grantor is located in the State set forth in the preamble hereto and will not be changed from such state without 30 days’ prior written notice to Collateral Agent. Grantor warrants that its books and records concerning Accounts and Chattel Paper constituting part of the Collateral are located at its chief executive office. Grantor’s State of organization is the State set forth in the preamble hereto, and such State has been its State of organization since the date of Grantor’s organization. Grantor will not change its State of organization from such State without 30 days’ prior written notice to Collateral Agent, and without Collateral Agent’s written consent to such change, and without delivering to Collateral Agent acknowledgment copies of financing statements filed where appropriate to continue the perfection of Collateral Agent’s security interest as a first priority security interest therein.

 

3.15      Name of Grantor. Grantor’s exact legal name and type of legal entity is as set forth in the preamble hereto. Grantor will not further change its legal name without 30 days’ prior written notice to the Collateral Agent, and without Collateral Agent’s written consent to such change, and without delivering to the Collateral Agent acknowledgment copies of financing statements filed where appropriate to continue the perfection of the Collateral Agent’s security interest as a first priority security interest in the Collateral. Grantor has not used any other name within the past five years except those described on Exhibit A attached hereto. Neither Grantor nor, to Grantor’s knowledge, any predecessor in title to any of the Collateral has executed any financing statements or security agreements presently effective as to the Collateral except those described on Exhibit A attached hereto.

 

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3.16      Disputes, Etc. Grantor shall advise Collateral Agent promptly of Inventory in excess of $50,000.00 for any one customer in any fiscal year or in excess of $100,000.00 in the aggregate for all customers in any fiscal year which are returned by a customer(s) or otherwise recovered from such customer(s) and unless instructed to deliver such Inventory to Collateral Agent, Grantor shall resell such Inventory for Collateral Agent and assign or deliver to Collateral Agent the resulting Accounts or other Proceeds. Grantor shall also advise Collateral Agent promptly of all disputes and claims in excess of $50,000.00 for any one obligor on the Collateral in any fiscal year or in excess of $100,000.00 in the aggregate for all obligors in any fiscal year and settle or adjust them at no expense to Collateral Agent. After the occurrence and during the continuance of an Event of Default, Collateral Agent may at all times settle or adjust such disputes and claims directly with the customers for amounts and upon terms which Collateral Agent considers commercially reasonable. No discount, credit, allowance, adjustment or return shall be granted by Grantor to any customer without Collateral Agent’s written consent other than discounts, credits, allowances, adjustments and returns made or granted by Grantor in the ordinary course of business prior to the occurrence and during the continuance of an Event of Default.

 

3.17      Power of Attorney. Grantor appoints Collateral Agent or any other person whom Collateral Agent may from time to time designate, as Grantor’s attorney in fact, with power to: (a) endorse Grantor’s name on any checks, notes, acceptances, drafts or other forms of payment or security evidencing or relating to any Collateral that may come into Collateral Agent’s possession; (b) sign Grantor’s name on any invoice or bill of lading relating to any Collateral, on drafts against customers, on schedules and confirmatory assignments of Accounts, Chattel Paper, Documents or other Collateral, on notices of assignment, financing statements under the UCC and other public records, on verifications of accounts and on notices to customers; (c) notify the post office authorities to change the address for delivery of Grantor’s mail to an address designated by Collateral Agent; (d) receive and open all mail addressed to Grantor; (e) send requests for verification of Accounts, Chattel Paper, Instruments or other Collateral to customers; and (f) do all things necessary to carry out this Agreement; provided, however, that so long as no Event of Default has occurred and is continuing, Lender: (x) shall not exercise the powers granted pursuant to Section 3.17(c) or (d); (y) shall exercise the power granted by Section 3.17(e) through Collateral Agent’s trade accounting firm name and not in any name identifying the verifying party as a bank, lender or other financial institution; and (z) shall exercise the powers granted by Section 3.17(f) only upon Grantor’s failure to take action requested by Collateral Agent within five (5) Business Days after the Lender has requested that Borrower take the requested action. Grantor ratifies and approves all acts of the attorney taken within the scope of the authority granted. Neither Collateral Agent nor the attorney will be liable for any acts of commission or omission, or for any error in judgment or mistake of fact or law. This power, being coupled with an interest, is irrevocable so long as any Obligation remains unpaid. Grantor waives presentment and protest of all instruments and notice thereof, notice of default and dishonor and all other notices to which Grantor may otherwise be entitled.

 

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3.18      Patents and Trademarks, Etc. Grantor agrees with Collateral Agent that, until the security interest granted by this Agreement has been terminated in accordance with the terms hereof:

 

(a)      Grantor will perform all acts and execute all documents including, without limitation, grants of security interest, in form suitable for filing with the United States Patent and Trademark Office, reasonably requested by Collateral Agent at any time to evidence, perfect, maintain, record and enforce Collateral Agent’s interest in the Collateral comprised of patents (collectively the “Patents”), patent applications (collectively the “Patent Applications”), trademarks or service marks (collectively the “Trademarks”) or of any applications therefor (collectively the “Trademark Applications”) or otherwise in furtherance of the provisions of this Agreement;

 

(b)      Except to the extent that Collateral Agent shall consent in writing, Grantor (either itself or through licensees) will, unless Grantor shall reasonably determine that a Trademark (or the use of a Trademark in connection with a particular class of goods or products) is not of material economic value to Grantor: (i) continue to use each Trademark on each and every trademark class of goods in order to maintain each Trademark in full force free from any claim of abandonment for non-use; (ii) maintain as in the past the quality of products and services offered under each Trademark; (iii) employ each Trademark with the appropriate notice of application or registration to the extent required by applicable law to maintain such Trademark; (iv) not use any Trademark except for the uses for which registration or application for registration of such Trademark has been made, unless such use is otherwise lawful; and (v) not (and not permit any licensee or sublicensee thereof to) do any act or knowingly omit to do any act whereby any Trademark may become invalidated;

 

(c)      Except to the extent that Collateral Agent shall consent in writing, Grantor will not, unless Grantor shall reasonably determine that a Patent is not of material economic value to Grantor, do any act, or not to do any act, whereby any Patent may become abandoned or dedicated;

 

(d)      Unless Grantor shall reasonably determine that a Patent, Patent Application, Trademark or Trademark Application is not of material economic value to Grantor, Grantor shall notify Collateral Agent immediately if it knows, or has reason to know, of any reason that any Patent, Patent Application, Trademark or Trademark Application may become abandoned or dedicated, or of any adverse determination or development (including, without limitation, the institution of, or any such determination or development in, any proceeding in the United States Patent and Trademark Office or any court) regarding Grantor’s ownership of any Patent or Trademark, its rights to register the same, or to keep and maintain the same;

 

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(e)      If Grantor, either itself or through any agent, employee, licensee or designee, shall file a Patent Application or Trademark Application for the registration of any Trademark with the United States Patent and Trademark Office, or any similar office or agency in any other country or any political subdivision thereof, Grantor shall promptly inform Collateral Agent, and, upon request of Collateral Agent, shall promptly execute and deliver any and all agreements, instruments, documents and papers as Collateral Agent may reasonably request to evidence Collateral Agent’s security interest in such Patent or Trademark and the goodwill and general intangibles of Grantor relating thereto or represented thereby;

 

(f)      Unless Grantor shall reasonably determine that a Patent Application or Trademark Application is not of material economic value to Grantor, Grantor will take all necessary steps, including, without limitation, in any proceeding before the United States Patent and Trademark Office, or any similar office or agency in any other country or any political subdivision thereof, to maintain and pursue each Patent Application and Trademark Application (and to obtain the relevant registration) and to maintain each registration of the Patents and Trademarks, including, without limitation, filing of applications for renewal and affidavits of use;

 

(g)      Unless Grantor shall reasonably determine that a Patent or Trademark is not of material economic value to Grantor, Grantor shall promptly notify Collateral Agent if any Patent or Trademark is infringed, misappropriated or diluted by a third party and either shall promptly sue for infringement, misappropriation or dilution and to recover any and all damages for such infringement, misappropriation or dilution, or take such other actions as Grantor shall reasonably deem appropriate under the circumstances to protect such Patent or Trademark; and

 

(h)      Grantor agrees that it will not enter into any agreement (for example, a license agreement) which is inconsistent with Grantor’s obligations under this Agreement.

 

3.19      Copyrights. Grantor agrees with Collateral Agent that, until the security interest granted by this Agreement has been terminated in accordance with the terms hereof:

 

(a)      Grantor will perform all acts and execute all documents including, without limitation, grants of security interest, in form suitable for filing with the United States Copyright Office, reasonably requested by Collateral Agent at any time to evidence, perfect, maintain, record and enforce Collateral Agent’s interest in the Collateral comprised of copyrights or copyright applications (collectively the “Copyrights”) or otherwise in furtherance of the provisions of this Agreement;

 

(b)      Except to the extent that the Collateral Agent shall consent in writing, Grantor (either itself or through licensees) will, unless Grantor shall reasonably determine that a Copyright is not of material economic value to Grantor, publish the materials for which a Copyright has been obtained (the “Works”) with any notice of copyright registration required by applicable law to preserve the Copyright;

 

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(c)      Unless Grantor shall reasonably determine that a Copyright is not of material economic value to Grantor, Grantor shall notify the Collateral Agent immediately if it knows, or has reason to know, of any reason that any application or registration relating to any Copyright may become abandoned or dedicated or of any adverse determination or development (including, without limitation, the institution of, or any such determination or development in, any proceeding in the United States Copyright Office or any court) regarding Grantor’s ownership of any Copyright, its right to register the same, or to keep and maintain the same;

 

(d)      If Grantor, either itself or through any agent, employee, licensee or designee, shall file an application for the registration of any Copyright with the United States Copyright Office or any similar office or agency in any other country or any political subdivision thereof, Grantor shall promptly inform Collateral Agent, and, upon request of Collateral Agent, execute and deliver any and all agreements, instruments, documents and papers as Collateral Agent may request to evidence Collateral Agent’s security interest in such Copyright and the Works relating thereto or represented thereby;

 

(e)      Unless Grantor shall reasonably determine that a Copyright is not of material economic value to Grantor, Grantor will take all commercially reasonable steps, including, without limitation, in any proceeding before the United States Copyright Office or any similar office or agency in any other country or any political subdivision thereof, to maintain and pursue each application (and to obtain the relevant registration) and to maintain each registration of the Copyrights;

 

(f)      In the event that any Copyright is infringed by a third party, Grantor shall promptly notify Collateral Agent and shall, unless Grantor shall reasonably determine that such Copyright is not of material economic value to Grantor, promptly sue to recover any and all damages or take such other actions as Grantor shall reasonably deem appropriate under the circumstances to protect such Copyright; and

 

(g)      Grantor agrees that it will not enter into any agreement (for example, a license agreement) which is inconsistent with Grantor’s obligations under this Agreement.

 

3.20      Control. Grantor will cooperate with Collateral Agent in obtaining control with respect to Collateral consisting of Deposit Accounts, Investment Property, Letter-of-Credit Rights, and Electronic Chattel Paper. Without limiting the foregoing, if Grantor becomes a beneficiary of a letter of credit, then Grantor shall promptly notify the Collateral Agent thereof and, if then requested by Collateral Agent, enter into a tri-party agreement with the Collateral Agent and the issuer and/or confirmation bank with respect to such letter of credit assigning the Letter-of-Credit Rights to the Collateral Agent and directing all payments thereunder to the Collateral Agent, all in form and substance reasonably satisfactory to the Collateral Agent.

 

3.21      Further Acts. Where Collateral is in the possession of a third party, Grantor will join with Collateral Agent in notifying such third party of Collateral Agent’s security interest and in obtaining an acknowledgment from such third party that it is holding such Collateral for the benefit of the Collateral Agent.

 

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3.22      Commercial Tort Claims. Grantor shall promptly notify the Collateral Agent of any Commercial Tort Claim acquired by it and, unless otherwise consented to by the Collateral Agent, Grantor shall promptly enter into a supplement to this Agreement granting to the Collateral Agent a security interest in such Commercial Tort Claim.

 

3.23      Motor Vehicles.

 

(a)     Grantor shall maintain all vehicle titles at its chief executive office.

 

(b)     Grantor shall promptly, but in any event no later than 10 days after the Collateral Agent’s written request (the date on which the Grantor receives such request being the “Titles Request Date”), deliver to the Collateral Agent originals of the certificates of title or ownership for the Motor Vehicles owned by it together with appropriate grant forms executed in favor of the Collateral Agent.

 

(c)     Upon the acquisition after the Titles Request Date by Grantor of any Motor Vehicle, Grantor shall deliver to the Collateral Agent originals of the certificates of title or ownership for such Motor Vehicle, together with the manufacturer’s statement of origin, with the Collateral Agent listed as lienholder; provided that, the Collateral Agent shall not be required to be the lienholder if the Motor Vehicle to be acquired is subject to a purchase money security interest permitted by Section 8(b) of the Loan Agreement.

 

(d)     Grantor hereby appoints the Collateral Agent as its attorney-in-fact, effective the date hereof and terminating upon the termination of this Agreement, for the purpose of (i) executing on behalf of Grantor title or ownership applications for filing with appropriate state agencies to enable Motor Vehicles now owned or hereafter acquired by Grantor to be retitled and the Collateral Agent listed as lienholder thereof, (ii) filing such applications with such state agencies, and (iii) executing such other documents and instruments on behalf of, and taking such other action in the name of, Grantor as the Collateral Agent may deem necessary or advisable to accomplish the purposes hereof (including, without limitation, for the purpose of creating in favor of the Collateral Agent a perfected Lien on the Motor Vehicles and exercising the rights and remedies of the Collateral Agent hereunder). This appointment as attorney-in-fact is coupled with an interest and is irrevocable until all of the Obligations are paid in full after the termination of the Loan Agreement and the other Loan Documents.

 

(e)     Any certificates of title or ownership delivered pursuant to the terms hereof shall be accompanied by odometer statements for each Motor Vehicle covered thereby.

 

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(f)     So long as no Event of Default shall have occurred and be continuing, upon the request of Grantor, the Collateral Agent shall execute and deliver to Grantor such instruments as Grantor shall reasonably request to remove the notation of the Collateral Agent as lienholder on any certificate of title for any Motor Vehicle; provided that any such instruments shall be delivered, and the release effective, only upon receipt by the Collateral Agent of a certificate from Grantor, stating that the Motor Vehicle, the Lien on which is to be released, is to be sold or has suffered a casualty loss (with title thereto passing to the casualty insurance company therefor in settlement of the claim for such loss), the amount that Grantor will receive as sale Proceeds or insurance Proceeds, and any Proceeds of such sale or casualty loss shall be paid to the Collateral Agent hereunder to be applied to the Obligations then outstanding.

 

ARTICLE IV

COLLECTIONS

 

Except as otherwise provided in this Article IV, Grantor shall continue to collect, at its own expense, all amounts due or to become due to Grantor under the Accounts constituting part of the Collateral and all other Collateral. In connection with such collections, Grantor may take (and, at Collateral Agent’s direction given after the occurrence and during the continuance of an Event of Default, shall take) such action as Grantor or Collateral Agent may deem necessary or advisable to enforce collection of the Accounts and such other Collateral; provided, however, that Collateral Agent shall have the right at any time, without giving written notice to Grantor of Collateral Agent’s intention to do so, to notify the account debtors under any Accounts or obligors with respect to such other Collateral of the assignment of such Accounts and such other Collateral to Collateral Agent and to direct such account debtors or obligors to make payment of all amounts due or to become due to Grantor thereunder directly to Collateral Agent and, upon such notification and at the expense of Grantor, to enforce collection of any such Accounts or other Collateral, and to adjust, settle or compromise the amount or payment thereof in the same manner and to the same extent as Grantor might have done, but unless and until Collateral Agent does so or gives Grantor other instructions, Grantor shall make all collections for Collateral Agent. In addition to its rights under the preceding sentence to this Section, Collateral Agent, at any time after the occurrence of an Event of Default may require that Grantor instruct all current and future account debtors and obligors on other Collateral to make all payments directly to a lockbox (the “Lockbox”) controlled by Collateral Agent. All payments received in the Lockbox shall be transferred to a special bank account (the “Collateral Account”) maintained at the Depository Bank for the benefit of Collateral Agent subject to withdrawal by Collateral Agent only. After the earliest to occur of an Event of Default, Collateral Agent’s exercise of its right to direct account debtors or other obligors on any Collateral to make payments directly to Collateral Agent or to require Grantor to establish a Lockbox, Grantor shall immediately deliver all full and partial payments on any Collateral received by Grantor to Collateral Agent in their original form, except for endorsements where necessary. Collateral Agent, at its sole discretion, may hold any collections on the Collateral delivered to it or deposited in the Collateral Account as cash collateral or may apply such collections to the payment of the Obligations in such order as Collateral Agent may elect; provided, however, that after an Event of Default has occurred and is continuing, Collateral Agent shall apply all collections in accordance with Section 7.7. Until such payments are so delivered to Collateral Agent, such payments shall be held in trust by Grantor for and as Collateral Agent’s property, and shall not be commingled with any funds of Grantor. Any application of any collection to the payment of any Obligation is conditioned upon final payment of any check or other instrument.

 

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ARTICLE V

ASSIGNMENT OF INSURANCE

 

Grantor hereby assigns to Collateral Agent, as additional security for payment of the Obligations, any and all monies due or to become due under, and any and all other rights of Grantor with respect to, any and all policies of insurance covering the Collateral. So long as no Default or Event of Default has occurred and is continuing, Grantor may itself adjust and collect for any losses of up to an aggregate amount of $50,000.00 for all occurrences during any of Grantor’s fiscal years and Grantor may use the resulting Insurance Proceeds for the replacement, restoration or repair of the Collateral. After the occurrence and during the continuance of a Default or an Event of Default, or after the aggregate amount of losses arising out of all occurrences during any of Grantor’s fiscal years exceeds $50,000.00, Collateral Agent may (but need not) in its own name or in Grantor’s name execute and deliver proofs of claim, receive such monies, and settle or litigate any claim against the issuer of any such policy and Grantor directs the issuer to pay any such monies directly to Collateral Agent and Collateral Agent, at its sole discretion and regardless of whether Collateral Agent exercises its right to collect Insurance Proceeds under this Section, may apply any Insurance Proceeds to the payment of the Obligations, whether due or not, in such order and manner as Collateral Agent may elect or may permit Grantor to use such Insurance Proceeds for the replacement, restoration or repair of the Collateral.

 

ARTICLE VI

EVENTS OF DEFAULT

 

The occurrence of any Event of Default as defined in the Loan Agreement shall constitute an Event of Default hereunder (“Event of Default”).

 

ARTICLE VII

RIGHTS AND REMEDIES ON DEFAULT

 

Upon the occurrence of an Event of Default, and at any time thereafter until such Event of Default is cured to the satisfaction of Collateral Agent, and in addition to the rights granted to Collateral Agent under Articles IV and V hereof, Collateral Agent may exercise any one or more of the following rights and remedies:

 

7.1      Acceleration of Obligations. Declare any and all Obligations to be immediately due and payable, and the same shall thereupon become immediately due and payable without further notice or demand.

 

7.2      Right of Offset. Offset, and cause each Lender to offset, any deposits, including unmatured time deposits, then maintained by Grantor with a Lender or with Collateral Agent, whether or not then due, against the Obligations, whether or not then due.

 

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7.3      Deal with Collateral. In the name of Grantor or otherwise, demand, collect, receive and give receipt for, compound, compromise, settle and give acquittance for and prosecute and discontinue any suits or proceedings in respect of any or all of the Collateral.

 

7.4      Realize on Collateral. Take any action which Collateral Agent may deem reasonably necessary or desirable in order to realize on the Collateral, including, without limitation, the power to perform any contract, to endorse in the name of Grantor any checks, drafts, notes, or other instruments or documents received in payment of or on account of the Collateral. Collateral Agent may comply with any applicable state or federal law requirements in connection with a disposition of the Collateral and compliance will not be considered adversely to affect the commercial reasonableness of any sale of the Collateral. Collateral Agent may sell the Collateral without giving any warranties as to the Collateral. Collateral Agent may specifically disclaim any warranties of title or the like. This procedure will not be considered adversely to affect the commercial reasonableness of any sale of the Collateral.

 

7.5      Access to Property. Enter upon and into and take possession of all or such part or parts of the properties of Grantor, including lands, plants, buildings, machinery, equipment, Data Processing Records and Systems and other property as may be necessary or appropriate in the reasonable judgment of Collateral Agent, to permit or enable Collateral Agent to store, lease, sell or otherwise dispose of or collect all or any part of the Collateral, and use and operate said properties for such purposes and for such length of time as Collateral Agent may deem necessary or appropriate for said purposes without the payment of any compensation to Grantor therefor. Grantor shall provide Collateral Agent with all information and assistance requested by Collateral Agent to facilitate the storage, leasing, sale or other disposition or collection of the Collateral after an Event of Default has occurred and is continuing.

 

7.6      Other Rights. Exercise any and all other rights and remedies available to it by law or by agreement, including rights and remedies under the UCC as adopted in the relevant jurisdiction or any other applicable law, or under the Loan Agreement and, in connection therewith, Collateral Agent may require Grantor to assemble the Collateral and make it available to Collateral Agent at a place to be designated by Collateral Agent, and any notice of intended disposition of any of the Collateral required by law shall be deemed reasonable if such notice is mailed or delivered to Grantor at its address as shown on Collateral Agent’s records at least 10 days before the date of such disposition.

 

7.7      Application of Proceeds.

 

(a)     All Proceeds of Collateral received by Collateral Agent or any Lender shall be applied in accordance with the UCC, and such Proceeds applied toward the Obligations shall be applied in the following order:

 

FIRST, to the Collateral Agent and each Lender in an amount equal to such Person’s reasonable costs and expenses incurred in connection with the enforcement of this Agreement, the sale or other disposition of the Collateral, the delivery of the Collateral, the collection of any such Proceeds or the collection of the Obligations (including, without limitation, reasonable attorneys’ fees and legal expenses regardless of whether suit is commenced);

 

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SECOND, to the extent of any amount remaining after application in accordance with clause FIRST above, to the Collateral Agent for distribution to the Lender for application to the Obligations then due and payable or, if such amount shall be insufficient to pay the Obligations in full, then ratably (without priority of any one over any other) to each Lender in proportion to its Percentage; and

 

THIRD, to the extent of any amount remaining after application in accordance with clauses FIRST and SECOND above, to Grantor 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.

 

(b)     When payments to the Lender are based upon their respective Percentages, the amounts received by each Lender shall be promptly applied as follows (for purposes of making determinations under this Section 7.7 only): (i) first, to the unpaid interest and fees constituting part of such Lender’s Obligations; (ii) second, to the unpaid principal amount of such Lender’s Note; and (C) third, to all other Obligations owed to such Lender. If any payment to any Lender of its Percentage of any distribution would result in overpayment to such Lender, such excess amount shall instead be ratably distributed in respect of the unpaid Obligations of the other Lenders entitled to such distribution.

 

(c)     For purposes of applying payments received in accordance with this Section 7.7, Collateral Agent shall be entitled to rely upon each Lender for a determination of the outstanding principal, interest and other Obligations owed to such Lender.

 

7.8      Patents and Trademarks. Upon the occurrence and during the continuance of an Event of Default:

 

(a)      Collateral Agent may, at any time and from time to time, upon thirty (30) days’ prior notice to Grantor, license or, to the extent permitted by an applicable license, sublicense, whether general, special or otherwise, and whether on an exclusive or non-exclusive basis, any Patent or Trademark, throughout the world for such term or terms, on such conditions, and in such manner, as Collateral Agent shall in its sole discretion determine;

 

(b)      Collateral Agent may (without assuming any obligations or liability thereunder), at any time enforce (and shall have the exclusive right to enforce) against any licensor, licensee or sublicensee all rights and remedies of Grantor in, to and under any one or more license or other agreements with respect to any Patent or Trademark and take or refrain from taking any action under any such license or other agreement, and Grantor hereby releases Collateral Agent from, and agrees to hold Collateral Agent free and harmless from and against, any claims arising out of, any action taken or omitted to be taken with respect to any such license or agreement;

 

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(c)      Any and all payments received by Collateral Agent under or in respect of any Patent or Trademark (whether from Grantor or otherwise), or received by Collateral Agent by virtue of the exercise of the license granted to Collateral Agent by subsection (g) below, shall be applied to the Obligations in accordance with Section 7.7 hereof;

 

(d)      Collateral Agent may exercise in respect of the Patents and Trademarks, in addition to other rights and remedies provided for herein or otherwise available to it, all the rights and remedies of a secured party on default under the UCC;

 

(e)      In order to implement the sale, lease, assignment, license, sublicense or other disposition of any of the Patents and Trademarks pursuant to this Section 7.8, Collateral Agent may, at any time, execute and deliver on behalf of Grantor one or more instruments of assignment of the Patents and Trademarks (or any application or registration thereof), in form suitable for filing, recording or registration in any country. Grantor agrees to pay when due all reasonable costs incurred in any such transfer of the Patents and Trademarks, including any taxes, fees and reasonable attorneys’ fees;

 

(f)      In the event of any sale, lease, assignment, license, sublicense or other disposition of any of the Patents or Trademarks pursuant to this Section, Grantor shall supply to Collateral Agent or its designee its know-how and expertise relating to the manufacture and sale of the products relating to any Patent or Trademark subject to such disposition, and its customer lists and other records relating to such Patents or Trademarks and to the distribution of said products; and

 

(g)      For the purpose of enabling Collateral Agent to exercise rights and remedies under this Agreement at such time as Collateral Agent shall be lawfully entitled to exercise such rights and remedies, and for no other purpose, Grantor hereby grants to Collateral Agent, an irrevocable, non-exclusive license (exercisable without payment of royalty or other compensation to Grantor) to use, license or sublicense at such time any Patent or Trademark, now owned or hereafter acquired by Grantor, and wherever the same may be located, and including in such license reasonable access to all media in which any of the licensed items may be recorded or stored and to all computer and automatic machinery software and programs used for the compilation or printout thereof.

 

7.9      Copyrights. Upon the occurrence and during the continuance of an Event of Default:

 

(a)      Collateral Agent may, at any time and from time to time, upon thirty (30) days’ prior notice to Grantor, license or, to the extent permitted by an applicable license, sublicense, whether general, special or otherwise, and whether on an exclusive or non-exclusive basis, any Copyright, for such term or terms, on such conditions, and in such manner, as Collateral Agent shall in its sole discretion determine;

 

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(b)      Collateral Agent may (without assuming any obligations or liability thereunder), at any time, enforce (and shall have the exclusive right to enforce) against any licensor, licensee or sublicensee all rights and remedies of Grantor in, to and under any one or more license or other agreements with respect to any Copyright and take or refrain from taking any action under any such license or other agreement and Grantor hereby releases Collateral Agent from, and agrees to hold Collateral Agent free and harmless from and against, any claims arising out of, any action taken or omitted to be taken with respect to any such license or agreement;

 

(c)      Any and all payments received by Collateral Agent under or in respect of any Copyright (whether from Grantor or otherwise), or received by Collateral Agent by virtue of the exercise of the license granted to Collateral Agent by subsection (f) below, shall be applied to the Obligations in accordance with Section 7.7;

 

(d)      Collateral Agent may exercise in respect of the Copyrights, in addition to other rights and remedies provided for herein or otherwise available to it, all the rights and remedies of a secured party on default under the UCC;

 

(e)      In order to implement the sale, lease, assignment, license, sublicense or other disposition of any of the Copyrights pursuant to this Section 7.9, Collateral Agent may, at any time, execute and deliver on behalf of Grantor one or more instruments of assignment of the Copyrights (or any application or registration thereof), in form suitable for filing, recording or registration in the Copyright Office or any country where the relevant Copyright is of material economic value to Grantor. Grantor agrees to pay when due all reasonable costs incurred in any such transfer of the Copyrights, including any taxes, fees and reasonable attorneys’ fees; and

 

(f)      For the purpose of enabling Collateral Agent to exercise rights and remedies under this Agreement at such time as Collateral Agent shall be lawfully entitled to exercise such rights and remedies, and for no other purpose, Grantor hereby grants to Collateral Agent an irrevocable, non-exclusive license (exercisable without payment of royalty or other compensation to Grantor) to use, license or sublicense any Copyright, now owned or hereafter acquired by Grantor, and wherever the same may be located, and including in such license reasonable access to all media in which any of the licensed items may be recorded or stored and to all computer and automatic machinery software and programs used for the compilation or printout thereof.

 

ARTICLE VIII

MISCELLANEOUS

 

8.1      No Liability on Collateral. It is understood that Collateral Agent does not in any way assume any of Grantor’s obligations under any of the Collateral. Grantor hereby agrees to indemnify Collateral Agent against all liability arising in connection with or on account of any of the Collateral, except for any such liabilities arising on account of Collateral Agent’s negligence or willful misconduct.

 

8.2      No Waiver. Collateral Agent shall not be deemed to have waived any of its rights hereunder or under any other agreement, instrument or paper signed by Grantor unless such waiver is in writing and signed by Collateral Agent. No delay or omission on the part of Collateral Agent in exercising any right shall operate as a waiver of such right or any other right. 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.

 

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8.3      Remedies Cumulative. All rights and remedies of Collateral Agent shall be cumulative and may be exercised singularly or concurrently, at their option, and the exercise or enforcement of any one such right or remedy shall not bar or be a condition to the exercise or enforcement of any other.

 

8.4      Governing Law. This Agreement shall be construed and enforced in accordance with, and the rights of the parties shall be governed by, the laws of the State of Minnesota, except to the extent that the perfection of the security interest hereunder, or the enforcement of any remedies hereunder, with respect to any particular Collateral shall be governed by the laws of a jurisdiction other than the State of Minnesota.

 

8.5      Expenses. Grantor agrees to pay the reasonable attorneys’ fees and legal expenses incurred by Collateral Agent in the exercise of any right or remedy available to it under this Agreement, whether or not suit is commenced, including, without limitation, attorneys’ fees and legal expenses incurred in connection with any appeal of a lower court’s order or judgment.

 

8.6      Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the successors and assigns of Grantor and Collateral Agent.

 

8.7      Recitals. The above Recitals are true and correct as of the date hereof and constitute a part of this Agreement.

 

8.8      Severability. 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 shall be prohibited by or invalid under such 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.

 

8.9      Reinstatement. This Agreement shall remain in full force and effect and continue to be effective should any petition be filed by or against Grantor for liquidation or reorganization, should Grantor become insolvent or make an assignment for the benefit of creditors or should a receiver or trustee be appointed for all or any significant part of Grantor’s assets, and shall continue to be effective or be reinstated, as the case may be, if at any time payment and performance of the Obligations, or any part thereof, is, pursuant to applicable law, rescinded or reduced in amount, or must otherwise be restored or returned by any obligee of the Obligations, whether as a “voidable preference”, “fraudulent conveyance”, or otherwise, all as though such payment or performance had not been made. In the event that any payment, or any part thereof, is rescinded, reduced, restored or returned, the Obligations shall be reinstated and deemed reduced only by such amount paid and not so rescinded, reduced, restored or returned.

 

8.10      No Obligation to Pursue Others. Collateral Agent has no obligation to attempt to satisfy the Obligations by collecting them from any other person liable for them and Collateral Agent may release, modify or waive any Collateral provided by any other person to secure any of the Obligations, all without affecting Collateral Agent’s rights against Grantor. Grantor waives any right it may have to require Collateral Agent to pursue any third person for any of the Obligations.

 

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8.11      Waiver of Jury Trial. GRANTOR HEREBY EXPRESSLY WAIVE(S) ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS (a) UNDER THIS AGREEMENT OR UNDER ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH, OR (b) ARISING FROM ANY RELATIONSHIP EXISTING IN CONNECTION WITH THIS AGREEMENT, AND AGREE(S) THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.

 

8.12      Collateral Agency Agreement. The provisions of the Collateral Agency Agreement by and among the Collateral Agent and the Lenders dated as of even date herewith are incorporated herein by reference as if fully set forth herein.

 

20

 

 

IN WITNESS WHEREOF, the Grantor has executed this Agreement as of the date and year first above written.

 

Grantor:

 

AIRCO 1, LLC, a Delaware limited liability company

 

By:                                                                     

Name: Chuck Kingsley

Its:       Vice President

 

 

 

COLLATERAL AGENT:

 

Acknowledged and Agreed as of the date and year first set forth above

 

 

MINNESOTA BANK & TRUST

 

By:                                                                      

Name:  Eric P. Gundersen

Its:       Senior Vice President

 

 

[Signature Page to Security Agreement]

 

 

 

 

EXHIBIT A

 

 

	
			I.

				
			Financing Statements on File Listing Grantor or Any Predecessor in Title as Debtor

			

 

 

	
			II.

				
			Location of Equipment and Inventory

			

 

	 	
			1.

				
			25233 E. Pinal Airpark Road, Suite 101, Marana, AZ 85653

			

	 	
			2.

				
			1853 S. Eisenhower Court, Wichita, KS 67209

			

 

 

 

	
			III.

				
			Prior Names within the last five years.

			

 

None.

 

 

 

 

EXHIBIT B

 

COMMERCIAL TORT CLAIMS

 

 

None.

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